The Global Risk Institute (GRI) yesterday published a paper titled “Climate-Related Legal Risks for Financial Institutions: Executive Brief” (the “Paper”), authored by Dr. Janis Sarra with the Canada Climate Law Initiative and Resilient LLP’s Lisa DeMarco.
The Paper provides an overview of the many risks now faced by the financial sector including regulatory liability, securities law litigation, fiduciary duty risk, professional indemnity insurance risk, “greenwashing” litigation, commercial contract risk, litigation against governments, and civil lawsuits. The Paper also provides “best practice tips” for financial institutions, risk managers, and board risk committees to consider and implement as a means to limit their liability and reduce their climate-related risks. These recommendations include, among others:
- Undertaking a high-level assessment of litigation exposure across loan and policy books, investment portfolios, and operations;
- Embedding management of climate-related risks as part of core business risk management;
- Investigating and disclosing climate-related vulnerabilities in investment portfolios; and
- Creating an action plan to reduce Scope 1, 2, and 3 carbon emissions as evidence of a financial institution’s due diligence in addressing climate-related financial risk.
The first page of the Paper appears below. The full text of the paper is available on the Global Risk Institute website here.