Climate Legislation and Litigation in Finance

Climate Legislation and Litigation in Finance

Matthew Gingell

There has been a wave of sustainability legislation and regulation in Europe, from the Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSRD) to the UK Green Finance Strategy. Many institutions, while cognisant of the rising tide of ESG concerns, find themselves inadequately prepared to manage the associated risks. This leaves them open to climate litigation.

There has been a wave of sustainability legislation and regulation in Europe, from the Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSRD) to the UK Green Finance Strategy. Many institutions, while cognisant of the rising tide of ESG concerns, find themselves inadequately prepared to manage the associated risks. This leaves them open to climate litigation.

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Climate Legislation and Litigation in Finance

9 mins 51 secs

Overview

There has been a wave of sustainability legislation and regulation in Europe, from the Sustainable Finance Disclosure Regulation (SFDR) and Corporate Sustainability Reporting Directive (CSRD) to the UK Green Finance Strategy. Many institutions, while cognisant of the rising tide of ESG concerns, find themselves inadequately prepared to manage the associated risks. This leaves them open to climate litigation.

Key learning objectives:

  • Outline examples of sustainability legislation

  • Understand the state of preparedness for climate enforcement

  • Identify the drivers of climate litigation

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Summary
What are some examples of sustainability legislation that has been introduced?
  • Sustainable Finance Disclosure Regulation (SFDR)
  • Corporate Sustainability Reporting Directive (CSRD)
  • EU Green Deal
  • UK Green Finance Strategy
  • German Supply Chain Due Diligence Act

How prepared is the financial sector for climate and ESG-related enforcement?
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.

What are the drivers of climate litigation?
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.

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Matthew Gingell

Matthew Gingell

Matt Gingell is the General Counsel of The Oxygen House Group, a global investment firm focused on making the world better. He is an in-house solicitor and frequently speaks on ESG and sustainability matters. Mathew founded The Chancery Lane Project, a global network of lawyers and business leaders using climate contracting for decarbonisation. He authored the climate contracts doctrine, which focuses on ground-level commercial contracts creating global environmental outcomes. He has been embedding ESG objectives into investments since 2014 and is an ESG Advisor to the QantX fund. He is also an External Associate of Exeter University's Centre for Environmental Law and a Fellow of the Institute of Corporate Responsibility and Sustainability.

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