, claiming that the UK’s financial regulator unlawfully approved the initial public offering (IPO) prospectus of a UK oil and gas company, which allegedly failed to adequately describe the climate-related risks associated with the company in its prospectus.
With climate risk increasing and climate-related reporting and disclosure being undertaken to varying degrees, one can certainly envisage circumstances in which investors may seek compensation for losses arising from inadequate climate risk disclosure.
Such a legal challenge against the FCA is rare, but it is not unprecedented; ClientEarth have previously written to the FCA twice, citing concerns that the financial regulator is “at risk of contravening its statutory objectives by its failures to address, and enforce against, companies’ inadequate reporting in relation to climate change.” This is ClientEarth’s first claim against the regulator, with the FCA indicating that it intends to oppose the petition.
Despite this, the challenge may have significant repercussions. For example, the FCA may introduce new disclosure rules on climate-related risk, or effectively become an enforcer for climate-related disclosures for companies seeking to become public. Ensuring accurate and comprehensive climate-related disclosure for newly listed companies appears to be ClientEarth’s ultimate aim. At a minimum, the petition will shine a spotlight on the increasing relevance of comprehensive climate-risk disclosures.
One cannot help but wonder what may be next on the climate litigation horizon: first, a judicial review relating to a listing prospectus containing allegedly incomplete climate risk information; next, could we be on the cusp of a wave of section 90 and/or section 90A/ Schedule 10A Financial Services and Markets Act 2000 (FSMA) claims from investors? These sections of FSMA enable investors who have acquired securities to seek compensation in relation to losses arising from any untrue or misleading statements or omissions published in listing particulars or, in the case of section 90A, for any misleading statement or dishonest omission within certain published information, which can include annual reports. Corporate, financial and insurer actors will be watching this space with interest and likely, some trepidation.