Utilities Face Mounting ESG Litigation Risk

A growing number of lawsuits based on ESG (Environmental, Social, and Governance) statements in securities filings and bond offerings are being filed against corporations and governments. Two ESG research directors at Fitch Ratings, writing in the trade publication Mining Review Africa, note the U.S. may be ground zero for these actions, but it’s an international phenomenon. “Litigation,” they write, “is one of the main transmission mechanisms of ESG issues to credit risk.”

Many of these lawsuits are climate-related, and sectors with large emissions impacts, including utilities, are often the targets. Mandatory reporting requirements are sometime an issue in these lawsuits, and an article from S&P Global makes it clear why. The article, based on a report card from shareholder advocacy group As You Sow, gives four out of five of the largest U.S. utilities an “F” on climate “for not including greenhouse gas emissions from their natural gas supply chains and other indirect pollution in their net-zero emission goals.”