Shareholder litigation is emerging as the next frontier in shareholder climate action, as investors respond to the scale and urgency of the threats posed by climate change. Climate change threatens devastating environmental and human impacts. It also threatens investment returns. Studies estimate that the financial value at risk could be up to 17% of global financial assets.

Investors are responding increasingly forcefully to require companies to better disclose and manage climate-related risks. This has led to stepped-up engagement and greater use of shareholder rights, such as voting against director re-appointments and shareholder resolutions.

The next step for driving climate action at recalcitrant companies is shareholder litigation. Two factors underline this direction of travel.

First, it is now firmly established that climate change poses material financial risks to businesses and investors. This is recognised by central banks, regulators, institutional investors and, increasingly, businesses. Climate-related risks can also be near-term. This was vividly illustrated by Californian utility PG&E’s bankruptcy following wildfires and liability fears last year, described by The Wall Street Journal as “The First Climate Change Bankruptcy, Probably Not the Last”...