Attribution Science Is Empowering Lawyers to Turn Climate Change into the Next Asbestos Liability
The work of a Norwegian geography academic is finally bearing fruit. Richard Heede spent a decade trying to determine whether he could pin down to what degree individual companies contributed to climate change.
By 2013, according to this report in Politico, he had his answer. Heede determined that through mergers and acquisitions and other economic activity, 90 companies worldwide were responsible for emitting nearly two-thirds of the world’s greenhouse gases since the dawn of the industrial revolution.
How Does This Connect to Risk Management and Insurance?
So what does this mean? In the area of liability, Heede’s discipline of “attribution science” is being put to the test in the courts.
New York’s Attorney General Letitia James sued Exxon Mobil, accusing the company of securities fraud. She alleges that Exxon Mobil was duplicitous in how it measured the impact of carbon-reduction policies on its business. She alleges that the company had an internal estimate for that cost that was different than the estimate it presented to investors.
But the potential for liability in this case goes far beyond Exxon Mobil’s clash with James.
To begin with, there a host of climate change lawsuits underway, in addition to New York’s.
If it can be scientifically proven that individual companies can be blamed for the greenhouse gas emissions producing climate change, then even more companies, and not just energy companies, can expect to be in the crosshairs of litigators.
Politico quotes one reinsurance executive, however, who thinks attribution science is still too new to consider it a solid bridge to corporate culpability.
“We follow the science very closely. We try to understand what this actually means to the risk which we are taking. But when it really comes down to attribution of certain events to climate change, our view is that this piece of science is at an early stage,” said Ernst Rauch, chief climate scientist and global head of climate and public sector business development with Munich Re.
How Are Insurance Companies Reacting?
Several large commercial insurers, though, no doubt read the writing on the wall and in seeking to limit their own liability, have begun to publicize policies limiting the amount of capital they will devote to investments and risk transfer for fossil fuel companies.
Bermuda-based AXIS Capital is the latest company to issue such a policy. That company’s announcement follows similar announcements by Chubb, Munich Re, Swiss Re and AXA.
As quoted in the Politico article, Durwood Zalke, the founder of the Institute for Governance & Sustainable Development, said investors are increasingly prodding companies for action on climate change.
The Politico authors note that the political climate is far more divided and partisan than it was back in the 1970’s, when significant environmental legislation, such as the Clean Water Act (1972) was passed.
Still, Zalke notes, “We all have a chance to be a little more heroic when circumstances demand, and that’s where we are — circumstances demand more heroism from the lawyers, the youth, the judges.”
And we would add, from insurers and their insureds. &