In recent years there has been an explosion in ESG litigation, particularly in relation to climate change. The UNEP Global Climate Litigation Report: 2020 Status Review estimates that the number of climate change cases globally increased from 884 in 24 countries in 2017 to 1,500 in 38 countries in 2020. This trend shows no sign of abating: in 2021 alone, there have already been a number of high profile and landmark cases, including:
• the French state being held responsible for failing to take action against climate change;
• a Netherlands court ruling that Shell must reduce carbon emissions by 45% by 2035, in comparison to its 2019 levels of emissions,
• the federal court of Australia holding that the Australian environment minister owes a duty of care to protect younger people from future harm from climate change;
• the Court of First Instance in Brussels finding the Belgian state negligent in its policies to combat climate change; and
• environmental activists filing a claim against the Italian state for not setting sufficiently ambitious climate change policies, and claims by five Polish citizens against the Polish government for failure to take action against climate change.
Alongside this growth in climate change litigation, shareholders are increasingly holding companies to account in relation to ESG and climate change. Recent examples include ExxonMobil’s shareholders voting to replace two of the company’s board members with candidates from an activist hedge fund who have campaigned for ExxonMobil to move away from fossil fuels, and Chevron’s shareholders voting for a reduction in the company’s scope 3 emissions.
With the construction industry responsible for around 38% of carbon emissions and the UK targeting of net zero by 2050 and a 78% reduction in emissions by 2030, companies operating in this field cannot ignore these trends. Key takeaways are:
1. Climate change litigation and shareholder activism are growing trends that must be taken seriously.
2. It is vital to take action now to reduce carbon emissions.
3. Carbon reduction plans and targets should be ambitious yet realistic, drive sustainable change and include scopes 1, 2 and 3 emissions.
Mills and Reeve has worked with Professor Sean Smith (Professor of Future Construction and Director of Centre for Future Infrastructure, University of Edinburgh) to produce a thought leadership piece, Building towards net zero: what is it and how do we get there?, to support the construction industry in its journey towards net zero. More information and how to download the report, can be found here.