When it comes to climate risk reporting silence is the most dangerous option according to a report by legal experts from the Commonwealth Climate and Law Initiative (CCLI), and the fear of legal action is no excuse for not disclosing the information.
Commentators have expressed concerns that compliance with the Task Force on Climate-related Financial Disclosure (TCFD) recommendations will expose companies to legal liabilities. This is because investors or clients relay on companies forward looking statements and then suffer losses if they fail to occur. There is also uncertainty surrounding future climate risk impacts and costs.
The report entitled Concerns misplaced: Will compliance with the TCFD recommendations really expose companies and directors to liability risk? explains that this concern misrepresents security laws and overstates the liability risk associated with forward looking statements. Secondly, the paper argues that compliance with the recommendations from the TCFD will actually protect companies from the kind of legal liability claims they fear.
ClientEarth corporate lawyer and co-author of the report Alice Garton explained: “Following the TCFD framework is currently the best insurance policy because if directors fail to reference material climate risk, the message to investors that business is as usual, which can leave them open to liability claims.”
Task Force special adviser Russell Picot added: “Climate risk is present in almost all investment portfolios. Companies need to look at different scenarios and give clear indications to investors of how they believe these might play out. Fear of liability should not be used as an excuse.”