Climate litigation as a financial risk: evidence from a global survey of equity investors

Climate litigation is growing in scale and complexity, yet its financial consequences remain poorly understood. We study how investors perceive climate litigation as a financial risk u sing a global survey of 811 equity investors and analysts. Most respondents regard climate litigation as financially material but they differ systematically in how and when they believe it matters. Many associate financial relevance with early-stage events such as media coverage or case filing, well before any court judgment, and they differ in the sectors they view as most exposed and in the legal channels they find most concerning. We recover latent dimensions of belief variation, and relate them to observable investor characteristics. We identify two dimensions - Litigation Salience and Risk Type Prioritization - which give rise to three investor profiles: Unconcerned, Regulatory-focused, and Physical/Litigation-focused. The two concerned groups relate litigation to climate in distinct ways: the former sees litigation and policy as complements, while the latter see them as substitutes, expecting litigation to arise from failures to regulate. Observable investor characteristics explain part but not all of this variation. Our findings show that disagreement over climate litigation is structured and economically meaningful suggesting it may be reducible through improved disclosure on firms’ climate litigation exposures.