Activity around environmental, social and governance (ESG) and sustainability issues is increasing as governments and citizens exert pressure on businesses to change their ways for the greater good, says Allianz says in its recent Global Claims Review 2022.
Climate change is already a top boardroom issue, as companies face an array of physical and liability-related risks from a more extreme climate and from the transition to a low- or no-carbon economy.
However, social issues are also a growing area of exposure, from diversity and inclusion through to an organization’s impact on local communities and supply chains.
Climate change-related litigation is likely to become a significant source of liability exposure for companies and their directors in coming years. The D&O insurance market has already seen claims related to climate change, such as in the aftermath of the California wildfires in 2018, and companies increasingly face the prospect of litigation from activist shareholders seeking to influence company policy or compensation for alleged damage related to past pollution.
Almost 2,000 climate change-related lawsuits have been launched to date – half of them in the past seven years.
Another potential exposure comes from claims of ‘greenwashing’, where a company is sued for unsubstantiated or misleading ESG claims, or its failure to match commitments with action. With growing reporting requirements, companies and their directors will face growing liability from climate-related disclosure and breach of fiduciary duty.
Environmental factors are also affecting product liability and construction claims. Extreme weather and unpredictable seasonal variations in climate can affect the quality and performance of building design and materials as the consequences of climate change intensify.
AGCS has already seen a number of claims where products fail to meet performance expectations in changing environmental conditions, including adhesives used in the windows of high-speed trains being affected by UV light. Claims have also arisen from building cladding and paint finishes that failed to perform in extreme temperatures.
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