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.
Keywords: International, Banking, Insurance, Securities, Climate Change Risk, Sustainable Finance, Climate Change Risk, Sustainable Finance, ESG, Climate Litigation Risk, NGFS
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.
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