The fifth edition of the UNEP Adaptation Gap Report (2020) found that 72% of countries have adopted at least one national adaptation instrument in their policy planning. Most developing countries are also preparing National Adaptation Plans to strengthen their focus on climate change adaptation. However, the capital needed to implement these plans has yet to grow accordingly. UNEP FI is continuing its work on adaptation finance by addressing the challenges identified in scaling up adaptation capital in the GCA Adaptation Finance Paper (2019). A new paper “ The Forgotten Climate-related Financial Risk: Liability Impacts on Adaptation and Adaptation Finance” will be launched on 20 April 2021 through a collaboration between UNEP FI and MinterEllison.
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, lack of meaningful disclosure of climate risks, and moral hazard.
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 (a) banks; and (b) the (re)insurance sector (noting any complementarities with the TCFD analysis currently being undertaken by UNEP FI in its insurance stream, with PwC/Sabin Center).
Download the UNEP FI / MinterEllison climate litigation in adaptation finance paper here.
Listen to the presentation given at the launch of the paper here.