Earlier this month Network for Greening the Financial System (NGFS) published a report titled “Nature-related litigation: emerging trends and lessons learned from climate-related litigation”. We share insights on the report and some of our key takeaways for directors and financial institutions below: ❓What is nature-related litigation❓ 🌳NGFS defines nature-related litigation as all strategic claims, brought before judicial bodies, focusing on climate, biodiversity loss and ecosystem services degradation. 🌳Whilst the majority of cases to date have been directed at states and public entities, litigants are starting to target corporates and financial institutions for causing adverse impacts on ecosystems, in particular through global supply chains. ❓What are the emerging trends in nature-related litigation against corporates❓ NGFS identified a number of cases filed against companies and financial institutions, challenging their role in causing adverse impacts on ecosystems, in particular through global supply chains. Examples of three strategic nature-related litigation cases are: 1️⃣ Under corporate sustainability due diligence legislation: a French credit institution has been challenged on the alleged inadequacy of its due diligence plan to prevent deforestation in the Amazon, and the violation of the rights of indigenous communities. The claim refers to the commercial ties of the credit institution to beef producers operating in the region. 2️⃣ In tort law: in Brazil, litigants have brought a case seeking to hold a steel company and its manager accountable for promoting illegal deforestation, as well as climate damages through GHG emissions derived from illegally sourced coal. 3️⃣ Shareholder rights: in Australia, a shareholder of the listed parent of a financial group has sought the court’s permission to access internal risk management documents, claiming that the bank within the group is failing to properly manage the twin crises of climate change and biodiversity loss. 💡Takeaways for directors and financial institutions: 👉Like for climate-related litigation, a potential trend may emerge in respect of claims arising from company law, such as shareholder actions against directors for breaches of fiduciary duties. 👉 Recent legal opinions commissioned by Commonwealth Climate and Law Initiative (CCLI) and Pollination point to the possibility of litigation risk arising from directors’ duties under existing corporate law, arguing that such duties include the responsibility to identify the company’s nature-related dependencies and impacts, as well as consider the potential risks these might pose to the company. 👉While strategic nature-related litigation is still in its infancy, the NGFS anticipates that the nature, scope and addressees of nature-related legal action will continue to evolve and grow. 👇 Links to resources in comments below. 📷from the NFGS report, page 17
In Brazil litigants bring a case seeking to hold a steel company and its manager accountable for promoting illegal deforestation: https://climatecasechart.com/non-us-case/federal-environmental-agency-ibama-v-siderurgica-sao-luiz-ltda-and-martins/
Landmark English law legal opinion on nature-related risks and directors’ duties: https://commonwealthclimatelaw.org/company-directors-should-consider-companys-nature-related-risks-including-climate-risks-landmark-english-law-legal-opinion/
In Australia a shareholder claims that a bank is failing to properly manage the twin crises of climate change and biodiversity loss https://law.app.unimelb.edu.au/climate-change/case.php?CaseID=988&browseAlpha=1
Landmark Australia law legal opinion on nature-related risks and directors duties: https://commonwealthclimatelaw.org/australian-company-directors-exposed-to-nature-related-risk-new-legal-opinion/
A French credit institution challenged on the inadequacy of its due diligence plan to prevent deforestation in the Amazon: https://climatecasechart.com/wp-content/uploads/non-us-case-documents/2023/20230227_19040_summons.pdf