Study Assesses Cost Of Climate Litigation On Shareholder Value

A working paper from the London School of Economics and Political Science that looked at over 100 climate-related lawsuits between 2005 and 2021 found that the filing of a climate-based litigation claim or corresponding unfavorable court decision reduced the market capitalization of the defendant company by about 0.41%, on average.

Broken out by incident, the study found that the mere filing of a climate-related lawsuit could decrease a company's market valuation by 0.35%, while an actual court decision finding liability on the company reduced the defendant company's market capitalization by 0.99%.

According to the working paper, the losses were not evenly distributed across all companies and sectors. The paper found a key distinction between "Carbon Majors" (i.e., companies in the energy, utilities, and materials sectors of the economy) and non-Carbon Majors. For Carbon Majors, the filing of a case reduced market capitalization by 0.57% while an unfavorable