Overview
Climate litigation is one of the fastest-growing areas of environmental law, and it is expanding beyond the environmental law community into mainstream corporate, securities, and financial regulation. It is no longer a specialist concern. Any major company, bank, insurer, or government that makes public statements about climate, or fails to act on commitments it has made, is a potential defendant.
The case count has roughly doubled since the Paris Agreement was signed in 2015. Courts in the Netherlands, Germany, Australia, the UK, and the US have all issued significant rulings. The legal theories being deployed are diverse, human rights law, securities fraud, consumer protection, corporate fiduciary duty, but they cluster around two dominant patterns.
The Two Main Patterns
Climate-washing cases challenge false, misleading, or unsubstantiated marketing claims about environmental credentials. These target the greenwashing in the specific sense: a company that advertises its products as “net zero,” “carbon neutral,” or “sustainable” without adequate evidence faces both regulatory action from advertising authorities and civil suits. In financial services, investment funds marketed as sustainable that do not meet SFDR classification criteria face enforcement action under EU law. These cases are proliferating because the gap between marketing language and underlying reality is often wide, and the evidentiary record, public advertising, annual reports, investor presentations, is easy to assemble.
“Turning off the taps” cases challenge the flow of finance to non-climate-aligned projects or companies. These are aimed at banks, asset managers, pension funds, and development institutions that continue financing coal, oil, and gas expansion despite making net zero commitments. Plaintiffs argue that financing carbon-intensive activities while claiming to support the Paris Agreement is a form of misrepresentation, or, in some jurisdictions, a breach of fiduciary duty to beneficiaries who bear the long-term risks of climate change.
Why Companies Are “Green-Hushing”
One documented response to climate litigation risk is greenhushing, the deliberate suppression of sustainability communications to avoid creating a paper trail that could be used against the organisation in court or regulatory proceedings. A company that publicly commits to an aggressive emissions reduction target has created a legal obligation it must meet; one that stays quiet has not.
This is covered in more detail in Greenwashing Typology, but it matters here because it illustrates the paradox litigation creates: the same legal pressure that punishes overclaiming also discourages legitimate disclosure, potentially starving markets of the information needed to direct capital toward genuinely sustainable activities.
Financial Institutions in the Crosshairs
Financial institutions face a distinct and expanding litigation exposure. Scope 3 financed emissions, the climate impact of what banks and investors fund, are increasingly the basis for legal claims that financial institutions are contributing to climate harm. Pension fund trustees are facing challenges over whether continued investment in fossil fuel expansion is consistent with fiduciary duty. Insurers are being scrutinised for underwriting fossil fuel projects.
Transition Risks include legal risk as a formal category for this reason. The TCFD framework requires companies to assess litigation risk as part of their climate risk disclosure. IFRS S1 and S2 extends this to mandatory disclosure under accounting standards.