Investors and regulators may not be fully accounting for the financial risks posed by climate lawsuits, research suggests. 

Research spearheaded by the University of Melbourne’s Dr Arjuna Dibley and Oxford University’s Associate Professor Thom Wetzer highlights a critical gap in the assessment of climate litigation risks. 

Their new study underscores the urgency for a revamp in evaluation methodologies.

Globally, the number of climate lawsuits has surged to nearly 2,500, with Chevron facing a staggering potential payout of US$8.5 trillion (AU$12.7 trillion). 

Australia ranks high in this legal battleground, with 134 climate lawsuits, trailing only the United States and ahead of Britain, Brazil, Germany, and Canada.

The implications of climate litigation extend beyond direct lawsuit losses, affecting companies through increased borrowing costs and enforced policy changes. 

Dr Dibley says that while Australian stakeholders are aware of climate change risks, they often overlook the financial jeopardy stemming from legal challenges.

The research advocates for a nuanced approach to assessing climate-related legal risks, proposing a blend of market-impact analysis and qualitative assessments, among other methods. 

This strategy aims to provide investors and regulators with a clearer picture of the financial landscape, encouraging a more informed decision-making process.