Friday, July 25, 2014

Multi-national NGOs finally turning towards climate change liability?

Greenpeace, WWF and CIEL launched, at the end of May, a letter campaign addressing board members and CEOs of big CO2 polluters and of insurance companies. In their letters, the NGOs ask the addressees to be aware of the risk of criminal and civil liability if they were to deny the causality link between CO2 emissions and climate change. More on the addressees and the letters can be found here.

Already five years ago, has invited two of the three involved multi-national NGOs and several others to investigate whether climate change compensation claims can serve as a leverage to curb climate change. Two years ago, launched another campaign. At the time, we heard from one of them that they would rather see chances for injunction law-suits against polluters. We wondered how a few successful injunction law-suits can ever achieve any improvement for the climate.

In the meantime, NGOs were targeting investor decision-making. When doing so, they already referred to possible liability of CO2 polluters.

The recent letter campaign illustrates that the multi-national NGOs might move further into the direction of climate change liability. However, it is not sure that their current threatening strategy will have more effects than making a few attorneys, consulted by worried managers, richer. The letters fail to demonstrate how the denial of climate change, under the jurisdictions of the targeted managers, might cause or might have caused a damage for which the managers can be hold liable. There is only a vague footnote in which they refer to risk disclosure obligations, obligations which protect shareholders. The NGOs seem to claim that the obligation to disclose risks linked to climate change would be infringed by public denial of climate change. However, these are different pairs of shoes. Disclosing risks linked to climate change can be achieved by reports targeting investors. In parallel thereto, the managers can well work in favor of denial of climate change in the public debate to protect the financial interests of their companies. The two threads can be followed in parallel by the same managers. Moreover, it could even be argued that managers have also the obligation to pursue the financial interests of their stakeholders and thus to follow the two threads in parallel.

Our overall impression is that the letter campaign somehow beats about the bush. It targets the managers instead of the companies themselves. It targets the wrong risk, the risk of not fulfilling disclosure obligations instead of the risk caused by climate change. And it works in favor of shareholders instead of the victims of climate change. The task of the NGOs should not be to protect the interests of shareholders, but to protect the interests of the victims of climate change and to deter investors from fossil fuel investments. Neither goal will be reached by the NGOs. Evidently, the victims do not profit from the NGOs action. If we look at it under the aspect of possible deterrence, the liability risk the NGOs point at is too small to trigger de-investment. Thus it will not do much favor to the climate. Only the damages caused by climate change weigh enough to outweigh the profits of the fossil fuel industry. Only the credible threat to hold polluters fully liable for many and high damages caused by climate change can deter investors from further investing in fossil fuel energy production.

Thus we still have to wait for the multi-national NGOs to embrace the unique promising strategy: suing polluters for compensation regarding the damages caused by climate change. For how long?