Strategic climate litigation: not always securing successful judgments, but is it achieving a broader objective?
11 October 2024Climate litigation attracts a good deal of attention at conferences and in the legal press, with many discussions circling around the question of whether the “noise” in the legal industry is disproportionate when compared with the number of cases brought. In this article we assess the current state of affairs – what cases have been brought and what impact have they had?
The increase in climate litigation has grown exponentially since the Paris Agreement 2015, with more than 2,666 cases filed globally. By “climate litigation”, whilst there is no universally accepted definition, we borrow that of the Sabin Centre for Climate Change Law at Columbia Law School, which encompasses “cases before judicial and quasi-judicial bodies that involve material issues of climate change science, policy, or law”.
Climate litigation can have both direct impact in the form of legal judgments or regulatory change, and indirect impact by shaping public dialogue, generating consumer pressure, and/or influencing insurance markets and the wider financial services industry.
From an activist’s perspective, strategic climate litigation can still be considered successful absent direct impact, so long as the indirect effects are sufficiently significant.
Below, we review developments in climate litigation in England and Wales, where there have been 139 filed climate litigation cases, including the move towards private claims by shareholders and against financial institutions, before considering whether, despite limited legal success, strategic climate litigation is achieving a broader impact through indirect consequences.
The development of climate litigation in England
In England, climate change litigation has its origins in claims brought by activist organisations and campaign groups which have used public law mechanisms to bring claims through judicial review or statutory challenges to specific initiatives where there was a clear climate or environmental impact.
Claimant activists have struggled historically to win public law challenges to climate-related decisions made in respect of specific projects in England and Wales. For example:
- in Preston, a case related to environmental impact assessments required to analyse the impacts of fracking, including greenhouse gas emissions (GHGs); and
in Drax Power, a case relating to the construction and operation of a new gas-fired power plant.
In both of those cases, the court refused permission for the claimants’ cases to proceed. However, there may be a trajectory shift following the ruling of the Supreme Court in the case of Finch, where it was determined that the impact of burning fossil fuels should be considered when granting permission for drilling sites.
Activist claimants have also brought claims focussed on broader policies, rather than specific projects and have had varied success; a trajectory which is mirrored in other jurisdictions like South Africa1, Japan2 and New Zealand3.
In England in 2022, three environmental NGOs found partial success when the court found that the government’s Net Zero Strategy (NZS) was lacking sufficient detail and necessary transparency. Following the publication of the amended NZS, Friends of the Earth (FOE) capitalised on that earlier partial success and brought a subsequent claim in 2024. FOE claimed successfully, for the second time in under two years, that the Secretary of State was in breach of its duties set out in the Climate Change Act 2008. The High Court ruled that the new NZS was still unlawful and not fit for purpose and the Secretary of State has 12 months from 3 May 2024 to draw up a further revised plan.
The success of recent cases targeting specific climate policies is not limited to England. Cases challenging government policies have been successful in South Korea4 and the United States of America amongst others.
What is also clear is that claims against government policy decisions have an impact on overall public perception. In the 2024 general election campaign, climate change was part of the broader political debate. The Labour and Conservative parties promised differing policies in relation to climate mitigation and adaptation. In the Labour manifesto, the party committed to forcing listed companies to implement transition plans which align with the 1.5 degree commitment of the Paris Agreement. The aim is to target banks, asset managers, pension funds and insurers, to make the UK “the green finance capital of the world”. Further details of how this will be achieved are currently awaited.
Development of human rights claims – a bridge between public and private law?
Climate change effects are often alleged to breach fundamental rights arising under human rights instruments or constitutions. In England, the most relevant legislation is the Human Rights Act 1998, implementing the European Convention on Human Rights (ECHR).
Whilst the case law applying the ECHR in the climate context has predominantly developed outside of the jurisdiction, these foreign decisions are likely to impact on future decisions of English courts. One example is KlimaSeniorinnen v Switzerland, which we have written about in more detail, and which is already being invoked in other jurisdictions, such as Poland.
While Klima does not create a new cause of action in English law, a possible impact of the case may be that the English courts, in accordance with the European Court of Human Rights’ interpretation of Article 8 in Klima, should effectively expand the scope of common law nuisance or negligence to establish climate-related duties of care owed by private entities/individuals. Similar arguments have already been accepted in the Hague District Court in Milieudefensie v Shell, which built on a successful public law case, Urgenda Foundation v State of the Netherlands.
The growth of private law claims
Whereas historically climate litigation has been a matter predominantly for public law, recently there has been an enhanced claimant focus on “climate accountability” for private sphere actors and resultant private law claims.
Corporate law
a. Directors' duties
We have previously considered ClientEarth’s application for permission to pursue a derivative action against the directors of Shell under s.172(1)(d) of the Companies Act 2006 pursuant to which directors have a duty to act in ways that would be most likely to promote the success of the company while having regard to community and environmental impact.
While ClientEarth was refused permission to bring its claim, the action generated significant external attention from the media and campaigners. Former Supreme Court justice, Lord Carnwath wrote extra-judicially on the outcome and criticised the reasons for the dismissal of the claim. This wider response may be considered a successful indirect impact of the claim.
A further indirect impact of the claim was that it was followed by a legal opinion commissioned by Pollination, a specialist climate change and investment advisory firm; the opinion follows similar legal opinions on directors’ duties in relation to nature and climate which have been published in Australia and New Zealand. Counsel’s conclusion was that nature-related risks are also relevant to directors’ duties under s.172 and s.174 of the Companies Act 2006, not just climate-related risks. The report argues that there is a legal basis for the financial relevance of nature in decision making by boards subject to English law and how directors may fail to uphold their duties if they fail to identify and, where appropriate, mitigate, the latent financial risks of a company’s unaddressed nature-related impacts and dependencies. The report advises that directors should document their decisions relating to such risks in order to avoid litigation on the same lines as the ClientEarth v Shell case and notes that the dismissal of that claim does not mean there cannot be similar claims in future.
b. Parent company liability
As discussed, in an earlier article, there have been recent court decisions (Vedanta, Okpabi, Mariana) in which the UK’s appellate courts have found that: i) it is at least arguable that a UK parent company could be responsible in law for harm occurring in a local jurisdiction of its subsidiaries; and ii) that it may be appropriate that the trial in relation to any such harm be heard before the courts of England and Wales, despite the harm happening overseas.
However, while this appears to be a new trend for large-scale climate-related litigation claims, the cases are still to be heard on their substantive merits; the Mariana case, for example, begins an 11 week hearing in October 2024.
With the introduction of the Corporate Sustainability Due Diligence Directive, claims such as those mentioned above may now have other avenues to achieve their strategic outcomes by holding corporate supply chains accountable. The Directive introduces obligations for large companies in relation to the adverse impacts of their activities on human rights and the environment. The Directive will require due diligence across a corporate value chain for non-EU companies with at least €450m turnover generated in the European Union from 1 January 2028, including ultimate parent companies of groups which, based on consolidated financial statements, would fall into that category. If an English parent company meeting that criterion is held to be in breach of the Directive, it will be subject to penalties up to the maximum of 5% of the net worldwide turnover of the company in the year preceding the penalty decision.
Not only do cases of this kind generate the prospect of new legislation, no matter their legal success, they are also the types of cases which attract litigation funding. The cost of defending climate actions is increasing, as is the cost of damages sought. For example, in the case of Mariana v BHP, claimants are seeking £36bn in damages in the largest ever opt-in group action to be brought before the English courts. This has resulted in the rise of third party litigation funding specifically for climate litigation claims. Mariana has reportedly already cost £70m and is being funded by litigation investors including Prisma Capital and North Wall Capital. Similarly, the case before the Australian Federal Court, Sanda v PTTEP Australasia, a case concerning an oil spill in the Timor Sea impacting over 15,000 Indonesian farmers, was funded by Harbour Litigation Funding, which spent over £17m bringing the claim and received £43m in the final settlement.
As climate-related cases increase in number and in quantum, we may see the rise of investment opportunities, speciality climate litigation funders and a new strategy in a (still) emerging asset class for private capital funds.
Competition law opt-out claims
Previously we wrote about the series of opt-out class actions for which an initial hearing (to determine whether to grant a Collective Proceedings Order) took place on 23–25 September 2024 – at the time of writing, judgment is pending. These claims are brought by Professor Carolyn Roberts on behalf of over 20m water company customers. In total these claims seek around £20m in damages. The claims before the Competition Appeal Tribunal (CAT) are the first to argue the abuse of a dominant position in relation to breaches of environmental laws. They focus on the failure of six water companies to adequately and accurately report the number of times that they caused polluting incidents by discharging or spilling raw waste into waterways in breach of legislation. As consumer prices are linked to performance objectives for each of the water companies, Professor Roberts alleges that their failure to accurately report these incidents resulted in avoidance of penalties from the regulator, OfWat, and increased consumer bills, amounting to the abuse of a monopolistic position.
If these cases succeed at the certification stage, it should be expected that further cases of a similar nature will be brought before the CAT, particularly considering the increasing quantity of opt-out claims being launched. It remains to be seen whether opt-out claims will be a viable means of challenging climate-related issues. It is at least possible that English claims will follow a similar trajectory to Australia, which has one of the most developed class action markets in the world and the highest per capita rate of climate-related litigation, including several climate-related class actions against the Commonwealth Government.
Financial disclosures and reporting
We have previously written about the first case of its kind to be filed in the English courts: a claim filed on behalf of institutional shareholders against Boohoo Group plc, who claim to have suffered loss due to Boohoo’s alleged breaches of s.90 and s.90A of the Financial Services and Markets Act 2000. Those statutory provisions enable investors to seek compensation for losses resulting from untrue or misleading statements, a dishonest delay in disclosing information and/or a failure to disclose relevant information.
Whilst domestic litigation relating to climate disclosures is to date limited, it is likely to increase amidst the increase in climate reporting and disclosure obligations introduced by instruments such as the EU’s Corporate Sustainability Reporting Directive, the expected UK Sustainability Reporting Standards, the Taskforce on Climate-Related Financial Disclosures (TCFD), and the Taskforce on Nature-Related Financial Disclosures (which is expected to become mandatory in the future given the TCFD trajectory).
The case is an example of how market reactions to ESG-related issues can dramatically impact corporate valuations and shareholder value. In a report by the Grantham Research Institute, it was found that receipt of a claim, or receiving an unfavourable outcome for a corporate, can reduce a firm’s value by -0.41% on average, relative to expected values. The report shows that the largest stock market responses were found for cases filed against the Carbon Majors5, reducing firm value by 0.57% following case filings and by 1.5% for unfavourable judgments. The Grantham Institute has predicted in its 2024 climate litigation snapshot that further claims will be brought against corporates and corporate actors in the coming years, following an increase in the global number of claims against corporations (25% of filed cases in 2023 related to corporates, with 40% of non-US cases being against corporate actors).
Whilst legal successes are limited, indirect impacts of climate litigation are developing
The development of climate litigation, in both the public and private legal spheres, demonstrates that at first if claimants don’t succeed, they try again and in novel ways. Even against the increasing backdrop of anti-ESG sentiment, regulation, and litigation, particularly in the US, global climate litigation continues to achieve considerable indirect impact.
With changes to financial markets, the insurance sector, litigation funding, consumer preferences and employment considerations, it is evident that climate litigation’s impact is being felt outside of the courtroom regardless of the legal outcome.
Whilst climate litigation is continuing to grow year-on-year, with nature-related litigation following a similar trajectory (which we will be covering in a future article), despite the often negative results in the courtroom, a snowball effect is expected in the number of claims brought, as the confidence and prominence of climate activists grow.
1 SDCEA & Groundwork v Minister of Foresty, Fisheries and the Environment ;Africa Climate Alliance et al v Minister of Mineral Resources and Energy et al
2 Citizens’ Committee of the Kobe Coal-Fired Power Plant v Kobe Steel Ltd et al; Youth Climate Case Japan For Tomorrow
3 Greenpeace New Zealand v Northland Regional Council; Lawyers for Climate Action NZ v Minister of Climate Change
4 Do-Hyun Kim et al v South Korea; Woodpecker et al v South Korea
5 The Carbon Majors are 90 corporate investor-owned entities which have been identified by research as entities responsible for fully two thirds of global carbon emissions between 1850-2010.
“A snowball effect is expected in the number of claims brought, as the confidence and prominence of climate activists grow.”
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