Climate Change Risk & Liability Report - 2nd Edition


Prologue October 2021

In Spring 2021, Clyde & Co published its Climate Change Risk and Liability report “ Stepping up good governance to seize opportunities and reduce exposure” , to help businessesnavigatesomeof thecomplexities involved in the transition to a low carbon economy. By setting out how the landscape is changing in terms of physical, transition and liability risk, and how this might impact on critical issues such as reporting requirements and corporate governance, our aim was clear: to provide insight on how to mitigate those risks, meet evolving duties of care and help companies position themselves to capitalise as opportunities rose. Six months on, as world leaders, policy- makers, businesses and others gather for the COP26 international climate summit, the issues addressed in this report are as pertinent as ever. Progress has been made and challenges in the battle to tackle climate change have continued to develop. Pledges by governments to deliver net zero carbon emissions are being supported by plans to invest more in green technologies and jobs 1 , such as those in the pipeline in the US 2 , China 3 and the EU 4 , and there are now almost 2,350 climate laws and policies in existence 5 . Despite this, concerns remain that still not enough is being done to achieve decarbonisation, with international commitments made to date on course

to reduce emissions by just 12% by 2030, instead of the 45% needed to keep global warming to 1.5˚C or below 6 . ACTIVISMAND LITIGATION Against this backdrop, activism continues to gather pace and take new shape. As of October 2021, almost 1,900 climate-related litigation cases are ongoing or have been concluded globally 7 . Such activism is only likely to be fuelled by landmark rulings such as the decision in the Milieudefensie et al. v. Royal Dutch Shell PLC case in May. This resulted in the oil major being ordered to make a 45% reduction in emissions (both its own and its end-users’) by 2030 on the basis that it owes a duty of care under Dutch law. While that decision is under appeal, it has already inspired similar rights-based cases against motor manufacturers and an oil firm in Germany. In the US, climate change lawsuits have been mired in procedural issues with the energy defendants fighting to keep the cases in federal court, which is seen as more favourable for the petroleum industry. In this regard, the energy defendants received a boost via the Supreme Court’s decision in BP PLC v. Mayor and City Council of Baltimore in May wherein the Supreme Court held that a lower court had wrongly limited its review of the energy defendants’ request to keep the case in federal court. Although the

1 Clean energy investment could create 10 million green jobs,World Economic Forum, 9 July 2021

2 Inside Biden’s Plan To Create Over 10 MillionWell-Paying JobsWith His Clean Energy Initiative, Forbes, 23 April 2021

3 China pours money into green Belt and Road projects, Financial Times, 26 Jan 2021 and China expected to favour green tech over coal in new five-year plan, Thomson Reuters Foundation, 1 March 2021

4 EU invests 122m to help bring low carbon technologies to market, Energy Live News, 29 July 2021

5 Climate Change Laws of theWorld

6 For a livable climate: Net-zero commitments must be backed by credible action, United Nations

7 Climate Change Laws of theWorld

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