Climate Legislation and Litigation in Finance

Many institutions, while cognisant of the rising tide of ESG concerns, find themselves inadequately prepared to manage the associated risks. This lack of preparedness is not merely a matter of compliance - it's a strategic oversight that exposes these institutions to substantial litigation and regulatory enforcement risks. Financial institutions must do a thorough review of corporate strategies and commitments related to climate change and carbon reduction and align their business practices with regulatory expectations and international standards. Additionally, they need to develop robust internal policies and controls to effectively manage and monitor their ESG impact.

The United States leads in the number of climate-related claims. However this trend is gaining momentum globally, fueled by factors such as the increasing recognition of climate change's impact on human rights and the willingness of courts to explore the legal responsibilities of financial institutions for emissions deriving from their investment decisions. Greenwashing, where organisations make misleading claims about their environmental practices, is now a significant legal battleground. In the UK, the Competition and Markets Authority (CMA) has developed the Green Claims Code, which is a framework for compliance that sets out key points to ensure your environmental claims are genuinely green and are not misleading.