Climate change could soon impact D&O cover – Clyde & Co
Underwriters need to start asking searching questions about how businesses are responding to climate change, according to law firm Clyde & Co. The warning came at a Clyde & Co seminar on the impact of climate change on D&O cover.
There is potential for a growing volume of litigation and disputes, in which corporate boards are being held to account for alleged reporting, regulatory and fiduciary failures linked to climate change and the fossil fuel sector, Clyde said.
The comments echo those made earlier this month by the International Association of Insurance Supervisors. The supervisory body issues a warning in its latest Global Insurance Market Report that insurance regulation needs to respond to the many changes forced on the insurance industry and its clients by climate change effects.
Clyde & Co partners Ned Kirk and James Cooper were joined on the panel by Alice Garton, a senior lawyer for ClientEarth, and Anthony Hobley, CEO of the Carbon Tracker Initiative. The panel members described three key types of litigation that will result from climate change:
• Companies failing to fully disclose how climate change affects their business
• Shareholders, pension fund members or investors suing investment and pension funds for investing in businesses adversely affected by climate change
• Companies contributing directly to pollution and climate change.
Litigation is already underway in the US against an energy firm for its failure to disclose the impact of climate change, after it wrote down oil and gas assets in 2016. Other actions are being considered.
Mr Kirk said: “Regulators like the SEC have already issued guidance on climate change disclosure and are taking action against energy companies. They are also starting to look long and hard at sectors like mining, transportation and insurance.”
Mr Cooper added: “Underwriters need to ask themselves how they get to understand the climate change risks inherent in these businesses. They need to ask some searching questions about how companies are dealing with climate risks.”
