Reality bites: Fossil fuel companies face climate liability claims after decades of denial

10/6/19 - Kristen Casper, Greenpeace International & Kathy Mulvey, Union of Concerned Scientists

Fossil fuel companies knew they were damaging the planet - and spent millions to mislead the public. Is the law about to catch up with them?

In the just completed annual general meetings season, climate change was a top priority for investors. While continuing to call for climate-proof business plans, investors should keep a close eye on the wave of climate lawsuits too.

The suits were triggered by revelations that the industry has known for well over 50 years that burning fossil fuels would lead to a climate breakdown. Instead of raising the alarm, fossil fuel companies and their trade associations spent millions to mislead the public and undermine both climate science and action. Given the growth of climate lawsuits, this is an increasingly pressing issue for shareholders. Here’s why: 

1) The fossil fuel industry failed to warn investors and the public for decades, while it engaged in climate science and had clear knowledge of the significant climate risks.

Journalists and organizations such as the Center for International Environmental Law, the Climate Investigations Center, Greenpeace USA, and the Union of Concerned Scientists (UCS) have been documenting internal company research on climate change and public-facing campaigns to cast doubt on climate science and solutions.

For example, corporate members of the American Petroleum Institute knew at least 50 years ago that unabated burning of their products would change the earth’s climate. There is evidence Exxon knew back in 1982 about the risk of reaching the record high rates of atmospheric carbon dioxide registered this year.

By 1988, Shell was aware of the threat its products posed to the global climate too. Instead of taking action to prevent a climate crisis, some companies deliberately deceived the public, policy makers, and their own shareholders. These disinformation campaigns have delayed investments in the energy transition even as climate impacts worsened.

2) In response to the revelations of corporate efforts to undermine action and mounting climate harms, affected communities are suing to recover the costs or to force companies to align business models with much-needed climate action.

In 2018, the New York Attorney General sued ExxonMobil over “an alleged fraudulent scheme to systematically and repeatedly deceive investors about the significant impact that future climate regulations could have on the company’s assets and value”.

Additionally, over a dozen US cities and counties, one state, and one industry association have filed lawsuits to hold fossil fuel companies financially responsible for their role in global warming-related damages. In Canada, the City of Toronto is looking into the costs of climate damage and exploring legal recourse to recover them.

In the Philippines, the Commission on Human Rights has concluded a first-ever national inquiry into the responsibility of fossil fuel companies for climate-related human rights violations. The investigation was triggered by a legal petition filed by disaster survivors and many others in 2015.

The Commission is expected to issue a report and resolution this year, which could result in a first-ever legal finding on corporate responsibility for the climate crisis and lay the foundations for accountability in other forums.

Not only is the risk of climate litigation here and growing, it was also foreseeable. Internal Shell Group documents dated 1998 foreshadowed the litigation we are seeing today. ConocoPhillips’ 2018 10-K disclosed that it is facing lawsuits, but other major fossil fuel companies including BP and ExxonMobil do not acknowledge existing climate liability lawsuits in their financial filings.

Lack of transparency about climate litigation risks could compound corporate liability.

3) More lawsuits are on the horizon because fossil fuel companies are failing to meaningfully respond to climate risks.

While some companies are responding to pressure from investors, their efforts remain insufficient to prevent the worst effects of the climate breakdown.

UCS’s in-depth analysis of the climate-related positions and actions of eight major oil, gas, and coal companies found that several have publicly supported the Paris climate agreement to limit harmful warming, but none of them has set company-wide emissions reduction targets consistent with that stated support.

Even worse, many continue to downplay or misrepresent climate science and the dangers of carbon emissions. At Chevron’s 2019 annual general meeting, it was reported that CEO Michael Wirth falsely claimed that there is no new science or evidence to back up climate liability cases against the fossil fuel companies.

Meanwhile, all eight of the companies UCS studied continue to support trade groups that spread climate disinformation and seek to block climate policies. In a new twist, BP, ConocoPhillips, ExxonMobil, and Shell are funding a lobbying push for a carbon tax proposal that conveniently includes a climate liability waiver for fossil fuel companies.

Expectations for improved corporate disclosure of climate-related risks are mounting, and proposed measures to strengthen disclosure in the EU and the US would provide new levers for climate accountability. Meanwhile, shareholders are expressing dissatisfaction with the leadership of ExxonMobil and others, sending an industry-wide message that foot-dragging and obstruction will not be tolerated.

Incomplete or misleading disclosures are among the key claims currently raised by shareholders. The next stage could be shareholder lawsuits over support for trade groups whose climate advocacy contradicts stated company positions.

Shareholders have upped the ante at this year’s annual general meetings, suggesting that they will use every tool at their disposal to pressure major fossil fuel companies to respond to the climate emergency. 

Kathy Mulvey is Climate Accountability Campaign Director, Union of Concerned Scientists. Kristin Casper is Senior Legal Counsel for Strategic Litigation, Greenpeace International