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Banks and climate litigation risk: navigating the low-carbon transition

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  • Smolenska, Agnieszka
  • Chan, Tiffanie
  • Poensgen, Ira
  • Higham, Catherine

Abstract

Over the past decade, climate-related litigation targeted at both public and private actors has mushroomed. This includes some high-profile cases brought directly against banks. Such litigation trends pose material financial risks to banks. In addition, credit institutions need to manage risks related to the rapidly evolving landscape of climate litigation against corporate clients. How banks identify, manage and mitigate these novel legal risks is of strong relevance from the perspective of prudential policy and the effectiveness of transition policies more broadly. To respond to this challenge, this report investigates how credit institutions engage with climate- and environment-related legal risks. It explains how insights from bank current practice, such as gaps in their legal risk management approaches, should be addressed with targeted prudential policy interventions.

Suggested Citation

  • Smolenska, Agnieszka & Chan, Tiffanie & Poensgen, Ira & Higham, Catherine, 2024. "Banks and climate litigation risk: navigating the low-carbon transition," LSE Research Online Documents on Economics 129325, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:129325
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    File URL: http://eprints.lse.ac.uk/129325/
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    as
    1. Annalisa Savaresi & Joana Setzer & Sam Bookman & Kim Bouwer & Tiffanie Chan & Isabela Keuschnigg & Chiara Armeni & Alexandra Harrington & Corina Heri & Ian Higham & Chris Hilson & Riccardo Luporini & , 2024. "Conceptualizing just transition litigation," Nature Sustainability, Nature, vol. 7(11), pages 1379-1384, November.
    2. Misato Sato & Glen Gostlow & Catherine Higham & Joana Setzer & Frank Venmans, 2024. "Impacts of climate litigation on firm value," Nature Sustainability, Nature, vol. 7(11), pages 1461-1468, November.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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