Climate change and the risks that it poses to, among other things, property and physical infrastructure, human health and economic interests are now well established. Impacts on corporations have also come under scrutiny and include physical damage to assets, supply chain interruption, reputational risks arising from poor sustainability practices, compliance costs associated with more stringent regulatory requirements, the economic impact of “stranded assets”, and finally, litigation by governments, regulators, shareholders and others.1
According to a recent publication by the C.D. Howe Institute, over 1,600 cases related to climate change are currently pending globally. While to date climate change disputes have tended to be dominated by claims against governments for their failure to implement adequate climate change policies and protections, corporations are increasingly coming under fire.
Corporations are the subject of litigation relating to climate change in a number of jurisdictions. In Peru, for example, a homeowner whose property was threatened by glacial melting brought an action for damages for the cost of flood prevention measures against a corporation that owned companies that were alleged to have discharged greenhouse gases. In Australia, a pension fund was sued for having allegedly failed to disclose information on climate business risks and its strategies to address them, and a bank was sued for allegedly having failed to disclose climate-change related risks of its investments. In the U.S., lawsuits have been brought by various cities and states against fossil fuel companies seeking damages based upon the companies’ alleged climate change impacts or alleged concealment of information about their products’ contribution to climate change. At least one securities class action has been commenced claiming that misrepresentations were made by the company concerning climate change related risks. In Canada, while no corporation has yet been sued in connection with climate change, in 2017 the Alberta Securities Commission agreed to review a complaint submitted by Greenpeace against a publicly traded company based upon allegations that the company had misled investors and failed to provide full, true and plain disclosure of all material facts in a preliminary prospectus and annual report by failing to fully disclose climate change risks.
According to a 2019 publication of WillisTowersWatson, litigation theories in climate change related litigation currently being tested in the courts include failure to mitigate greenhouse gas emissions, failure of the corporation to adapt to physical impacts of climate change, failure to adapt the corporations’ investment strategies to mitigate the impacts of climate change, failure to disclose climate related risks, and failure to comply with environmental regulatory obligations.
As data pertaining to greenhouse gas emissions expands and technology for tracking businesses’ contributions to global warming advances, the incidence of tort claims against corporations involved in particular industries will likely increase. Advancements in attribution science may make the determination of a causal link between sources of emissions and their climate-related harms more likely. Climate science researchers now represent that they are able to identify groups of defendants whose contributions to climate change are “identifiable, measurable and significant.” There is evidence linking climate change to “specific anticipated impacts.” This means that claimants in tort actions may have a better chance of demonstrating the probability and severity of the harms caused by a particular business’ emissions.
The American tobacco litigation of the 1990’s may potentially act as a blueprint for plaintiffs advancing claims based on climate change. In those cases, states alleged that companies knew about the adverse effects of smoking, yet attempted to hide such information from consumers and regulators. The resulting settlement included an agreement to pay states billions of dollars annually. Large carbon emitters could potentially be held liable in similar actions if it could be demonstrated they hid climate change data which resulted in harm.
However, as the U.S. and Australian experience demonstrates, even publicly traded companies not at risk of litigation arising out of their direct greenhouse gas emissions face the risk of shareholder actions alleging a failure to adequately disclose material risks facing the company arising out of climate change. In both the U.S. and Canada, publicly traded companies can be sued in shareholder class actions alleging that misrepresentations were made in offering documents and other public disclosure documents such as press releases, including in relation to the company’s disclosure of risks facing the business. As well, at least in Canada, securities regulators have taken proceedings against both corporations and their directors and officers for authorizing, permitting or acquiescing in the corporation’s breach of its public disclosure obligations.
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