Climate change risk examples and checklist for legal practice

Physical risks (acute and chronic)

Physical risks can include floods, droughts, forest fires, heat stress, coastal erosion and wildfires.

Physical risks and extreme weather events (such as storms) will impact:

• commercial and residential buildings
• transport infrastructure and business operations (such as supply chains)
• agricultural impact

Physical risks can lead to loss of life and increased population and species migration.

Potential impacts on solicitors’ legal practice

1. Consider the impacts of physical risks on office locations and staff. Scenario planning and contingency measures to address these, such as remote working plans that can be activated if extreme weather events occur
2. Impact of climate change risks on staff health and wellbeing
3. Depending on office locations, potential impact on insurance premiums or availability

Potential climate legal risks created and impacts on client advice

Physical risks on clients’ businesses

Consider the impact of physical risks on clients’ businesses (such as when advising on property transactions and asset purchases).

How will climate events affect the business’ supply chain and outputs?

Will this affect the financing of transactions?

How will the client mitigate their greenhouse gas (GHG) emissions and adapt to be climate resilient?

Acquisition or asset purchases

Advice on an acquisition or asset purchase should take account of:

• how the client’s emission reduction targets will be impacted by the acquisition, and
• what adaptation of the asset may be needed to improve climate resilience

Associated risks and costs should be flagged.

Asset values and potential commercial impacts

Consider impact on asset values and potential commercial impacts. For example:

• insurance
• directors’ duties
• share price

Conveyancing transactions

Consider the impact of physical and transition risks on conveyancing transaction in accordance with our climate change and property practice note.

Is a climate search needed? Address the impact of climate risk on the property within your advice.

For instance, if the property is on a flood plain, address:

• increasing flood risk incidence and severity
• cost and availability of insurance and finance, and
• how this affects the decision to buy and the price

Transition risks

Examples include policy, legislative, regulatory and market changes to support targets for carbon reduction and emissions reporting.

This could include legislation requiring:

• mandatory reporting on carbon footprints
• nature-related disclosures
• corporate reporting requirements
• the production of climate transition plans

These changes will occur alongside growing critical infrastructure constraints.

Transition risks could also include emerging measures such as:

• mandatory climate-related financial disclosures: the UK mandates Task Force on Climate-Related Financial Disclosures (TCFD)-aligned climate reporting for large companies and is moving to adopt the International Sustainability Standards Board (ISSB) global sustainability standards
• expanding nature-related disclosure framework requirements for companies to develop and publish net zero transition plans

Asset values may change and/or products may become unaffordable, unavailable or uninsurable.

Potential impacts on solicitors’ legal practice

1. Compliance with emerging climate legislation (for example, mandatory climate reporting)
2. Ensuring lawyers across all practice areas are trained on emerging legislation, regulation and practice relevant to their practice/professional obligations, or where to obtain advice from relevant third-party specialists
3. Follow Law Society and other potential Solicitors Regulation Authority (SRA) guidance as it emerges

Potential climate legal risks created and impacts on client advice

Factor emerging climate and nature risk regulation (for example, on reporting and disclosures) into advice, so clients are aware of upcoming requirements.

Be aware of how changes in client demand or stakeholder sentiment could affect asset values and operating costs. For example:

• the sale value of a company with a high carbon footprint or large net negative impact on nature could change rapidly
• in conveyancing, changes in insurers’, lenders’ and homeowners’ view on issues such as properties on flood plains could impact property values (see climate change and property)

Be aware of potential additional commercial contracts, such as increased professional indemnity or other insurance premiums.

Carry out appropriate due diligence to assess climate change risks.

For example, carry out a climate search to take account of the risk that certain properties may become uninsurable or ones for which mortgage finance cannot be obtained (see climate change and property).

Liability risks

Examples include legal liabilities for law firms, governments and organisations from people or businesses seeking compensation for losses arising in relation to physical or transition risks.

Businesses may be sued by those impacted by climate change or nature loss for their contribution to climate or nature damage, or for attributable losses.

Potential impacts on solicitors’ legal practice

1. Monitor risks of climate litigation from clients who consider advice did not adequately cover climate risks
2. Training staff to identify climate risks that may impact the firm’s advice
3. Potential impacts on the availability or cost of professional indemnity insurance if advising in high-risk areas (such as clients likely to be heavily impacted by climate risks)
4. Risk of greenwashing claims or other challenges owing to marketing claims or composition of client base
5. Potential risk of negligence claims in the event of inaccurate advice or failure to warn of upcoming legal requirements

Potential climate legal risks created and impacts on client advice

Most likely claims relate to conveyancing, highlighting climate risks associated with the property or real assets.

Client exposure to greenwashing challenges or litigation with attendant business risks.

Client exposure to regulatory action for breaches of climate-related regulations or fiduciary duties (such as disclosure obligations) as some regulators increase scrutiny on misleading climate-related claims.

Corporate governance and risk management

Advice on corporate governance and risk management structures should include oversight and management of the risks and opportunities presented by climate change.

You should understand, where relevant:

• the implications of climate change for your clients
• the energy transition, and any related claims and commitments made by your clients
• emerging governance, risk management and disclosure frameworks and best practice standards (such as the recommendations of the Taskforce on Climate Financial Disclosures (TCFD) and developing standards for transition planning)

For corporate clients, this includes directors’ duties and liabilities in relation to the management of climate change risk.

Directors should remain aware of evolving standards in the area, as failure to address climate-related risks can result in reputational risks and liability.

For more guidance, see our guide on climate risk governance and greenwashing risks.

Corporate reporting and due diligence disclosure obligations

If you advise companies on disclosure and reporting, you should understand the rapidly evolving international and national policy and regulatory regimes with attendant disclosure requirements and how your clients are affected.

Relevant developments include (but are not limited to):

• EU Corporate Sustainability Reporting Directive (CSRD): this principally affects larger organisations which operate in the EU but are headquartered elsewhere (including the UK) by imposing reporting obligations on any asset of environmental impacts of their operations and supply chains, consistent with TCFD. Following the EU’s omnibus reforms, obligations on non-EU groups will be narrowed to those meeting high EU-turnover thresholds
• Taskforce on Nature Related Financial Disclosures (TNFD) recommendations: the TNFD potentially creates an expectation that directors’ responses on nature-related risks could be scrutinised carefully under sections 172 and 174 of the Companies Act 2006. The disclosure obligations of TNFD (finalised in 2023) may impose further reporting obligations if incorporated into mandatory reporting frameworks
• International Sustainability Standards Board (ISSB) standards: these aim to provide a global baseline for sustainability reporting, ensuring comparability and decision-useful information for investors. UK endorsement of the standards is underway and the government has taken steps towards implementing a sustainability disclosure regime based on ISSB standards

Companies are already subject to a general obligation to disclose enough information so investors can understand a company’s material financial environmental impacts and impacts on nature.

While not yet tested in court, some legal opinions support the contention that directors have obligations related to a company’s sustainability and nature-related risks:

• in relation to financial reporting, a legal opinion issued by Social Value International concluded that compliance with the statutory duty placed on directors in section 393(1) of the Companies Act 2006 for company accounts to present a true and fair view of a company’s financial position should reflect sustainability issues affecting the company
• a legal opinion issued by Pollination Law and Commonwealth Climate and Law Initiative addresses the importance of company directors being aware of and taking into account relevant nature-related risks.

This is an evolving area of law, and the above opinions were commissioned for specific purposes.

It may be worth considering whether failures to address these issues may lead to material reputational issues.

Disputes and potential challenges

If you are a disputes lawyer, you should understand and advise clients on:

• global developments in climate litigation and the increasing likelihood of litigation in relation to climate change (including strategic climate litigation)
• the variety and innovation in:
  • the nature of claims brought in relation to climate change – greenwashing, biodiversity damage and protected species
  • the parties bringing them – for example, shareholders challenging boards, NGOs (and future generations) challenging governments, and governments challenging corporations

You should advise clients on climate litigation risk, including developing appropriate mitigation and oversight mechanisms and avoiding misrepresentation.

In R (on the application of Finch) v Surrey CC [2024] UKSC 20, the Supreme Court held that the effects on climate of emissions caused by the combustion of fossil fuels extracted from a development (‘downstream’ or ‘scope 3’ emissions) must be:

• included in an environmental impact assessment (EIA), and
• considered by a local authority when deciding whether to grant planning permission for that development

In this case, the GHG emissions that would occur when oil extracted from an oil well was burnt as fuel (after being refined) had to be included in the EIA as downstream impacts.

The ICJ advisory opinion on obligations of states in respect of climate (July 2025) confirmed that states have obligations under international and human rights law to take preventative measures to avoid climate harm.

Failure to do so could constitute a ‘wrongful act’ attributable to that state.

Although the opinion governs the responsibility of states, it suggests they must apply due diligence in regulating the emissions of private actors to aim for the 1.5ºC threshold following the Paris Agreement.

The ICJ’s opinion may influence future litigation against states and companies.

Real estate and asset-based transactions

You should advise on physical climate risks and how they impact real estate ownership and use, such as flooding, fire, inaccessibility, uninsurability and potential impacts of capital investment.

You can find a checklist, template reporting clauses and comments on the use of climate searches in our practice note on climate change and property.

Commercial contracts and agreements

You should address the climate impact and risk of a transaction in the relevant commercial agreement to make sure:

• the impacts are reduced or avoided, and
• the risks are adequately managed so liability risks are avoided and/or mitigated/appropriately allocated

Model climate clauses for a wide variety of agreements are available from several sources, including the Chancery Lane Project.

Human rights and social governance issues

Climate change has been directly linked to the International Covenant on Civil and Political Rights (ICCPR) and human rights by the UN Human Rights Council and domestic and international courts.

There is growing recognition of climate change as a human rights concern (including concerning its impacts on other fundamental human rights).

This includes in relation to a just transition in developing economies, and how such standards may enhance:

• clients’ responsibilities in relation to climate change
• related due diligence requirements, and
• obligations to mitigate any adverse human rights impacts identified

In Verein KlimaSeniorinnen Schweiz v Switzerland (53600/20), the European Court of Human Rights found that article 8 (right to respect for private and family life) of the convention encompasses a right to effective protection by the state authorities from the serious adverse effects of climate change on lives, health, wellbeing and quality of life.

The case related to a complaint by a Swiss association, Verein KlimaSeniorinnen Schweiz.

Its members were all older women concerned about the failure of the Swiss authorities to take sufficient action to mitigate the effects of climate change.

The court found the applicants’ article 8 rights had been breached by the failings in Switzerland’s climate change mitigation policy.

Issues for advice

Issues for the retainer

Suggested questions for specialist solicitors: commercial, real estate and dispute resolution

The table below sets out key questions to consider when advising on commercial or real estate transactions, and when advising on dispute resolution.