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Canadian Youth File Climate Risk Lawsuit Against CPP Investments

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Four young Canadians have launched a legal claim against the Canada Pension Plan (CPP) Investment Board (CPP Investments), Canada’s largest pension fund manager, alleging that it is mismanaging and has underestimated climate-related financial risks to the $732B in assets under management of the CPP. The claim alleges that by underestimating and failing to disclose climate-related financial risks, CPP Investments could expose Canadians to dramatically reduced retirement benefits, the need for substantially higher contribution rates, or both. This bulletin briefly summarizes key information regarding the claim. Overview. The claim notes that CPP Investments has publicly recognized climate change as a significant investment risk, but “backtracked” on its net-zero commitment earlier this year. The applicants allege that this reversal, combined with ongoing fossil fuel investments, demonstrates an absence of sufficient measures to manage climate-related financial risks in the best interests of younger contributors. The youth applicants, which are all anticipated to receive pension benefits after 2050, argue that by severely underestimating and failing to disclose climate-related financial risks, CPP Investments is failing to: properly manage climate-related financial risks, thereby jeopardizing the long-term value of the portfolio and the security of contributors’ benefits; and adequately identify and assess climate-related financial risks to CPP funds, including in its use and reporting of the MSCI Climate Value-at-Risk model without describing how it applies judgement to the results despite the alleged uncertainty regarding the model’s ability to adequately capture systemic risks from higher degrees of warming. The claim relies on the latest research on the severe impacts of climate change (including the triggering of tipping points and cascading risks) on society and financial systems beyond 1.5°C of warming. According to Ecojustice, the claim is the first climate case against a pension fund investment manager “anchored in the duty of impartiality and even-handedness in a multi-generational context” and is also…

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International Court of Justice Releases Landmark Climate Change Opinion

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The International Court of Justice (ICJ) today released its unanimous advisory opinion on obligations of States in respect of climate change (the Advisory Opinion). The Advisory Opinion, delivered by Judge Yuji Iwasawa and non-binding, determined that States may face legal consequences under international law for failing to meet their obligations to address climate change and protect the environment. This bulletin briefly summarizes background information, key findings of the Advisory Opinion, and highlights from separate opinions of ICJ judges delivered alongside the Advisory Opinion. Background. On 29 March 2023, the General Assembly of the United Nations adopted a resolution requesting the ICJ to give an advisory opinion on the following questions: (a) What are the obligations of States under international law to ensure the protection of the climate system and other parts of the environment from anthropogenic emissions of greenhouse gases (GHG) for States and for present and future generations? (b) What are the legal consequences under these obligations for States where they, by their acts and omissions, have caused significant harm to the climate system and other parts of the environment, with respect to: (i) States, including, in particular, small island developing States, which due to their geographical circumstances and level of development, are injured or specially affected by or are particularly vulnerable to the adverse effects of climate change? (ii) Peoples and individuals of the present and future generations affected by the adverse effects of climate change? Key findings. Key findings of the Advisory Opinion in response to question (a) include: International climate change treaties, including the United Nations Framework Convention of Climate Change (UNFCCC), Kyoto Protocol (KP) and the Paris Agreement (PA), set forth binding obligations for States parties to ensure the protection of the climate system and other parts of the environment from anthropogenic GHG emissions. Customary international law sets forth obligations for States to ensure the…

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Ontario Court of Appeal Allows Appeal in Youth Climate Change Case

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The Court of Appeal for Ontario (ONCA) today released its unanimous decision (the Decision) on an appeal of the dismissal of a youth-led constitutional challenge of Ontario’s emissions target (see our earlier bulletin here). The ONCA allowed the appeal, determining that the Ontario Superior Court (ONSC) application judge erred in characterizing the case as a positive rights case and remitted it to the ONSC for reconsideration. The case is the first in Canada to consider whether a government’s approach to climate change can violate the Canadian Charter of Rights and Freedoms (the Charter). This bulletin briefly provides key background details of the case and the main findings of the Decision.   Background. The appellants, seven Ontario youths, some of whom are Indigenous, brought an application for (i) a declaration that Ontario’s 30% reduction of greenhouse gas (GHG) emissions target (the Target) under section 3(1) of the Cap and Trade Cancellation Act, 2018 (the CTCA) – implemented through Ontario’s “A Made-in-Ontario Environmental Plan” (the Plan) – and section 16 of the CTCA, repealing Ontario’s Cap-and-Trade system, were unconstitutional as they violated their rights under sections 7 and 15 of the Charter, and (ii) an order declaring their Charter rights have been violated and requiring Ontario to set a science-based emissions reduction target and to revise the Plan in accordance with international standards. The application judge dismissed the application. While the judge found the issue of the appellants’ sections 7 and 15 Charter rights justiciable, she characterized it as a positive rights claim and concluded that any deprivation of life or security of the person under section 7 was not contrary to fundamental justice, and that section 15 did not impose a positive duty on Ontario to act against climate change.   The Decision. The following is a brief overview of the ONCA’s main findings: The application judge erred in her analysis of the case as…

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Dutch Court Rules KLM Misled Customers and Engaged in Greenwashing

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The District Court of Amsterdam (the Court) recently released its decision on alleged ‘greenwashing’ claims against Dutch airline KLM (the Decision). The Court found that 15 of the 19 impugned KLM advertising statements and environmental claims were unlawful and misleading to consumers. Specifically, the Court held that it was misleading and unlawful for KLM to make advertising statements suggesting that (i) flying can be or become sustainable, and (ii) the purchase of or contribution to a “compensation” product actually reduces, absorbs or compensates for part of the climate impact of flying. This bulletin briefly summarizes the background of the case and important aspects and implications of the Decision. Background. Dutch environmental groups Fossielvrij Netherlands (Fossil Free Netherlands) and Reclame Fossielvrij (Fossil Free Advertising) (together, FF), supported by ClientEarth, an international environmental advocacy organization, delivered a letter to KLM in May 2022 stating their intention to file a legal claim if their demands, including calling for a ban on all fossil fuel advertising in the EU, were not met. FF and ClientEarth indicated that they were targeting KLM’s ‘Fly Responsibly’ ad campaign and the airline’s offers for customers to purchase carbon offsets to fund reforestation projects or the purchase of biofuels to offset the emissions from a customer’s flight. FF filed a ‘greenwashing’ lawsuit against KLM in July 2022, alleging that the airline’s climate-related advertising misled the public and challenging KLM’s carbon offsetting marketing, which purported to allow customers to reduce the carbon impacts of their flights by supporting reforestation projects or the purchase of small quantities of biofuels and Sustainable Aviation Fuel (SAF). Court’s Findings and Decision. The Court considered 19 statements made by KLM in connection with its ‘Fly Responsibly’ and ‘CO2ZERO’ marketing campaigns and ‘KLM Real Deal Days’ promotion campaign under the Dutch Unfair Commercial Practices Act and…

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UK High Court Dismisses Shareholder Climate Lawsuit Against Shell’s Board of Directors

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The UK’s High Court (the Court) has denied the world’s first climate-related derivative action against a board of directors to hold them personally accountable over their alleged failure to properly prepare for the energy transition.   Background. On February 9, 2023, environmental law organization ClientEarth filed a derivative action, brought by shareholders on behalf of the company, seeking permission to bring a claim against Shell’s board of directors (the Board), alleging breaches of legal duties under the UK’s Companies Act 2006 (the Act). ClientEarth alleged that the Board was mismanaging material and foreseeable climate risks in breach of the Act and had failed to adopt and implement an energy transition strategy that aligns with the Paris Agreement. Specifically, ClientEarth alleged that the Board breached its duties under: s. 172 of the Act, which requires directors to act in a way that they consider will best promote the success of the company for the benefit of its members as a whole; and s. 174 of the Act, which requires directors to exercise reasonable care, skill and diligence in the discharge of their duties. ClientEarth had requested that the Board be required to adopt a strategy to manage climate risk in line with its duties under the Act, and in compliance with the 2021 Dutch Court judgment requiring Shell to reduce CO2 emissions of the Shell group by net 45% in 2030, compared to 2019 levels, through the Shell group’s corporate policy (see our earlier bulletin here).   Judgment. Mr Justice Trower of the UK High Court denied permission to ClientEarth to bring its climate-related derivative action against the Board in the UK. In dismissing the lawsuit, the judge determined that ClientEarth’s action sought to “impose specific obligations on the directors as to how the management of Shell’s business and affairs should be conducted, notwithstanding the well-established principle that it is for directors…

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