The legal liability risk of pension funds that fail to consider the risk of climate change is to be explored by a new initiative involving the UK’s Prince Charles.
It joins a nascent drive to clarify the legal responsibility of fiduciaries around climate change risk, reported by RI in February, with news of a potential legal test case involving a UK pension fund.
The new Commonwealth Climate & Law Initiative (CCLI) will explore legal liability risks from climate change for company directors and pension fund trustees in Australia, Canada, South Africa, the United Kingdom and other Commonwealth common law countries.
The initiative will examine the legal basis for directors and trustees to take account of physical climate change risk and societal responses to climate change. It will not look at building specific cases.
In addition, it will also assess the materiality of potential liabilities associated with inaction. CCLI is a joint initiative between the University of Oxford’s Smith School of Enterprise and the Environment, law firm ClientEarth and The Prince of Wales’s Accounting for Sustainability (A4S) initiative.It was launched today during the Commonwealth Heads of Government meeting in Malta. Its first phase will last from November 2015 to Summer 2016, with a next phase thereafter. Many of the jurisdictions it will cover are major financial centres and/or have significant fossil fuel reserves.
Jessica Fries, Executive Chairman of A4S, said: “Climate change poses significant risks for pension funds and companies, in addition to that faced by society as a whole. Trustees and company directors need to ensure that they respond appropriately. A proper understanding of the legal and fiduciary responsibilities is key. This new initiative will explore the issues faced and help to develop a response.”
In recent months, Bank of England Governor Mark Carney has warned that company directors could be held legally liable for failing to manage climate change risks. And in early November 2015 the New York State Attorney General issued subpoenas to Exxon and Peabody Energy and began investigations over claims they misled the public and investors about the dangers and potential business risks associated with climate change.