Climate Change Litigation and Liability Risks in Adaptation Activities & Finance

To explore adaptation finance from a litigation perspective, UNEP FI has collaborated with MinterEllison to examine how litigation may increase or reduce the barriers to adaptation finance identified in the earlier reports. The output of this collaboration, a high-level briefing paper “Liability Risk and Adaptation Finance: Legal action as a driver and consequence of climate-related physical risk adaptation”, will be launched at this event. The Forgotten Climate-related Financial Risk: The Role of Climate Litigation in Adaptation and Adaptation Finance is a high level briefing paper that will explore the legal implications of adaptation (or a lack thereof) to climate change-related impacts. By reference to existing cases and the likely future direction of litigation, it will show how climate litigation can act as both a driver and consequence of adaptation or maladaptation. As a corollary of the analysis, observations will be drawn on the potential for litigation (or the risk / spectre of liability) to help overcome some of the barriers to scaling finance for adaptation identified by UNEP FI, such as: weak management of physical climate risk (CLF v ExxonMobil); lack of meaningful disclosure of climate risks (Abrahams v CBA); and moral hazard (Illinois Farmers). Understanding the role of climate litigation and liability as a catalyst of adaptation outcomes will contribute to the efficient pricing, and integration, of climate-related risk issues into financial decision-making, and assist in driving adaptation financing across the financial services sector. Conversely, if barriers to adaptation and adaptation financing are not removed, litigation may play a more prominent role as a driver of adaptation outcomes - albeit in a manner that is ad hoc, inefficient and expensive. The report will conclude with the key takeaways of the analysis for banks and investors.