Our report, produced for the United Nations Environment Programme Finance Initiative (UNEPFI), examines how climate litigation can act as both a driver and consequence of adaptation or maladaptation.

Climate change litigation and other legal action, such as regulatory enforcement proceedings, fines and penalties, have long-been recognised as a source of financial risk. Legal action, or the credible threat thereof, can act as both a driver of adaptation to physical climate-related risks, and as a consequence of maladaptation or a failure to adapt.

In order for a financial institution or prudential supervisor to quantify the potential risk impact – including the credit risk or systemic risk – of climate change litigation and other legal action to a given project, borrower, portfolio, institution or system, they must understand the magnitude of that risk in a given context, and its materiality.

This briefing paper seeks to contribute to these foundational points of understanding, at an introductory level.

The report titled Liability risk and adaption finance can be downloaded from www.unepfi.org.