Photo by Weiss & Paarz law firm
Climate litigation is no longer a hypothetical risk, but a rapidly materialising one, the London School of Economics’ ninth annual snapshot of the state of play in climate litigation shows.
Chiara Zilioli, the European Central Bank’s director general for legal services and chair of the Network for Greening the Financial System (NGFS) experts’ network on legal issues, calls the report “a must-read for the general counsels of central banks, supervisors and financial institutions” as climate litigation risk is already here.
A “wide range of financial institutions are facing materialising climate litigation risk and closer regulatory scrutiny…from banks to pension funds, from insurers to asset managers” whether “as defendants or claimants,” she says in the report’s foreword.
While last year’s report found that markets had come to accept litigation as a financially material risk, this year’s edition shows it crystallising — in courtrooms, regulatory enforcement and on balance sheets.
“Climate litigation is now a permanent feature of the global governance landscape,” says Joana Setzer, associate professorial research fellow at the Grantham Research Institute and co-author of the report. “The question is not whether it will impact climate action, but how much, in which direction and at what pace”.
More than 3,600 cases are happening across 62 countries, up from just 17 countries a decade ago, with 249 filed in 2025 alone and over three-quarters lodged since the 2015 Paris Agreement, the report finds.
Insurers step into the fray
The most novel development is insurance firms taking government bodies to court for losses linked to their failure to tackle climate change. The report frames this carefully: insurers are not acting strategically but trying to pursue lost funds through a process known as subrogation, which is how insurers seek to recover costs paid to clients following an insurance claim.
The cases filed so far however carry troubling distributional implications, note the authors. Tokio Marine’s claim over South Africa’s 2022 KwaZulu-Natal floods, for instance, would see a large international insurer recover corporate losses “from a cash-strapped municipality in the Global South, while the communities who bore the greatest physical burden of the floods remain uncompensated”.
Yet lawmakers are increasingly considering how the same mechanism can be turned on polluters, to address what the US Senate budget committee has called a “climate change-driven insurance crisis”. Hawaii and California have both floated bills that would let insurers, or the state, recover disaster costs directly from major emitters.
This is key, says the report, as the insurance industry cannot absorb the mounting costs of climate-driven losses indefinitely, and fossil-fuel companies should be made to shoulder some of the costs.
The result, the authors conclude, is an insurance industry “entering the climate litigation landscape in ways that may have serious implications for climate justice — implications the industry is unlikely to have fully reckoned with”.
Governments’ obligations solidify
This development reflects a broader trend: globally in 2025, courts finally recognised that states have meaningful legally binding obligations to address climate change — an issue once cast by high-emitting nations as a matter of political choice.
“Addressing climate change for governments is no longer a political choice. It is really a duty…all the way from the international to the domestic courts,” Setzer said at the launch event during a historic heatwave during London Climate Week.
Three back-to-back advisory opinions — from the International Tribunal for the Law of the Sea, the Inter-American Court of Human Rights and, in July 2025, the International Court of Justice (ICJ) — have, along with the European Court’s KlimaSeniorinnen ruling, produced what the authors call “a consolidated statement of state obligations under customary international law”.
That consolidation won political endorsement on 20 May, when the UN General Assembly welcomed the ICJ’s opinion, with 141 states voting for it and eight against.
These influential, international decisions are already reshaping how national courts read domestic law.
“The question is no longer whether climate obligations exist in law, but whether and how they can be made effective under conditions of institutional stress,” the report states.
Corporate liability has “crossed a critical threshold”
Such consolidating state duties may also “be starting to strengthen the case for corporate accountability”, as cases translate international law into domestic rules and technical hurdles that previously blocked cases from getting off the ground fall. Of 30 cases against private companies examined by the authors, 15 have now cleared the admissibility threshold — meaning, as Setzer put it, they will no longer be “stopped on the door of the courtrooms”.
In many countries, “corporate climate liability has crossed a critical threshold”.
The pool of private defendants is widening too, with banking, insurance and financial services increasingly amongst target sectors, and state-owned financial institutions and multilateral lenders similarly drawing increased scrutiny.
For example, one case (Bank Climate Advocates v. US Department of Treasury) indirectly targets the International Finance Corporation (IFC) by seeking disclosures on its due diligence assessments before it financed 13 projects. These projects included gas plants and a cement plant and were initiated after the IFC refused to disclose the assessments, citing “client confidentiality and deliberative privilege”.
Firms and financial institutions tempted to retreat from green commitments in response will find little benefit from this approach.
“Adopting the practice of ‘greenhushing’… does not eliminate legal risk; it may shift it,” the report warns as claimants shift their focus from greenwashing onto financial institutions that are taking no public action at all.
The authors’ advice for banks is plain: “well-evidenced transition plans” are the best way to reduce exposure; “silence or pre-emptive retreat” is not.
This page was last updated July 10, 2026
Written by
Ike Walker, a Green Central Banking contributor since 2023, has a decade's experience in research writing. An Utrecht-based scholar, Ingrid specialises in transformative justice, green finance, law and systems change. They are an Utrecht University's Bright Minds scholar and previously worked for Cambridge University and various justice-based NGOs.
