Nowhere to hide - climate legal risk

Climate legal risk is hitting businesses and individuals with hugely expensive outcomes - both financial and reputational. Marcelo Lozada Gomez is leading our work in this field at JS Global Advisory and sets out the key issues below 

Financial sector accountability represents a major new frontier. Milieudefensie filed a suit against ING Bank in March 2025, claiming the bank's fossil fuel financing violates Dutch duty of care. Meanwhile, greenwashing cases against financial firms have resulted in considerable penalties, including Deutsche Bank's DWS facing €25 million in German penalties plus $25 million in the U.S. for misleading ESG claims. 

 

Retail and consumer goods companies face increasing oversight. Following an investigation by the UK’s CMA, fast fashion giants Asda, Asos, Boohoo, agreed to restructure their green claims and file regular reports to track compliance with their commitments. At the same time, the aviation sector saw its first major greenwashing defeat when KLM's sustainability claims were ruled to violate EU consumer law by Amsterdam’s District Court. 

 

Traditional energy litigation continues to expand. In January 2025 the U.S. Supreme Court declined oil companies' effort to block a lawsuit from the city of Honolulu seeking billions in damages for climate deception against major companies like ExxonMobil, BP, Shell, and Chevron. Similarly, Italy's Supreme Court ruled in July 2025 that climate lawsuits against Italy’s energy giant Eni can proceed, marking the first time Italian courts recognised their authority to hold corporations accountable for climate change impacts. 

 

Directors and officers face personal liability and governance disputes. PG&E's climate-related wildfires resulted in former executives and directors paying $117 million to settle fiduciary duty breach claims, whilst Engine No. 1's successful proxy campaign against ExxonMobil demonstrated how climate strategy failures can result in board replacement. 

 

Retail and consumer goods companies face increasing oversight. Following an investigation by the UK’s CMA, fast fashion giants Asda, Asos, Boohoo, agreed to restructure their green claims and file regular reports to track compliance with their commitments. At the same time, the aviation sector saw its first major greenwashing defeat when KLM's sustainability claims were ruled to violate EU consumer law by Amsterdam’s District Court. 

 

Traditional energy litigation continues to expand. In January 2025 the U.S. Supreme Court declined oil companies' effort to block a lawsuit from the city of Honolulu seeking billions in damages for climate deception against major companies like ExxonMobil, BP, Shell, and Chevron. Similarly, Italy's Supreme Court ruled in July 2025 that climate lawsuits against Italy’s energy giant Eni can proceed, marking the first time Italian courts recognised their authority to hold corporations accountable for climate change impacts. 

 

Directors and officers face personal liability and governance disputes. PG&E's climate-related wildfires resulted in former executives and directors paying $117 million to settle fiduciary duty breach claims, whilst Engine No. 1's successful proxy campaign against ExxonMobil demonstrated how climate strategy failures can result in board replacement. 

 

 

Alongside expanding litigation, governments worldwide are implementing comprehensive regulatory frameworks that transform voluntary climate commitments into mandatory legal obligations, creating additional pathways for corporate liability. 

 

The United States leads with state-level targeted liability mechanisms. New York and Vermont's ‘Climate Superfunds’ require fossil fuel companies to pay billions for climate adaptation costs based on their historical emissions contributions. These regimes create direct financial accountability for past climate impacts, establishing precedents other states are likely to follow. 

 

Australia’s Sustainability Reporting Standards (ASRSs) establish climate-related financial disclosures aligned with international frameworks. Large companies must now report Scope 1, 2, and 3 emissions with mandatory assurance, creating legal exposure for inadequate climate risk management and disclosure failures. 

 

The European Union advances the most comprehensive corporate climate accountability framework globally. The Corporate Sustainability Due Diligence Directive (CSDDD) established mandatory human rights and environmental due diligence obligations, requiring climate transition plans aligned with Paris Agreement 1.5°C targets and creating civil liability for damages claims. Complementing CSDDD, the Empowering Consumers for the Green Transition Directive establishes EU-wide standards for environmental marketing claims, creating additional greenwashing liability exposure (which may be complemented by the proposed Green Claims Directive). 

 

 

The diversification in climate legal activity is also backed by unprecedented international legal pressure requiring States to regulate corporate climate liability. Three major international advisory opinions in 2024-2025 have established binding obligations for States oversight of private sector emissions. 

 

The International Tribunal for the Law of the Sea ruled in May 2024 that States must "ensure that non-State actors under their jurisdiction or control comply" with climate obligations, creating direct corporate accountability through mandatory regulatory frameworks. The Inter-American Court of Human Rights declared in May 2025 that states must exercise "reinforced due diligence" in regulating corporate fossil fuel activities. Finally, the International Court of Justice's July 2025 opinion went further, establishing that states must regulate corporate activities to meet climate targets using "all means at their disposal". Companies should thus anticipate more comprehensive climate liability frameworks across jurisdictions as States implement binding international obligations to regulate corporate climate impacts. 

 

 

The convergence of expanded litigation, tightening regulation, and binding international obligations marks a fundamental transformation in the corporate legal landscape. Climate legal risk has become a core business reality demanding board-level attention and strategic response. Companies that continue to treat climate accountability as voluntary corporate social responsibility will find themselves increasingly exposed to material financial liability, reputational damage, and operational disruption. Companies must now conduct comprehensive climate legal risk assessments, integrate climate considerations into their risk management frameworks, and develop proactive compliance strategies that anticipate rather than respond to this evolving legal landscape.