Climate-related claims by groups of campaigners and affected individuals are a growing risk for corporates around the world.

At our recent Risk Resilience in the Energy Sector Conference, we discussed why Scotland should be on the risk register for corporates who may face group actions relating to climate change.

• There has been a significant increase in climate claims over recent years: individuals and NGOs are using the courts to drive change in relation to climate action.
• There is wide scope to bring a climate change claim against a company in Scotland. For instance, based on a registered office address, operational or manufacturing presence, and/or if they have customers and consumers in Scotland.
• Claimants may be attracted to Scotland given the prominence of particular sectors, e.g. energy and financial services; a new group actions regime; a well-established legal system; and the ease of enforcing Scottish judgements abroad.

Key points you need to be aware of

• There are very significant risks involved for a company defending group litigation. A large class of claimants is likely to have litigation funding to pursue their claim more robustly, can coordinate more efficiently, and it means potentially very significant exposure – both in compensation and legal costs.
• Climate claims cover a broad range of approaches. This includes a significant increase in climate-washing (or greenwashing) cases, attacking company statements and practices that assert that products or services are more climate-friendly than they really are.
• Research has identified a measurable reduction on company value from climate change litigation, even as a result of a climate case simply being filed/issued, as well as following an unfavourable judgment.
• Whilst climate litigation may have direct impacts forcing a change in company policy or stalling or preventing a project, for campaigners, it is not all about the money: claimants see success in more intangible indirect impacts such as an increase in public awareness, understanding and behaviour. This impacts the potential outcome and risk profile of climate litigation.
• Regulatory activity can bolster or provide an impetus for private claims, by throwing a spotlight on sectors or issues, and providing evidence to support a claim. The Competition and Markets Authority has a current focus on greenwashing, with a Green Claims Code, and expanding sectoral focus most recently in the household energy sector. There are also significant consumer-friendly reforms in the Digital Markets, Competition and Consumers Act (DMCC), including the power to direct companies to pay financial redress to consumers.
• Companies can manage and potentially mitigate the risks of a group claim, for example by:
  • Monitoring of potential claims through social and other media
  • Early engagement with claimants and their lawyers
  • Taking advantage of a unique ‘early warning system’ in the Scottish court process
  • Involvement of experienced advisors who can guide companies through this novel process.

If you would like to speak directly to one of our experts on how this issue may affect your business, please get in touch.

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