Investors Fail to Account for Climate Litigation Risk

New research published by the University of Oxford’s Sustainable Law Programme (SLP) has warned that few investors and regulators are considering companies’ exposures to climate litigation risk when evaluating their climate-related financial risks. The report noted that 2,485 climate lawsuits have been filed globally to date and have targeted some of the biggest carbon emitters – including US oil and gas giant Chevron, which could be liable for up to US$8.5 trillion. Organisations tasked with providing frameworks for assessing climate risks, such as the International Sustainability Standards Board, have been including legal risks within transition risks, providing little to no detail on how to evaluate them. In light of those findings, SLP suggested five ways in which climate-related legal risks could be assessed by regulators, including quantitative analysis, estimated costs of accelerated climate mitigation, attribution of climate change damages, analysis using the social cost of carbon, and market impact analysis. “Policymakers, investors, and companies have accepted the need to understand climate risk exposures,” said Associate Professor Thom Wetzer, lead author of the report and Director of SLP. “But doing so diligently means engaging with the law through research that combines legal reasoning with financial analysis and climate science. Else, they will continue to fly blind in their treatment of climate risk.” 

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