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Commentary

Human Rights as a Basis for Climate Litigation

Olga Hancock, Head of Responsible Investment at the Church Commissioners for England, explores the implications for investors of the EHCR decision on Swiss government inaction.

In November 2023, I wrote about the links between human rights and climate change for investors. Since then, there have been significant developments. One in particular stands out.

Last month, the European Court of Human Rights (ECHR) determined that the Swiss government had violated its citizens’ human rights, due to its lack of action on climate change. The case – Verein KlimaSeniorinnen Schweiz v Switzerland – was brought by four women and a supporting association who were concerned about the consequences of climate change on their living conditions and health.

The ECHR ruling is significant because it makes the link between human rights and climate change material for investors – and establishes a legal precedent for climate litigation on the basis of human rights law. And so this ruling inevitably raises the pressure on governments to be more ambitious on climate change. The case is also important for investors because of the implications for private legal actions.

So what happened?

To simplify: the ECHR ruled that the Swiss government had not adequately addressed its climate change obligations and needed to take measures to do so. Significantly, these obligations were defined as alignment around 1.5°C, adequate intermediate reduction targets, and a goal of net zero by 2050. For the 46 member states of the ECHR, that effectively imposes obligations to enhance climate mitigation policies.

Engagement with governments

The decision hands investors an important weapon as they engage with governments to enhance climate ambition. Investor engagement with governments is an increasing area of focus, as investors move from a stewardship approach focused on company engagement to collaborative engagement with governments to address systemic risk – and thus create an enabling environment for sustainable investments.

Governments have to date been able to respond to investors by saying that their requests to create a Paris-aligned enabling environment form part of a broader political process. Now there is a judgment which requires ECHR member governments to comply with the ambition of the Paris Agreement.

This decision will no doubt guide other judicial bodies’ thinking around the world, when considering human rights as the basis for climate litigation. The jurisprudence in EHCR rulings, whilst not binding, is considered ‘persuasive authority’ in other jurisdictions, so the case is also important for engaging with governments outside the 46 member states of the ECHR.

Significantly, the principles in the case are also relevant for actions brought against private entities including companies and investors. That’s because the courts, as public authorities, must enforce ECHR decisions – creating ‘litigation risk’ for private actors. As noted in my previous article, in 2021, the Hague District Court ordered Shell to reduce its emissions by 45% by 2030, relative to 2019, including both its own emissions and end-use emissions. The decision cited the UN Guiding Principles on Business and Human Rights as a “global standard of expected conduct for all business enterprises wherever they operate”.

This is a particularly useful tool for investors engaging with high-emitting companies, where the companies’ emissions trajectories and emissions plans do not align with the framework set out in this judgment. Investors are accustomed to the rejoinder that companies will enhance climate ambition when governments create a level playing field. But now companies must factor in two new developments: that governments may be bound by this decision, and that human rights-based litigation can be brought against themselves.

Sting in the tail

Finally, with legal developments and jurisprudence on climate and human rights developing rapidly, investors may need to consider the possibility of an action if they fail to address climate impact in their own portfolios.

In fact, this is already happening. In 2019, the Korean National Pension Fund found itself subject to a complaint lodged via the Organisation for Economic Co-operation and Development  (OECD) as an investor in steel manufacturer POSCO, because of the company’s alleged failure to implement adequate human rights due diligence to identify and address the adverse impacts caused by an Indonesian subsidiary. That subsidiary was alleged to have caused large scale deforestation in an area of exceptionally rich biodiversity, making it uninhabitable for local communities. While that particular complaint was addressed through the OECD mediation process, in future, cases like this are increasingly likely to go to court.

In short, now that the ECHR has firmly established the principle of human rights as a basis for climate change litigation, governments and companies – and indeed investors – will need to start taking this seriously.

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