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Climate Litigation in Financial Markets: A Typology

Published online by Cambridge University Press:  06 November 2019

Javier Solana
Javier Solana*
Affiliation:
University of Glasgow School of Law, Glasgow (United Kingdom (UK)). Email: [email protected].
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Abstract

Over the past few years, the number of climate cases being filed against corporations and public authorities around the world has been on the rise. Aware of the central role of finance in economic development, the financial sector has remained vigilant. Traditionally, climate litigation in financial markets had been rare, but that seems to be changing: in 2018 there were more cases filed than in any previous year. The development of existing and forthcoming private and public sector initiatives with the aim of promoting sustainable finance may usher in even greater numbers in the next few years. This article provides the first systematic overview of climate cases in financial markets and introduces a typology to classify this type of climate case. This classification reveals common issues across different financial systems and raises questions for further enquiry that define a new research area within the emerging literature on climate litigation.

Keywords

Climate changeClimate litigationClimate financeSustainable financeDisclosureFiduciary duties
Type
Symposium Article
Information
Transnational Environmental Law , Volume 9 , Issue 1 , March 2020 , pp. 103 - 135
Copyright
Copyright © Cambridge University Press 2019

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Footnotes

This contribution is part of a collection of articles growing out of the conference ‘Climate Change Litigation’, held at Aarhus University Department of Law, Aarhus (Denmark), 14–15 June 2018.

I would like to thank Peter Barnett, Iain MacNeil, and two anonymous referees for their useful comments and feedback on earlier versions of this article. All errors are my own.

References

1 See UN Climate Change, ‘Introduction to Climate Finance’, 2019, available at: https://unfccc.int/topics/climate-finance/the-big-picture/introduction-to-climate-finance.

2 This article adheres to the UN's broad understanding of the term ‘climate finance’ in the context of the UNFCCC (n. 3 below): ‘Climate finance refers to local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change’: UN Climate Change, ibid.

3 New York, NY (US), 9 May 1992, in force 21 Mar. 1994, available at: http://unfccc.int.

4 For an overview of the introduction of climate finance into the negotiations of the UNFCCC and its accompanying protocols and agreements, see UN Climate Change, ‘Climate Finance’, 2019, available at: https://unfccc.int/topics/climate-finance/the-big-picture/climate-finance-in-the-negotiations.

5 China and the European Union (EU) have taken a leading role. See, e.g., The People's Bank of China, The Ministry of Finance, National Development and Reform Commission, The Ministry of Environment Protection, China Banking Regulatory Commission, China Securities Regulatory Commission & China Insurance Regulatory Commission, ‘Guidelines for Establishing the Green Financial System’, 31 Aug. 2016, available at: http://www.pbc.gov.cn/english/130721/3133045/index.html; Communication from the European Commission, ‘Action Plan: Financing Sustainable Growth’, 8 Mar. 2018, COM(2018)97 final, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018DC0097 (EC Sustainable Finance Action Plan).

6 This represents approximately 2.5% of the world's gross domestic product: IPCC, ‘Global Warming of 1.5°C: Summary for Policy Makers’, Oct. 2018, para. D.5.3, available at: https://www.ipcc.ch/sr15.

7 EC Sustainable Finance Action Plan, n. 5 above, p. 2.

8 Ibid. Shortly thereafter, the European Commission adopted a package of measures implementing several key actions announced in its action plan: European Commission, ‘Sustainable Finance’, available at: https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance_en.

9 Together with the EU, China has taken a leading role in promoting sustainable finance. See, e.g., the Green Investment Guidelines adopted by the Asset Management Association of China, 10 Nov. 2018, available at: http://www.gflp.org.cn/index/index/newsdetail/id/31.html; and Peng, H., Lu, X. & Zhou, C., ‘Introduction to China's Green Finance System’ (2018) 11(1) Journal of Service Science and Management, pp. 94–100CrossRefGoogle Scholar. In the United Kingdom (UK) and California (United States (US)), recent legislative initiatives will require pension funds to start disclosing their climate change strategy as soon as Oct. 2019: see S. Rust, ‘DWP Drops “Statement on Member Views” Requirement from ESG Rules’, IPE, 11 Sept. 2018, available at: https://www.ipe.com/news/esg/dwp-drops-statement-on-member-views-requirement-from-esg-rules/10026589.article; J. Thompson, ‘California Turns up the Heat on Climate Change Disclosures’, Financial Times, 29 Sept. 2018, available at: https://www.ft.com/content/a4c8fffa-869a-3e76-8e05-e8acc572d293.

10 See M. Nachmany & J. Setzer, ‘Global Trends in Climate Change Legislation and Litigation: 2018 Snapshot’, Grantham Research Institute Report, May 2018, p. 5, available at: http://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2018/04/Global-trends-in-climate-change-legislation-and-litigation-2018-snapshot-3.pdf.

11 Ibid.

12 See, e.g., Task Force on Climate-related Financial Disclosures (TCFD), ‘Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures’, 29 June 2017, available at: https://www.fsb-tcfd.org/publications/final-recommendations-report; Prudential Regulation Authority, ‘The Impact of Climate Change on the UK Insurance Sector’, Sept. 2015, pp. 57–65, available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/publication/impact-of-climate-change-on-the-uk-insurance-sector.pdf.

13 See Peel, J. & Osofsky, H.M., ‘Litigation's Regulatory Pathways and the Administrative State: Lessons from U.S. and Australian Climate Change Governance’ (2013) 25 Georgetown International Environmental Law Review, pp. 207–59, at 210–11Google Scholar.

14 For prominent examples of this literature, see the list of works in Setzer, J. & Bangalore, M., ‘Regulating Climate Change in the Courts’, in Averchenkova, A., Fankhauser, S. & Nachmany, M. (eds), Trends in Climate Change Legislation (Edward Elgar, 2017), pp. 175–92, at 177CrossRefGoogle Scholar.

15 Ibid., pp. 177–8.

16 Ibid., pp. 178–80. For a more recent review on the literature, see Setzer, J. & Vanhala, L., ‘Climate Change Litigation: A Review of Research on Courts and Litigants in Climate Government (2019) 10(3) Wiley Interdisciplinary Reviews: Climate ChangeGoogle Scholar online articles, available at: https://onlinelibrary.wiley.com/doi/abs/10.1002/wcc.580.

17 N. 10 above.

18 See, e.g., Wallace, P., ‘Climate Change, Corporate Strategy, and Corporate Law Duties’ (2009) 44(3) Wake Forest Law Review, pp. 757–76Google Scholar; S. Barker, ‘Directors Duties in the Anthropocene: Personal Liability for Corporate Inaction on Climate Change’ (Master's thesis, University of Melbourne, Victoria (Australia), 2013), available at: http://responsible-investmentbanking.com/wp-content/uploads/2014/11/Directors-Duties-in-the-Anthropocene-December-2013.pdf; M. Gold & A. Scotchmer, ‘Climate Change and Fiduciary Duties of Pension Fund Trustees in Canada’, Koskie Minsky LLP, 18 Sept. 2015, available at: https://www.turnbackthetide.ca/tools-and-resources/whatsnew/2015/KoskieMinskyLLP.pdf; Barker, S. et al. , ‘Climate Change and the Fiduciary Duties of Pension Fund Trustees: Lessons from the Australian Law’ (2016) 6(3) Journal of Sustainable Finance & Investment, pp. 211–44CrossRefGoogle Scholar; Erion, G., ‘The Stock Market to the Rescue? Carbon Disclosure and the Future of Securities-Related Climate Change Litigation’ (2009) 18(2) Review of European, Comparative & International Environmental Law, pp. 164–71CrossRefGoogle Scholar; J. Solana, ‘The Power of the Eurosystem to Promote Environmental Protection’, (2019) European Business Law Review (forthcoming), available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3241341.

19 The three other circles include, in order of proximity to the core: (i) litigation with climate change as a peripheral issue; (ii) litigation with climate change as one motivation but not raised as an issue, e.g., cases against coal brought on environmental grounds; and (iii) litigation with no specific climate change framing but implications for mitigation or adaptation, e.g., fracking cases: Peel, J. & Osofsky, H.M., Climate Change Litigation: Regulatory Pathways to Cleaner Energy (Cambridge University Press, 2015), p. 8CrossRefGoogle Scholar.

20 This is in line with empirical analyses of climate litigation: see, e.g., Markell, D. & Ruhl, J.B., ‘An Empirical Assessment of Climate Change in the Courts: A New Jurisprudence or Business as Usual’ (2012) 64(1) Florida Law Review, pp. 15–86, at 27Google Scholar.

21 Armour, J. et al. , Principles of Financial Regulation (Oxford University Press, 2016), pp. 22–3CrossRefGoogle Scholar (emphasis in original).

22 Database available at: http://climatecasechart.com.

23 Database available at: http://www.lse.ac.uk/GranthamInstitute/climate-change-laws-of-the-world.

24 See Nachmany & Setzer, n. 10 above.

25 See, e.g., Gahleigh, N.S., ‘“Six Honest Serving-Men”: Climate Change Litigation as Legal Mobilization and the Utility of Typologies’ (2010) 1(1) Climate Law, pp. 31–61CrossRefGoogle Scholar; Preston, B.J., ‘Climate Change Litigation (Part 1)’ (2011) 5(1) Carbon & Climate Law Review, pp. 3–14CrossRefGoogle Scholar; Preston, B.J., ‘Climate Change Litigation (Part 2)’ (2011) 5(2) Carbon & Climate Law Review, pp. 244–63CrossRefGoogle Scholar; D. Markell & J.B. Ruhl, n. 20 above; Wilensky, M., ‘Climate Change in the Courts: An Assessment of Non-U.S. Climate Litigation’ (2015) 26(1) Duke Environmental Law & Policy Forum, pp. 131–79Google Scholar; Setzer & Bangalore, n. 14 above.

26 See Peel, J. & Osofsky, H.M., ‘A Rights Turn in Climate Change Litigation?’ (2018) 7(1) Transnational Environmental Law, pp. 37–67, 48–60CrossRefGoogle Scholar.

27 See Stichting Urgenda v. Government of the Netherlands (Ministry of Infrastructure and the Environment), ECLI:NL:RBDHA:2015:7145, Rechtbank Den Haag, C/09/456689/HA ZA 13-1396 (Urgenda); Ashgar Leghari v. Federation of Pakistan (W.P. No. 25501/2015), Lahore High Court Green Bench, Orders of 4 Sept. and 14 Sept. 2015 (Leghari), para. 7; Juliana v. United States, No. 6:15-cv-01517, (D.Or., 10 Nov. 2016) (Aiken, J.) 46 ELR 20175 (Juliana).

28 See Urgenda, ibid.

29 See Leghari, n. 27 above, para. 7; Case No. W109 2000179-1/291E, Federal Administrative Court, Austria, 2 Feb. 2017 (Vienna International Airport); Earthlife Africa Johannesburg v. Minister of Environmental Affairs & Others, Case No. 65662/16, Judgment of the High Court of South Africa, Gauteng Division, Pretoria (South Africa), 8 Mar. 2017.

30 Ibid. Other fundamental rights arguments rely on the right to liberty and property (see Juliana, n. 27 above) and the principles of sustainability and environmental protection (see Leghari, n. 27 above, para. 7; Vienna International Airport, ibid.).

31 For an analysis of this typology, see Peel & Osofsky, n. 19 above, pp. 30–2.

32 See The Queen (on the Application of People and Planet) v. HM Treasury, High Court of Justice, Queen's Bench Division, Administrative Court, 20 Oct. 2009, [2009] EWHC 3020 (Admin) (RBS), para. 10.

33 The UK Human Rights Act (HRA) 1998 gives further effect to rights and freedoms guaranteed under the European Convention on Human Rights (ECHR) (Rome (Italy), 4 Nov. 1950, in force 3 Sept. 1953, available at: http://www.echr.coe.int/pages/home.aspx?p=basictexts). Art. 1 HRA identifies the specific provisions of the ECHR that comprise the category of ‘Convention rights’ under the HRA.

34 See RBS, n. 32 above, para. 12.

35 ECtHR, 10 Jul. 2012, Dennis Grainger and Others v. United Kingdom, Appl. No. 34940/10 (Grainger), paras 3–18.

36 Ibid., para. 32.

37 See EFTA Court, Case E-16/11 European Free Trade Association (EFTA) Surveillance Authority v. Iceland, 28 Jan. 2013 [2013] EFTA Court Reports (nyr) (Icesave); ECtHR, 14 Jan. 2014, Adorisio v. The Netherlands, Appl. No. 47315/13 (Adorisio); Goldman Sachs International v. Novo Banco S.A., UK Supreme Court, 4 July 2018 [2018] UKSC 34 (Novo Banco).

38 For a critical analysis of these decisions, see D. Ramos & J. Solana, ‘Fundamental Rights: A Limit to Bail-in?’, 31 May 2019 (on file with the author).

39 ‘Green assets’ refers to assets in low-carbon industries and ‘brown assets’ to assets in carbon-intensive industries: see P. D'Orazio & L Popoyan, ‘Fostering Green Investments and Tackling Climate-Related Financial Risks: Which Role for Macroprudential Policies?’, LEM Working Paper Series ISSN (Online) 2284-0400 2018/33, 12 Nov. 2018, available at: https://ssrn.com/abstract=3106350.

40 See, e.g., J. Dankert et al., ‘A Green Supporting Factor: The Right Policy?’, SUERF Policy Note, Issue No. 43, Oct. 2018, available at: https://www.suerf.org/policynotes/3473/a-green-supporting-factor-the-right-policy.

41 See, e.g., Grainger, n. 35 above, para. 33.

42 See Ramos & Solana, n. 38 above.

43 See, e.g., Case C-526/14, Tadej Kotnik and Others v. Slovenia [2016] ECLI:EU:C:2016:570 (Kotnik), para. 65.

44 Ibid., para. 66; Grainger, n. 35 above, para. 39. Both cases confirm that public authorities will enjoy wide political discretion when the exercise of their powers ‘involves complex economic and social assessments’: see, e.g., Kotnik, ibid., para. 38.

45 Paris (France), 12 Dec. 2015, in force 4 Nov. 2016, available at: http://unfccc.int/paris_agreement/items/9485.php.

46 For a list of examples, see n. 9 above.

47 See, e.g., Case C-370/12, Thomas Pringle v. Government of Ireland and Others [2012] ECLI:EU:C:2012:756; Case C-62/14, Peter Gauweiler and Others v. Deutscher Bundestag [2015] ECLI:EU:C:2015:400 (Gauweiler); Case C-493/17, Heinrich Weiss and Others [2018] ECLI:EU:C:2018:1000 (Weiss).

48 See Ramos, D. & Solana, J., ‘Bank Resolution and Creditor Distribution: The Tension Shaping Global Banking – Part I: “Individual v. Bank Group” and “Ex Ante v. Ex Post” Dimensions’ (2019) 28 University of Miami Business Law ReviewGoogle Scholar (forthcoming); Ramos, D. & Solana, J., ‘Bank Resolution and Creditor Distribution: The Tension Shaping Global Banking – Part II: The Cross-border Dimension’ (2019) 28 University of Miami Business Law ReviewGoogle Scholar (forthcoming).

49 This is a common measure across different regulatory initiatives that aim to promote sustainable finance. See, e.g., EC Sustainable Finance Action Plan, n. 5 above, p. 9. One of the main arguments against lowering capital requirements for green financial assets is that there is no direct relationship between sustainability and lower credit risk: see, e.g., F. van Lerven & J. Ryan-Collins, ‘Adjusting Banks’ Capital Requirements in Line with Sustainable Finance Objectives’, 28 Feb. 2018, available at: https://www.ucl.ac.uk/bartlett/public-purpose/sites/public-purpose/files/briefing-note-capital-requirements-for-sustainable-finance-objectives.pdf.

50 For an overview of these debates with regard to the ECB's mandate, see Solana, n. 18 above, pp. 2–3.

51 The European Commission has proposed broadening the scope of the mandates of the European Supervisory Authorities (ESAs) to include the supervision of sustainability issues: see EC Sustainable Finance Action Plan, n. 5 above, p. 12. This kind of initiative might help to forestall claims of ultra vires but would still leave the door open to claims seeking to challenge the actual exercise of new powers. In this context, potential claimants are likely to rely on fundamental rights arguments. See Section 3.1 above.

52 Lisbon (Portugal), 13 Dec. 2007, in force 1 Dec. 2009 [2012] OJ C 326/47, available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2012:326:FULL:EN:PDF.

53 For a critical analysis of the Eurosystem's monetary policy under Art. 11 TFEU, see Solana, n. 18 above.

54 Under English law, this type of breach would give rise to different remedies, e.g., restoration of the trust property that was removed from the trust such as by selling the shares or seeking compensation for any loss to the trust: see MacNeil, I.G., An Introduction to the Law of Financial Investment (Hart, 2012), p. 177Google Scholar. Similar issues could arise in the context of corporate law. For example, a bank's constitution might provide for a similar purpose. Under UK law, company directors are bound by a statutory duty to act in accordance with the company's constitution: Companies Act 2006, s. 171(a). I describe the potential remedies available to a company in the event of a breach of directors’ duties in Section 3.6 below.

55 Franta, B., ‘Litigation in the Fossil Fuel Divestment Movement’ (2017) 39(4) Law & Policy, pp. 393–411CrossRefGoogle Scholar.

56 See Harvard Climate Justice Coalition and Others v. Harvard Corporation and Others, Complaint for Declaratory and Injunctive Relief, 19 Nov. 2014, paras 41–62, available at: http://climatecasechart.com/case/harvard-climate-justice-coalition-v-president-fellows-of-harvard-college.

57 Harvard Climate Justice Coalition and Others v. Harvard Corporation and Others, Massachusetts Superior Court, 17 Mar. 2015, Civil Action No. 2014-3620-H.

58 Harvard Climate Justice Coalition and Others v. Harvard Corporation and Others, Massachusetts Appellate Court, 6 Oct. 2016, No. 15-P-905.

59 The Appraisal and Valuation in Central Government (the ‘Green Book’) sets out HM Treasury guidance regarding decision making in central government: see RBS, n. 32 above, para. 8.

60 RBS, n. 32 above, para. 9. The same paragraph describes the other two grounds: regard to industry-wide regulation to deal with environmental problems as an irrelevant consideration; and a misapplication of s. 172 Companies Act 2006, which sets out basic corporate governance rules.

61 RBS, n. 32 above, para. 21.

62 Ibid., paras 26–30.

63 Ibid., paras 22, 25.

64 Solana, n. 18 above.

65 Ibid., n. 18 above, pp. 17–19

66 Ibid.

67 Center for Biological Diversity and Others v. Export-Import Bank of the US and Others, US Court of Appeals for the Ninth Circuit, 16-15946, 28 June 2018 (Ex-Im Bank), pp. 4–5.

68 See also Mississippi Insurance Department v. US Department of Homeland Security and Others, Federal District Court for the Southern District of Mississippi, Complaint, 26 Sept. 2013, 1:13-cv-379-LG-JMR (Mississippi Insurance Department).

69 Friends of the Earth, Inc. and Others v. Peter Watson and Phillip Merrill, US Federal District Court for the Northern District of California, 23 Aug. 2005, No. C 02-4 106 JSW.

70 For details see http://climatecasechart.com/case/friends-of-the-earth-v-watson.

71 Sierra Club v. US Department of Agriculture, Rural Utilities Service, US District Court for the District of Columbia, Order, 29 Mar. 2011, Case 1:07-cv-01860-EGS.

72 Sierra Club v. US Department of Agriculture, Rural Utilities Service, ibid., Memorandum of Opinion, 31 Jan. 2012.

73 Ex-Im Bank, n 67 above.

74 Ibid., p. 7.

75 Ibid., p. 8.

76 Ibid., p. 16. The court also relied on the absence of the funding contracts from the record to dismiss the respondents’ arguments that the claims were moot because the projects had been completed, the loans disbursed, and one of them fully repaid, therefore leaving Ex-Im Bank no channel to affect the environmental impact of the project: ibid., p. 10.

77 Ibid., p. 17.

78 Chesapeake Climate Action Network v. Export-Import Bank of the United States, US District Court for the District of Columbia, Memorandum Opinion, 21 Jan. 2015, 13-1820 (RC).

79 Complaint to the Commonwealth Ombudsman presented by Environmental Justice Australia, 6 July 2018: Environmental Justice Australia, ‘EJA Files Complaint with Ombudsman about EFIC’, available at: https://www.envirojustice.org.au/projects/eja-files-complaint-with-ombudsman-about-efic.

80 Letter from Environmental Justice Australia to EFIC, 13 June 2018: Environmental Justice Australia, ibid.

81 Environmental Justice Australia, ‘The Real Risks of EFIC Support for Adani’, 6 June 2018, available at: https://www.envirojustice.org.au/projects/eja-files-complaint-with-ombudsman-about-efic. Environmental Justice Australia had made a similar, yet more elaborate, argument in relation to the financing by Northern Australia Infrastructure Facility of a railway project tied to the exploitation of a coal mine: see Environmental Justice Australia, Submission to the Senate Standing Committee on Economics, 28 July 2017, paras 9–33, available at: https://www.envirojustice.org.au/our-work/climate/climate-and-finance/adani-naif-and-efic.

82 The Commonwealth Ombudsman has the power to compel EFIC to disclose internal documents, such as the Board's assessment: see Environmental Justice Australia, n. 79 above.

83 Another evident litigation front is public authority mandates: see Section 3.2 above.

84 Institute for Energy Research v. US Department of the Treasury, US District Court for the District of Columbia, Complaint, 17 Jul. 2018, C.A. No. 18-1677 (Institute for Energy Research).

85 N. 12 above.

86 E.g., Art. 2.3 of the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (Aarhus (Denmark), 25 June 1998, in force 30 Oct. 2001, available at: https://www.unece.org/env/pp/treatytext.html) does not seem to regard financial data as ‘environmental information’. In Friends of the Earth Germany, two environmental NGOs challenged the refusal by the Federal Ministry of Economic Affairs and Labour (BMWA) to provide them with certain environmentally sensitive information relating to export credit support and/or guarantees provided by BMWA. The Berlin Administrative Court examined whether the information requested by the claimants fell within the scope of the German Access to Environmental Information Act of 2003 as amended, and proposed a settlement to the parties detailing the elements that BMWA would have to disclose: Bundes fur Umwelt und Naturschutz Deutschland e.V. & Germanwatch e.V. v. Bundesrepublik Deutschland, vertreten durch Bundesminister fur Wirtschaft und Arbeit, Verwaltungsgericht Belin, 10 Jan. 2006, VG 10 A 215.04 (Friends of the Earth Germany). An unofficial translation of the German original is available at: http://climatecasechart.com/non-us-case/german-federation-for-environment-and-conservation-bund-ev-v-minister-for-commerce-and-labor-on-behalf-of-federal-republic-of-germany.

87 In addition to the public authorities in the jurisdictions mentioned above, most multilateral financial institutions engage in environmental impact assessment: see W.V. Kennedy, ‘EIA and Multi-lateral Financial Institutions’, conference paper presented at OECD Conference on FDI and the Environment, The Hague (The Netherlands), 28–29 Jan. 1999, available at: http://www.oecd.org/daf/inv/investmentfordevelopment/2076277.pdf.

88 See W.X. Ming, ‘The Banking Regulatory Bureau Imposed Penalties for the First Time on the Basis of Green Credit Guidelines: How Should the Banking Industry Respond to the New Requirements for Green Credit?’, Blue Map, 12 July 2018, available at: https://mp.weixin.qq.com/s/T8VcbIZFIVMv40AAodnRSA.

89 See, e.g., Regulation (EU) 2017/1129 on the Prospectus to be Published when Securities Are Offered to the Public or Admitted to Trading on a Regulated Market [2017] OJ L 168/12 (Prospectus Regulation).

90 See Armour et al., n. 21 above, pp. 62–4.

91 See Letter, CCAN and Ruth McElroy Amundsen to the SEC in the matter of Dominion Midstream Partners LP Registration Statement, 6 May 2014, available at: http://climatecasechart.com/case/letter-to-securities-and-exchange-commission-regarding-dominion-midstream-partners-lp-registration-statement.

92 For details see ibid., pp. 6–7.

93 See Letter from 20 NGOs to the 14 banks that underwrote the Kinder Morgan Canada IPO and the 14 other banks involved in current and past Kinder Morgan revolving credit facilities, 6 June 2017, available at: http://www.amisdelaterre.org/IMG/pdf/final_trans_mountain_letter_june_2017.pdf. Kinder Morgan is one of the largest energy infrastructure companies in North America, with its headquarters in Houston, TX (US).

94 Ibid.

95 See, e.g., EC Sustainable Finance Action Plan, n. 5 above.

96 As we shall see in the next subsection, there are precedents of investors suing issuers for loss compensation on grounds that the latter misrepresented information in their statutory reports.

97 See, for all, Australian Competition and Consumer Commission, ‘Goodyear Tyres Apologises, Offers Compensation for Unsubstantiated Environmental Claims’, 26 June 2008, available at: http://climatecasechart.com/non-us-case/australian-competition-and-consumer-commission-v-goodyear-tyres.

98 Letter from New York AGO to the Chairman of Dominion Resources, Inc., 14 Sept. 2007, available at: http://climatecasechart.com/case/in-re-dominion-resources-inc (In Re Dominion Resources); Assurance of Discontinuance in the Matter of Dynegy Inc., AOD #08-132, 23 Oct. 2008, available at: http://climatecasechart.com/case/in-re-dynegy-inc (In re Dynegy); Assurance of Discontinuance in the Matter of The AES Corp., AOD # 09-15, 19 Nov. 2009, available at: http://climatecasechart.com/case/in-re-aes-corp (In re AES); Assurance of Discontinuance in the Matter of Peabody Energy Corp., AOD # 15-242, 8 Nov. 2015, available at: http://climatecasechart.com/case/in-re-peabody-energy-corp (In re Peabody); Letter from New York AGO to S. Jack Balagia Jr., Vice-President and General Counsel of Exxon Mobil Corporation, 4 Nov. 2015, available at: http://climatecasechart.com/case/new-york-attorney-general-investigation-of-exxonmobil (In re Exxon Mobil (NY)).

99 See Letter from Massachusetts AGO to Exxon Mobil Corp., 2016-EPD-36, 19 Apr. 2016 (In re Exxon Mobil (MA)). See also US Virgin Islands Office of the Attorney General v. Exxon Mobil Corporation, 4 Apr. 2016, Case No. 2016 CA 002469. Both documents are available at: http://climatecasechart.com/case/in-re-civil-investigative-demand-no-2016-epd-36.

100 See In re Dynegy, n. 98 above; In re AES, n. 98 above. In In re Peabody (n. 98 above) the company agreed to disclose similar information in its regular reports to the SEC and to avoid disclosing information to ‘shareholders, the financial industry, investors, the general public and others’ that is inconsistent with certain guidelines regarding the company's projections of the impact of climate change on its business.

101 See In re Exxon Mobil (NY), n. 98 above. Similar fraud investigations have been launched by the Massachusetts AGO and the US Virgin Islands AGO. See In re Exxon Mobil (MA), n. 99 above; US Virgin Islands Office of the Attorney General v. Exxon Mobil Corporation, 4 Apr. 2016, Case No. 2016 CA 002469.

102 See People of the State of New York v. Exxon Mobil Corporation, Supreme Court of the State of New York, 28 Oct. 2018, No. 452044/2018.

103 On 26 July 2017, the claim was expanded to include additional investors who had acquired Exxon's publicly traded common stock between 31 Mar. 2014 and 30 Jan. 2017: Pedro Ramirez, Jr. and Others v. Exxon Mobil and Others, US District Court of the Northern District of Texas, Dallas Division, Complaint, 7 Nov. 2016, Case No. 3:16-cv-3111.

104 See Pedro Ramirez, Jr. and Others v. Exxon Mobil and Others, ibid., Opinion and Order, 14 Aug. 2018, Civil Action No. 3:16-cv-3111-K.

105 Ibid.

106 Greenpeace Canada, ‘Investor Beware: Kinder Morgan Canada's Climate Risk’, 9 Apr. 2018, available at: https://www.greenpeace.org/canada/en/publication/1290/investor-beware-kinder-morgan-canadas-climate-risk.

107 Greenpeace Canada, ‘Alberta Securities Commission Reviewing Greenpeace Complaint of Inadequate Disclosure of Climate Risk by Kinder Morgan’, 9 Apr. 2018, available at: https://www.greenpeace.org/canada/en/press-release/285/press-release-alberta-securities-commission-reviewing-greenpeace-complaint-of-inadequate-disclosure-of-climate-risk-by-kinder-morgan.

108 TCFD, n. 12 above.

109 For more information about the TCFD, see https://www.fsb-tcfd.org/about. For more information about the FSB, see http://www.fsb.org/about.

110 Greenpeace Canada, n. 106 above, pp. 6–9; see also TCFD, n. 12 above, pp. 5, 25–31.

111 Greenpeace Canada, n. 107 above.

112 These included the Annual Report, Directors’ Annual Report and Financial Report for the 2016 financial year.

113 Guy Abrahams (and Another) v. Commonwealth Bank of Australia, Federal Court of Australia, General Division, Victoria District Court Registry, Concise Statement filed on 7 Aug. 2017, paras 16–19, available at: https://www.envirojustice.org.au/sites/default/files/files/170807%20Concise%20Statement%20(as%20filed).pdf (Abrahams).

114 Ibid., para. 20.

115 G. Hutchens, ‘Commonwealth Bank Shareholders Drop Suit over Nondisclosure of Climate Risks’, The Guardian, 21 Sept. 2017, available at: https://www.theguardian.com/australia-news/2017/sep/21/commonwealth-bank-shareholders-drop-suit-over-non-disclosure-of-climate-risks.

116 In ACCR, e.g., a bank published its notice of meeting for the annual general meeting but failed to include the vote on several resolutions advanced by a group of shareholders, who proposed that the bank disclose certain climate-related information. The shareholders filed a suit before the Federal Court of Australia seeking an injunction that the bank ensured that the first two resolutions be considered or moved at its next annual general meeting. The first instance court dismissed the shareholders’ claims and concluded that the proposed resolutions fell within the power of management, which the bank's constitution vested exclusively in the board: Australasian Centre for Corporate Responsibility v. Commonwealth Bank of Australia, Federal Court of Australia, General Division, Victoria District Court Registry, 31 July 2015, [2015] FCA 785 (ACCR), paras 16–40. The Federal Court of Australia confirmed the primary judge's decision: Australasian Centre for Corporate Responsibility v. Commonwealth Bank of Australia, Federal Court of Australia, 10 June 2016, 248 FCR 280 (2016). In the US, similar complaints have been filed before the SEC but, as of 31 Dec. 2018, none involved financial market participants. There are several examples of boards of directors that have supported shareholder resolutions seeking to enhance transparency on climate risks: see, e.g., A. Raval & O. Walker, ‘BP Agrees to Greater Climate Disclosure’, Financial Times, 1 Feb. 2019, available at: https://www.ft.com/content/60638ece-25b0-11e9-8ce6-5db4543da632. Despite cases like ACCR, the example of BP suggests that shareholder resolutions may be an effective mechanism to influence boards’ decision-making processes.

117 All complaints are available at: https://www.documents.clientearth.org/library/download-info/fca-complaint-lancashire-holdings-limited.

118 FCA Handbook, DTR 4.1.8 R, available at: https://www.handbook.fca.org.uk/handbook/DTR.

119 Directive 2004/109/EC on the Harmonisation of Transparency Requirements in relation to Information about Issuers whose Securities are Admitted to Trading on a Regulated Market and Amending Directive 2001/34/EC [2004] OJ L 390/38 (as amended) (Transparency Directive).

120 For all, see ClientEarth, ‘Complaint to the FCA: Lancashire Holdings Limited’, 2 Aug. 2018, paras 143–50, available at: https://www.documents.clientearth.org/library/download-info/fca-complaint-lancashire-holdings-limited.

121 For all, see ibid., paras 166, 168.

122 All complaints are available at: https://www.documents.clientearth.org/library/download-category/company-reporting.

123 FCA Handbook, n. 118 above, DTR 1A.3.2 R. FCA-approved primary information providers act as regulatory information services and disseminate regulatory announcements required by the Listing Rules and DTR on behalf of listed companies by passing the announcements to news vendors (i.e., secondary information providers). See Art. 89P Financial Services and Markets Act 2000. In addition to a breach of specific reporting requirements for listed companies under the DTR, the complaints further alleged that the failure of these four companies to disclose climate-related information in their annual reports had breached specific provisions of the 2006 Companies Act and the Listing Rules. For all, see ClientEarth, ‘Complaint to the FRC Conduct Committee: Bodycote PLC’, 7 Sept. 2018, paras 73–111, available at: https://www.documents.clientearth.org/library/download-category/company-reporting.

124 For all, see ibid., para. 116.

125 In certain cases, regulators have published formal guidance regarding existing disclosure requirements as they apply to climate change: see, e.g., Securities and Exchange Commission, ‘Commission Guidance regarding Disclosure related to Climate Change’, 8 Feb. 2010, available at: https://www.sec.gov/rules/interp/2010/33-9106.pdf; Canadian Securities Administrators, ‘CSA Staff Notice 51-333 Environmental Reporting Guidance’, 27 Oct. 2010, available at: https://www.osc.gov.on.ca/documents/en/Securities-Category5/csa_20101027_51-333_environmental-reporting.pdf.

126 See Rust, n. 9 above.

127 See Thompson, n. 9 above.

128 See ICMA, Green Bond Principles, June 2018, p. 3 (emphasis added). The Green Loan Principles (GLP) published by the Loan Market Association (LMA) include a very similar definition which emphasizes the need for green loans to ‘exclusively … finance or re-finance, in whole or in part, new and/or existing eligible Green Projects’: LMA, Green Loan Principles, 21 Mar. 2018, p. 2 (emphasis added).

129 ICMA, ibid., p. 3. See also LMA, ibid., p. 2.

130 E.g., investment funds seeking to commercialize green portfolios among their customers will be keen to guarantee that all the assets in that portfolio meet certain standards, including compliance with the GBP, lest those customers initiate legal proceedings for misrepresenting information: see Section 3.4 above.

131 See, e.g., K. Allen & J. Shotter, ‘Environmental Qualms Cloud Poland's Green Bond Sale’, Financial Times, 6 Feb. 2018, available at: https://www.ft.com/content/634b4fe8-074b-11e8-9650-9c0ad2d7c5b5.

132 E.g., the Final Terms of a EUR 300 million bond issue by a Polish energy company, Energa, in 2017 included an express restriction on the use of proceeds: ‘Proceeds will be used for funding distribution capex and for general corporate purposes. This facility will not be used for new power generation projects’ (emphasis added). The Final Terms are available at: https://www.bourse.lu/security/XS1575640054/248345.

133 These objectives are identified as one of the elements that issuers and borrowers should communicate to investors and lenders, respectively, as part of the Process for Project Evaluation and Selection: see ICMA, n. 128 above, p. 4; LMA, n. 128 above, p. 2.

134 In recent years, there have been several initiatives that aim to promote sustainable banking practices, e.g., the Equator Principles, which focus on Project finance, and the Principles for Responsible Banking, which have a more general application. Financial institutions subscribe voluntarily to these sets of principles. In order to comply with them, banks may be required to engage in environmental due diligence exercises.

135 See ICMA, n. 128 above, p. 4.

136 See ibid., p. 6; see also, LMA, n. 128 above, p. 3.

137 The AES Corporation v. Steadfast Insurance Company, Virginia Supreme Court, Record No. 100764, 20 Apr. 2012 (Steadfast Insurance).

138 Ibid., paras 21, 78. For an overview of the types of claim that policyholders might raise in relation to failure to mitigate or to adapt to the impacts of climate change, see ibid., paras 63–74.

139 See J. Reeves & J.M. Umbert, ‘Climate Change and Insurance: Litigation Risks for Insurers’, Insurance Law360, 23 Jan. 2019, available at https://www.zelle.com/news-publications-626.html.

140 For an analysis of the primacy of beneficiary interests in the duty of loyalty under US and UK law, see C. Woods, ‘Funding Climate Change: How Pension Fund Fiduciary Duty Masks Trustee Inertia and Short-Termism’, Oxford University Research Archive Working Paper, 2009, available at: https://ora.ox.ac.uk/objects/uuid:f8296faa-6757-4246-a8e7-c9894fe01fec. See also Freshfields Bruckhaus Deringer, ‘A Legal Framework for the Integration of Environmental, Social and Governance Issues into Institutional Investment’, Oct. 2005, available at: http://www.unepfi.org/fileadmin/documents/freshfields_legal_resp_20051123.pdf.

141 See J. Solomon, ‘Pension Fund Trustees and Climate Change’ (2009) ACCA Research Report No. 106, p. 22, available at: https://www.accaglobal.com/content/dam/acca/global/PDF-technical/climate-change/rr-106-001.pdf.

142 See, e.g., R. Nash, ‘Why Investors Should Act in Response to Climate-Related Risks and Opportunities: A Survey of Current Evidence’, report prepared for ClientEarth, Aug. 2018, available at: https://www.clientearth.org/top-uk-pension-funds-put-on-notice-over-climate-risk.

143 See The Economist Intelligence Unit, ‘The Cost of Inaction: Recognising the Value at Risk from Climate Change”, The Economist, 2015, available at: https://eiuperspectives.economist.com/sites/default/files/The%20cost%20of%20inaction_0.pdf.

144 See, e.g., M. Carney, ‘A Transition in Thinking and Action’, speech at International Climate Risk Conference for Supervisors, De Nederlandsche Bank, Amsterdam (The Netherlands), 6 Apr. 2018, available at: https://www.bankofengland.co.uk/speech/2018/mark-carney-speech-at-international-climate-risk-conference-for-supervisors. Institutional investors are increasingly aware of these risks: see, e.g., letter signed by 95 institutional investors representing USD 11.5 trillion of assets under management on 20 Dec. 2018, available at: https://www.iigcc.org/download/investor-letter-on-power-sector-decarbonisation/?wpdmdl=1832&refresh=5cefc0f1d7f421559216369.

145 Barker et al., n. 18 above, p. 226.

146 Freshfields Bruckhaus Deringer, n. 140 above, p. 13. See also R. Sullivan et al., ‘Fiduciary Duty in the 21st Century’, UNEP Report, Sept. 2015, available at: http://unepinquiry.org/publication/fiduciary-duty-in-the-21st-century.

147 The latest IPCC report has revisited the conclusions reached in earlier reports and presents dire prospects of limiting the warming of the planet to 1.5°C above pre-industrial times: IPCC, n. 6 above, para. D.1.

148 For an attempt to disentangle its intricate scope, see DeMott, D.A., ‘Beyond Metaphor: An Analysis of Fiduciary Obligation’ (1988) 37(5) Duke Law Journal, pp. 879–924CrossRefGoogle Scholar.

149 See, e.g., Bristol and West Building Society v. Mothew [1998] Ch 1, p. 16, para. F (per Millet LJ) (Mothew).

150 See, e.g., Companies Act 2006, s. 178(2).

151 Mark McVeigh v. Retail Employees Superannuation Pty Ltd, Federal Court of Australia, General Division, New South Wales District, Concise Statement filed on 23 Jul. 2018, available at: https://www.envirojustice.org.au/wp-content/uploads/2018/07/rest-concise-statement.pdf.

152 Mark McVeigh v. Retail Employees Superannuation Pty Ltd, Federal Court of Australia, General Division, New South Wales District, Amended Concise Statement filed on 21 Sept. 2018, available at: https://www.envirojustice.org.au/wp-content/uploads/2018/10/180921-Amended-Concise-Statement-STAMPED.pdf.

153 Ibid., paras 13–8.

154 In re Peabody, n. 98 above.

155 Lori J. Lynn and Javier Gonzalez v. Peabody Energy Corporations and Others, US District Court of the Eastern District of Missouri, Eastern Division, 30 Mar. 2017, Case No. 4:15-cv-00916 (Lynn), pp. 8–9.

156 Ibid., pp. 16–8.

157 Ibid., p. 14.

158 Bobby D. Fentress and Others v. Exxon Mobil Corporation and Others, US District Court of the Southern District of Texas, Houston Division, 30 Mar. 2018, Civil Action No. 4:16-cv-03484 (Fentress), pp. 1–4.

159 In re Exxon Mobil (NY), n. 98 above.

160 Fentress, n. 158 above, p. 6. The claimants also argued that the company had breached its duty to monitor the fiduciaries: ibid., pp. 26–7.

161 Ibid., p. 13.

162 Unlike in Lynn, however, the claimants in Fentress had provided several alternatives to holding company stock that a prudent fiduciary could have considered. The court dismissed all of the claimants’ arguments: ibid., pp. 17–26.

163 EAC, ‘MPs Seek Answers from Pension Funds on Climate Risk’, 5 Mar. 2018, available at: https://www.parliament.uk/business/committees/committees-a-z/commons-select/environmental-audit-committee/news-parliament-2017/green--finance-chairs-cooments-17-19.

164 EAC, ‘Greening Finance: Embedding Sustainability in Financial Decision Making’, 7th Report of Session 2017–19, 4 June 2018, para. 34.

165 See, e.g., Letter from ClientEarth to Mr H.C. Mather, Chairman of Trustees, Shell Contributory Pension Fund, 10 Aug. 2018, p. 1. This and the additional 13 letters are available at: https://www.documents.clientearth.org/library/download-category/pensions. The Pensions Ombudsman has legal powers to deal with complaints of maladministration and disputes of fact or law concerning personal and occupational pension schemes in the UK, and to make decisions that are final, binding and enforceable in court: Pension Schemes Act 1993, ss. 146, 150.

166 Under UK law, see, e.g., Companies Act 2006, s. 174.

167 See, e.g., the brief description of the financing arrangements of Kinder Morgan's Canada business as described in Greenpeace Canada, n. 106 above.

168 For a general analysis of directors’ duties of care and skill under UK law, see Arnold, M., ‘Duty to Exercise Reasonable Care, Skill, and Diligence’ in Mortimore, S. (ed.), Company Directors: Duties, Liabilities, and Remedies (Oxford University Press, 2017), pp. 327–44Google Scholar.

169 A company may pursue a damages claim in conjunction with contractual claims for breach of the director's service contract: A. Zacaroli, ‘The Company's Remedies for Breach of Directors’ General Duties’, in Mortimore, ibid., pp. 461–502, at 462.

170 In Mothew, Millet LJ defined a fiduciary as ‘someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence’ and her distinguishing obligation as one of loyalty: Mothew, n. 149 above, p. 18, para. B.

171 Indeed, preliminary legal assessments of the discharge of directors’ duties in the climate context of Australia, Canada, South Africa, and the UK suggest that there is a legal basis for directors and trustees to take account of physical climate change risk and societal responses to climate change. All reports are available at: https://ccli.ouce.ox.ac.uk/publications.

172 Companies Act 2006, s. 178(2).

173 As of Sept. 2018, more than 500 firms from a broad range of sectors with a combined market capitalization of over USD 7.9 trillion supported the TCFD. These included over 287 financial firms, responsible for assets of nearly USD 100 trillion: see TCFD, ‘2018 Status Report’, Sept. 2018, p. iv, available at: https://www.fsb-tcfd.org/wp-content/uploads/2018/08/FINAL-2018-TCFD-Status-Report-092518.pdf. Moreover, in some jurisdictions financial regulators have endorsed the TCFD as a reference standard for compliance with climate-related financial disclosures: see, e.g., Prudential Regulation Authority, ‘Enhancing Banks’ and Insurers’ Approaches to Managing the Financial Risks from Climate Change’, Supervisory Statement 3/19, Apr. 2019, para. 3.21.

174 For an analysis of the relevance of directors’ duties for climate litigation against fossil fuel companies in the US, see L. Benjamin, ‘The Road to Paris Runs Through Delaware: Climate Litigation and Directors’ Duties’ (2019) Utah Law Review (forthcoming). For a general analysis of the directors’ duty to promote the success of the company under UK law, see M. Arnold & M. Haywood, ‘Duty to Promote the Success of the Company’ in Mortimore, n. 168 above, pp. 279–313.

175 Contractual claims against company directors for breach of their service contract may also be available: Zacaroli, n. 169 above, pp. 461–76.

176 This is precisely the type of case that the science of extreme weather event attribution might promote: see Marjanac, S. & Patton, L., ‘Extreme Weather Event Attribution Science and Climate Change Litigation: An Essential Step in the Causal Chain?’ (2018) 36(3) Journal of Energy & Natural Resources Law, pp. 265–98, at 297CrossRefGoogle Scholar. See, e.g., Illinois Farmers Insurance Co. and Others v. Metropolitan Water Reclamation District of Greater Chicago and Others, US District Court for the Northern District of Illinois, Eastern Division, Notice of Dismissal, 3 June 2014, Case No. 14-CV-03251. The claimants, however, ultimately withdrew the case.

177 This is one of the objectives of the European Commission's Sustainable Finance Action Plan, n. 5 above.

178 There are precedents for this type of litigation in financial markets. For example, after the ECB, in the exercise of its resolution powers under the Single Resolution Mechanism, put a Spanish bank, Banco Popular, into resolution in June 2017, some of the banks’ creditors sued the ECB before the CJEU in an attempt to recover some of the losses they suffered. For a detailed analysis of these claims, see Ramos & Solana, n. 38 above.

179 See Heede, R., ‘Tracing Anthropogenic Carbon Dioxide and Methane Emissions to Fossil Fuel and Cement Producers, 1854–2010’ (2014) 122(1) Climatic Change, pp. 229–41CrossRefGoogle Scholar.

180 Marjanac & Patton, n. 176 above, p. 278.

181 See Lliuya v. RWE AG, Essen Regional Court, Case No. 2 O 285/15.

182 See Grossman, D., ‘Warming Up to a Not-So-Radical Idea: Tort-Based Climate Change Litigation’ (2003) 28(1) Columbia Journal of Environmental Law, pp. 1–62, at 6–7, 22–7Google Scholar. For a more recent review see Ganguly, G., Setzer, J. & Heyvaert, V., ‘If At First You Don't Succeed: Suing Corporations for Climate Change’ (2018) 38(4) Oxford Journal of Legal Studies, pp. 841–86CrossRefGoogle Scholar.

183 See Section 3.2.

184 The question is particularly relevant in those cases where financiers exert considerable control over the borrower, e.g., if they have one or several seats on the borrower's board of directors or as a result of loan covenants. Where such control exists, there may also be scope for claims of vicarious liability.

185 The TCFD has indeed identified climate litigation risk as in important risk in financial markets: TCFD, n. 12 above, p. 5.

186 This bias is widely acknowledged: see, e.g., Setzer & Bangalore, n. 14 above, p. 181.

187 See n. 18 above.

188 See, e.g., Grossman, n. 182 above; Peel & Osofsky, n. 19 above.

189 E.g., insurance companies appear to be particularly vulnerable to climate litigation: see Section 3.7 above.

190 See, e.g., Peel & Osofsky, n. 13 above; Setzer & Bangalore, n. 14 above.