Climate change disputes | S1 EP6

At the date of this podcast, there are over 1800 global climate change lawsuits. 18 months ago, that number was 1,543. The effects of climate change are proliferating, and litigation is following suit. But what does a climate change and sustainability dispute look like? What laws and legal principles are engaged? And what can international trends tell us about Canada’s litigation risk profile? Ailsa Bloomer and Andrew McCoomb talk to Cara Dowling and Michael Manhas about the rise of climate and sustainability disputes, and why we expect more will reach our Canadian shores. Cara is our Director of Global Disputes and has multi-jurisdictional experience in litigation and arbitration, with particular expertise in climate change dispute risks. Michael is a Partner in our Vancouver office practising litigation, administrative and regulatory law, with a focus on environmental, energy and indigenous matters.

For more information, including sector-specific insights and cross-border guides, check out our Climate change and sustainability disputes website. 

CPD credits: This episode qualifies for 0.75 hours of Substantive credit in Ontario and 0.75 hours of Substantive credit in British Columbia.

Transcript

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Transcript:

Andrew McCoomb  00:11
Hi, you're listening to Disputed, a Norton Rose Fulbright podcast. We're your hosts Andrew McCoomb from Toronto and Ailsa Bloomer from Calgary. And this episode is about climate change disputes. It's trite to say that climate change and sustainability issues are the new reality. Climate change is self-evident and it is everywhere. But this is a podcast about the law, not about climate change. How are the two connected?

Ailsa Bloomer  00:34
As climate change pervades the physical landscape, so it does the legal. The range of disputes that we're seeing connected to climate change issues is vast. They are spanning many jurisdictions, fields of law, novel causes of action and multiple sectors, not just energy, but banking and finance, mining, insurance, transport, infrastructure and technology. The nature of relief sorting climate change cases is also unpredictable. There are compensation claims for the effects of climate change, such as property damage caused by extreme weather, contract disputes arising from supply chain disruptions, regulatory investigations and greenwashing claims for improper disclosure of environmental impacts. There's also the use of litigation to bring about change, plaintiffs are seeking to mandate, or alter, climate-related policy and conduct.

Andrew McCoomb  01:30
One thing is clear from the outset, you can't separate Canada from the international scene. While there haven't been any substantial climate change lawsuits on our shores yet, like we've seen in European and US jurisdictions, Canadian businesses are assessing their risk profile and preparing for the change.

Ailsa Bloomer  01:46
And to help you in that process. We spoke with Cara Dowling and Michael Manhas. Cara Dowling is the Director of Global Disputes at Norton Rose Fulbright Canada, qualified in England and Australia, and a registered foreign practitioner in Vancouver. Cara provides strategic support to our global disputes and international arbitration practices. She has particular expertise in climate and sustainability risks.

Andrew McCoomb  02:11
Michael Manhas is a Partner in our Vancouver office who practices litigation, administrative and regulatory law. Michael's practice focuses on environmental, Indigenous, energy and natural resources matters. And he advises on regulatory investigations, permit compliance and transactional liability risks.

Cara Dowling  02:37
Thank you for having us.

Michael Manhas  02:38
Thank you. 

Andrew McCoomb  02:40
Before we dive into talking about climate-related disputes, or climate change disputes, maybe we can start from a higher perspective and just talk about kind of the risk landscape that businesses are facing when it comes to climate change or climate-related issues. What are climate-related risks from-- from your perspective, guys?

Cara Dowling  02:59
Well, climate-related risks are generally lumped into a couple of categories, you have your physical risks, and those are the risks that arise from the effects of climate change. So you're thinking about changing climate--, climactic conditions, more frequent and extreme weather events and the like. And they can cause serious disruptions to businesses, operations and services. And it's not just their physical locations, but also the infrastructure that they rely on. Energy you know, technology like the internet and such, as well as, for example, their partners, suppliers, customers, and assets, their finance and investing. So that's the first category. The second category relates to transition risks. So that's the risks that arise from the political, legal and regulatory and market adjustments that we're seeing around the world as we move to a low carbon or net-zero economy. And also as the world tries to become more resilient to the physical effects of climate change that I talked about. And every single sector is being affected by these rapid and very deep transitions. There's huge opportunities for businesses arising out of the transitions, obviously. But these transitions bring risks, they'll impact on how companies operate, and again, impact their suppliers, partners, customers and assets. So for example, where these changes this transitional changes prompt a reassessment of the value of assets, investments, that can have a really big impact on companies, or the changes in sentiment around the purchase of certain consumables or investment in certain assets. And one really important aspect of transition risk is the risk of disputes and investigations. And sometimes that's talked about as its own category. Companies can be really seriously impacted when they are themselves or their related companies are sued or face investigations. That can be a really serious cost consequences or an adverse judgment could have serious financial and operational ramifications. And of course, there's reputational damage. Businesses can also be impacted by other kinds companies that have been investigated or sued. And there can be broader consequences if a judgment increases the likelihood of copycat claims. Companies may even be affected by claims against governments that might lead to stronger regulation or increase the costs of doing business. And I guess, the really interesting thing about this practice is that in Canada and around the globe, the risks for companies related to climate change disputes and investigations is in a state of flux. The laws, regulations and guidance, more broadly relating to climate change in the energy transition, and multiplying as they are evolving. And in parallel, in some regions, courts are stepping in to fill gaps that are left by legislators. So it's an evolving state of risk globally.

Ailsa Bloomer  05:43
Okay, so-- so when we talk about climate change risks, we're talking two broad categories. Number one, the obvious, which is the physical effects of climate change and the chaos that that causes. And then secondly, as we transition to a low carbon economy, which obviously is something never done before the risks of disputes that that presents, whether that's consumer to business supply chain disputes, regulatory investigations, it goes on and on. But as you noted, it's a global risk. We can't talk about Canadian climate change disputes in isolation. So tell us about the international legal setting for climate change disputes.

Cara Dowling  06:19
Yeah, well, that could be an entire podcast in and of itself. The UN has been super active in the space and active since the 1950s, 60s, and 70s. So we don't have a huge amount of time. So I'll just jump on to a couple of key initiatives that you've probably heard about in the news. In 1988, the Intergovernmental Panel on Climate Change, the IPCC, was created. And that's really the leading international authority on climate change science. The IPCC’s reports are really important as they're relied on in formulating climate change policy laws and increasingly, they're referred to in legal judgments. So that's one really important framework. The second is the UN Framework Convention on Climate Change, the UNFCCC, and that was established in 1992. And that convention sets out various commitments for the contracting parties, including an obligation to track their greenhouse gas emissions, implement climate change mitigation programs and report on the measures that they've been undertaking. You've no doubt been hearing all about COP26, well the reporting that I just mentioned under the UNFCCC that's reviewed annually at the Conference of Parties, COP. So COP is the body responsible for negotiating new climate change commitments between UNFCCC state parties. So that's what we're seeing going on right now, the 26th Conference of the Parties, COP 26. But really the most important development is the Paris Agreement. And that agreement was also falls within the UNFCCC framework. And it was negotiated at COP21 In Paris, hence its name Paris Agreement in 2015. It's a really landmark treaty, because it has really ambitious goals in a very wide scope. Its overarching objective is to limit global warming to under two degrees, but ideally to 1.5 degrees above pre-industrial temperatures, by reducing greenhouse gas emissions. So that's critical, and you'll hear a lot about the Paris Agreement. And there's one last quite important international development worth covering. And that's the TCFD. Historically, investors, financial institutions, regulators and other stakeholders really struggled to access consistent, comparable and decision useful data on how companies are managing their climate-related financial risks. And because of concerns about how the impact of that inadequate data might have, especially on financial markets, in 2015, the G20 asked the Financial Stability Board to launch the Task Force on Climate-related Financial Disclosures, the TCFD. In 2017, the TCFD published its recommendations, and they set out non-binding guidance on things like what might be considered material and relevant climate-related financial risks. It establishes principles for disclosure, and provides related guidance on implementation and the TCFD recommendations of voluntary but they're really hugely influential and many companies use them. We're also seeing a trend towards mandatory disclosure requirements at a national level. And those are often based on TCFD recommendations. And, you know, as we'll come to there have been quite a lot of disputes about how companies report and disclose their climate-related risks. So the TCFD is playing a role in all of that as well.

Ailsa Bloomer  09:42
Okay, so it sounds like the key dates are 1988 when the IPCC was created, and the IPCC produces the science reports that interestingly you mentioned are increasingly relied on in legal judgments, and then 1992 when the UN Framework Convention was established, I think you said through-- through that the contracting states agreed to track their greenhouse gas emissions and report on progress COP is the annual review of that progress. And out of that comes revised commitments like we've seen this past month. And then for the private sector, there's non-binding guidance, like the TCFD on corporate disclosure and risk recommendations. And so with that--, that backdrop in mind, what actually constitutes a climate change dispute?

Cara Dowling  10:30
Sure. Well, there's no single definition of what constitutes a climate change disputes, but there are a couple of definitions that I tend to rely on or refer to. An ICC commission report on resolving climate-related disputes through arbitration had a pretty neat definition, defining it as ‘any dispute arising out of or relating to the effects of climate change and climate change policy’. Another good definition is from UNEP, the United Nations Environment Program, which also tracks climate change disputes. UNEP defines climate litigation ‘as cases that refers specifically to climate change mitigation, adaptation, or the science of climate change’. And I quite like that one, because it expressly captures the disputes arising out of the energy industry transitions and measures to increase resiliency and adaptation, which I think is really critical. So I generally use a definition similar to those although I like to add sustainability to my definition. And that's really in recognition of the fact that these disputes often encompass other issues, which traditionally wouldn't be viewed as climate change related, but are intersectional risks with climate change. So for example, human rights and other fundamental rights traditionally have been viewed as a distinct category. But those of us who've been tracking climate change disputes trends for years, have been predicting quite accurately that we'll see an increase in claims that are essentially climate-related disputes, but formulated as fundamental rights arguments, whether under international treaties or regional constitutions that enshrine those rights. So other examples of biodiversity and land degradation issues, which are also critically impacted by climate change, and vice versa. So this intersectionality of climate change and other sustainability disputes is going to increase in coming years. So for me, in practice, the term ‘climate change’ is viewed on its own is a bit too narrow, unless you're making niche academic inquiries.

Andrew McCoomb  12:26
So that's, I mean, that's a good overview on the kind of categories that we're looking at. And I find it particularly interesting, this idea of intersectionality, and that, we could be talking about things that straddle sort of human rights litigation just as much as we're talking about things specifically rooted in climate change. So can we drill down now to some, maybe some specific examples of ongoing litigation or past litigation to situate these concepts?

Cara Dowling  12:51
Yeah, for most people, what springs to mind, and I'm sure it's the case for you as well. Other high-profile lawsuits against major greenhouse gas and gas emitters, where plaintiffs are seeking financial compensation for damages associated with the effects of climate change. So the costs of putting in barriers to protect from rising sea levels, for example, and they're a really interesting and important category of cases. But they actually make up a very small component of the broader body of cases globally. And unfortunately, we don't have enough time today to export all of the different types of claims, and there are loads of them. But I can give a few examples of what we're seeing. So in addition to the climate change damages litigation that I just mentioned, one really important bucket of cases, which captures a variety of different types of claims, are those brought to mandate or change climate-related policy or conduct. The targets of those cases initially tended to be governments. But nowadays, corporate entities and their directors and officers are being targeted. And as some of those cases succeed around the globe, then the pressure on companies will intensify. We're also seeing a lot of cases related to reporting and disclosure of climate-related risks. That includes both attempts to compel companies to assess and disclose their risks, as well as attempts to compel better or more fulsome disclosure of those risks. And in parallel, we're also seeing shareholders seeking to add access to records of board and management decisions to check where the company's actions and decisions are in line with their ESG policies and frameworks and their public statements and disclosures. Shareholder activism in this space is incredibly high and that's a trend that will certainly be continuing. It's worth noting in the same vein that insurers have been warning for some time now of a potential wave of climate-related claims against directors and officers. We are already seeing that borne out in the disputes with directors often named nowadays in cases against companies. And of course that also means D&O insurance policy and coverage disputes as well.

Ailsa Bloomer  14:56
I've also seen reference to greenwashing claims Can you explain what greenwashing is?

Cara Dowling  15:02
So greenwashing, well, it depends on how the claims formulated and what statute, but it's to do with not accurately representing the green credentials of the product or service that you're offering. But the common ground is that they're making statements and claims as to the green or sustainability credentials are those products and services, which the claimants are saying are inaccurate on this misrepresentation, we're seeing a massive uptick in greenwashing claims. And I use that term to include quite a host of different claims. Advertising standard complaints, consumer protection, fraud, misspelling, regulatory complaints, and the like. The targets are a really wide range of companies, products and services. And as we're seeing more and more sustainability linked claims and products coming on the market, I expect this greenwashing trend will continue to rise as well. And as a litigator, it's certainly much easier and cheaper to bring a greenwashing claim than one of the massive damages actions that I was talking about. But for companies, it can be just as impactful, especially if you're considering reputational risk

Ailsa Bloomer  16:14
It's interesting, Andrew, I don't know if it reminds you of a certain case, we talked about in our parent company liability episode with regards to companies holding themselves out as good corporate citizens and perhaps not following through on those promises. I think that one of the types of disputes that you mentioned, I know there’s a few more that we’ll cover in a second but one of the ones you mentioned is  this idea of mandating change. And of course, I understand that in, in a state context, in terms of claims brought against a state because they're not doing enough to protect their citizens about the effects of climate change. But when that's brought against a company that we have seen internationally in the past few months happen. I mean, that's a whole different area and level of risk for private companies, isn't it really, because it's not a case of they could be fixed with a liability financially, it's more, there's a risk of their corporate strategy in the next 20,30, however, many years of their--, their planning is going to be impacted or controlled by-- by an order resulting from these actions.

Cara Dowling  17:25
Exactly. And they can have global implications for companies. So decisions made in certain states and certain regions can affect a company's global operations, we’re already seeing that. Another important category of dispute arises out of climate-related weather events. And these are disputes that follow the business disruption, for example, hurricanes, floods, fires, etc. And we saw it recently with the Texas winter skipped-- winter storms and the Hurricane Harvey and Katrina and the like. And why does this tie back to climate change? Well, the accepted climate change science says that we're seeing and will see more frequent and extreme weather events because of climate change. And if we see-- if that's right, and we see more frequent and extreme weather events, it's going to mean more business interruption, more operational risk, and therefore much more risk of disputes. And related to what you're talking about before, you know these transitions and the impact of changing business. There are also significant numbers of contractual disputes arising out of the energy and other industry transitions that are well underway. Trillions of dollars of public and private funds are being poured into those very, very important transitions. And, of course, a proportion of those projects and transactions will end up needing to manage some sort of dispute. And likewise, the trillions of dollars of investments into adaptation and resiliency infrastructure is going to equally have some form of dispute resolution needed. And related to that we're seeing disputes arising out of legal and regulatory change. Governments around the globe are taking steps to deal with climate change and the industry transitions. Some of those actions could impact the profitability or even viability of commercial arrangements. And when that happens, you see high stakes strategically important disputes follow. And of course, we can't forget the thousands of routine legal matters, for example, licensing and permitting, where it's now extremely common to see climate change issues raised. And these are really interesting as a collective group for me, as it's really been a quiet revolution. Tribunals and judges nowadays deal with these issues routinely. So it's had a very direct impact on the legal system that isn't really being discussed in the press in the same way high-profile climate change damages in litigation are it's not a sexy, but it's having a direct impact on how companies do business and operate.

Andrew McCoomb  19:50
So maybe we can talk a bit about trends and proliferation. To take an example from for example, the you know, the recent business interruption insurance claims that have taken route across North American other jurisdictions when it first there were a few and then there were thousands. How quickly are these claims proliferating and what are they looking like?,

Cara Dowling  20:12
Well they're certainly on the rise. And those of us who have been working in this space for time-- some time now can, you know, will clearly state that the volume of climate change litigation against companies and governments worldwide is growing. So I think it's-- it's a trend that's going to continue, especially as developments happen in the regulatory and legal space. And as we see successful judgments happen. And I guess that's, brings me to another major trend or takeaway, really, there's a cross-pollination of ideas going on globally, legal arguments being picked up from one region and imported to be utilized in another. The proliferation of human rights based arguments in climate change cases is an example of that. Claims asserting those types of arguments have just exploded globally, in large part because some have succeeded in other regions.

Ailsa Bloomer  21:05
Yeah. Would it be fair to call some of this copycat litigation claims influenced and inspired by other jurisdictions where simply bringing the action matters more than the merits of the claim itself?

Cara Dowling  21:21
Exactly. That's exactly what we're seeing. And they're being brought in other jurisdictions, irrespective of whether the prospects locally are very good. These-- these cases can be quite speculative. But also winning on the merits is often not as important as the publicity that the case generates. That said, there is a real risk that in some regions, plaintiffs will start to win a few of these major cases. And S&P Global Markets recently warned of exactly that. And they said that the climate change attribution science, which is the science that looks at the causes of climate change, in particular - the role of humans - that science is strengthening, and could increasingly contribute to judgments against, for example, heavy greenhouse gas emitters, if more cases win, it will impact the risk of climate change litigation here in Canada, as well as impact corporate behavior and the risk appetites related to climate change risks.

Andrew McCoomb  22:19
So Cara, you've told us about how, you know, plaintiffs are taking cues from plaintiffs and other jurisdictions. I mean, what about what about regulators and legislators? What are they learning and taking away from what's happening in other jurisdictions?

Cara Dowling  22:32
It’s 100% the same, we're seeing a massive cross-fertilization of ideas amongst regulators and legislators. And this is why it's so important to track these trends globally. It's a really big mistake to focus on just what's happening or not happening in your home jurisdiction, or even just what's happening in your sector because the cross pollination of ideas is cross sectoral as well. And related to this for most businesses, their risk isn't limited to what's happening in companies in Canada, depending on where their businesses operate, and the location of their suppliers, customers, the assets they invest in, or finance etc. Very feasibly, they could be seriously impacted by climate change disputes elsewhere. So this means that the risks for companies nowadays are multi-jurisdictional, multidisciplinary and multi sectoral, no sector is immune. When I first started talking about climate change risks, many years ago, it was viewed as an oil and gas problem. And that is really not the case anymore. And for companies, I think that's what makes this risk so hard to get their head around, combined with the fact that the risk landscape is in a state of flux, as we're seeing governments, regulators, and even the courts grapple with how to deal with these really quite complex issues.

Andrew McCoomb  23:47
So let's take this from the global multi-jurisdictional perspective and bring it home to Canada. Michael, you practice environmental litigation in BC and Alberta. What are the risks of climate change and sustainability disputes being brought in Canada for businesses domiciled here? And what kind of climate litigation have we seen so far?

Michael Manhas  24:04
So it's fair to say that businesses have largely come out unscathed in terms of direct litigation at this point. What we've seen in Canada are-- are two broad buckets of challenges. One is sort of the bread and butter regulatory related challenges where there's a project approval or an environmental assessment that's claimed before a tribunal. And challenges are brought to the approval or to the environmental assessment on the basis of climate change impacts. And those have been ongoing for more than a decade now. The other type of litigation we've seen in Canada is direct challenges to government action, whether that's based on a failure to adhere to treaty requirements that they've entered into, or based on constitutional rights. We saw some of the first treaty cases about 10 years ago, relating to Canada's implementation of the Kyoto Protocol. And more recently, the constitutional type cases have been brought by environmental groups, groups of use, and in particular, Indigenous groups as well. And it's important to recognize that there's a lot of focus in Canada on the oil sands and their contribution to climate change. But it's important to recognize that that’s still only a small portion of the emissions that we as a country that, you know, we're cold country, you know, require a lot of heating in the wintertime, we're geographically dispersed. And so transportation both between cities and provinces and within cities, where there's not a lot of urban density, requires cars, and shipping and things that require fossil fuels, at least at present. So there's-- there's a lot of potential avenues for liability that may come to the forefront in the future.

Andrew McCoomb  25:53
And what about Canada as-- as a litigation landscape? I mean, is it fertile ground for these types of claims to take root? Is it favourable to-- to companies or entities defending them? Who holds the high ground here right now?

Michael Manhas  26:11
Well to focus on, on the direct claims that can be brought against companies in particular data, it's important to recognize we do have a well-developed class action bar in Canada, that’s certainly not adverse to trying novel claims. In particular, they will often take the sort of the baton from, at the Americans, or things that you see in other jurisdictions to try copycat claims has been described. The-- the public law claims that have been brought so far have largely been unsuccessful. And in particular, the courts are really hesitant to get into the world of policy. And so that, because that avenue has become less fertile, or has been less fertile. The flip side of that is, you know, there-- there are tort law principles in Canada that could give rise to perhaps an increased likelihood of success here compared to other jurisdictions. I have two thoughts, the two areas in particular that that have jumped out to me when you sort of read the literature. One is the concept of public nuisance. And public nuisance is essentially an action brought on behalf of the public for some sort of harm to public rights, typically, to bring a public nuisance claim in common law jurisdictions, you need some sort of special damage for the plaintiff. And that's not damages, it’s just a difference of degree, but really a unique form of damage that a plaintiff suffers relative to the community at large. And so where you see in these claims brought elsewhere they've-- they've often failed because of the inability to prove that special damage. But in Canada, there's certainly been commentary from the courts, and in recent decades that a difference in degree of harm may be sufficient to ground a claim. And in that regard, there may be a potential for certain groups to be able to bring actions based on public nuisance that maybe may have been unsuccessful in other jurisdictions. The other area that I think is interesting is the area of causation. We have very well developed law around multiple causation, both in terms of where you have multiple contributors to a single injury that's been suffered, and--, and also where multiple parties have contributed to the risk of harm that that's risen. And although that law has not, to a large extent, been extended to environmental claims at this point, there's certainly commentators who suggested that in the future environmental claims in particular might be right to have those concepts brought in for the purpose of litigation.

Ailsa Bloomer  28:41
I think that's interesting, the move from public to private. And I just--, I just want to reiterate those points. So it sounds like what you said the courts don't want to interfere in public policy matters. So these claims are filtering into the private sector. And the hooks that will make Canada a likely jurisdiction of the climate change disputes are it’s established class actions regime, and the openness of the courts to entertain novel duties of care instead of just dismissing them at the summary judgment stage. And then in the area of public nuisance courts are relaxing the thresholds for bringing such-- such claims too. The point I think is most interesting here, as you know, is causation. And I’d just like to explore that a bit more. Because when you talk about multiple parties causing loss, that makes me think of an earlier UK House of Lords Fairchild case from-- from 20 years ago, where workers were exposed to asbestos multiple times by different employers and the causation principle that came out of that was that each employer had materially contributed to the risk of contracting mesothelioma. I mean, will it be a similar analysis in the climate change dispute context or is it totally different?

Michael Manhas  29:56
I think an important distinguisher there is the materialality concept and really the-- the direct linkage between a producer of asbestos for example, and-- and someone who--, who then suffers mesothelioma from inhaling asbestos residues, you know, there, there's a very clear causal link and where one party may not have, you know, the finger couldn't have been pointed at that one party for the specific cancer that was caused, they certainly were a material contributor to the risk that the plaintiff ultimately faced. It's a little bit different in the climate change context where you've got emissions that have accumulated over centuries, you've got, you know, both the producers, but also the consumers of the product that are potentially part of the-- the broader picture when it comes to causation. Imposing some sort of material-- materiality threshold when you're bringing a claim against an individual party, when they're alleged to have contributed to that, I think is a lot more challenging. And it's something that the court has not really grappled with where you're talking about really dispersed contribution to the risk that's currently arisen.

Andrew McCoomb  31:10
Cara was just talking about greenwashing and the expectation on companies in their disclosure about what they're doing to deal with their footprint and sustainability and everything related to climate. How--, how are we seeing litigation affecting directors and officers obligations as they have to deal with disclosure and everything related there, too.

Michael Manhas  31:33
So we're at the point in Canada now, where the Canadian Securities Administrators are--, are currently consulting on proposed disclosure framework for climate risk. And that framework addresses everything from governance, to risk identification, to developing strategies to address those risks that have been identified. And I think it's important to recognize that specifically when it comes to disclosure frameworks that once those frameworks are in place, they certainly give rise to potential liability, whether in the regulatory context or your class actions or other shareholder actions or harms that are suffered as a result of failure to comply with those disclosure obligations. But also, more broadly, it's important to recognize that directors and officers have duties to the company in Canada when it comes to their obligations. And if it's a broad liability to stakeholders. And so given those obligations to stakeholders, I think the-- the questions of, well, if you have an obligation stakeholder, what does that mean, in terms of your fiduciary duties, when you're balancing between the needs of shareholders, needs of the company and needs the stakeholders more broadly, in the course of your acting as a director or as an officer? There's certainly legal questions that have not been tested yet, as it relates to climate change.

Andrew McCoomb  32:48
It definitely sounds like what's developing there in terms of frameworks and expectations around disclosure, and then the potential for those expectations or those frameworks to be breached. That-- that whole structure could fill the void that is potentially created by some of, you know, the-- the causation risks you're identifying before when it-- when-- when the when the issue becomes more about, What have you said you were going to do? or what have you said you are doing? And have you done what you said you're going to do, as opposed to, you know, has your-- has your pollution contributed to a .001% uptick in, you know, the temperature of the planet?

Michael Manhas  33:28
Yeah, absolutely. I mean, I think using litigation to create incentives to change behaviour, as opposed to using litigation to get court orders requiring changes in behaviour is a method that's been used for a long time. And, you know, if you can impose those obligations on directors and officers to ensure that companies make the necessary changes to achieve international targets or-- or whatever, it's certainly an easier path to litigation, than having to prove a damages claim and perhaps seek injunctive relief or something along those lines to effect change.

Ailsa Bloomer  34:01
So is there any other regulatory action coming down the pipeline in Canada that you think is going to affect this-- the landscape?

Michael Manhas  34:09
Well, I think an interesting one to follow in the coming years will be the federal government's sort of ongoing response to climate change. As it currently stands, we had the recent constitutional challenge to the Greenhouse Gas Pollution Pricing Act, and that was upheld as constitutional. But we know that the federal government is not going to stop there. We heard Justin Trudeau at COP26 say that Canada intends to impose a hard cap on oil and gas emissions. And I think how the federal government intends to implement that change will be interesting to follow, particularly given the Supreme Court of Canada's recent decision, which I think was very careful to limit its findings about the constitutionality the act to the legislation that was before it at that time. As some may recall, the Alberta Court of Appeal characterized the legislation essentially as a Trojan horse that could open the door to any sort of a broad range of regulation by the federal government that you know, much of which may be constitutionally impermissible. And in turn, the Supreme Court of Canada I think, was very narrow, and it's finding some constitutionality. And so as the federal government ramps up its regulatory inaction, I think, seeing whether there's ongoing challenges to what they can and what they cannot regulate in the world of greenhouse gas emissions will be an interesting development to follow.

Ailsa Bloomer  35:32
And how this whole topic that we're talking about fits into the Canadian Constitution, which obviously was developed before this was this was even on the table, right. So what can companies do to mitigate all the risks that we've been talking about?

Cara Dowling  35:48
That's a tricky question. And it really depends on the sector they're operating in, the type of business they're doing and, and their exposure. But I guess, you know, that's the starting point really based companies will benefit from assessing their exposure to these risks, in cont-- in context, and then taking steps to mitigate that risk. So in other words, undertaking risk analyses whether in the course of business, or at the onset of a new product or transaction. And that really should be done at the global as well as a granular level. Other important tips are really about around being proactive and paying attention to what's happening in this space, doing their due diligence, I can't stress that enough. Due diligence is critical, accurate data underlying any disclosures and statements is also essential. It's very important to engage with shareholders and other important stakeholders, early engagement might avoid the risk of disputes, or you may see it coming down the pipeline. Good governance is related to that and that's again key. And these issues have to be made a top down concern, but equally, it has to be integrated into every aspect of the business. And again, as I’ve mentioned, it's really important to stay on top of regional and global developments and that will allow you to spot a future risks for the company. And of course, there's-- there's an increased need to deal with investigations and disclosure-- disputes as they arise. I think we all have to accept that there will be some disputes, disputes are a part of business is about how you prepare for and resolve those disputes. And I cannot stress enough that this is a cross-sectoral issue. As I mentioned, when I first started talking about climate change risks many years ago, it was viewed by many as an oil and gas problem. And I warned them then and I continue to warn now that that's not the case, energy companies have been targeted. But we've seen a lot of different sectors targeted as well, with more to come, no doubt. So the risk of climate change and sustainability disputes should be on the agenda of every board and every in-house legal team. 

Andrew McCoomb  37:59
Like you said Cara, this is multi-jurisdictional, it's multidisciplinary, it's multi sectoral. It sort of sounds terrifying if you’re legal counsel, in-house legal counsel, external legal counsel focused on trying to conduct that diligence that you're talking about. So what does this mean in practice for us and for our clients? And for anyone who's in this space? How do you how do you get a handle on this intimidating subject matter?

Cara Dowling  38:26
Well, I like to start by saying it seems scary, and it seems overwhelming. But really, it's not. And I spend a lot of time trying to convince people of that. Lawyers are really good at dealing with difficult, complex and nuanced issues, we deal with them all the time. That's what we are paid to do, that's what we're hired to do. As for how to get a handle on them individually? Well, we're all a really diverse group. And even if you look at just disputes lawyers in private practice and in-house, we all have very different practices for very different businesses so it's hard to give specific tips. But really, what you need to do is know enough about the issues and the risk profile, to enable you to think about climate change and sustainability to risk as you go about your daily practice. This should just be something that's on your list of things to think about during your everyday work. How are your contracts affected by climate change? Will certain provisions be ineffective in reality? Or will you need new risk management systems which also have to be backed by contractual requirements to be truly effective?

Andrew McCoomb  39:31
Cara as I hear you talking about this, I'm also imagining the transactional due diligence cycle. And the questions that, you know corporate lawyers and in-house teams are thinking about when they're trying to figure out whether you know, business to acquire or a business unit to acquire is-- is a safe acquisition. And I have to imagine, this is a whole new chapter in that assessment about what is the climate portfolio of the business we're acquiring? Who does it deal with in terms of suppliers? What's the footprint in terms of its output and how it's impacting the globe, just from the perspective of sort of, you know, good business citizenry, but also from-- from the perspective of, you know, managing your potential future disputes as well.

Cara Dowling  40:15
Exactly. And if you're acquiring or partnering with another company, what’s their disputes risk profile, if they get bogged down in a very expensive prolonged dispute that could change the viability of your project or partnership. So it's really important to understand enough about the disputes risk profile for yourselves and--, and others so that you can see those red flags for projects or transactions that might have a higher climate change and sustainability risk. But I think central to this is just accepting that disputes are going to arise. And for litigators, especially and for transactional partners, focus on finding efficient and effective ways to mitigate and-- and eventually resolve those disputes. What can you do at the front end that will support a later dispute-- dispute resolution process? And I think it's also really important to keep in mind that risks are not limited to legal risks, or liability--, legal liability risks, lawyers also have a very important role in managing reputational risks for companies as well. So it's just making sure that you've come up to speed and that you understand the risk profile more broadly. So as I said, disputes risk profile more specifically.

Ailsa Bloomer  41:26
And on that point, understanding the risk profile more broadly, how can our listeners learn more about these issues?

Cara Dowling  41:33
Well, we've got a website, which has a lot of really helpful guidance, including both sectoral and practice perspectives. And we also have a cross-border guide to climate change and sustainability, risk and regulation, which covers 16 regions around the globe. We get that it's complicated and it's really hard to fund these things so we've tried to simplify it in those guides and uncover some of the essential pieces that that you need to get up to speed on these issues. And of course, there's our team where we're here to assist and we're all very passionate about helping our clients navigate sustainability issues, including disputes risk.

Ailsa Bloomer  42:07
Yeah, I can personally vouch for the website that you just mentioned, I found it an absolutely fantastic resource. It's got the legal regulatory frameworks, guides, publications and trends analysis across numerous industries. So and that isn't me greenwashing, I can genuinely vouch for that and for listeners, we will put a link to the website in this episode's description. But I will say thank you very much, Cara and Michael, for a great and hugely important discussion.

Cara Dowling  42:36
Thank you very much. It was a pleasure.

Michael Manhas  42:38
Thanks for having us. 

Ailsa Bloomer  22:59
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