Introduction

The starting point is that no single country, not even the United Kingdom (UK), can solve the climate crisis in isolation. The UK continues to lead global efforts to mitigate climate risk, recognising that there is a moral and social imperative to enable adaptation to net zero while balancing the needs of the most vulnerable in society and helping to facilitate a just transition to renewable energy in emerging economies, which are often least responsible for, yet most affected by, climate change.

The Sustainable Development Goals of the United Nations and Artificial Intelligence

Artificial intelligence may play a useful role in the efforts to mitigate climate change. Co-operation and partnerships between governments, across industries and in every conceivable way are needed to address this issue. Climate action is at the heart of the sustainable development goals (SDGs) of the United Nations. SDG 13 aims to “take urgent action to combat climate change and its impacts”. It is one of 17 SDGs established by the General Assembly of the United Nations in 2015. SDG 13 is linked to the other 16 SDGs of the 2030 United Nations’ Agenda for Sustainable Development. The implementation of the agreement reached in Paris in 2015 to limit global temperature rise to below 2 degrees Celsius of pre-industrial levels is proving to be a Herculean task in today’s geo-political context and the practical demands of the digital and climate transitions. Achieving a just and equitable climate transition to net zero that does not leave behind vulnerable groups and developing economies (the least responsible for the current state of the planet yet often suffering the most) remains a challenge.

By way of context, the European Union’s State of the Climate Report 2023 (the “EU’s Climate Report”) compiled by the Copernicus Climate Change Service and the World Meteorological Organization found that 2023 had been the hottest year on record thus far, with climate-related losses reaching an estimated EUR13.4 billion, 1.6 million people affected by flooding, 36,000 people affected by wildfires and 555,000 people affected by storms, and with lives lost attributable to storms, floods and wildfires. The EU’s Climate Report found that 81% of economic losses were attributable to flooding. The State of the Global Climate Report 2023 by the World Meteorological Organization published on 19 March 2024 confirmed 2023 as the hottest year on record by a clear margin. This report found that:

• the cost, both economic and human, of climate inaction is greater than the cost of climate action;
• extreme weather undermines socio-economic development;
• 2023 extreme weather events exceeded records for ocean heat, sea level rise, Antarctic Sea ice loss and glacier retreat; and
• renewable energy transition still provides hope.

The International Energy Agency has repeatedly emphasised that the energy sector is central to efforts to combat and mitigate climate change.

United Nations’ World Environment Day on 5 June 2024 aimed at encouraging global awareness and action to protect the climate. In a special address on climate action at the American Museum of Natural History in New York, Antonio Guterres, the Secretary-General of the United Nations described the current climate situation as a “moment of truth” and called on all nations to take maximum action before it is too late. Antonio Guterres described climate change as the “mother of all taxes paid by the most vulnerable in society”, which we all have a moral obligation to mitigate. He called for systemic change in the way we approach a just energy transition. Some of the ingredients should include a ban on advertising from fossil fuel companies and greater investment by the fossil fuel industry in green energy. For example, despite declaring record profits in 2023, the fossil fuel industry invested only 2.5% of total capital spending in green energy in 2023. The Secretary-General encouraged the fossil fuel industry to be more proactive in investing in green energy and lead the renewables transformation, which would guarantee the fossil fuel industry’s leadership in the new energy sector. The Secretary-General also called for accurate climate risk disclosures to regulators and shareholders of businesses, high integrity carbon markets, the phasing out of fossil fuels by 2050, with concrete steps to increase energy efficiency and focus on renewable energy production and storage between now and 2030.

Climate change is a global issue, affecting all sectors in all jurisdictions. The UK remains at the forefront of global responses to climate change, including:

• investment in renewable energy;
• emissions trading systems;
• transforming carbon heavy infrastructure;
• carbon sinking; and
• carbon tax.

The UK recognises that the global financial system must be part of the solution, not the problem, in mitigating climate change. The UK encourages investment in clean energy and will play a leading role in the forthcoming Conference of the Parties of the United Nations Framework Convention on Climate Change (COP) 29 meeting in Baku in November 2024 and COP30 in Brazil after that. Some of the key areas of focus are discussed below.

COP28

COP28 was held in the United Arab Emirates in December 2023. The headline agreements were the operationalisation of the Loss and Damage Fund created at COP27 and an international agreement to transition away from fossil fuels. The UK made the following commitments at COP28:

• provide USD2 billion in climate finance to the Green Climate Fund, including GBP60 million for loss and damage;
• provide GBP10 million to boost climate-resilient farming practices globally by scaling up a partnership with the World Bank; and
• treble renewable energy as part of the Global Renewables and Energy Efficiency Pledge.

COP28 marked the first global stocktake to assess the progress made towards achieving the goals of The Paris Agreement 2015. The first global stocktake clearly showed that worldwide actions are far behind those which are urgently needed. Its insights are intended to help policymakers and stakeholders strengthen their climate policies and inform the next round of nationally determined contributions. It was agreed that following COP28 a global stocktake will take place every five years.

Climate Policy and Law

The UK’s environmental, social and governance (ESG) legal landscape remains fragmented and continues to be governed by a multitude of government policies and legislative acts. Over the last 12 months, climate policy has been impacted by the implementation of more rigorous environmental and climate-related disclosure requirements. In August 2023, the UK government announced the creation of the UK Sustainability Disclosure Standards (SDR) as part of its broader strategy to act against climate change and meet the UN Sustainable Development Goals. A revised timeline and details on the SDR framework are expected within the coming months. In addition, the EU implemented the EU’s Corporate Sustainability Reporting Directive which, although it does not apply in the UK, will impact UK-incorporated companies under certain circumstances.

Looking forward, a significant development in climate policy and law may be brought about following the recent UK General Election in July 2024. There will likely be significant changes to the UK’s policies and laws on climate change. The Labour Party has pledged to achieve net-zero emissions by 2030 and will introduce more stringent emissions reduction targets and increase investment in renewable energy technologies to meet this target. This could have a profound impact on businesses operating in the UK: they will need to monitor policy shifts and adapt strategies accordingly.

Climate Change-Related Litigation

Environmental impact assessments and planning permission

R (on the application of Finch on behalf of the Weald Action Group) (Appellant) v Surrey County Council and Others (Respondents) [2024] UKSC 20 was a case heard by the UK Supreme Court which looked at environmental impact assessments for individual projects carried out by the relevant planning authority in the context of granting planning permission. The relevant legislation, the Town and Country Planning (Environmental Impact Assessment) Regulations 2017, which implemented European Union Directive 92/11/EU, required the EIA to identify, describe and assess the likely “direct and indirect significant effects” of the proposed project on the environment, including (among other factors) the impact on the climate (for example, the nature and magnitude of greenhouse gas emissions).

Lord Leggatt, with whom Lord Kitchin and Lady Rose agreed, gave the majority judgment, holding that: (i) it was an agreed fact that the consequences of the proposed project would have a significant impact on climate; and (ii) the relevant legislation did not impose a geographical limit on the scope of the environmental effects of a project that must be assessed. It is in the very nature of “indirect” effects that they may occur away from their source. The impact of greenhouse gas emissions on climate does not depend on where the release occurs. The purpose of environmental impact assessments is to ensure that, whatever the decision taken by the planning authority, it is taken with full knowledge and public awareness of the likely significant environmental consequences. Consequently, the planning authority’s failure in this case to assess the effect of the proposed project on climate meant that its decision to grant planning permission for the project was unlawful.

Lord Sales, dissenting, observed that the relevant legislation contemplated that decisions on the grant of planning permission would often be taken by local or regional authorities. Downstream emissions are the responsibility of central governments at the level of national policy. Consequently, in Lord Sales’ view, it would be constitutionally inappropriate for a local planning authority to assume practical decision-making authority based on its own views on downstream emissions and it would be contrary to the EU’s principle of proportionality to do so.

Climate change-related litigation is a trend that has seen significant growth. In particular, there has been an increase in cases brought against governments for inadequate climate action both within the UK and globally.

Cases brought against UK government

In the UK, several high-profile cases have been brought against the government, challenging its climate policies and decision-making processes. In May 2024, the High Court declared that the government’s Carbon Budget Delivery Plan breached its obligations under Section 13 of the Climate Change Act 2008. The case was brought by three environmental groups, including ClientEarth, which successfully argued that the plan failed to provide sufficient information and was vague in detailing how future climate targets could be met. This ruling marked the second time in two years that the government would have to rewrite a climate-related strategy. Crucially, it highlights the need for adaptive and flexible strategies if the UK is to reach its target of net zero by 2050.

European Court of Human Rights

A noteworthy example was the ruling by the European Court of Human Rights (ECtHR) on a case brought by a group of Swiss women in April 2024 . The ECtHR found that Switzerland had failed to take adequate action against climate change, and in doing so violated the women’s human rights. Switzerland failed to comply with its duties under Article 8 of the European Convention on Human Rights. In this landmark case, the ECtHR declared that Article 8 encompasses a right for individuals to be effectively protected by State authorities against the adverse effects of climate change on their lives, health, well-being and quality of life. It was the first-ever climate case victory in the ECtHR and could spur similar human rights-based climate litigation across Europe.

While the judgment in this case is only binding on other EU countries, it may be of persuasive value in the UK; it dealt with similar complex issues that UK courts are also dealing with. Cases such as these have the potential to influence the UK legal and regulatory framework by setting precedents for holding governments liable for climate inaction. They may also prompt the UK to strengthen its climate laws, policies and enforcement mechanisms to mitigate the risk of similar lawsuits.

Greenwashing

Allegations of greenwashing against companies are rising and therefore expose companies to increased litigation and regulatory risks. Consumers are increasingly activists and seek to hold companies accountable for their actions relating to the climate and wider ESG issues. This also represents increased reputational risk.

The identification and prevention of greenwashing has become a growing priority for regulators in the UK, including the Competition and Markets Authority (CMA) and the Financial Conduct Authority (FCA). A recent example is the CMA’s investigation of the fast fashion industry. In March 2024, the regulator announced that retailers including Boohoo and ASOS have signed formal agreements to ensure they do not promote and describe their green credentials in a way that misleads consumers. The CMA also laid down strict rules that must be adhered to, including the use of clear language by retailers when describing products.

In respect of greenwashing, firms must adapt if they are to adequately manage their litigation and regulatory risks. Firms should consider their internal governance structures and establish appropriate ESG risk assessments, policies and monitoring systems to deal with environmental claims and disclosures effectively. As part of this, there must be an adequate allocation of internal resources and training. This will enable firms to not only deal with environmental claims but also to remain up to date with ESG developments.

Competition Law Issues

In October 2023, the CMA published the Green Agreements Guidance in its final form to provide legal clarity to businesses on the application of the Chapter 1 prohibition (Competition Act 1998) to environmental sustainability (ESG) agreements between competitors. The Guidance establishes a framework to assess whether ESG agreements are likely to be considered exempt from enforcement of the prohibition. To be exempt, the following four conditions must be satisfied:

• the agreement provides a quantifiable benefit;
• the agreement is indispensable (reasonably necessary) to achieve the benefit;
• the benefit to consumers must outweigh the harm to competition; and
• there is no substantial elimination of competition (there must still be scope to compete on core parameters).

The Guidance also introduced an “open-door policy” enabling businesses and organisations to seek informal guidance on proposed agreements that promote environmental sustainability. If a proposal is endorsed by the CMA, a business would not expect to be subject to the potential fines related to any enforcement action. The CMA issued its first informal guidance to the Fairtrade Foundation in December 2023, soon after the publication of the Green Agreements Guidance, on its proposal for the longer-term supply of certain Fairtrade products. This demonstrated the CMA’s willingness to engage with parties in good faith and provide clear guidance on the applicability of the new rules. This should encourage other businesses and organisations to approach them as the UK transitions towards a net-zero economy.

Financial Institutions – Green Finance

Climate change continues to pose serious financial risks to the UK. Part of the Bank of England’s responsibility is to stabilise financial risks due to climate change. It is anticipated that, in the coming year, there will be further expansion of regulatory climate stress testing for financial institutions to quantify exposures to climate risks.

The proliferation of climate litigation is not just impacting governments but also financial institutions. The UK Stock Market listing value for carbon majors, which includes the world’s largest energy firms, typically falls following the filing of a case against them or when an unfavourable judgment is reached. Even if the drop in value is modest, it can have a significant financial and reputational cost for investors, banks and companies.

Financial institutions play a key and increasingly important role in the development of climate resilience, which encompasses the ability to anticipate but also respond to events, crises and trends related to climate. For example, both UK and international financial institutions made new commitments at COP28 to offer Climate Resilient Debt Clauses (CRDCs) by the end of 2025. CRDCs lower the risk of default and facilitate a pause in debt service repayments so that borrowing nations have the necessary fiscal capacity to respond to climate crises such as tropical hurricanes.

There is increasing pressure on financial institutions to divest investments in the fossil fuel industry and focus on renewable energy/green finance to support a just energy transition. At a systems level, some of the difficulties include fragmented and opaque climate risk disclosure requirements and onerous climate funding requirements. More effective co-operation between multilateral/bilateral climate funding sources and greater dialogue between all stakeholders is called for. Securitisation has been identified as a useful mechanism for climate capital mobilisation as it enables commercial and multilateral development banks to transform long-term loans on their balance sheet into tradable securities capable of being sold to investors. The UK is leading the way in creating a climate finance ecosystem which is sensitive to the needs of emerging economies to enable a just transition to net zero.

There is increasing recognition in OECD countries and beyond that the impacts of climate change are not gender neutral. Consequently, financial institutions are encouraged to take gender considerations into account when considering the financing projects, particularly in the agriculture and infrastructure sectors. Financial institutions are encouraged to support economic opportunities that could emerge for vulnerable groups in greener economies. There appears to be a growing consensus among decision-makers that climate resilience, social and economic inclusion and sustainable renewable energy security should be at the forefront of decision-making at all financial institutions.

Conclusion

Climate considerations, mitigation, adaptation and resilience building affect all sectors of the economy, society and all jurisdictions. The UK continues to lead global efforts to deal with this existential threat. Much of the response to date has been ad hoc and reactive. It is time to face vested interests and not yield to their pressure. Nothing should distract from concerted global, regional, national and individual efforts to prioritise mitigating the existential threat of climate change.

It is no longer viable to think of a trade-off between economic growth and climate action. There seems to be a growing recognition that every part of society, every level of government, every sector of the economy must join forces on this issue. In practical terms, there would be merit in a more coherent and practically implementable legal and regulatory framework. The moral imperative to incorporate effective climate targets in everyday business plans and individual accountability should find expression in every aspect of governmental, business and individual human endeavour. Businesses and governments need to be more agile in adapting to the demands of climate change. A key trend that is becoming increasingly apparent is the proliferation of climate change-related litigation, often brought by a more activist public against corporations and governments.