The changing climate is continuing to create a new environment for businesses, with the potential for risks and liabilities that did not exist previously. The role of the courts in these changes has been underscored recently by the Supreme Court's decision in Smith v Fonterra Co-Operative Group Ltd (see our article here). While we will continue to follow the Smith litigation closely, there are many other climate change-related litigation trends that we can expect to see in 2024 and beyond. 

Potential director liability: Overseas we are seeing increasing shareholder activism, including a trend of claimants purchasing shares in publicly traded companies (particularly in industries that utilise fossil fuels) specifically to enable them to bring derivative claims against the directors for their investment practices. Similar steps have been taken by becoming members of superannuation schemes. ClientEarth, a special purpose climate litigation vehicle, is doing just that. While the English Court of Appeal recently refused permission to appeal proceedings brought against Shell’s directors (see our article here), we doubt this outcome will deter similar actions in the future. Similarly in Australia, an ANZ shareholder has brought proceedings in respect of alleged increases to the bank’s fossil fuel-related lending. We can expect to see similar claims on this side of the ditch. 

As part of this, it’s relevant to consider the introduction of s 131(5) into the Companies Act 1993, which provides that “a director may consider matters other than maximisation of profit (for example, environmental, social, and governance matters)” in deciding what is in the best interests of the company (see this article here). 

Litigation related to mandatory climate reporting: Last year, the Government introduced a new regime making climate-related disclosures mandatory for some large organisations (known as ‘climate reporting entities’ or CREs). These organisations are required to make annual ‘climate statements’ that publicly disclose information about the effects of climate change on their businesses or any funds they manage. You can read more on this here. We are starting to see the first financial statements requiring compliance, and in time it is likely there will be enforcement action by the FMA for non-compliance.

Attempts to hold the Government to its climate change targets: In 2023, Lawyers for Climate Action challenged Cabinet decision-making and its consistency around the Government's 2050 carbon targets when setting emission budgets. The then-Minister of Climate Change accepted that a breach had occurred and agreed to move emissions budget decisions back into line with targets. The Court then endorsed what was effectively a settlement between the parties, making orders requiring the Minister to reconsider the earlier decision. You can read more on this here. The proceedings show the continued use of judicial review as a means of scrutinising the Government's actions against its climate change obligations, and that this can be effective in causing change, even without proceeding to a fully-argued hearing. This trend is very likely to increase over the next few years. 

A possible new right to a clean, healthy and sustainable environment: Parliament is currently considering a Bill that would introduce a new right to "a clean, healthy, and sustainable environment” into the New Zealand Bill of Rights Act 1990. Given the recent change of government, this Bill is very unlikely to find support in the current Parliament. However, should it pass in future, it creates a presumption that the Government and others subject to the Act must act in a way that is consistent with this right. While legislation could contravene it, the Bill would allow the courts to interpret legislation in a way that gives effect to the right, to strike down inconsistent regulations, and to issue 'declarations of inconsistency'. 

Ongoing changes and challenges with the Emissions Trading Scheme: The new Government has stopped the wide-ranging review into the ETS that was underway last year, but administrative changes already implemented continue to have implications. Last year, four representative bodies across the forestry industry jointly issued judicial review proceedings against the Government for significant increases to the fees associated with participating in the ETS. An independent review into elements of these fees has now been commissioned by the Minister of Forestry. 

Greenwashing: Consumer NZ and others have brought proceedings against Z Energy in relation to an advertising campaign regarding its efforts to ‘get out of the petrol business’, which the plaintiffs claim was misleading given the company’s overall on-going role in the fossil fuel sector. Among other things, the claim seeks orders requiring Z to carry out ‘corrective advertising’. The law regarding misrepresentation (including use of the Fair Trading Act 1986) is well-developed in New Zealand, and looks likely to continue this new chapter in monitoring what companies say and do in relation to their environmental credentials. You can read more on this here. 

Conclusion 

As we’ve seen this year with Smith, the creative and targeted use of existing and new climate-focused causes of action only looks like it will increase in the coming years. It is a strong global trend, seeking to force action where governments are not seen to be moving fast enough and to hold businesses accountable for their movements in this space.

Please get in touch with one of our experts if you would like to discuss the potential implications of this article on your organisation.

Special thanks to Gus Coates for his help in preparing this article.