Climate litigation and ESG risks

COP29 could be a prompt to organisations to consider their ESG risks. Climate litigation is a key risk for the Board, given its potential impact on both value and reputation.

The June 2024 decision of the UK Supreme Court in R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council is the most significant decision on climate change issues in recent years and perhaps signals a change in attitude of the courts towards a more climate-friendly approach. The case considered whether the indirect greenhouse gas emissions arising from the use of oil extracted from an onshore oil drilling project had to form part of the environmental assessment supporting the proposal’s planning application. The court decided that such emissions had to be assessed. This judgment, therefore, has significant implications for any development project where indirect carbon emissions are an inevitable consequence of the approved operations.

Following Finch, in September 204, the High Court quashed an approval for a new coal mine in Cumbria, and the government “will not resist” challenges to two North Sea oil extraction licences which commenced on 13 November.

While it is still to be further tested in the courts, the prevailing view is that indirect carbon emissions should now form part of the environmental assessment of many large-scale development projects where an Environmental Impact Assessment is required. In some cases, this might be relatively straightforward, but for more complex projects, quantifying such emissions and their likely environmental effects could be difficult and getting it wrong may lead to costly delays.

Finch and the related cases are not the only recent judgments on climate change. In Friends of the Earth v SoS for Energy Security and Net Zero, in May 2024, the High Court held that the former government had breached its duty under the UK Climate Change Act to adopt policies and proposals which would allow statutory carbon reduction targets to be met. Again, this suggests that the courts may be increasingly willing to consider climate change and the climate emergency as pressing issues and hold the government to task where failures to properly consider statutory obligations related to climate and carbon emissions are identified.

These recent cases are not the first that have been brought in relation to the climate. Other cases in the last few years include challenges against the proposed third runway at Heathrow Airport, the extension of Bristol Airport and three new road schemes in East Anglia. None of those proceedings were successful, but the willingness of action groups and NGOs to bring climate-related challenges, now seems to be paying off. Although primarily an issue for major development projects, such litigation may well shape broader government policy where climate and emissions reductions are matters to be considered.

TLT advise regularly on the content and scope of Environmental Impact Assessments for major development projects and have long-standing expertise on the procedural and legal aspects of the process. Alongside the technical aspects of Environmental Statements, ensuring that the reports are legally robust is key to minimising delays and risks from legal challenges.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.