Financial Institutions Facing Increased Climate Litigation Risks

The threat of climate-related litigation against financial institutions is on the rise, with recent cases targeting banks for their contribution to climate change. Milieudefensie, a Dutch arm of the Friends of the Earth network, recently threatened legal action against ING over its environmental impact. This is not an isolated incident, as other banks in Europe have also faced similar lawsuits in recent years.

NGOs are strategically using litigation to draw attention to the potential illegality of failing to take action against climate change. These lawsuits are not only about seeking damages, but also about creating noise and raising awareness about the environmental impact of financial institutions. Ratings agencies are also taking note of this trend, with potential consequences for banks’ credit ratings if they fail to address climate and environmental risks.

The regulatory environment surrounding climate litigation is complex, with different laws in each country. Banks operating in multiple markets must navigate these diverse legal frameworks, which can create challenges in maintaining a consistent approach to climate action. The conflicting demands of different jurisdictions could force banks to make difficult decisions that may impact their reputations.

As the threat of climate-related litigation continues to grow, banks must be prepared to address these risks jurisdictionally and ensure compliance with evolving legal requirements. Failure to do so could result in reputational damage and potential legal consequences for financial institutions.