Directors, Emissions, and the Arithmetic of Climate Liability

The topic of director responsibilities vis-à-vis global warming has generated a great deal of scholarly energy and, ultimately, a great deal of disappointment. My recent contribution to ECGI’s conference in Oxford offers a gloss on what that disappointment reveals, and one intuition as to where a more consequential set of pressure points may be forming.

The limits of fiduciary duties

One popular approach to engaging corporate directors on climate – pristinely laid out a few months ago by my colleagues Maurits Dolmans and Andreas Wildner – has run through their fiduciary duties. The idea is intuitive, on its face: if boards are bound to act in the best interests of the company, and climate change poses material risks to long-term value, then a failure to manage climate risks should in principle give rise to liability. 

This is a coherent theoretical argument, and one that has animated significant litigation and lobbying. Yet I am of the view – which John Armour, Luca Enriques and Thom Wetzer have articulated with characteristic precision – that, measured against reality, that argument is hopeful. 

As currently constructed, fiduciary duties require directors to act in the best interests of the company they run – not to internalise the costs that its emissions impose on others. A director who declines to pursue a costly transition, on the basis that the returns are too uncertain and too distant (all the more so, in a deregulatory climate) is far from obviously in breach of any legal duty. And the ongoing polycrisis – of which global warming is just one element – has made directors’ balancing act more intricate, if anything. 

Courts are ill-equipped, and institutionally reluctant, to second-guess how boards weigh competing considerations of this complexity, over time horizons that far exceed shareholders’ average investment lifespan. The fiduciary framework was not designed to solve collective action problems, and straining it to do so has so far produced more risk for claimants than accountability for defendants.

As a lawyer, I cannot be convinced by the fiduciary duties argument. As a citizen, I cannot find comfort in the view that private for-profit companies should be the agents of social change.

Shifting grounds 

I do see, however, a different set of pressures forming. They arise not from the governance of climate strategy, but from the accumulation of climate damages; and not from directors’ forward-looking duties, but from the backward-looking tort liability that attaches to their past conduct.

Last May, the Court of Hamm ruled on a case brought by a Peruvian farmer against one of Germany's largest energy companies (RWE). The court dismissed Mr Lliuya’s claim on evidentiary grounds – finding that the risk to his property had been insufficiently established – but affirmed three principles that deserve attention.

First: Major emitters can be held liable for their proportional contribution to climate harms (including harm caused abroad). This has become possible thanks to the extraordinary advances of weather attribution science, which can now quantify with legal-grade precision the share of a weather event attributable to cumulative emissions. The arithmetic is instructive: floods in Emilia Romagna (not far from where I live) caused €9 billion in damages in 2023; conservative attribution methodology assigns 30% (€2.7 billion) to anthropogenic warming; RWE's historical share of global emissions is 0.47%, making it responsible for €12.7 million from that event alone; across the top 20 emitters, aggregate exposure comes close to €1 billion. Under these principles, every major climate disaster becomes a replicable claim against an identifiable set of defendants.

Second: Regulatory compliance provides no immunity. What matters is not the unlawfulness of the conduct, but the injustice of the outcome. Energy producers like RWE should have known of the consequences of their emissions “since the mid-1960s”. This forecloses directors’ compliance defence – as it did for tobacco and asbestos.

Third: Parent companies bear responsibility for subsidiaries’ emissions – a now familiar principle of environmental tort law, but with sweeping implications for groups with a dispersed carbon footprint.

Though Lliuya v. RWE broke new ground in climate litigation, none of this is novel. Courts’ recourse to proportional liability where causation is proven but individual contributions cannot be isolated is well established. The Hamm judges applied precedents with precision. New cases filed since – in Germany (again against RWE), Switzerland, the UK and Italy – suggest it is a question of when, not whether, emissions claims succeed on merits.

Sharpest teeth

It seems to me that insurance is where this picture acquires its full dimension.

Faced with rapidly escalating weather damage, regulators across Europe are introducing mandatory public-private climate insurance schemes (“PPIs”). Italy was the last to do so – with Germany, Greece and Austria to follow. The alignment of interests in making them work is stark, and rarely bipartisan: 

• Governments carry debt burdens that preclude effective disaster relief (Italy’s public debt sits at 138% of GDP – against an 88% regional average); 
• Voters cannot afford unabated risk-priced coverage (in Italy, premiums have risen 12% year-on-year since 2018, and 97% of climate damages are uninsured – against a 75% regional average); and
• Insurers face skyrocketing claims (in Italy, extreme weather pay outs amounted to 352% of the related premium income in 2023), just as private reinsurers retreat.

This conundrum reveals insurers as the natural institutional plaintiffs for climate tort: coopted, deep-pocketed, prudentially supervised, fiduciarily obliged to recover what they can of the subrogated claims they inherit (which are worth billions of dollars in the present), and – unlike Mr Lliuya – capable of aggregating damages across events and jurisdictions.

It is this development that will bear on directors that are late to transition.

Note the temporal asymmetry. Transition decisions are forward-looking: they enjoy the shield of the business judgement rule, and resist judicial second-guessing. Tort liability looks backwards: it attaches to decisions made, emissions generated, and damage that continues to accumulate.

The fiduciary duty thesis invited directors to act on principle. The tort thesis invites them to act on financial arithmetic. The former argument has so far lacked teeth. The latter is biting already. Insurers are its sharpest teeth.

__________

Clara (Charlie) Cibrario Assereto is a corporate lawyer, co-founder of Cleary Gottlieb’s ESG practice, and executive director of CLIMA: a Rome-based interdisciplinary collective that helps reshape climate narratives across policy, business and public imaginary.

This blog is based on a discussion held at the Intesa Sanpaolo Business Law and Regulation Conference: "Directors' responsibilities in a time of change" on 6th March 2026. Visit the event page to explore more conference-related blogs.

The ECGI does not, consistent with its constitutional purpose, have a view or opinion. If you wish to respond to this article, you can submit a blog article or 'letter to the editor' by clicking here.