Climate litigation is progressing apace in the United States, with cascading effects for corporate governance. Cities, states, and municipalities are increasingly filing negligence and nuisance claims against major greenhouse gas emitting companies, seeking redress for climate damages. Until recently, scholars and jurists thought it unlikely, even impossible, for these claims to succeed in redressing the physical harms of climate change. But advances in the science of climate change attribution undermine this assumption. Scientists can now model the impacts of anthropogenic emissions on climate change and link human contributions to GHGs to specific extreme weather events and impacts. These developments are promising for climate litigants, and they have major implications for companies in high emitting sectors.

Corporate executives in high emitting sectors must now grapple with litigation risk across multiple jurisdictions, new oversight obligations and fiduciary duties to shareholders, and an enhanced understanding of stakeholder impacts. Beyond the financial damages and reputational risks that defendant corporations face because of these climate lawsuits, internal company records and other information produced through discovery motivate additional corporate and securities claims. In one recent example, ExxonMobil shareholders brought claims against negligent managers for misleading investors about climate risks. In another case, Shell shareholders brought claims against executives for failing to plan for climate change and a net zero transition. Access to internal corporate communications concerning emissions and climate risks can also inform criminal or conspiracy claims against fossil fuel executives, as alleged by the state of Minnesota in its lawsuit against the American Petroleum Institute, for example. This evolving legal landscape presents corporate managers with new material risks.

Should climate litigants succeed in leveraging the tools of climate attribution to secure damages from corporate defendants, companies in high emitting sectors, like fossil fuel producers, could conceivably face bankruptcy. While such a scenario would likely be forestalled by a federal bailout, mass settlement agreement, or legislative preemption of climate tort claims, bankruptcy does not eliminate the targeted industries but restructures them. In the comparable example of tort litigation against opioid manufacturers, industry leaders faced bankruptcy because of lawsuits brought by cities, states, and municipalities seeking redress for the harms and public health burdens of the opioid crisis. In its bankruptcy settlement, Purdue Pharma was restructured as a public benefit corporation, owned by a public trust, and with restricted operations. A similar fate is plausible for companies like ExxonMobil and ConocoPhillips, which could be restructured as public benefit corporations owned by a climate trust, for example, and with operational restrictions in the public interest. These outcomes would require novel ownership arrangements and new experiments in governance that deviate from existing terms.

Read more at ECGI