NGFS Survey Identifies Increasing Climate-Related Litigation Risk
The Network for Greening the Financial System (NGFS) published a technical report to raise awareness about climate-related litigation as a growing source of risk. The report provides an overview of climate-related litigation in the context of climate-related financial risks, outlines general trends in climate-related litigation, and proposes ways to address these risks. The report also includes an overview of selected cases as well as the results of a survey that was conducted among NGFS members to gather information from the respective jurisdictions about climate-related litigation.
An analysis of the survey results shows that 58% of the respondents expect a general increase in climate-related litigation in the future, 52% of the respondents confirmed there were climate-related cases in their jurisdiction, and 46% were not aware of any such litigation. In the report, NGFS concludes that, on the basis of the research and the results of the survey, it is clear that climate-related litigation is increasing across jurisdictions and is a fast-moving target. Climate-related cases are increasingly brought directly against financial institutions and NGFS considers it likely that these developments will continue in the coming years. Supervisory authorities may not have, so far, fully recognized the impact of such cases when assessing climate-related financial risks even though they constitute an important channel through which physical risks and transition risks may affect assets or counterparties of financial institutions. Therefore, the current trend of rising climate litigation requires a careful monitoring of these risks by supervisors and central banks. Supervisors need to ensure that financial institutions supervised by them adequately manage financial and operational risks resulting from potential climate-related litigation against themselves as well as against institutions to which they are exposed.
Related Links
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, Sustainable Finance, Climate Change Risk, Sustainable Finance, ESG, Climate Litigation Risk, NGFS
Featured Experts
Michael Denton, PhD, PE
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Previous Article
IFRS Announces Developments Related to Sustainability DisclosuresRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.