Lawyers warn business will find compliance with new legal environment anything but ESG-sy

While the (re)insurance sector has been keen to drive its environmental social and governance (ESG) credentials it needs to pray that its clients have done the same.

Law firm RPC held a week long event to examine the major litigation trends across the world and ESG dominates the thinking of many legal experts.

The warnings are clear, from the US, to Europe and the UK the courts are wrestling with key cases which will define legal approach to climate risk, the threat from forever chemicals, and the issues around companies looking to greenwash their ESG inactivity.

Regulatory are going through the gears when it comes to a swathe of new rules around ESG, and environmental legislation with NGOs, and shareholders waiting in the wings to launch their action if and when the firms fail to adhere to the new rules.

The biggest current issue is lack of clarity. While regulators are keen to bring in sweeping reforms there are growing rumbling from business leaders that the reforms are too broad and too general and as such directors and officers have little of no chance and navigating the requirements leaving their firms open to legal challenge.

However, NGO and clients are also looking at new ways in which to adapt current law to hold those they see as failing to account. Courts are seeing ever more innovative ways in which plaintiffs are looking to take companies to court over ESG risk breaches.

While the environment and climate change are grabbing the headlines the real threat it seems is set to come from the chemicals which are used in thousands of applications.

Described as “forever chemicals” PFSA are used so wildly that the legal experts say the biggest issue of to understand how they affect human health and the environment but warned that given their use in the supply chain firms will soon be required to take a thought review of their suppliers and the goods they supply to seek to eradicate the forever chemicals for society. Quite apart from how they will be replaced the question will be how much time will business be given to cleanse their operations of the chemicals before the writs arrive?

Already multinational firms such as Danone are being challenges for their efforts to rid its operations of single use plastic, with 9 billion tonnes already in the world’s oceans. Do not get the lawyers started on microplastics, which again are far too prevalent they warn and cause so much damage that when the courts get their act together in how to treat the miniscule menace firms will be facing billions in damage claims.

Insurers have been urged to turn the threat into opportunity and work with their risk managers to ensure their ESG credentials and strategies are up to rigorous examination. In the US marsh are already seeking to encourage insurers to reward their clients with robust ESG systems with more enhanced and cheaper cover.

The problem remains that the coming 12 months is likely to see court judgements that will redefine the legal landscape and the exposures with it.

Jon Guy, Editor

Emerging Risks