The Dispute Resolution Yearbook 2025

Introduction

Disputes involving a significant Environmental, Social and Governance (“ESG“) component are now an entrenched feature of the litigation and regulatory landscape, both within the UK and in jurisdictions around the world.

Such claims are among the largest and most high-profile before the English civil courts, and UK regulators have been increasingly focussed on holding companies to account for public statements on ESG matters. We have seen similar developments in jurisdictions overseas, including by way of the European Union’s introduction of the Corporate Sustainability Due Diligence Directive (“CS3D“) and the adoption by the US Securities and Exchange Commission of rules requiring public companies to make certain climate-related disclosures in accordance with the Task Force on Climate-related Financial Disclosures (“TCFD“) Recommendations.

In this article, we examine recent developments in this jurisdiction at a time when, following President Trump’s return to office, the global ESG landscape seems more polarised than ever before, creating real challenges for businesses facing into both the US and Europe.

Will AI catalyse ESG litigation and regulatory engagement?

As AI continues to improve, both in terms of capability and reduced cost, we expect to see it used by an increasing number of regulators as an important part of their toolkit to identify potential wrongdoing, perhaps mitigating some of the effects of resource challenges which at times have constrained enforcement efforts.

By way of example, the UK Advertising Standard Agency (“ASA“) has announced that it uses AI to vastly increase the number of online adverts it is able to analyse (see our recent briefing on this, here) to up to 500,000 adverts per month. Sectors targeted so far include aviation, fossil fuels, e-cigarettes, food and the motor industry.

Regulators are also deploying AI in the course of investigations, enabling a broader review of documentary evidence than would sensibly be achievable with human reviewers alone. For example, the Competition and Markets Authority (“CMA“) confirmed in 2024 that it was piloting the use of AI-based tools to support document review. Unlawful conduct identified in this way (such as greenwashing) may provide a hook for activist groups and other claimants to bring their own claims.

The continued use of group actions in ESG litigation

The use of group actions is an established yet evolving trend in ESG claims. Individual ESG claims are often relatively low value and only economically viable if aggregated with related claims in a group action and supported by third-party litigation funding.

A high-profile recent example is the claim under sections 90 and 90A of the Financial Services and Markets Act 2000 (“FSMA“) against Boohoo plc brought by a group of institutional investors, in respect of losses incurred when Boohoo’s allegedly unethical practices were exposed. Sections 90 and 90A/Schedule 10A FSMA permit acquirers of securities to seek compensation in respect of misleading statements or omissions in certain published information made by issuers of securities. This is one of the first ESG-related claims to be brought via this route in the UK, and whilst claimants in securities litigation face uncertain times (see our recent briefing here), we expect this intersection between securities and ESG litigation only to continue to develop. A recent attempt to bring an opt-out competition class action against water and sewerage companies in connection with environmental harm caused by wastewater discharges has been rejected by the Competition Appeal Tribunal (“CAT“)[1]. However, given the scaling facilitated by this regime, we expect claimants (or perhaps more accurately, the law firms and funders supporting them) to be nimble in adapting their approach in light of that decision in order to pursue this path with different claims in future.

An expansive approach to jurisdiction in ESG claims

The English courts now have significantly greater discretion over whether to accept claims against English-domiciled defendants than was the case pre-Brexit. That said, they have recently demonstrated a clear willingness to exercise that discretion in favour of accepting jurisdiction in appropriate cases over ESG-related claims with a significant foreign element.

For example, the Court of Appeal in Limbu v Dyson[2] recently accepted jurisdiction over claims against members of the Dyson Group brought by 24 migrant workers from Nepal and Bangladesh, in respect of harm alleged to have arisen from forced labour practices and human rights abuses at the facilities of one of the Dyson Group’s Malaysian suppliers. (See our briefing here). Similarly, in Da Silva v Brazil Iron Limited[3] the High Court accepted jurisdiction over the claims of 103 Brazilian nationals in respect of environmental harm allegedly arising from the defendants’ Brazilian mining operations.

These decisions send a clear signal that the English courts remain willing – and indeed enthusiastic – post-Brexit to accept jurisdiction over claims in respect of the global operations and value chains of English-domiciled companies. Our sense is that there is a real desire on the part of the English judiciary to have these novel claims heard in England, which is often the place from which the defence is in any event coordinated.

Will increased regulation increase litigation risk?

Over the past decade, the shift from soft law (voluntary guidelines) to hard law (binding regulations) has gained increasing momentum, both in the UK and overseas. Companies are increasingly obliged to exercise human rights and environmental due diligence (“HREDD“) in respect of their own businesses and, in certain circumstances, their supply chains, with regulatory frameworks such as the UK Modern Slavery Act, the German Supply Chain Act, the Norwegian Transparency Act and CS3D, highlighting the growing importance of HREDD.

International frameworks such as the OECD Guidelines for Multinational Enterprises, the OECD Due Diligence Guidance for Responsible Business Conduct, and the UN Guiding Principles on Business and Human Rights (“UNGPs“) help to provide the foundation and a broader framework for this mandatory due diligence legislation. The CS3D, in particular, builds upon the underlying UNGPs and OECD Guidelines, outlining a six-step due diligence process for responsible business conduct.

In the UK, the TCFD regime requires certain entities across the financial and non-financial sectors to include climate-related disclosures in their annual financial reports. In-scope entities must report on a ‘comply or explain’ basis, either complying with each of the TCFD “recommended disclosures” or explaining their non-compliance. Under the TCFD recommendations, litigation or legal risk is identified as a subset of climate risk, resulting from a failure to mitigate or adapt to climate change or insufficient disclosures of material financial risks.

However, along with such transparency in regimes comes a greater basis upon which to bring forward claims against companies, including in respect of allegedly misleading eco-friendly and sustainability claims. Whilst the regulatory environment is itself evolving, the novel and developing regulatory world will inevitably inform the way in which ESG litigation is brought and navigated within the UK, despite no signs of such follow-on litigation having yet been brought. Whilst some will say litigation fills any space left by (an absence of) regulation, our own view is that increased regulation will in turn lead to an increase in litigation in this area.

The landscape of climate change litigation in the UK

In the UK, public law claims have been the primary route through which activist groups have sought to tackle climate change. Claims of this type have included applications for judicial review targeting the adequacy of government climate strategies, as well as challenges to projects that may have a significant climate impact.

Climate change litigation is yet to form a significant part of the UK litigation landscape as against businesses. Early attempts to hold corporates and others directly accountable for their contributions to climate change have made limited progress. Attempts to do so by way of derivative actions (in ClientEarth v Shell[4] and McGaughey v USSL[5]) failed at the preliminary stages, and the courts have made clear that they will be reluctant to interfere with director decision-making in relation to businesses’ climate policies.

One possible route for claimants to seek to establish climate change-related liability as against businesses may have been provided by the European Court of Human Rights (“ECtHR“) in KlimaSeniorinnen[6], which established liability as against the Swiss Government in respect of climate change harm. Although not the focus of the case, the ECtHR expressly recognised that the decision was also likely to have ramifications for private companies. It may therefore provide a basis for claimant groups and activists to seek to hold businesses liable for activities that contribute to climate change.

What does a ‘win’ look like in ESG litigation?

ESG litigation creates different opportunities and poses different challenges to many other types of dispute. It is multi-layered, with numerous stakeholders, each of whom may have their own objectives, certain of which will not necessarily be financially driven as more typically tends to be the case with general commercial litigation.

The primary aim of an activist may not be to win in the courtroom, but instead to draw attention to their cause – whether by way of the media, or by focussing the minds of Boards, investors or other stakeholders on the issue at hand. Conversely, a defendant may be more concerned with the potential reputational damage associated with allegations of ESG wrongdoing, given their sensitivity, than any eventual damages award that may arise from the claim.

As a result, what constitutes a ‘win’ in the context of ESG litigation may be quite different as between various stakeholders. In light of those dynamics, it is important for businesses faced with ESG litigation to keep firmly in mind what they (and their opponents) would consider as a “win”, to remain aware of the associated risks that may arise outside the courtroom and to think creatively when it comes to any potential settlement opportunities.

Conclusion

The ESG-litigation landscape is evolving quickly and will remain dynamic over the coming years. The breadth and depth of our experience in this area means that we can help clients assess the nature of ESG-related risk as it applies to their individual business, so that they are in the best position possible to ensure that they fulfil their sustainability ambitions in a way that does not expose them to unwarranted risk. While there are no silver bullets for avoiding regulatory attention, or indeed being the target of ESG-related litigation, businesses that are well prepared to meet the scrutiny this brings are best able to weather the challenge.

In addition to handling any litigation or regulatory actions, our team is happy to provide preventative counselling in this area, taking account of not only of risks intrinsic to the business and sector in question, but also the structure, maturity and wider sustainability strategy of the client’s organisation, and the nature of ESG-related statements and claims they may be making, and to whom.