Climate exposures placed on boardroom agendaPosted On: Apr. 1, 2021 12:00 AM CST
As regulators increasingly focus on climate-related disclosures and environmental, social and governance issues, public company boards should review their operations and U.S. Securities and Exchange Commission filings, industry experts say.
Like cyber security, climate change is becoming a regular topic at company board meetings, and boards need to take a hard look at the issue as part of their oversight role, said Vince Morgan, a partner at Houston-based law firm Bracewell LLP.
Boards should make certain the company is doing what it can to ensure access to resources and to try to reduce its carbon footprint, he said.
One tool that will continue to be used is shareholder suits against companies for allegedly failing to disclose business and other risks related to climate change, said Brian Moskal, a partner at Greenberg Glusker LLP in Los Angeles.
However, climate change and its effects are so ubiquitous that “we’re going to start seeing types of litigation that we might not be able to predict now,” he said.
Energy and power generation companies have borne the brunt of climate-related litigation so far, but other industry sectors should start thinking about these issues, Mr. Moskal said.
More than 1,500 climate-related lawsuits have been filed globally, of which three-quarters have been in the U.S., said Nigel Brook, London-based partner at Clyde & Co.
Litigation related to climate impacts is expanding and companies should do their due diligence, he said.
Much of the impact of climate change on liability insurance and financial lines will stem from the indirect effects of extreme weather on claims, said Jennifer Waldner, Houston-based chief sustainability officer at American International Group Inc.
“More frequent severe storms, floods, wildfires and extreme temperatures can increase claim frequency and severity,” she said. Third-party claims resulting from lawsuits against utilities for wildfire damages are an example.
“Event-driven directors and officers litigation stemming from any bad news resulting in share price decline has grown significantly in recent years, and where climate change causes or intensifies adverse events, securities litigation will follow,” she said.
Ms. Waldner made the comments during a March 5 webinar hosted by the Institute of International Finance and EY Global Insurance practice.