Globally, the cumulative number of climate change related cases has more than doubled since 2015, bringing the total number of cases to over 2000. Around one quarter of these were filed between 2020 and 20221.
Banks are increasingly focussed on the risks of climate change litigation and the pace of preparedness for risk is certainly increasing. Earlier in February 2022 an international bank added greenwashing to its risk register and additionally stated:
Early claims focussed broadly on testing access to information in order to test the adequacy of disclosure. For example, proceedings were issued against an Australian Bank in 2021 seeking access to documents under the Corporations Act to assess compliance with the Paris Agreement with regard to involvement with certain gas and oil projects and their impact on the environment. That litigation was brought to an end by way of consent orders to access certain documents.3
Further a number of Banks have received complaints with regards to an alleged breach of the Organization for Economic Cooperation and Development guidelines (“the Guidelines”), (which are not legally binding). For example, a number of Japanese Banks received a complaint as early as 2018 alleging a breach of the Guidelines with regard to their financing of coal power plants in Vietnam.4
A new Eurozone claim indicates that the risk for Banks is increasing.
On 23 February 2023 it was announced that the Eurozone’s largest bank has been sued for its involvement in fossil fuel financing. It is alleged that the Bank’s involvement in new fossil fuel project finance are in breach of duties owed in French law not to harm the planet (the so called “duty of vigilance”). Whilst there has yet to be any case which requires a Bank to change its practices under this legislation, the case represents an important development in the wider global trend of climate change litigation.5 It is argued that the Bank’s financial strategy fails to take account of warnings from the scientific community that new oil, gas and coal fields will push the 1.5C limit set out in the Paris Agreement out of reach.
The duty of vigilance was imposed in 2017 and requires large French companies to establish measures and to identify risks and prevent severe impacts from human rights and the environment both from its own activities and those with whom it has an established commercial relationship. A court may impose a penalty for non-compliance. The law also provides for civil liability. Under the law, harmed individuals can bring a civil lawsuit (based on French tort law) to seek damages resulting from a company's failure to comply with its vigilance obligations, where compliance would have prevented the harm.6
Notwithstanding extensive work undertaken by Banks to address climate change, we expect more claims in this arena. A Bank’s insurance arrangements, and how insurance may respond, both to its own potential liability for climate change claims and that of its directors and officers, should be incorporated into its consideration of such risk. Talk to your WTW broker to discover more.
1 Global trends in climate change litigation: 2022 snapshot
2 HSBC Report and Accounts 2022
3 Abrahams v. Commonwealth Bank of Australia (2021)
4 Market Forces v. SMBC, MUFG and Mizuho
5 'Blank cheques’: Environmental groups sue BNP Paribas over fossil-fuel lending
6 France's Duty of Vigilance Law
