A working paper from the Grantham Research Institute at the LSE has studied the results of rising climate litigation on the share value of those companies in the dock.

Using a database of filings and decisions relating to 108 climate change lawsuits against US and European-listed corporations between 2005 and 2021 show that climate litigation filings or unfavourable court decisions reduced firm value by -0.41 per cent on average.

Further, the authors identify conditions that would lead to a bigger effect, such as cases against the largest emitters, or Carbon Majors, and cases involving novel legal arguments. Carbon Majors (the largest emitters operating in energy, utilities, and materials), reducing firm value by -0.57 per cent following case filings and by -1.50 per cent following unfavourable judgements.

The results offer the first robust evidence on climate litigation risk as a financial risk and suggest that lenders, financial regulators and governments should consider climate litigation risk as a relevant financial risk in a warmer future.

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