After Brexit, the issue of climate change is one of the most talked about topics in this year's general election. According to a November YouGov poll, the environment is now seen as a much bigger issue than it was in the 2017 general election. There is an interplay between the growing awareness of climate risk and corporate disclosures and directors' duties and flowing from this, claims under D&O policies. 

Climate change - political issue

The UK Parliament declared a climate emergency in May 2019. Each of the parties' manifestos sets out plans to tackle the crisis and with all parties promising tougher policies on the environment and climate change:

  • the Conservatives promise to "fight climate change and protect the environment" by delivering on net zero carbon emissions by 2050 and doubling the UK's international climate finance spend. It pledges a £500m fund to protect oceans from plastic and promises to tackle deforestation. It says that it will incentivise clean growth such as offshore wind farming
  • Labour promises a "green industrial revolution". It says that it will deliver net zero carbon emissions by 2030. It pledges 1 million green jobs as well as a Clean Air Act and funding for flood defences. Some of these jobs will derive from its promise to plant 2 billion trees by 2040
  • The Liberal Democrats promises "climate action now". It pledges to deliver net zero carbon emissions by 2045. It will require all UK companies to set targets consistent with the Paris Agreement on climate change and to report on their implementation. As well as this, it plans to establish a general corporate duty of care for the environment. It also plans to regulate financial services to encourage green investments.

Climate change - regulatory issue

Climate change is also becoming a key issue for regulators. Mark Carney addressed the UN Climate Summit General Assembly in September 2019 and said that climate risks and resilience should be brought into the heart of financial decision making and "climate disclosure must become comprehensive, climate risk management must be transformed and sustainable investment must go mainstream."

The Prudential Regulatory Authority published a supervisory statement earlier this year called "Enhancing banks' and insurers' approaches to managing the financial risks from climate change" which requires financial institutions to address the financial risks of climate change.

Climate change – issue for investors

Investors too are playing their part. Many investors are now putting pressure on companies to respond to climate change. A recent example being the hedge fund, TCI, which has warned that it will vote against directors of companies if they fail to disclose their carbon dioxide emissions. 


With this changing mood, there is a rise in climate change related claims. The most high profile example is that of ExxonMobil and its directors which is being sued by shareholders in the USA who have alleged that the company misled shareholders about the impact of climate change on its business. 

Most of the examples we have seen to date concern actions against corporations but clearly there is scope for directors and officers to be held accountable if their actions fall short of the expected standards.

The main risks from a D&O perspective are:

  • Risk management: companies and directors need to ensure that they understand and mitigate climate related physical and financial risks
  • Reporting: climate related risks must be fully disclosed to enable informed investment decisions. In the USA, investors have filed proceedings against a utility company Pacific Gas and Electric Company in connection with the catastrophic wildfires in California in 2017 and 2018. The investors allege that the company failed to take proper fire mitigation measures and that its failure to do so directly contradicted representations made in offering documents for more than US$4billion worth of bonds
  • Governance: directors must comply with corporate governance and statutory obligations in this context. The government announced in its Green Finance Strategy published in July 2019 that it expects all listed companies and large asset owners to report climate risks by 2022.

In the words of Greta Thunberg speaking at the UN Climate Summit in September 2019:

"The eyes of all future generations are upon you. And if you choose to fail us, I say – we will never forgive you".

Directors and officers – you have been warned. 

This article is for general information only and reflects the position at the date of publication. It does not constitute legal advice.