5.2.3 Liability risks

Liability risks arise when financial institutions are held liable for climate-related damages. Liability risks may also result from exposures on companies that are vulnerable to such claims. Current examples of the latter are the case of Milieudefensie against Royal Dutch Shell,1 and the case of a Peruvian farmer against RWE, a German energy company (“the case of Huaraz”).2 In both cases the companies are held liable for causing environmental damages. In court, a cause and effect relationship between the acts of the company and the alleged damages may not be easily concluded.3 Still, these cases could lead to financial and, perhaps more importantly, considerable reputational consequences for both the companies concerned as well as lenders and investors in these companies. Also, the results of one case may affect the whole industry (spill-over effect).

Liability and reputational risks can also arise out of claims or complaints concerning the financing of non-sustainable activities. For example, Friends of the Earth Europe and others notified the Netherlands National Contact Point (NCP) in 2014 with regard to an alleged violation of the OECD Guidelines for Multinational Enterprises by Rabobank.4 The notification concerned Rabobank’s responsibility to prevent or mitigate negative impacts as a result of the (allegedly: non-sustainable) palm oil activities of Bumitama Agri Group. These activities were financed by Rabobank.5

In 2017, Oxfam/Novib and others filed a similar complaint at the NCP with regard to an alleged violation of the OECD Guidelines by ING. The complainants state that ING provides financial backing for many companies and projects in industries that release large quantities of greenhouse gases. They request that ING starts reporting on its indirect greenhouse gas emissions and that it establishes and pursues goals which will bring the bank’s indirect greenhouse gas emissions in line with the goals of the Paris Agreement. According to the complainants, ING is also misleading customers with its “climate neutral” statements.6

Noticeably, companies falsely claiming to be bound to a (sustainability) code of conduct and operating their businesses accordingly, could be found engaging in misleading business-to-consumer commercial practices.7 Also, companies providing false information that causes the other party to take a transactional decision that they would not have taken otherwise, could, under certain circumstances, be held liable.8