To address the challenges identified in scaling up adaptation capital from GCA Adaptation Finance Paper (2019), UNEP FI has collaborated with MinterEllison to produce the paper: “Liability risk and adaptation finance: Legal action as a driver and consequence of climate-related physical risk adaptation”.

This high-level briefing paper explores the legal implications of adaptation (or a lack thereof) to climate change-related impacts. By reference to existing cases and the likely future direction of litigation, it shows how climate litigation can act as both a driver and consequence of adaptation or maladaptation.

As a corollary of the analysis, observations are drawn on the potential for litigation (or the risk/spectre of liability) to help overcome some of the barriers to scaling finance for adaptation identified by UNEP FI, such as weak management of physical climate risk (CLF v ExxonMobil), lack of meaningful disclosure of climate risks (Abrahams v CBA), and moral hazard (Illinois Farmers).

Understanding the role of climate litigation and liability as a catalyst of adaptation outcomes will contribute to the efficient pricing, and integration, of climate-related risk issues into financial decision-making, and assist in driving adaptation financing across the financial services sector. Conversely, if barriers to adaptation and adaptation financing are not removed, litigation may play a more prominent role as a driver of adaptation outcomes – albeit in a manner that is ad hoc, inefficient and expensive. The report will conclude with the key takeaways of the analysis for banks and investors.

Watch recording here