Climate and biodiversity risk
In this chapter of our Annual Insurance Review 2024, we look at the main developments in 2023 and expected issues in 2024 for Climate and biodiversity risk.
Key developments in 2023
2023 closed with the COP28 conference and a more tangible commitment by nations worldwide to transition away from fossil fuels. Over 2,500 climate change related cases have now been filed worldwide, including in relation to plastic pollution. Biodiversity cases are also gathering pace brought on behalf of individual species and the environment.
Whilst the outcome of COP27 had been disappointing after a deal could not be negotiated in relation to phasing down or reducing fossil fuels, COP28 saw renewed pledges regarding de-carbonisation, curbing methane emissions and tripling renewable energy capacity by 2030. The conference also focused on the need to protect global ecosystems and the synergetic relationship between climate and nature. Investing more in protecting oceans through the restoration of mangroves was a hot topic and demonstrated progress, following the discussions led by the Global Mangrove Alliance and Coral Reefs Resilience Action at COP27.
In December 2023, it was announced that the EU Parliament had reached a provisional agreement on the Corporate Sustainability Due Diligence Directive. This will set out the obligations for large companies to conduct due diligence regarding actual and potentially adverse impacts on human rights and the environment. It will also address the adoption of climate transition plans and enforcement, including injunctive relief, fines and the establishment of a civil liability regime for failures to comply with the directive.
2023 also saw further developments in relation to plastic pollution, both in terms of evolving regulations and litigation. The negotiation of a global plastic treaty is ongoing and in October 2023, the UK implemented a ban on single-use plastics including plates, trays, bowls, cutlery, balloon sticks and certain types of polystyrene cups and containers. In January 2024, it was announced that the UK government is considering a ban on fruit and vegetable plastic packaging, in order to reduce waste. The proposed new rules would reportedly make compostable or recyclable bags compulsory.
The European Consumer Organisation, ClientEarth and ECOS filed a complaint with the European Commission, alleging that Coca-Cola, Nestle and Danone have made misrepresentative statements concerning the recyclability of plastic water bottles. This follows ClientEarth's case against Danone in relation to plastic pollution and its global supply chain, and alleged failures to devise a solution. At the end of 2023, New York State filed a lawsuit against PepsiCo for allegedly causing contamination of the Buffalo River and making misleading statements/ failure to warn the public regarding the accumulation of plastic waste in the environment.
The "Carbon Majors" cases brought against the oil, gas and mining industries concerning historic greenhouse gas (GHG) emissions, continue to make progress through the US courts. Most notably, in September 2023, the State of California filed a lawsuit against BP, Shell and others, in relation to alleged false advertising over many decades, concerning the risks associated with fossil fuels, and causing billions of dollars of environmental damage. This follows similar cases filed in state courts by other cities and states, including the City of Honolulu and Rhode Island, which allege public nuisance (via the global emission of GHGs), misleading advertising and marketing, fraudulent business practices, and failure to warn (strict and negligent products liability).
In Europe, to date, we have seen two "climate impact" cases filed. Lliuya-v-RWE is a case brought in the German courts in relation to the melting of a glacier in Huarez, Peru. As we reported last year, Lliuya is regarded as a test case for whether a private corporation can be held liable for historic GHG emissions, by reference to its percentage contribution to global emissions (based on nuisance principles and using attribution science to calculate RWE's 0.47% share). In February 2023, a second case (Asmania et al-v-Holcim) was filed in the Swiss courts by inhabitants of an Indonesian island of Pari, against concrete manufacturer, Holcim. This is on the basis that manmade climate change has caused sea levels to rise, and the island is at extreme risk of flooding. The claimants seek damages for historic GHG emissions and a contribution to adaptation measures, and also a commitment by Holcim to reduce its CO2 emissions by 43% by 2030.
Although a historic GHG emissions case has not yet been filed in the English courts, the Supreme Court's decision in May 2023 in Jalla v Shell[1] provided useful guidance on environmental claims brought on private nuisance grounds and limitation issues. The case concerned a 2011 oil spill off the coast of Nigeria that allegedly caused ongoing pollution. The claimants asserted that the claims were not time barred because the spillage was a “continuing nuisance”. The Supreme Court rejected this argument and held that there was no repeated activity by the defendants or an ongoing state of affairs which could be deemed a continuing nuisance. The continued presence of pollutants on the claimants' land due to inadequate clean-up was to be distinguished and originated from the 2011 spill. This is an important decision both for claims arising from standalone catastrophic events (which must be brought in time) and for claims concerning repeated, ongoing pollution (where a cause of action accrues afresh (e.g. GHG emissions, plastic pollution, PFAS and other types of air pollution).
2023 also saw the dismissal of ClientEarth's climate change related derivative action against Shell's Board of Directors. The case had targeted Shell's directors in relation to carbon emissions commitments, on the basis that they had failed to implement an adequate transition plan. The court held that ClientEarth had fail to establish a prima facie case that the directors were in breach of their duties under the Companies Act 2006. It remains to be seen whether other shareholders will overcome the hurdles to bringing similar types of claim in an ESG context.
What to look out for in 2024
In 2024, the focus on human rights in the context of climate change litigation will continue to gain traction. We can expect more historic GHG emissions cases to be filed across the world. Given the recent uptick in cross-border environmental litigation, it remains to be seen whether we will see a climate impact or "Carbon Majors" case brought in the English courts.