Litigation Local weather Dangers and Adaptation Monetary Report printed

Who needs to read it?

Financial institutions, in particular banks, asset owners, asset managers and insurance companies, as well as the financial supervisory authorities that regulate them.

Why read it? What does the report cover?

Climate change-related litigation, regulation enforcement, and other legal action have long been recognized as a source of financial risk. This paper focuses on two key topics:

1. How can climate change-related litigation, regulation enforcement, and other legal action act as a driver or consequence of adapting to the physical risks of climate change.
2. Developing a framework by which the institutions can consider the range of climate-related liability risks for a borrower, book, portfolio or system – both before and after the relevant physical risk has crystallized.

The paper explores the potential for litigation (or the risk / specter of liability) to overcome some of the barriers to adjustment such as: B. poor management of physical climate risk, lack of meaningful disclosure of climate risk and moral hazard.

Our view

The risk of litigation related to climate change is already an issue in New Zealand. We have seen claims made against companies that their emissions caused environmental damage and sea level rise [1]and also a lawsuit against a local corporation for failing to comply with a statement by the local government that urgent leadership is needed to address climate change [2]. Climate disputes, regulation and other legal steps are likely to increase as drivers for adaptation to climate change. This document provides unique insight into the impact that boards of directors, management, and all leading financial services companies should consider when planning their business.

Understanding the role of climate disputes and liability as a catalyst for adaptation outcomes will contribute to efficient pricing and integration of climate-related risk issues into financial decision-making and will help drive adaptation finance across the financial services sector. Conversely, if barriers to adaptation and adaptation financing are not removed, legal disputes can play a more important role as drivers of adaptation outcomes, albeit in an ad hoc, inefficient and expensive manner.