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Climate Litigation Decreases Firm Value

New research published by the London School of Economics’ Grantham Research Institute on Climate Change and the Environment (LSE GRI) has highlighted a causal link between climate litigation and stock prices. Analysing 108 climate change lawsuits against US and European-listed corporations between 2005-21, the paper noted that climate litigation filings or unfavourable court decisions reduced firm value by –0.41% on average. The largest stock market responses were observed for cases filed against high-emitting companies across the energy, utilities and materials sectors, with a -0.57% average firm value reduction following case filings and a -1.50% value reduction average following unfavourable judgements. “The findings suggest that lenders, financial regulators and governments should consider climate litigation risk as a relevant financial risk in a warmer future,” the paper said.  

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