Emerging trend of climate change litigation that’s only getting hotter

6 February 2020

What is climate change litigation?

Climate change litigation refers to the use of the legal system (including court proceedings) to advance beneficial outcomes in relation to climate change.  This includes not only cases where climate change is the focus of the litigation, but also cases where it is an underlying factor or related consideration.

The legal basis for these cases is varied, as is the subject matter.  Actions may relate to:

  • challenges of decisions approving projects or developments;
  • the direct and indirect impacts of companies and businesses on the climate;
  • failures of companies or directors to disclose, assess, or take action on climate change risks;
  • recovery of losses by investors or shareholders.

Some of these types of cases are yet to be tested in Australia.  Overall, climate change litigation is increasing in Australia with more cases and broadening subject matters.

 

Why is climate change litigation important to businesses and directors?

There is no law that directly requires companies and directors to act in a manner that takes into account climate change.  The reason why climate change litigation occurs, and is increasing, is in part related to strengthening public opinion on the importance of taking climate action.  As this view gains more prominence, various organisations (for example, the ASX, Australian Accounting Standards Board, G20 taskforce) are coming out with policies which encourage businesses to consider and act on climate change.

Further, in order to protect their reputation and maintain a “social licence” to operate, businesses must adapt to reflect the public’s expectations of them.  This idea is tied to concepts of corporate social responsibility and “triple bottom line” reporting which many socially and environmentally aware businesses now use.

 

Legal implications and risks

Given that there are no laws directly requiring businesses to consider and act on climate change risks, why is the trend of climate change litigation of concern?

Firstly, by being aware of climate change risks and acting to mitigate those risks, businesses are less likely to be caught in a situation where they are targeted for litigation relating to climate change.  For example, if a superannuation fund considers the impact of climate change on its investments, it's members are unlikely to commence climate change litigation relating to a failure to so.

Secondly, commentators suggest that a failure to consider and address climate change risks could be a breach of a directors’ duties to act in the best interests of the shareholders, especially where a failure to consider and address those risks could lead to a decrease in share price.

Finally, it is only a matter of time before voluntary policies and recommendations for businesses dealing with climate change become compulsory requirements.  By considering the impacts of climate change now, how to mitigate those risks to business, those companies will be well prepared for those changes.

 

This article provides general comments only.  It does not purport to be legal advice.  Before acting on the basis of any material contained in this article, we recommend that you seek professional advice.

 

Author:

Nicole Mead, Associate in our Disputes Team

Contact
Email: nmead@dmawlawyers.com.au
Direct Telephone:  +61 8 8210 2270