Investors are ’flying blind’ to risk of climate lawsuits

Polluting companies could be liable for trillions in damages from climate lawsuits. But few investors and regulators are taking these risks into account when evaluating companies' climate-related financial risks, according to new Oxford Sustainable Law programme research published today in Science. The research calls for an overhaul in how climate litigation risks are assessed and provides a new framework for doing so. 'Financial risk is the dominant frame through which investors and regulators engage with climate change. But climate risk analysis fails to satisfactorily account for legal developments. Against a backdrop of increasingly impactful climate litigation and regulatory enforcement actions, which shift and amplify climate risks, we argue that current climate risk assessments misrepresent the distribution and scale of climate-related financial risks. That means investors end up investing in the wrong projects and run risks that neither they nor regulators understand, thereby further aggravating the financial risks climate change entails,' explains Associate Professor Thom Wetzer , lead author and Director of the Oxford Sustainable Law Programme.