The World Economic Forum’s Climate Litigation: From Compliance to Strategic Imperative report, published in April, makes clear that climate change should be treated as a material legal and financial risk with implications for corporate strategy, governance and capital allocation.
While legal doctrines differ across jurisdictions, courts and regulators increasingly expect companies to anticipate, manage and disclose climate risk at the board level. For UK businesses and their advisers, this marks an inflection point in how directors’ duties, disclosure standards and risk governance should be understood and managed.
Value chain accountability
A key theme of the report is the expansion of climate liability beyond a company’s operations to its wider value chain.
This trend is most advanced in Europe, where mandatory due diligence and reporting regimes are embedding climate risk mitigation measures into legally enforceable obligations. The reach of these regimes extends beyond the EU and can capture both upstream and downstream activity.
In light of such regimes, a critical question for boards is whether their organisations have credible oversight mechanisms in place to support climate commitments that can withstand legal scrutiny.
Transition planning under judicial scrutiny
A second major risk driver is the growing scrutiny of climate transition planning. Where projects rely on incomplete climate analysis or are in misalignment with stated transition strategies, they are increasingly vulnerable to challenge. Remedies in this area often focus on structural change, such as the suspension of permits or requirements to revisit environmental assessments, rather than monetary damages.
For projects to be legally defensible, they must be supported by sound, evidence-based analysis that demonstrates an alignment with climate transition planning.
Duties, rights and foreseeability
The report identifies the rise of duty of care and rights-based climate litigation as one of the most transformative developments globally. The focus of such claims is typically that climate harm constitutes a foreseeable risk, engaging established principles of constitutional law, human rights and tort law.
Although the success and impact of such claims thus far have varied globally, courts appear increasingly willing to examine whether foreseeable climate risks have been adequately considered and incorporated into corporate strategy by senior executives.
Greenwashing as litigation risk
Greenwashing remains one of the fastest-growing drivers of climate litigation risk. The report highlights increasing intolerance from regulators, investors and courts for environmental and sustainability claims that are not supported by credible evidence.
Crucially, the risk is not confined to overtly false statements. Courts and regulators are scrutinising the assumptions underlying climate claims, the credibility of offsetting strategies and the robustness of internal governance and verification processes. Financial institutions and asset managers face particular exposure where sustainability claims outpace underlying portfolio alignment.
A key implication is that, when it comes to environmental claims, corporate communications should be treated with the same rigour as financial disclosures and be supported by appropriate internal controls.
Litigation as a driver of policy and market change
The report underscores that climate litigation increasingly functions as a mechanism of policy influence and market disruption. Judicial decisions are shaping how climate laws are interpreted and implemented, prompting regulatory reform and influencing investor stewardship expectations.
For companies, the most significant risk often lies in these indirect effects. Court-driven shifts can alter regulatory frameworks, carbon pricing mechanisms or market access conditions with little warning, creating feedback loops between litigation, policy and corporate behaviour. Climate litigation should therefore be viewed not only as a legal threat, but as an early indicator of wider systemic change.
Polarised environment
Diverging and increasingly polarised political and regulatory attitudes, notably between Europe and the US, are identified as creating a new type of climate litigation risk for complex multinationals: irreconcilable regimes. A transition plan that complies with one jurisdiction’s legal regime, avoiding activist litigation, may face securities litigation in another. Geopolitics affects all of the themes identified in the report, and requires boards to proactively identify and manage regime incoherence.
Governance inflection point for boards
For boards and their advisers, the report sets out a series of indicative board assurance questions addressing climate risks. The challenge for businesses in mitigating the risk of climate litigation lies in ensuring genuine alignment between external-facing public commitments and operational reality, and embedding climate risk into traditional governance frameworks.
Organisations that treat climate litigation as a forward-looking risk signal, rather than a backward-looking compliance issue, will be best placed to navigate an increasingly complex legal landscape. In doing so, they will not only mitigate legal exposure but also meet the evolving expectations of effective board-level governance.
Mark Banks is a senior associate and Elizabeth Barbeary, who also contributed to this article, a former associate in Baker McKenzie’s dispute resolutions practice group, London
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