Climate risk and biodiversity

Key developments in 2024

2024 closed with the conclusion of COP29 and COP16 conferences.  COP29 continued discussions in relation to financing greener energy projects and compensation of developing countries in the Global South for loss and damage as a result of extreme weather events. Although world leaders were able to commit to USD1.3 trillion per year as a new collective quantified goal for climate finance to support developing countries, no deal was concluded in relation to reductions in use of fossil fuels or phasing down.  Climate and nature were also less prominent at COP29 than at COP28, leaving it to COP30 to increase momentum and link biodiversity pathways with climate action.

COP16 focused on biodiversity and the implementation and advancement of the Kunming-Montreal Global Biodiversity Framework (the "GBF"). Countries were expected to submit their national biodiversity strategies and action plans to align with GBF targets by the start of the summit. Disappointingly, by the end of the summit only 22% of parties (44 out of 196) had submitted new biodiversity plans.  Countries were able to reach a consensus on a first ever agreement on a new sharing mechanism for genetic resources on plant and animal genetics. Countries were also able to agree to the establishment of a new permanent body for indigenous people, as key stewards in conservation efforts, who will be able to advise at biodiversity COPs.

2024 also saw further developments in relation to plastic pollution, both in terms of evolving regulations and litigation.  In April 2024, the UK further implemented a ban on wet wipes containing plastic, adding to the list of banned and restricted plastic products in the UK.  However, the end of 2024 saw postponement of both the finalisation of the much-anticipated plastics treaty. Negotiations at INC-5 unfortunately stalled in a blow to efforts to combat plastic pollution and implement global standards for plastic products.  2024 also saw the delay of the EU deforestation directive by one year (it will now come into force on 30 December 2025). In March 2024, the EU passed an "ecocide" law by criminalising actions which are "comparable to ecocide", e.g. by companies which cause harm to the environment deliberately or recklessly¹.  

Climate impact cases against various energy companies concerning historic greenhouse gas (GHG) emissions, continue to progress through the US courts. These claims seek to establish corporate liability for past contribution to climate change.  There have still been no findings on the substantive issues with the parties mainly arguing over which forum (state or federal court) should hear the claims.  In Europe, there are now three historic emissions cases.  In addition to Lliuya-v-RWE² and Asmania -v- Holcim, proceedings have been filed in the Belgian commercial courts in Hugues Falys-v-TotalEnergies.  In the claim against Total, a farmer alleges that crop yield has declined due to climate change and seeks various orders for the percentage reduction of Total's GHG emissions and participation in the oil and gas industry at various dates between 2030 and 2050.  To date, no historic GHG emissions claim has been filed in the English courts. 

This year we also saw the advancement of the case of De Rezende before the Brazilian courts as the first Brazilian tort climate case. The Amazon Task Force, established in 2018 by federal prosecutors, has filed a claim against a Brazilian farmer for the deforestation of 2,488 hectares (equivalent to 4,650 football fields) between 2011 and 2018 in the Amazon for monetary damages totalling USD17million and an injunction for the removal of cattle from the farms.

Biodiversity cases are also gathering pace, including governments being targeted in relation to failure to halt projects which present danger to biodiversity. These lawsuits involve governments, corporations, NGOs or individuals seeking to enforce environmental laws, challenge harmful practices or strategically push for stronger environmental protections. The apparent trade-offs between climate grounded policies or projects and the need to protect biodiversity is exemplified in the Supreme Court case of M.K. Ranjitsinh and Others v. Union of India³. The Indian Supreme Court, dealt with a balance of interests between the conservation of two endangered birds – the Great Indian Bustard and the Lesser Florican, and the undergrounding requirement of overhead transition lines in light of India's commitment to reduce emissions and move away from fossil fuel-based energy sources.

In March 2024, a legal opinion commissioned by the Commonwealth Climate and Law Initiative was published in the UK arguing that UK-based directors must consider nature-based-related-risks establishing perhaps a legal duty to manage nature and biodiversity risks. The case of Bloom et a –v- TotalEnergies before the Criminal Court of Paris is looking at the board of directors and main shareholders of Total for knowingly contributing to climate change via decisions made which caused environmental damage, endangering lives, damaging biodiversity and not addressing a disaster.

As regards insurance coverage, the Supreme Court of Hawaii's decision in Aloha Petroleum Ltd -v-AIG⁴ and others is a very important decision in the context of climate impact litigation and insurers' duty to defend in US proceedings.  The court focused on 1) the scope of an "occurrence" under an occurrence-based general liability policy and 2) the definition of "pollutant" in the context of a pollution exclusion.  The court held that the consequences of reckless conduct could qualify as an "accident" and therefore falls within the definition of an Occurrence for policy interpretation purposes.  This was despite Insurers arguing that the consequences of the use of fossil fuels were known and foreseeable and therefore not "accidental".  However, the court also held that GHGs qualify as pollutants and therefore the pollution exclusion applied to exclude coverage.  As a result, Insurers were not obligated to defend Aloha. 

The application of the pollution exclusion will therefore be crucial when considering climate impact claims.  Moreover, it will be interesting to see whether insurers are able to rely on "deliberate acts" arguments in relation to reckless behaviour (particularly if there is no pollution exclusion), and how this might clash with the definition of Occurrence, in circumstances where reckless conduct constitutes an "accident" under local law. 

What to look out for in 2025

January 2025 has commenced with unprecedented wildfires in the Los Angeles area of California.  As this goes to print, losses arising from the fires are estimated in the region of USD135bn.  Although the insurance industry exposure is predicted to be significantly lower (with a large number of carriers having exited home insurance due to previous wildfire losses), insured losses are still projected up to USD30bn.  There will no doubt be much discussion and fall-out over the coming months.

In 2025, we are likely to see more climate impact cases brought outside of the USA and more focus on action to prevent loss of biodiversity.  We should also see more regulation, in particular the long-awaited plastics treaty.  

Explore Annual Insurance Review 2025