Climate litigation is evolving - and businesses should take notice

Since the Paris Agreement on Climate Change, the number of climate litigation cases has grown to more than 3000 cases.

This trend shows no sign of slowing – and it means that businesses are increasingly pressed to examine how significant a risk climate litigation may pose to their operations.

While no court has yet ruled that a company must pay direct compensation, trends in Europe show that this could be on the horizon.

As of 2025, three international courts have advised on climate change. In the first case, before the Law of the Seas Tribunal, the court held that CO² and other greenhouse gases should be seen as a pollutant given its impacts on the ocean and states are obliged to reduce their emissions.

In the second case before the International Court of Justice, the court’s advisory opinion of July 2025 stated that it sees 1.5℃, and not 2℃, as the legally binding target of the climate regime based on the decisions of the Conference of the Parties. It held that all countries must ensure that their Nationally Determined Contributions are more stringent than the previous one and that together they must lead to the achievement of the 1.5℃ climate target. Moreover, it ruled that the continuous use of fossil fuel by states could amount to an ‘internationally wrongful act’. States must not only reduce significant harm to the climate system, but are also accountable for the acts of companies and other actors within the state. Finally, the court argues that international environmental and human rights agreements must be seen and implemented in tandem by states.

The third advisory opinion is that of the Inter American Court of Human Rights, which concluded that climate change affects a range of human rights and must therefore be mitigated with due diligence.

None of these opinions are legally binding, but they do reflect collectively the current state-of-the-art of international law. They are likely to influence the way courts in other jurisdictions see climate change and hence the responsibilities of business.

Of the 3,000 recorded climate litigation cases globally, more than 600 are against companies – 161 of which are against fossil fuel companies. Most cases focus on corporate deception or misconduct; many focus on human rights violations or procedural violations with respect to Environmental Impact Assessments. Some include the impacts of climate change and sometimes that CO² is a pollutant.

In Europe, climate litigation has seen campaigners oversee some cautious victories. In a German case brought by a Peruvian national against a German company, the court held that such climate cases were possible, but did not find adequate proof of harm to the Peruvian national. With greater evidence, such cases may succeed in Germany. In the Netherlands, a court asked an oil major to reduce its emissions as requested by the plaintiffs. In Africa, cases tend to focus on inadequately prepared/approved Environmental Impact Assessments. In Asia, a Philippines case showed that even if oil and gas companies are not based in the country, if by their acts, there is damage in the Philippines, they can be held accountable.

Specific laws in some countries make it easier for plaintiffs to bring forward climate-based litigation – for example, the Human Rights Act in Queensland and France’s Duty of Vigilance law. Plaintiffs are using different courts in different countries and making different arguments, but evidence is mounting that the courts are beginning to listen in some jurisdictions. This could mean that, in the future and with better data, plaintiffs could start winning compensation from these companies.

Stock markets selectively respond to court rulings, being more likely to respond to favourable than less favourable decisions of courts. However, a study of climate lawsuits across US and Europe-listed firms shows that stock returns fall generally after a lawsuit is filed or there is a negative court decision for companies, and that the Carbon Majors have seen the greatest declines. The study found that financial markets consider such litigation to be a relevant financial risk.

However, most companies scarcely account for litigation risk. But there is a growing risk especially for, but not limited to, the fossil fuel companies. If 1.5℃ is seen as the legally binding target, and 2024 saw the first year that crossed an average temperature of 1.5℃, this would imply that most companies need to rethink their continued reliance on fossil fuel. The growing requirement for better quality environmental impact assessments might also influence company plans and projects.

It is easy to dismiss such litigation risk as small and unlikely. It is also possible to fight such risk through strategic litigation against public participation litigation. But the story of the tobacco industry shows that once litigation begins to succeed – that hurts the companies concerned – but it is often followed by policies that hurt all companies.

In the final analysis, even if the litigation risk can be dismissed as small and unlikely, the growing evidence of the impacts of climate change must surely make businesses rethink fossil fuel dependency.