Polluting companies could face trillions in damages from climate lawsuits. However, few investors and regulators are considering these risks when assessing companies’ climate-related financial risks, according to a new study from the Oxford Sustainable Law program, published on Jan. 11 in Science. The study calls for a revamp in the assessment of climate litigation risks and proposes a new framework for doing so.
“This means that investors end up investing in the wrong projects and face risks that neither they nor regulators fully comprehend, thereby exacerbating the financial risks associated with climate change,” explains Associate Professor Thom Wetzer, the lead author and Director of the Oxford Sustainable Law Program.
To date, a total of 2,485 climate lawsuits have been filed globally, and their increasing impact poses significant risks for some of the world’s largest carbon emitters. For instance, U.S. oil and gas giant Chevron could potentially be liable for up to $8.5 trillion alone, according to the authors’ estimates. The company’s profits from 1990 to 2019 amounted to $291 billion. “It is possible that Chevron’s business may actually be destroying net value,” says co-author Dr. Rupert Stuart-Smith, Senior Research Associate at the Oxford Sustainable Law Program.
The study also highlights how organizations responsible for providing frameworks to assess climate risks, such as the International Sustainability Standards Board and The Network for Greening the Financial System, group legal risks together with “transition risks” and offer limited guidance on how to evaluate them.
“This suggests that they view climate litigation as a peripheral risk, despite recent court events demonstrating that it is a much greater concern,” says co-author Dr. Arjuna Dibley, Head of Sustainable Finance Research at Melbourne Climate Futures.
2024-01-12 13:00:04
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