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Regulatory changes could prompt biodiversity litigation


Businesses face an expanding range of lawsuits related to environmental, social and governance issues, and cases alleging liability for biodiversity loss could gain traction as regulatory and disclosure frameworks evolve, experts say.

Biodiversity lawsuits are a fraction of the number of climate-related cases filed to date, said Nigel Brook, London-based partner at Clyde & Co. LLP. “It’s very early days. In Europe, the main source of biodiversity cases has been about supply chains,” he said.

This trend could take off when the European Union Corporate Sustainability Due Diligence Directive takes effect later this year and EU nations implement the measure in their national laws, he said. 

A securities class action lawsuit filed in November 2022 in U.S. District Court in Greenbelt, Maryland, against Enviva Inc., a company that produces wood pellets, is an example of a biodiversity-related suit, said Zaneta Sedilekova, London-based associate at Clyde & Co.

While the case concerns alleged misrepresentation of the environmental sustainability of wood pellets, investors contend Enviva’s inventories of hardwood trees were incorrect and that “inventories of hardwood trees are decreasing, replaced by less expensive pine seedlings and negatively impacting forest biodiversity,” Ms. Sedilekova said.

In these types of cases the biodiversity impact is often in a different venue, but the case is brought in a jurisdiction where “the legal system is sophisticated enough to deal with things like proof, evidence, causation, but also damages, and in the U.S. that is a big thing,” Ms. Sedilekova said.

A 2021 case, for example, against the French supermarket chain Casino Group alleged that the company’s due diligence plans failed to detail the environmental and human rights harm caused by the supply of cattle from deforested areas to its Brazilian subsidiary.

Whereas the EU has a statutory framework, at least in draft form, that sets out how claimants might pursue claims related to environmental harm, in the U.S. this is happening at the Securities and Exchange Commission enforcement level and the private securities plaintiffs level, said William Passannante, a shareholder with Anderson Kill P.C. in New York.

“In the U.S., so far we’ve got a differing approach to how those liabilities might increase. … It’s just an acknowledgment that there are new types of disclosure obligations that can form and potentially (lead to) materially misleading statements,” Mr. Passannante said. 

Because these securities claims are novel, “they’re likely to be expensive” and generate directors and officers coverage litigation, he said.