Investment Advisors Could Face Court for Ignoring Climate Risk
Legal action could be ahead for pension and investment funders who ignore the systemic risk that climate change represents for the global economy, according to a paper published last week in the journal Nature.
“Clients of investment firms and beneficiaries of pension funds might have a legal case to bring if those who manage money for them stand idly by as emissions erode the value of their stock,” said co-author and ClientEarth trustee Howard Covington. “We are currently exploring such a possibility.”
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“To produce a wholesale change in attitude, a court ruling on the obligations of fiduciary investors to control systemic climate risk will probably be needed,” agreed CEO James Thornton. “Because of the uncertainties in estimating future climate damage, this will not be an easy case to bring. But we anticipate that such a case will ultimately succeed.”
The paper argues that climate change “could damage the global economy by, for example, droughts and heat waves that lead to famines which in turn lead to migrations of millions of people,” The Guardian reports. “They estimate there is a 5% chance of global investment portfolios being reduced by 10%—US$7 trillion—in coming decades, a level of risk and exposure that is routinely declared and acted on by big companies today.”