Finance-related ESG litigation

The combination of a developing regulatory framework and heightened market expectations on both ESG disclosure and practices is creating a fertile ground for growth in litigation and regulatory sustainability-related risks for financial services firms. This is particularly the case against the backdrop of a significant uptick in claims brought by shareholders against companies and directors and the rise of climate activist litigators. Litigation funders are increasingly targeting ESG issues, enabling claimant groups to finance litigation against corporates, likely resulting in an increase in class actions.

In addition to the substantial and evolving regulatory disclosure requirements for financial services, greenwashing is in sharper focus for regulators and supervisors. 

CMS have been supporting financial services firms with mapping these sustainability-related legal and regulatory risks, which are primarily connected to the publication of detailed information on sustainability matters – both at entity level and in financial product documentation.

The priority questions we address are:

• How is the sustainability-related regulatory backdrop impacting the level of litigation and regulatory enforcement risk? 
• What are the likely claims/enforcement that could arise? 
• Who is likely to make a claim? 
• If a claim/enforcement did occur, what is the likelihood of it succeeding and how does this relate to financial impact and reputational damage for our business? 

We have various solutions to support with tackling this issue including: 

• training sessions - typically attendees come from all areas of the business with an interest in sustainability, most commonly legal, compliance and sustainability teams, to understand more of what the risks are and potential mitigation against them; 
• sustainability-related litigation and regulatory risk matrix – mapping the risk of claims and enforcement that could arise, bespoke to your business. The matrix increases the understanding across personnel of the nature of the claims and enforcement that could arise and how to effectively mitigate against them; 
• board packs – directors are increasingly in the greenwashing spotlight, with the requirements on them to take responsibility for sustainability strategies. Our board packs help unpack the legal and regulatory greenwashing risks in an appropriate format for directors.

For an initial conversation on how we can support you on greenwashing risk, please reach out to the partners listed on this page or to your usual CMS contact.