Joana Setzer from the Grantham Research Institute on Climate Change at LSE discusses the implications on governments and companies of the growing wave of climate litigation.
While the world pins its hopes on emerging technologies such as hydrogen and carbon capture and storage to tackle climate change, the reality is that sometimes the ‘stick’ can be just as effective as the ‘carrot’. The growing raft of legal cases being brought against governments and companies for their perceived roles in causing the climate crisis certainly suggests this is the case; according to the United Nations Environmental Programme, climate cases have nearly doubled over the past three years.1
The reality is that sometimes the ‘stick’ can be just as effective as the ‘carrot’
To discuss the implications of these actions, we spoke to Joana Setzer, Assistant Professorial Research Fellow at the Grantham Research Institute on Climate Change and the Environment, part of the London School of Economics and Political Science (LSE).
As a contributing author for the Intergovernmental Panel on Climate Change’s Sixth Assessment Review and someone who has discussed with the Bank of England how to include climate litigation in its stress tests, Setzer is a leading expert in climate law. Her views offer real insight for anyone interested in the significance of climate litigation on the political and economic environment.
The lawyer Roger Cox said ‘Only the law can save us now’ when it comes to forcing governments to take climate action. What’s your view?
I had a realisation that this could be part of the solution when I heard Dr James Hansen, the NASA scientist, say that the only solution is to go to court. Professor Jeffery Sachs also came to present his ‘proposal for climate justice' at LSE; I thought he would present some economic models, but he also said the only way to achieve climate justice was through the courts. So, I started collecting quotes from people who were working in the field, from economists, scientists and lawyers. They confirmed my feeling this was getting serious.
We have been looking at trends in climate legislation and litigation at the Grantham Institute for the last ten years, and we observe how in the last five years litigation has become a tool of climate governance. It has aspects that are purely legal, about legislation and doctrine, but now science and law are coming closer together.
This is where Friedereike Otto and Richard Heede’s work has made a real difference (read more about Otto’s work here). They have provided attribution data, but they are also producing science that is useful for courts. We had scientific output prior to that, but lawyers couldn’t readily use it. Now the lawyers and scientists are talking, the scientists are producing information that is purposeful and this is already making a difference.
What is the relevant start point for action? Should we be judging what has changed in the atmosphere since the start of the industrial revolution, the time since the first Intergovernmental Panel on Climate Change (IPCC) report came out, or some other variable? And how will we measure it?
The question ‘from when?’ is something Dr Otto and others have been grappling with. In some of the US cases, litigants are examining internal documents and go back to relevant dates where they can show that a company knew of the risks internally, but still proceeded unchanged or even started to manipulate or conceal the relevant information. It is clear now that even in the 1970s companies had internal reports saying that they were aware of negative climate impacts from their actions. A lot of research work is really digging into archives.
Companies will find it harder to have cases against them dismissed
In more general terms, what is considered are the dates when international frameworks were agreed, such as the United Nations Framework Convention on Climate Change and the scientific basis that underpinned those agreements – particularly produced by the IPCC. As soon as you have these, the information is seen to be common knowledge and in the public arena. Companies will find it harder to have cases against them dismissed if this combination of specific and general information coexists.
Recently, we have struggled with issues of trust and whether leaders of governments or companies deliver what they say they will. What are the implications in the climate field?
Issues with trust and consistency have been key drivers of climate litigation, challenging governments and corporations. Leaders of nation states go to conferences, make commitments, publicise those and it feels like they are doing so much. Sometimes they get back home and not very much is translated into action. These are the areas that litigation is concentrating on. The key question is this: ‘Is what you are saying over there consistent with what you are doing over here?’
There’s an interesting and relevant case in Norway.2 Norway supports so much climate action, for example funding countries in the South to combat deforestation, but it is still a major oil producer. The litigation case against the government triggered a huge debate and raised awareness about this inconsistency.
You have the same in the corporate sector, but that is trickier because the commitments a company makes are soft commitments. They are voluntary and you could question whether they could be challenged in court. The Shell case in the Netherlands is important, because it is asking whether Shell is going to deliver on its targets. Those bringing the case are saying ‘It does not look as if you are doing that…’ and really calling on Shell to change its core business model.
The last type of cases I find fascinating are those around greenwashing. There are more efforts to show that certain advertisements are not consistent with a company’s investment strategy. This resonates with the public: no one wants to be cheated, and we are seeing more non-governmental organisations and shareholders bringing this type of claim.
Figure 1: Climate-related litigation: Cases against companies 1986-20193
Where are the main jurisdictions in which cases are being taken?
It is no coincidence we see a lot of fiduciary duty-type litigation in Australia, and we are seeing human rights duty of care cases in the Netherlands. The Urgenda case4 was very important; if we had not had that, I don’t think we would have the Shell case now.
What it is basically trying to do is say: ‘Look, courts, you have flagged the duty of care that the state has; surely these corporations should have a similar duty?’ Essentially, they are taking a principle and considering whether it can be extended to a company. But before Urgenda, if you spoke to Dennis van Berkel or Roger Cox (legal counsel), they would say: “No one believed us. They thought we were crazy. They said we had no chance at all, but we won.”
Precedents are being set in countries that do not have the environment mentioned in their constitution
Of course, countries that already have the environment mentioned in their constitution are likely to be jurisdictions where it is easier to argue duty of care for the environment is a fundamental human right. But precedents are being set in countries that do not have this. Litigants are still testing action where there is seen to be limited chance of success; we have already seen that in the Leghari case in Pakistan, and that set an important precedent for the adoption of adaptation measures.
There are also countries with climate targets that might be perceived to be insufficient; they could be challenged. The US has no climate-specific legislation, but it does have rights protected under its constitution and an established body of corporate law.
Can you give any more details about the concentration of fiduciary cases in Australia?
Australia is interesting: the government continues to expand its coal industry and there has been a lack of effort on climate change action, but at the same time there is a real challenge in bringing human rights cases. But litigants have been using corporate law and securities law, which require disclosure of climate risks. There are specific fiduciary duties and requirements for directors, and this is how litigants have found a way to challenge the nature of investments being made and the quality of the information provided by companies and investors.
There is a real challenge in bringing human rights cases in Australia
There was an interesting case against REST, a pension fund, where the litigant, a 23-year old student Mark McVeigh, questioned the fund’s investment and disclosures related to the Adani coal mine.5 There is also a case brought by a law student who claims Australia’s Office of Financial Management and its Treasury are deceiving investors by not disclosing climate change alongside other financial risks.6 In terms of human rights cases, there is an ongoing case being brought by islanders of Torres Strait. The reason they want to go straight to the UN is that there is not enough domestic legislation to allow them to protect their rights in the national courts.7
How do you see the relationships between physical, transition and litigation risk?
As physical risks become larger, so does the litigation risk. In recent years, we have seen a number of cases where the plaintiffs are claiming for major emitters to pay for the costs of relocation and adaptation to the physical effects of climate change. But transition risks also increase litigation risk. This is why it is important for private actors to track cases against states, not just cases against companies they invest in or insure.
It’s important to consider what the broader implications of a change in policy might mean right across the private sector
There seems to be a belief that cases against the state are somehow remote. In fact, this is exactly what we mean when we talk about transition risk. If a suit against a state seeks a phase-out of coal, that is likely to lead to policies that will affect several sectors, and impact investors and insurers. It’s a ripple effect, so it’s important to consider what the broader implications of a change in policy might mean right across the private sector.
At the same time, RWE recently filed a €2 billion case against the Netherlands because it decided to phase out coal due to the Urgenda decision. So, the company is the subject of climate litigation, but it is also using litigation against a foreign government.8
Litigation is being used in every direction, and we are going to see more of it. The terrain becomes complex, risks and uncertainty are high, and the players involved are powerful. It will be a hard fight.