Managing Risk

"But as climate change related harm increases, a new type of lawsuit has arisen."
THOMAS LENNARZ 
Partner Dispute Resolution CMS Stuttgart

Climate change used to be a topic dealt with by, or between, state actors. But, according to CMS Stuttgart partner Thomas Lennarz, as climate change-related harm increases, a new type of lawsuit has arisen. Claimants are suing governments and companies, trying to hold them accountable for their contribution to climate change.

Lawsuits targeting states are spreading across the globe. They are mostly brought by individuals or NGOs, using litigation as a new tool to fight for climate protection. The claimants challenge insufficient climate policies and the non-implementation of international climate treaties by their governments. Their claims are based mainly on human rights and public international law.

In the US, a wave of climate change lawsuits is rolling towards oil, gas and energy companies due to their carbon dioxide emissions. These lawsuits are mainly brought by individuals or state entities demanding compensation for climate-related harm and damaging climate change. In these cases, liability is usually established by using tort and product liability law.

In another recent example, a climate lawsuit filed in Germany by a Peruvian farmer against the largest German energy company shows that this litigation trend is already reaching Europe.

Meanwhile, claimants are devising new litigation strategies in their fight against companies that they consider to be damaging the environment. In Poland, an environmental association bought shares in an energy company and then sued it as a shareholder. The association claims that the Board’s decision to extend a coal power plant was a violation of its fiduciary duties of care due to the climate-related financial risks of such a plant.

Lawsuits are also being filed against insurers and investors such as banks or pension funds on account of alleged climate-damaging investment decisions or from within by its customers / members due to non-disclosure of climate-related risks.

Most of these lawsuits are still pending and outcomes are unclear. However, climate-related issues such as the risk of litigation, as well as physical and regulatory risks, form part of today’s corporate reality and should be addressed as a standard part of risk assessments.