#TBT Fossil Investors Beware: Here Come the Lawyers

Oct. 8, 2023

Now that science is naming names and calling polluters to account, how much longer can banks and pension funds hold fossil companies close?

A news story earlier this year assigning responsibility for Western Canadian and U.S. wildfires may not have looked like a real and present threat to the investments and social licence that keep the oil and gas industry operating, extracting, and polluting.

But when the history of this time is written—when we look back at how we managed the series of wins that finally got climate change under control—the ability to pinpoint the polluter responsible for a specific measure of climate harm will surely stand as a milestone.

The CBC report in late May cited a peer-reviewed paper in the journal Environmental Research Letters that came up with a remarkably precise measure of the fossil industry’s accountability for climate chaos: it traced 37% of burned forest area in Western Canada and the United States between 1986 and 2021 back to 88 major fossil fuel producers and cement manufacturers.

The study was “the first to quantify how corporate emissions have made wildfires worse,” Grist wrote at the time. “Experts say the new research could help advance growing efforts to take polluters to court.”

Based on the “vapour pressure deficit”—a measure of atmospheric drying power, or how thirstily a warming atmosphere sucks moisture out of vegetation—the modelling by the Cambridge-based Union of Concerned Scientists (UCS) and the University of California, Merced connected the dots between the companies’ climate pollution and 80,000 square kilometres of forest loss. That’s an area larger than Ireland that might not otherwise have burned.

"What we found is that the emissions from these companies have dramatically increased wildfire activity," study co-author Carly Phillips, research scientist with the UCS Science Hub for Climate Litigation, told CBC.

The Law Would Like a Word

The CBC story looped through some commentary from independent experts and obligatory deflection from the fossil lobby before getting to the crux of the study: the emerging field of attribution science is now well enough established to link specific harms to specific companies. That follows the growing mountains of evidence that colossal fossil influencers like ExxonMobil, Shell, the American Petroleum Institute, and many others understood the risks of climate change as early as the 1970s.

"I think the accountability piece for fossil fuel companies is really important and part of what makes this research unique," Phillips said. “We know that historically industries have been held accountable for the risks of their products, whether it be tobacco or asbestos. And a big part of holding those companies accountable was research showing the linkages between their product and the impact."

Now that the spotlight is on oil, gas, and coal, the law would like a word.

While Grist wrote that the connection back to specific court cases could still “prove thorny”, U.S. climate accountability experts said the wildfire study could support the 20 or so lawsuits filed by U.S. cities and states, accusing fossils of deceptive advertising and seeking compensation for a fair share of local climate adaptation costs. Jessica Wentz, a fellow at Columbia University’s Sabin Center for Climate Change Law, cited a specific case in Colorado where the city and county of Boulder and San Miguel County are seeking millions from Exxon and Calgary-based Suncor Energy.

Out of the various municipal cases on U.S. dockets, “that’s the one lawsuit where wildfire-related damages are forefront and central,” Wentz told Grist.

Vancouver was on its way to contributing funds to a similar class action lawsuit in British Columbia, until a new city council overturned the decision.

The key ingredient that could catapult the wildfire study from the news pages to the courtrooms is an exhaustive piece of research by the Snowmass, Colorado-based Climate Accountability Institute. The institute is mostly the work of one very dedicated number cruncher, Richard Heede. It’s been described to The Energy Mix by a mutual colleague as a “real labour of love that’s paying huge dividends” for climate attribution.

The database captures fossil fuel emissions back to the 1800s, and it name names. The latest version of Heede’s work in late May showed the percentage of global emissions between 1988 and 2018 attributable to individual companies and added up US$209.4 billion per year in compensation that the top dozen or so polluters should be paying.

The top four on the full list were state-owned fossil companies in Saudi Arabia, Russia, Iran, and India. Privately-held colossal fossils Exxon, Shell, BP, and Chevron came in fifth, sixth, eighth, and 10th. The Abu Dhabi National Oil Company (ADNOC), where CEO Sultan al Jaber was under intensifying pressure earlier this year to step down as president of this year’s COP 28 negotiations, placed 11th. About a dozen were oil and gas companies that are based or have operations in Canada, according to a dataset obtained by The Energy Mix.

They Didn’t See This Coming

It’s a good bet that fossil companies and their major investors didn’t see this level of scientific scrutiny coming until it hit them with the force of…okay, maybe just a post-tropical storm for now, as opposed to a Category 5 cyclone. People in Atlantic Canada and Puerto Rico can tell you that’s more than enough damage to hurt.

But this is still a developing story, as we say in the news biz, because it’s only recently that attribution science has become this finely tuned. For the longest time, when climate hawks needed to connect distant carbon emissions and remote-sounding science to everyday experience, we would say climate change “loaded the dice” for more frequent, severe damage and hardship, even if it couldn’t be connected directly to a specific storm, wildfire, or drought. It was like a pro baseball player on steroids, we would say: with 30 or 40 home runs per year, the player was just having a great year, but with 73, there was something else going on.

Now, we’re seeing an organized flurry of attribution studies, some of them shockingly fast, that have isolated the climate component of the devastating and deadly 2021 heat dome in British Columbia, disastrous flooding in Pakistan, heat waves in Asia and Europe, and now, 35 years of wildfires in the western reaches of North America. With Alberta continuing and amping up its fact-free campaign against federal climate regulation, we should all want to know what this means for the town of Fort McMurray—where spring flooding in 2020 followed the 2016 wildfire known as The Beast and some people, including a current provincial cabinet minister, lost their homes twice in four years.

Cold Comfort for Financial Institutions

The CBC coverage of the wildfire study captured the tone of vague dismissal in the fossil lobby’s response so far.

"While our view may differ from the group who produced the study, what we can agree on is the need for continued work towards driving down greenhouse gas emissions," said Jay Averill, spokesperson for the Canadian Association of Petroleum Producers.

"The clear agenda of this group aside, America's oil and natural gas industry is focused on delivering affordable, reliable energy while reducing emissions,” the American Petroleum Institute’s Christina Noel said in a statement.

But the PR reps’ championship skating ability should be cold comfort for financial institutions that still seem to delight in pouring fuel on the climate fire by funding new oil and gas projects, urgings from the International Energy Agency and the Intergovernmental Panel on Climate Change be damned. Institutions like the Royal Bank of Canada, which established itself earlier this year as the biggest fossil fuel investor in the world, not just in Canada. Or the B.C. Investment Management Corporation (BCI), which somehow managed to convince itself that a natural gas network in the UK and a speculative pitch about hydrogen home heating would be a prudent place to lock in retirement funds on behalf of 715,000 current and former public servants.

The problem for the banks, the pension funds, and the recipients of their fossil largesse is that it’s easy enough to deflect and obfuscate in a short news interview, a lot tougher in a court of law. Climate litigation is still an emerging field, and it’s never wise to count on a win in any one case, especially while court precedents are taking shape. But the Sabin Center’s climate litigation database lists more than 2,300 cases, the momentum is going in the right direction, and legal action is just starting to take a toll: a study released in May by the Grantham Research Institute at the London School of Economics found that legal judgements against “carbon majors” led to a small but discernible drop in their share prices.

“The researchers hope their work will encourage lenders, financial regulators, and governments to consider the effect of climate litigation when making investment decisions in a warmer future, and ultimately drive greener corporate behaviour,” the Guardian wrote.

This does put big investors in a somewhat less tenuous position than the fossil operators they’re currently so determined to fund. If your asset is a pipeline, a refinery, or an oil sands mine, there isn’t much else you can do with it. If your product is investment capital, you can pivot a lot faster—if you want to, or once you decide you need to.

So the real question here is what it will take, and how long it will take, for these companies to become too toxic for the big banks and other investors to handle. And, to give them the prompt they obviously need, what government regulation can do to push the financial sector farther, faster.

Mitchell Beer traces his background in renewable energy and energy efficiency back to 1977, in climate change to 1997. Now he and the rest of the Energy Mix team scan 1,200 news headlines a week to pull together The Energy Mix, The Energy Mix Weekender, and our newest weekly e-digest, Cities & Communities.

[Top photo: Stock photo by August de Richelieu/Pexels​]