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Impacts of Climate Litigation on Firm Value

Impacts of Climate Litigation on Firm Value

Full Title: Impacts of Climate Litigation on Firm Value
Author(s): Misato Sato, Glen Gostlow, Catherine Higham, Joana Setzer and Frank Venmans
Publisher(s): London School of Economics
Publication Date: May 23, 2023
Full Text: Download Resource
Description (excerpt):

Communities and individuals are increasingly turning to courts to hold governments and high emitting corporations to account for the adverse consequences of climate change, and they are starting to find success. For defending corporations, the rise in climate litigation risk may exacerbate well-known physical and transition risks associated with climate change – yet little is known about the impacts of climate litigation against corporations.

The authors of this paper provide the first robust evidence on these impacts. They construct a comprehensive database of filings and decisions relating to 108 climate change lawsuits against US and European-listed corporations between 2005 and 2021. They show that climate litigation filings or unfavourable court decisions reduced firm value by -0.41% on average. They identify conditions that would lead to a bigger effect, such as cases against the largest emitters, or ‘Carbon Majors’, and cases involving novel legal arguments. The results offer the first robust evidence on climate litigation risk as a financial risk.

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