Riders on the Storm - Investors' Fiduciary Duty and Liability in Climate Change Matters
With climate change cases topping number 1000 around the world, who is next? Is there a long leap from companies to investors and pension funds? Should we expect, or plan against, a (further) climate case against Statoil and a climate case against “Oljefondet”?
Esmeralda Colombo is a PhD candidate who does research on climate lawsuits at the Faculty of Law at the University of Bergen. On April 24th, she held a presentation at the Bergen Energy Lab about investors’ fiduciary duty and liability in climate change matters.
The costs of renewable energy technologies are falling rapidly, and every year since 2015, more renewable energy has been added globally to the energy mix than all other sources combined. Electric vehicles might reach global cost parity in 2024-2025, and there are almost 10 million people employed in the renewable sector worldwide today.
Still, traditional oil companies are investing heavily in the petroleum sector. In fact, the Carbon Tracker Initiative has estimated that some oil and gas companies have planned investments, even 20%-30% of their investments that are not needed in a two-degree scenario. This poses a significant financial risk, but oil and gas companies are also increasingly facing the risk of climate lawsuits.
Last summer, San Mateo County and other counties and cities in California filed a lawsuit against 29 fossil fuel companies, including Statoil, over their responsibility for contributing to climate change and causing millions of damages to the cities and counties in California bringing the lawsuit. According to Esmeralda, this is just one of the possible ways for holding companies accountable and nudge a change in their corporate strategy.
A fiduciary duty is the legal responsibility of acting in the best interests of another party. Investors who do not take into account the risks related to climate change could be found liable for breaching their fiduciary duty. This could potentially lead to cases against not only companies, but also investment funds such as the Norwegian Government Pension Fund – Global (‘Oljefond’).
Last week, Esmeralda arranged a lawsuit simulation at NHH involving students in the Economics of Climate Change course. In this case, Nature and Youth and the Republic of Palau sued the Norwegian Government Pension Fund - Global (‘Oljefond’)demanding the fund to divest and to cover damages for the republic of Palau. Endre Nåmdal, a former judge and former assistant professor at UiB, played the role as the judge during the simulation. He decided that the duty of care was not fleshed out enough, and the claims against the Oljefond were dismissed.
However, in a real lawsuit in the future the outcome could be different. Companies, and the Norwegian Government Pension Fund - Global need to work towards preventing their Liability Risk.
Read more in Esmeralda’s presentation below