Climate Risk and more generally ESG-related legal challenges have greatly increased in recent years.
Recently, ClientEarth have filed a case with the High Court in London against the UK’s Financial Conduct Authority (The FCA) over their approval of Ithaca Energy plc’s prospectus. Ithaca Energy has significant interests in the Cambo and Rosebank oil and gas fields in the North Sea.
Ithaca completed its initial public offering recently and is now listed on the London Stock Exchange (LSE).
ClientEarth argues that Ithaca has failed to adequately describe its climate-related risks, and thereby has not fulfilled the requirements of prospectus regulation. By approving Ithaca’s prospectus, ClientEarth argues that the FCA has therefore breached legal requirements and has unlawfully enabled Ithaca’s initial public offering.
Although Ithaca recognises that there are general risks to the oil and gas industry, ClientEarth argues that Ithaca does not explain how significant they are for its business. ClientEarth argues that this is a significant omission in Ithaca’s disclosure given their plans to develop new fossil fuel assets, which go against the 1.5°C temperature goal set out in the Paris Agreement. New oil and gas projects present several risks to companies and investors such as carbon lock and stranded assets.
ClientEarth also argues that the disclosure has failed to provide a meaningful indication of how Ithaca’s business and finances might be affected by full or even partial achievement of the Paris Agreement goal, therefore depriving stakeholders of critical information needed for an informed assessment of the company’s financial position. Protecting investors is a key duty of the FCA, and ClientEarth argues that the regulator has therefore failed in its duty to investors.
ClientEarth lawyers have filed the claim as a judicial review case against the FCA. It is now up to the High Court to decide whether to grant permission to bring the claim.
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Our audit provides an objective analysis of an organisation’s ESG credentials, including its supply chain, and helps companies prepare for mandatory ESG disclosures and regulatory requirements. Show your commitment to sustainability and stay compliant with the latest standards.
Dr Jacqueline Faridani
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