The Principles on Climate Obligations of Enterprises: an attempt to give teeth to the universally adopted view that we must keep global warming below an increase of two degrees Celsius

The Principles on Climate Obligations of Enterprises: an attempt to give teeth to the universally... Abstract It is almost universally accepted that global warming should not exceed the threshold of two degrees Celsius. At that stage, the debate gets stuck. There has been barely a discussion about the legal obligations of the major players: States, enterprises, and investors. The Oslo Principles and the Principles on Climate Obligations of Enterprises aim to fill that gap by mapping very concrete obligations, based on the interpretation of the law as it stands, or will likely develop, by the members of the respective groups. The latter set of principles has been endorsed by—at the time of writing—68 distinguished experts from around the globe.1 I. Introduction Climate change poses extremely serious threats to humankind, the environment, and the economy. Climate change scientists paint an ever-gloomier picture of the looming catastrophes, even if we would be able and willing to keep global warming below two degrees Celsius. Many countries and regions already experience the consequences of unprecedented natural calamities—extreme droughts, torrential rainfall, and hurricanes.2 At this stage, climate change scientists are unable to attribute specific events to climate change, but many experts believe that quite a few of these events are caused, or at least worsened, by global warming.3 It is beyond reasonable doubt that global warming is human induced. Over the past 25 years, politicians and business leaders have been talking about the looming threats and have expressed the urgent need to prevent cataclysmic climate change. Time and again, they have promised to take the necessary measures to stem the tide. Admittedly, quite a lot has happened. For the time being, however, global emissions have barely been reduced, let alone to the extent needed.4 In the unlikely scenario that countries will honour the pledges, made in the context of the Paris Agreement, global temperature will rise by at least 2.7 degrees Celsius.5 Many believe that passing three or four degrees is a more realistic scenario. That would seriously jeopardize the life and well-being of the next generations. Hence, we must explore solutions that could stem the tide. Legal strategies might work. However, that can only happen if we are able to discern the legal obligations of the respective major players: States, enterprises, and investors. There is surprisingly little discussion about these obligations. The discussion gets mainly stuck in abstractions such as the ‘polluter pays’, obligations towards future generations, the non-regression principle, and other niceties. For now, I emphasize that these slogans may serve as an underpinning of concrete obligations, but they do not provide much guidance for defining concrete obligations—for example, how much should the Netherlands or General Motors reduce their emissions and what other obligations do they have.6 I am not a dreamer. I do not think that there is any single solution nor that lawyers will or can rescue the planet. But we can and should go to lengths to explore legal avenues to come to grips with the Gorgon Medusa. Together with others, we can make a difference. II. From the Oslo Principles to the Principles on Climate Obligations of Enterprises The Oslo Principles, issued in March 2015, aim to discern the legal obligations of countries.7 A considerable amount of emphasis is put on reduction obligations, but we also mapped a series of other obligations. The group could not reach agreement on pertinent obligations of enterprises.8 A smaller group—lawyers from five continents, among them one still active and two retired members of the judiciary—took up the gauntlet. We believe that it is quite possible to discern concrete and pertinent legal obligations of enterprises and investors. The latter Principles—the Principles on Climate Obligations of Enterprises (Climate Principles for Enterprises) are laid down in 30 principles, based on an amalgamation of legal sources: private, environmental, company, human rights, and international law, a lot of ‘soft law’, judgments, authoritative reports, and legal doctrine.9 The Principles are accompanied by a detailed commentary (300 pages).10 Although not formally binding, we also drew from a series of codes of conduct and governance. They shed light on how the often open norms should be interpreted. Both the Oslo Principles and the Climate Principles for Enterprises focus on prevention—that is, steps that can and must be taken to avoid that we pass the fatal threshold of two degrees Celsius.11 We do not express a view about compensation. Personally, I do not think that damages is a promising solution.12 III. Reduction obligations Not surprisingly, reduction obligations are the backbone of the Climate Principles for Enterprises. We had to determine a convincing yardstick. In our view, we should stay close to the obligations of the country in which the enterprises operate (Principle 2).13 Under the Oslo Principles, the global ‘carbon budget’ is determined each year on the basis of the precautionary principle and the two degree Celsius threshold (Principles 3 and 6). It is divided over countries on a per capita basis; the global permissible emissions in a given year are divided by the world’s population. The resulting figure is the permissible quantum per person (Principle 4). This figure is multiplied by the number of inhabitants of a specific country. The resulting figure is the carbon budget of that country (the permissible quantum of greenhouse gas (GHG) emissions). There are two categories of countries: countries that exceed their carbon budget (above permissible quantum (APQ) countries) and countries that emit less than their carbon budget (below permissible quantum (BPQ) countries). APQ countries are, barring exceptions explicated in several principles, required to reduce their emissions to the permissible quantum within one year (Principle 13). This reduction obligation, expressed in a percentage, extends to the activities of enterprises in that APQ country (Principle 2). BPQ countries do not have any primary GHG emission reduction obligations.14 Aligning the reduction obligations of enterprises to those of the country in which they operate means that enterprises in most developing countries do not have, or, for the time being, only have very few, reduction obligations (the common but differentiated responsibilities maxim), unless the relevant country has assumed reduction obligations under the Paris Agreement (Principle 2.1).15 The reason for this alignment is that countries cannot achieve their reduction obligations unless enterprises reduce theirs at least at the same pace. From there onwards, things get more complicated. One should be cautious of lumping all enterprises together. Some enterprises manufacture or provide basic goods and services, while others merely produce luxury products; some have already reduced their emissions significantly, while others have not; the enterprise’s emissions may be below or above those of its competitors. In our submission, it should be left to the relevant countries to cope with this ‘problem’. Principles 3 and 4 provide the necessary flexibility. These principles list a series of factors that must be taken into account when a country aims to reduce (or increase) the reduction percentage of one or more enterprises. States complying with their own obligations obviously have a wider margin of appreciation compared to non-complying countries. The latter still have some flexibility as long as all enterprises together have to comply with Principle 2. We realize that this may cause some injustice if a State is outright unwilling to apply Principle 3 or 4, as the case may be. In such a scenario, domestic law may offer solutions.16 We strongly believe that what we have labelled ‘global enterprises’—that are, the major multinational enterprises—have more obligations compared to most enterprises operating in BPQ countries.17 In our view, subsidiaries in developing countries of such enterprises have reduction obligations, even if the local enterprises do not. There are several reasons for this view. Among others, they are global players, and one cannot escape obligations by shifting production to developing countries.18 Enterprises belonging to this category have to reduce the emissions from their activities in BPQ countries (mostly developing countries) at the same rate that the world at large has to reduce its emissions (Principle 5). All enterprises have to take all measures to reduce GHG emissions as can be taken without incurring additional cost. Principle 7 lists a series of examples, such as switching off power-consuming equipment when not in use and switching from fossil fuel-based energy sources to renewable energy sources. In addition, Principle 8 requires measures to reduce GHG emissions that incur additional costs, if the costs will, beyond reasonable doubt, be offset by future financial savings or financial gains within a reasonable time period. In our view, both obligations are utterly reasonable in light of the deleterious consequences of unabated climate change. Any reasonable person would, or at least should, act accordingly. Principles 12 and 13 provide some relief if the obligations cannot be fulfilled, while Principle 15 emphasizes that the reduction obligations emanating from the principles cannot be set aside by less stringent domestic law. IV. Obligations concerning activities, products, and services Next to the primary obligations to reduce emissions from the enterprise’s activities to a certain percentage, the enterprises must avoid carrying out activities and/or making available products or services that cause excessive GHG emissions, without making countervailing measures to offset the excessive emissions (Principles 9 and 10). Some activities, such as operating coal-fired power plants, extracting oil from tar sands, and fracking to obtain shale gas, are so GHG intensive that they are in principle excessive. In less obvious cases, emissions will be excessive if they are higher than those of the competitors or if more efficient choices could have been made at an affordable cost. Affordable cost leaves enough room to cope with the different situations of APQ and BPQ countries.19 These Principles may—and probably do—imply that several, if not quite a few, products and services have to be redesigned, and if that is impossible they are doomed to disappear, unless countervailing measures are put in place. This may sound harsh, but it is by no means a novelty. Over time, some products and services, such as asbestos, are no longer allowed. This is an inherent business risk. Our principle aligns with the old saying that ‘motoring should pay its way’. The only difference with ‘motoring’ is that the interests at stake are much higher in relation to the excessive emissions of GHGs.20 Principle 11 provides an escape if the activity, the product, or the service can be shown to be indispensable. It follows from the text and the commentary that this Principle should be applied cautiously to avoid that it undermines the essence of Principles 9 and 10. For instance, water and road transport are indispensable around the globe. However, this does not mean that steps should not be taken to make these activities less carbon emitting, if they would otherwise emit excessive amounts of GHGs.21 With the exception of the least developed countries, the amounts to be incurred to lower emissions can be added to the price of the products or services, which would solve the problems that the suppliers might otherwise face.22 V. Minimal causation The mere fact that the GHG emissions of almost all enterprises are minimal, seen from a global angle, does not relieve them from compliance with our Principles (Principle 14). This is not self-explanatory, but any other approach would mean that climate change would be a lawless realm or, put differently, that the law could only play a role in relation to relatively trivial issues.23 That said, minimal causation is an easy way out for courts unwilling to enter this field.24 Minimal causation may serve as a serious obstacle if enterprises are sued for damages, but our Principles are not about liability for damages. Both the members of the Oslo Group and the Enterprises Group do not express a view on the desirability of claims for damages.25 Instead, they focus on prevention, which is by far the most urgent challenge. The causation problem would be solved, or at least become less intrusive, if past and present GHG emissions could be attributed to a small number of enterprises. That view, fuelled by Richard Heede and others, is gaining ground.26 This position incorporates past emissions and believes that enterprises are responsible for the emissions of their activities, products, and services down the chain. This is not our view. First, we did not incorporate historical emissions, although they play a role if one applies the formula of Principle 2.27 Second, we do not believe that there is a sufficiently sound legal basis for such a proposition. Even more importantly, the effect would be counter-productive. It would mean that ‘only’ a handful enterprises would have reduction obligations. The others would not. In such a scenario, there is not the slightest chance that the global reductions required to avoid passing the fatal threshold could be achieved.28 It is up to debate whether causation plays a role in relation to injunctive relief against enterprises that are unwilling to reduce their emissions or to take other steps legally required. In most countries, causation is not a requirement for injunctive relief. A threat of an unlawful act suffices, which means in this context a threat of serious damage that can and should be avoided. To some extent, the beast reappears in the context of unlawfulness,29 but not necessarily so.30 A related, equally thorny, issue is the idea that it does not matter whether single enterprises reduce their emissions and/or take other useful steps. Their reductions would not solve the global problem in any way. Be that as it may, arguing along these lines would mean that no enterprise would have obligations. Hence, climate change would be insolvable in the legal arena. Put differently, it would imply that climate change would be a lawless realm; the law would be reserved for nitty gritty cases only. Not surprisingly, even the not very overly progressive Supreme Court of the United States rejected this view in its groundbreaking judgment in Massachusetts v EPA.31 VI. Consideration of suppliers’ GHG emissions To the extent reasonably and feasibly possible, enterprises must also ascertain and take into account their suppliers’ emissions when selecting their suppliers: how the emissions of suppliers compare to alternative suppliers should be seriously investigated by the buying enterprise and the results of this investigation have to be reflected in the final choice (Principle 17). The mere fact that the products or services of a specific supplier are cheaper than those of others does not serve as a justification to buy them. Reasonability and feasibility allows for a kind of cost-benefit analysis. The larger the number of suppliers or goods and services, the more difficult it will be to assess the respective GHG emissions.32 VII. Disclosures and impact assessments Principles 18–23 are about an increasingly hot topic: disclosures.33Prima facie, these principles are merely of a procedural nature. In real life, they are very important. Disclosures urge enterprises to assess the impact of climate change from various angles. In many instances, they will require subsequent action to lower the impact. According to Principle 18, an enterprise must evaluate: the vulnerability of its facilities and property to climate change; the financial effect that climate change will, or is likely to, have on the enterprise; the enterprise’s actions to increase its resilience to climate change; and the technically and financially feasible and cost effective options available to reduce GHG emissions. Enterprises must also publicly disclose the information in Principle 18 and ensure, in particular, that it is readily accessible to those who are, or are likely to be, directly or indirectly affected by the enterprise’s activities, including investors, shareholders, clients, financiers, employees, securities regulators, and the public (Principle 19). In addition, they must publicly disclose information about their performance in complying with their obligations under the Climate Principles for Enterprises to reduce the GHG emissions from their activities and ensure, in particular, that this information is readily accessible to those who are, or are likely to be, directly or indirectly affected (Principle 20). An enterprise must also publicly disclose information about the GHG emissions connected to the enterprise’s products and services and show how these emissions compare to those connected to the products and services of other enterprises and ensure, in particular, that the information is readily accessible to users, consumers, and customers (Principle 21). Principle 22 adds that the content and manner of disclosure required by Principles 18–21 should be proportionate to the relevant products and services and the enterprises concerned. Hence, the obligations diverge between major and small enterprises and enterprises in developed and developing countries.34 With respect to Principle 20, which requires the disclosure of (non-)compliance with the Climate Principles for Enterprises, our group appreciates that our interpretation of the law—in particular, the part that concerns the reduction obligations of enterprises—may be mistaken, albeit that we believe that in such a scenario the reduction obligations of most enterprises in developed countries will likely be more stringent. An enterprise may challenge our submissions. If it does, it should explain (disclose) what it believes to be its reduction (and other) obligations. Enterprises in developed countries cannot argue that their obligations equate to nil, simply because it is extremely unlikely that such a view is right. If it were right, the inevitable consequence would be that global emissions cannot and will not be curbed to the extent required.35 That may sound like rhetoric, but we do not think it is. After all, both political and business leaders have emphasized the urgent need to take action to avoid the fatal threshold being passed. They openly admit that much more must be done to achieve that imperative. Hence, the law should align with this given, which unavoidably means fairly stringent obligations of all kinds. Since time immemorial, the law has been interpreted and reinterpreted to meet the demands of society. There is a strongly emerging view that most fossil fuels have to stay in the ground.36 This, in turn, will affect the value of the fossil fuel industry and the enterprises that are dependent on it. Principle 23 attunes with this view. It requires the disclosure of the risk of stranded fossil fuel assets, in that an enterprise whose activities include fossil fuel production must assess the impact that any limitations will impose on the future extraction or use of fossil fuels, consistent with the ‘carbon budget’ concept enunciated by the Intergovernmental Panel on Climate Change and others. Not surprisingly, this view is challenged, inter alia, by Exxon.37 The criticasters argue that there will be a significant demand for fossil fuels for a long period to come, partly because of the growing world population, economic growth, and the eradication of poverty in developing countries. As a matter of fact, they may have a point in light of the slow pace of progress to reduce global GHG emissions. More likely than not, the odds are against them. At some stage, the transition towards renewable energy will gain track, and from then onwards the stranded asset maxim may materialize much faster than envisaged. More and increasingly serious natural catastrophes may be required before the major players translate rhetoric into real action. But it will happen. The only question is when. In addition, the price of renewables is decreasing and is already lower than the price of fossil fuels. That said, enterprises cannot be denied the right to take a different stance. If they do, they also have to provide information based on the stranded assets concept.38 Principle 24 is about impact assessments if an enterprise aims to build a major new facility or expand an existing facility. The phenomenon is widely acknowledged, albeit that assessment of the proposed facility’s carbon footprint, the adverse upstream and downstream effects, the ways to reduce such effects, and the potential effects that future climate change may have on the proposed facility is not yet commonly accepted.39 Case law from various countries underscores the importance of this principle. VIII. The importance of a focus on obligations of enterprises An emphasis on legal obligations of enterprises can make a difference. If enterprises do not comply with their obligations, they can be sued before the courts and, contrary to the apparently prevailing view, not only before the courts of their ‘own’ country. In particular, global enterprises can often be sued around the globe. Some legal obstacles may have to be removed, while it may be a challenge to enforce the obligations of the group by suing a subsidiary or seizing the enterprise’s assets. Our group believes that enterprises betting on a favourable stance of ‘their’ own courts may have a rude awakening. In addition, their boards may face personal liability. Armies of lawyers are entering the scene to reap what they consider to be low hanging fruit. In addition, such enterprises will become increasingly unpopular among investors and financiers, which may have an adverse impact on new investments (expansion of production facilities, mergers, and take-overs). IX. Obligations of banks and major investors Unabated climate change will have a significant adverse impact on financiers and investors. This penny has dropped. They are increasingly active in putting pressure on enterprises to reduce their emissions and to take other useful steps to avoid surpassing the fatal threshold of two degrees Celsius.40 X. Obligations of financiers Providers of money (mostly banks) for new, or even existing, projects will have to ask themselves: will the money be repaid. An answer in the affirmative is no longer self-explanatory because society must—and will—change to keep global warming below the two degrees Celsius threshold. Principle 25 attunes with this truism: ‘[B]anks must ascertain and take into account the GHG emissions of any project that it considers financing, and the likelihood of the borrower’s ability to repay the loan granted in light of the GHG emissions caused.’ ‘Must ascertain and take into account’ does not mean that ticking the box suffices.41 The difficulty lies in trying to identify the future. This is a risky game anyway. As a rule of thumb, short-term loans will not be jeopardized by climate change. More likely than not, financing shale gas operations, coal-fired power plants, enterprises largely dependant on these activities, and, more generally, excessively emitting enterprises will be ridden with risk. Hence, financiers should be very cautious in providing money to this kind of enterprise. Investing in these activities requires a compelling justification.42 This principle is not only about the financial risk. All enterprises have to act responsibly, which means, perhaps with exceptions,43 that financing new coal-fired power plants is hugely irresponsible, even if it could be taken for granted that the loans will be repaid because they are secured by sureties. In this and other examples, ‘take into account’ means that banks should refrain from providing such loans, full stop. XI. Obligations of investors The principles put emphasis on investors in light of their power and influence to bring about the bitterly needed change. That is not say that we believe that investors should solve the entire problem. That can only be achieved if all of the major players—countries, enterprises, and others—join forces.44 I cannot escape the impression that the at times rather one-sided focus on investors is fuelled by either pragmatism or, worse, an unwillingness to discuss and accept far-reaching reduction obligations of enterprises.45 The Climate Principles for Enterprises focus on investors that should have a long-term view, such as (re)insurers46 and pension funds.47 Pension funds should be able to meet their long-term obligations. After all, many pensions have to be paid in the decades to come. By then, there should be enough funds to pay the retirement benefits. Insurers also have long-term obligations. They must be able to pay losses covered by their insurance policies; some of them have a very long tail. If society at large is unable to keep global warming (well) below two degrees Celsius, the economic toll will be very high, which will adversely affect investments.48 This, in turn, implies that these investors cannot be indifferent to the doom of climate change. To the extent reasonable and feasible, they must try to secure their investments to meet their future obligations, and this will unavoidably affect their investment decisions and the need to put pressure on non-complying countries and enterprises to meet their obligations. With respect to investors, the legal debate offers three rather diverging views: investors do not have obligations in the face of climate change; they are allowed, but not obliged, to take ‘sustainability issues’ into account; and they must divest from fossil fuel and related companies (the stranded asset maxim).49 None of these views is fully satisfactory. We stand firm that the submission that investors do not have legal obligations is mistaken. Our group has not the slightest doubt that major investors—probably with the exception of hedge funds and similar vehicles—must take sustainability issues into account in their investment strategies. That, we think, is not a finding without importance but that still leaves quite a bit of room for manoeuvring.50 Principles 26, 27, 29, and 30 focus on all investments: shares, bonds, and other equity. This explicitly includes bonds issued by countries (Principle 26). That is important. On paper, the low hanging fruit is to refrain from buying bonds issued by badly performing States (guess which). However, this is easier said than done. Those bonds may still generate returns, whereas arguably, if not probably, there are insufficient adequate return-generating alternative investments.51 An investor must ascertain and take into account whether or not the entity in which it aims to invest, or has already invested, complies with its obligations under these Principles, as part of its long-term strategy (Principle 26). According to Principle 27, investing in a non-complying entity requires a justification that the investor must provide on request to those who are, or are likely to be, directly or indirectly affected by the investment, including securities regulators. Both principles are cautiously drafted. ‘Must ascertain and take into account’ means that the relevant factors must be given genuine weight. We would overstate our case if we would have submitted an obligation to stay away from non-complying entities altogether. There are several reasons for that view. First, it is very much up to debate whether there are sufficient and sufficiently attractive alternative investments. Second, if all investors that should have a long-term view would sell the shares or bonds of non-compliers, these assets would be bought by hedge funds and other less scrupulous investors. The latter would acquire them at a bottom prices, and a return would be guaranteed. More likely than not, these investors will not even try to persuade the relevant entities to do a better job. Hence, society at large would be worse off. This leaves untouched, of course, the idea that long-term investors could—and, as a rule of thumb, should—refrain from buying or keeping equity issued by the worst in class, while the ‘best in class’ may offer attractive opportunities.52 There is an emerging trend that investors ought to, should, or even must refrain from investing in fossil fuel companies. There may well be sound economic/financial reasons for this stance. We do not think that there is a sufficiently sound legal basis for such a far-reaching position. That is not to say that we are admirers of this branch of industry but, rather, that our Principles are not a beauty contest. One of the reasons why the fossil fuel industry is so unpopular is, I think, that many people believe that they are the one and only cause of climate change. That is not our view. It is not a very promising view either. It would mean that only this branch of industry would have to reduce its emissions and would have to refrain from putting oil and gas on the market. Others would not have reduction obligations. In that scenario, there is not the slightest chance to achieve the reductions globally required. We are not suggesting that investing in the fossil fuel industry can, or cannot, be justified. Again, that is largely an economic question. In this respect, reasonable expectations about the demand for fossil fuels carry weight. We fully and unconditionally endorse the view that the very greater part of fossil fuels should stay in the ground. But that does not mean that this will happen. The latter also counts for investors. Let us assume that, say, Shell could be persuaded to lower its production of oil and/or gas; what will happen? Others, such as Gazprom, Aramco, Petrobas, and the like will step in as long as renewable energy is not readily available. Would that make the world a safer place? Do not make a mistake, we realize very well that our view is, in a sense, not very principled. We have struggled with this issue. So do many investors. In our view, it would be of little avail to submit principles based on daydreams. The law is doomed to reconcile ambition and realism. So are our principles. We could have been more courageous. Even if there was a sound legal basis for a much more pronounced set of principles—which I do not believe there is—they would not fall on fertile ground. Hence, they would be rather meaningless. Do not get me wrong. All I am saying is: for the time being, there is insufficient legal basis for the submission that, to put it bluntly, all problems have to be solved by investors. As a whole, our principles are courageous. If States would comply with the Oslo Principles and enterprises with the Climate Principles for Enterprises, we could keep global warming below the fatal threshold of two degrees Celsius. Principle 28 is the corollary of Principle 23. It reads: ‘Investment by a prospective investor in coal-fired power plants or enterprises engaged in energy generation from other comparatively excessively emitting fossil fuels requires a compelling justification’ (emphasis added). I already mentioned that there may be sound reasons to keep investments in non-complying entities. That is only allowed if the relevant investor promotes compliance by the entities in point with the obligations under the Climate Principles for Enterprises by making use of its power as an investor (Principle 29). Ever more major investors already liaise with their investees. Finally, Principle 30 paints disclosure requirements of pension funds. The disclosure is about its investment portfolio, its investment strategy in light of the threat of climate change, and to whom it has entrusted the asset management as well as its guidelines or instructions to the asset manager, unless it provides a justification for not disclosing such information. XII. Legal basis of the Climate Principles for Enterprises I already mentioned that both the Oslo Principles and the Climate Principles for Enterprises are based on an amalgamation of legal sources.53 The same can be said in particular for Principles 2–17. They serve as a sound basis for the submission that the world at large must reduce its GHG emissions to the effect that global warming will not exceed two degrees Celsius at most. The next step is to figure out what that means for countries and enterprises. We do not deny that the obligations laid down in Principles 2–5 do not necessarily follow from the earlier-mentioned legal sources. However, it is the logical consequence of the per capita approach. The better option is to tie the reduction obligations of enterprises to those of the States in which they operate, with some flexibility for the respective countries to modify them. Hence, we believe that our approach is a sensible interpretation of the law as it stands or will likely develop. It is much easier to derive the additional obligations, emanating from Principles 7–10 and 17, from the earlier-mentioned legal sources. The urgent need to come to grips with climate change and the cataclysmic consequences if we cannot keep global warming below two degrees Celsius barely leaves room for a (much) more lenient interpretation of the law. The Principles about disclosure and impact assessment are in line with legislation in ever more countries, listing requirements, codes of governance, and authoritative reports.54 Last but not least, Principles 25–30 align with the urgent need to mobilize investors to do everything reasonably possible to put pressure on enterprises to comply with their obligations and to protect themselves against the adverse consequence of their assets in case global warming would exceed the fatal threshold. From there onwards, it is only a small step to interpret an enterprise’s fiduciary duty, or its non-common law equivalent, along the lines of our Principles.55 XIII. As concrete as possible We have tried to be as concrete as possible, including in the examples we have used. We are mindful that several principles are, to some extent, open-ended or are based on legal notions that have to be interpreted in a case in point. We very much welcome suggestions, criticism, and, of course, endorsements. We do not think that our Principles are the final word. But, at the very least, we hope that they will stimulate debate. We are more than happy to engage in discussions both on the Climate Principles for Enterprises, avenues to improve them, and other initiatives to the same or similar effect. XIV. Final observations Our group is not a legislator. Hence, our Principles are not ‘law’; they are an interpretation of the law as it stands or, in our view, will likely develop. Our Principles may—and probably will—be challenged. We may be mistaken in one or more respects, but, even so, this would not mean that enterprises and investors do not have legal obligations. It would only mean that they have different obligations. During the final stage of drafting, my associate reporter Daniel Witte and I had the privilege to discuss our ideas with senior experts from the financial world, industry, pension funds, and prudential authorities. With a few exceptions, there was not much appetite in the business community for the idea that enterprises have legal obligations in the face of climate change. Most discussion partners preferred non-binding rules and voluntary pledges. I appreciate that stance, but I do not think that it serves their interests and those of society best. Only clear and binding rules create a level playing field and, more importantly, give us a chance to reach our goal: staying (well) below two degrees Celsius. Major investors are much more inclined to accept that they have an important role to stem the tide. In particular, the reactions at the discussions after the launch of the Climate Principles for Enterprises in Amsterdam in January 2018 are very encouraging. We would be delighted, of course, if major players would endorse our Principles. What really matters is that they will take the necessary steps to achieve the almost universally embraced need to avoid global catastrophes, either by means of ‘voluntary’ steps or not. The result counts. There is much reason to believe that the courts will step in in the unfortunate scenario that enterprises and investors will lean backwards or confine themselves to clearly insufficient action. It can only be hoped that those keen to start litigation—probably non-governmental organizations—will choose the ‘right’ cases. Bad precedents may work counter-productively. The Urgenda judgment56 and a few other judgments in other European countries have shown that (even) courts in this part of the world are prepared to issue bold, imaginative, sound, and convincing judgments.57 An Austrian court voided the permit to erect a third runway at the Vienna airport in light of the impact on climate change.58 The judgment was reversed on appeal, and the same may, or may not, be the fate of the Urgenda judgment. Unlike a distinguished Austrian colleague, I do not think that the disappointing position taken by the Austrian Constitutional Court implies that court cases do not stand a favourable chance. Time will tell.59 My firm impression, based on discussions with senior judges from around the globe and the at times miraculously courageous and impressive judgments issued by courts in Asia, Australia, Latin America, and, to a lesser extent, in other countries, seems to suggest that those who believe that they can safely stick to business as usual or that they can create their own legal world by means of self-acclaimed bold, but insufficient, voluntary action are mistaken.60 It is perhaps telling that our Principles are endorsed by—at the time of writing—68 distinguished experts from around the world, including retired and still active senior judges from five continents. In a very recent judgment in the case between Ashgar Leghari and the Federation of Pakistan et al., the chief justice of the Lahore High Court ruled: Environmental Justice 20. On a jurisprudential plane, a judge today must be conscious and alive to the beauty and magnificence of nature, the interconnectedness of life systems on this planet and the interdependence of ecosystems. From Environmental Justice, which was largely localized and limited to our own ecosystems and biodiversity, we have moved on to Climate Justice. Our environmental jurisprudence from Shehla Zia case to Imrana Tiwana case … has weaved our constitutional values and fundamental rights with the international environmental principles. The environmental issues brought to our courts were local geographical issues, be it air pollution, urban planning, water scarcity, deforestation or noise pollution. Being a local issue, evolution of environmental justice over these years revolved around the national and provincial environmental laws, fundamental rights and principles of international environmental laws. The solutions entailed penalties and shifting or stoppage of polluting industries based on a precautionary approach leading to the recognition of the Environmental Impact Assessment (EIA). Climate Justice 21. Enter Climate Change. With this the construct of Environmental Justice requires reconsideration. Climate Justice links human rights and development to achieve a human-centered approach, safeguarding the rights of the most vulnerable people and sharing the burdens and benefits of climate change and its impacts equitably and fairly. Climate justice is informed by science, responds to science and acknowledges the need for equitable stewardship of the world’s resources. The instant case adds a new dimension to the rich jurisprudence on environmental justice in our country. Climate Change has moved the debate from a linear local environmental issue to a more complex global problem. In this context of climate change, the identity of the polluter is not clearly ascertainable and by and large falls outside the national jurisdiction. Who is to be penalized and who is to be restrained? On the global platform the remedies are adaptation or mitigation.61 ‘In order to facilitate the working of the Federal Government’, the Court ‘constitutes a Standing Committee on Climate Change, which will act as a link between the Court and the Executive and will render assistance to the above mentioned Governments and Agencies in order to ensure that the Policy and the Framework continue to be implemented’. Other Asian, in particular, Indian, superior courts have delivered similarly courageous judgments. That may—and, in my view, probably will—not easily happen in most developed countries. But I have little doubt that courts around the globe will soon come to understand that they do not have a choice in issuing thought-provoking judgments if countries and enterprises refrain from taking the bitterly needed steps. Believe me, a lot is in the pipeline.62 Footnotes 1 See for references Expert Group on Climate Obligations of Enterprises, Principles on Climate Obligations of Enterprises (Eleven Publishing International, 2018), p. 13, 14 and 52 ff. The Principles and the Commentary (hereinafter the Commentary) are also put on the group’s website: https://climateprinciplesforenterprises.org. See also U.S. Global Change Research Program, Highlights of the Findings of the U.S. Global Change Research Program: Climate Science Special Report, https://science2017.globalchange.gov/chapter/executive-summary/; Kevin Anderson and John Broderick, Natural Gas and Climate Change (2017), https://www.foeeurope.org/sites/default/files/extractive_industries/2017/natural_gas_and_climate_change_anderson_broderick_october2017.pdf. 2 See the Commentary (n 1) p. 52 with further references and U.S. Global Change Research Program (n 1). Strikingly, that view was already embraced by the U.S. Supreme Court in Massachusetts v. EPA, 549 U.S. 497 at 521-2. 3 Energy & Climate Intelligence Unit, Heavy Weather, http://eciu.net/assets/Reports/ECIU_Climate_Attribution-report-Dec-2017.pdf. 4 See https://insideclimatenews.org/news/12112017/climate-change-carbon-co2-emissions-record-high-2017-cop23. 5 Commentary (n 1) p. 15 with further references. Paris Agreement on Climate Change, UN Doc. FCCC/CP/2015/L.9/Rev.1, 12 December 2015. 6 I am not suggesting that these phenomena are pointless; they are definitely useful in concrete cases. Intergenerational equity, for instance, should serve as an underpinning of injunctive relief to stop drilling in the Arctic region if this would have deleterious consequences in, say, eighty years. The polluter pays maxim is useful in case of pollution that can easily be traced to a specific source. 7 Eleven Publishing, 2015; also available at the website mentioned in n 1 under resources. 8 Nonetheless, some are mentioned (Principles 27–30). They were a source of inspiration for the ‘Enterprises Group’. 9 For further elaboration, see the Commentary (n 1) p. 66ff. 10 Also available at the website mentioned in n 1. 11 For the reasons why we have opted for two degrees, see the Commentary (n 1) p. 50ff. 12 See in more detail the Commentary (n 1) p. 41 ff. See for elaboration Jaap Spier, Shaping the Law for Global Crises (Eleven International Publishing, 2012), p. 181 ff. 13 For the reduction obligations under the Oslo Principles, see the Commentary (n 1) p. 67. 14 Some have no-cost and other obligations and the obligation to take all reduction measures where no additional cost or where offset financially. 15 For a discussion on the consequences of the ‘voluntary’ pledges under Paris Agreement, see the Commentary (n 1) p. 112ff. 16 See in more detail the Commentary (n 1) p. 123ff. 17 Principle 1 defines global enterprises as follows: ‘an enterprise or a group of enterprises that manufactures products or offers services that are, for a significant part, consumed in multiple APQ countries. However, an enterprise in a BPQ country is considered to be a global enterprise only if it is, directly or indirectly, a subsidiary of an enterprise based in an APQ country.’ 18 For elaboration, see the Commentary (n 1) p. 129ff. 19 See in more detail the Commentary (n 1) p. 141ff. 20 See in more detail the Commentary (n 1) p. 146ff. 21 Desalination of water, for instance, may emit rather high GHGs; see Jiabong Liu, Silan Chen, Hao Wang, and Xiangdong Chen, ‘Calculation of Carbon Footprints for Water Diversion and Desalination Projects’, 75 (2015) Energy Procedia, 2483-94, https://ac.els-cdn.com/S1876610215010073/1-s2.0-S1876610215010073-main.pdf?_tid=abe65862-090b-11e8-af5b-00000aacb35e&acdnat=1517680817_5fc59be5ed690e1e7ab9254e5f1280bb. 22 See the Commentary (n 1) p. 149 and 150. 23 I am by no means suggesting that other cases are unimportant. Many are, and most are to the parties concerned. But that is not the point. 24 See for elaboration the Commentary (n 1) p. 153 ff and Jaap Spier, in Jaap Spier and Ulrich Magnus (eds), Climate Change Remedies (Eleven International Publishing, 2014), p. 10ff. The many initiatives, conferences and writings by—among many others—senior members of the judiciary underscore that ever more judges do understand that they cannot abstain. The Global Pact for the Environment, http://www.leclubdesjuristes.com/wp-content/uploads/2017/05/Draft-project-of-the-Global-Pact-for-the-Environment-24-June-2017.pdf, the growing number of Environmental (Green) courts and the Global Judicial Institute on the Environment may serve as partes pro toto. See, e.g., Michael Wilson, ‘Climate Change: Judge as Water Trustee’; the author kindly provided me with his article before being published; it is not yet available on the internet. In addition, quite a few very senior members of the judiciary have endorsed the EP. 25 Commentary (n 1) p. 43. This does not mean that the individual members do not have a view on this important topic. Speaking for myself, I quite strongly believe that damages will do more evil than good, although liability should perhaps not be barred lock stock and barrel. For elaboration, see Spier (n 12) p. 181ff. 26 See e.g. Richard Heede, ‘Tracing Anthropogenic Carbon Dioxide and Methane Emissions to Fossil Fuel and Cement Producers’, (2014) Climatic Change, 1854-2010, https://link.springer.com/content/pdf/10.1007%2Fs10584-013-0986-y.pdf and CDP, The Carbon Majors Database, CDP Carbon Majors Report 2017, https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/327/original/Carbon-Majors-Report-2017.pdf?1499691240. 27 For further elaboration, see the Commentary (n 1) p. 63ff. 28 For the attribution of emissions, refer to the Commentary (n 1) p. 32ff. 29 This is a somewhat colloquial expression which refers to the required standard of care as defined in art. 4:102 Principles of European Tort Law, reading: ‘(1) The required standard of conduct is that of the reasonable person in the circumstances, and depends, in particular, on the nature and value of the protected interest involved, the dangerousness of the activity, the expertise to be expected of a person carrying it on, the foreseeability of the damage, the relationship of proximity or special reliance between those involved, as well as the availability and the costs of precautionary or alternative methods. (2) ... (3) Rules which prescribe or forbid certain conduct have to be considered when establishing the required standard of conduct.’ 30 I quite strongly believe that minimal causation does play a role, also in the realm of injunctive relief. If minimal contributions do not suffice for damages, it is quite a step to label the relevant acts ‘unlawful’. See in much more detail Spier (n 24) p. 13ff. 31 549 U.S. 497 (2007). 32 For further elaboration, see the Commentary (n 1) p. 160ff. 33 For references, see the Commentary (n 1) p. 166ff; see also the ground-breaking TCFD report, Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017), https://www.fsb-tcfd.org/. 34 Commentary (n 1) p. 186. 35 Commentary (n 1) p. 184 and 185. 36 See for more details https://www.carbontracker.org/ (accessed 28 February 2018). 37 Quoted in the Commentary (n 1) p. 190 and 191. 38 For elaboration, see the Commentary (n 1) p. 187ff. 39 Commentary (n 1) p. 192ff. 40 For elaboration, see the Commentary (n 1) p. 198ff. 41 Commentary (n 1) p. 203–5. 42 See in more detail the Commentary (n 1) p. 203ff. 43 Such as coal-fired power plants in least developed countries if there are no feasible alternatives; see the Commentary (n 1) p. 208. 44 For a slightly different view, see EU High-Level Expert Group on Sustainable Finance, Financing a Sustainable European Economy (January 2018; Final Report), https://ec.europa.eu/info/sites/info/files/180131-sustainable-finance-final-report_en.pdf. 45 I.e. the belief that investors are the only, or most promising, way to get enterprises on the move. 46 These institutions are major investors. 47 Commentary (n 1) p. 208ff. 48 Commentary (n 1) p. 210ff. 49 See in more detail the Commentary (n 1) p. 218ff, 236 and 237. 50 See in considerable detail the Commentary (n 1) p. 208ff. 51 Pension funds also need a return on investments to pay the current pensions. 52 May, because prices may well skyrocket if investors would have to compete to buy this kind of equity. For elaboration, see the Commentary (n 1) p. 227ff. 53 See in considerable more detail the Commentary (n 1) p. 66 and under the respective Principles. 54 See in more detail the Commentary (n 1) p. 168ff; see also TCFD (n 33); Sean Whittaker, ‘The Right of Access to Environmental Information and Legal Transplant Theory: Lessons from London and Beijing’, 6/3 (November 2017) Transnational Environmental Law, p. 509 ff; GRI, Shining a Light on Human Rights: Corporate Human Rights Performance Disclosure in the Mining, Energy and Financial Sectors (2016); Frank Bold, Comparing the Implementation of the EU Non-financial Reporting Directive in the UK, Germany, France and Italy (November 2017), http://www.purposeofcorporation.org/comparing-the-eu-non-financial-reporting-directive.pdf. 55 See in much more detail, also for references, the Commentary (n 1) p. 218ff. 56 District Court of the Hague, 24 June 2016, ECLI:NL:RBDHA:2015:7145 and for an English translation https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2015:7196. See Marc Loth’s contribution to this special issue. 57 See for other examples Wilson (n 24). 58 Bundesverwaltungsgericht 2 February 2017, AFLG et al v Federal Government of Lower Austria, https://www.ris.bka.gv.at/Dokument.wxe?Abfrage=Vfgh&Dokumentnummer=JFT_20170629_17E00875_00. 59 See for a wealth of case law the website of the Sabin Center for Climate Change Law, Columbia University, http://columbiaclimatelaw.com. 60 See e.g. Atisha Sisodiya, The Role of Indian Judiciary in Protection of Environment in India, (2015), https://www.lawctopus.com/academike/role-indian-judiciary-protection-environment-india/; Antonio Herman Benjamin, ‘We, the Judges, and the Environment’, 29/2 (Winter 2012) Pace Environmental Law Review, p. 582ff; Brian Preston, ‘The Role of the Judiciary in Promoting Sustainable Development: The Experience of Asia and the Pacific’, 9 (2005) Asia Pacific Journal of Environmental Law, http://www.lec.justice.nsw.gov.au/Documents/preston_the%20role%20of%20the%20judiciary%20in%20promoting%20sustainable%20development.pdf; Gitanjali Nain Gill, Environmental Justice in India, and a review of that book by Michael Handtke, 6/3 (November 2017) Transnational Environmental Law, p. 557ff; Michael Wilson, Climate Change: The Role of Judges, https://www.eufje.org/images/docConf/ox2017/wilson.pdf; and Gabriel Wedy, Climate Legislation and Litigation in Brazil (October 2017), http://columbiaclimatelaw.com/files/2017/10/Wedy-2017-10-Climate-Legislation-and-Litigation-in-Brazil.pdf. 61 Case no. W.P. No. 25501/2015, http://www.pja.gov.pk/system/files/2018LHC106.pdf. 62 For the avoidance of doubt: I am not involved in litigation. © The Author(s) (2018). Published by Oxford University Press on behalf of Unidroit. All rights reserved. For permissions, please email journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Uniform Law Review/Revue De Droit Uniforme Oxford University Press

The Principles on Climate Obligations of Enterprises: an attempt to give teeth to the universally adopted view that we must keep global warming below an increase of two degrees Celsius

Uniform Law Review/Revue De Droit Uniforme , Volume Advance Article (2) – Apr 26, 2018

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Abstract

Abstract It is almost universally accepted that global warming should not exceed the threshold of two degrees Celsius. At that stage, the debate gets stuck. There has been barely a discussion about the legal obligations of the major players: States, enterprises, and investors. The Oslo Principles and the Principles on Climate Obligations of Enterprises aim to fill that gap by mapping very concrete obligations, based on the interpretation of the law as it stands, or will likely develop, by the members of the respective groups. The latter set of principles has been endorsed by—at the time of writing—68 distinguished experts from around the globe.1 I. Introduction Climate change poses extremely serious threats to humankind, the environment, and the economy. Climate change scientists paint an ever-gloomier picture of the looming catastrophes, even if we would be able and willing to keep global warming below two degrees Celsius. Many countries and regions already experience the consequences of unprecedented natural calamities—extreme droughts, torrential rainfall, and hurricanes.2 At this stage, climate change scientists are unable to attribute specific events to climate change, but many experts believe that quite a few of these events are caused, or at least worsened, by global warming.3 It is beyond reasonable doubt that global warming is human induced. Over the past 25 years, politicians and business leaders have been talking about the looming threats and have expressed the urgent need to prevent cataclysmic climate change. Time and again, they have promised to take the necessary measures to stem the tide. Admittedly, quite a lot has happened. For the time being, however, global emissions have barely been reduced, let alone to the extent needed.4 In the unlikely scenario that countries will honour the pledges, made in the context of the Paris Agreement, global temperature will rise by at least 2.7 degrees Celsius.5 Many believe that passing three or four degrees is a more realistic scenario. That would seriously jeopardize the life and well-being of the next generations. Hence, we must explore solutions that could stem the tide. Legal strategies might work. However, that can only happen if we are able to discern the legal obligations of the respective major players: States, enterprises, and investors. There is surprisingly little discussion about these obligations. The discussion gets mainly stuck in abstractions such as the ‘polluter pays’, obligations towards future generations, the non-regression principle, and other niceties. For now, I emphasize that these slogans may serve as an underpinning of concrete obligations, but they do not provide much guidance for defining concrete obligations—for example, how much should the Netherlands or General Motors reduce their emissions and what other obligations do they have.6 I am not a dreamer. I do not think that there is any single solution nor that lawyers will or can rescue the planet. But we can and should go to lengths to explore legal avenues to come to grips with the Gorgon Medusa. Together with others, we can make a difference. II. From the Oslo Principles to the Principles on Climate Obligations of Enterprises The Oslo Principles, issued in March 2015, aim to discern the legal obligations of countries.7 A considerable amount of emphasis is put on reduction obligations, but we also mapped a series of other obligations. The group could not reach agreement on pertinent obligations of enterprises.8 A smaller group—lawyers from five continents, among them one still active and two retired members of the judiciary—took up the gauntlet. We believe that it is quite possible to discern concrete and pertinent legal obligations of enterprises and investors. The latter Principles—the Principles on Climate Obligations of Enterprises (Climate Principles for Enterprises) are laid down in 30 principles, based on an amalgamation of legal sources: private, environmental, company, human rights, and international law, a lot of ‘soft law’, judgments, authoritative reports, and legal doctrine.9 The Principles are accompanied by a detailed commentary (300 pages).10 Although not formally binding, we also drew from a series of codes of conduct and governance. They shed light on how the often open norms should be interpreted. Both the Oslo Principles and the Climate Principles for Enterprises focus on prevention—that is, steps that can and must be taken to avoid that we pass the fatal threshold of two degrees Celsius.11 We do not express a view about compensation. Personally, I do not think that damages is a promising solution.12 III. Reduction obligations Not surprisingly, reduction obligations are the backbone of the Climate Principles for Enterprises. We had to determine a convincing yardstick. In our view, we should stay close to the obligations of the country in which the enterprises operate (Principle 2).13 Under the Oslo Principles, the global ‘carbon budget’ is determined each year on the basis of the precautionary principle and the two degree Celsius threshold (Principles 3 and 6). It is divided over countries on a per capita basis; the global permissible emissions in a given year are divided by the world’s population. The resulting figure is the permissible quantum per person (Principle 4). This figure is multiplied by the number of inhabitants of a specific country. The resulting figure is the carbon budget of that country (the permissible quantum of greenhouse gas (GHG) emissions). There are two categories of countries: countries that exceed their carbon budget (above permissible quantum (APQ) countries) and countries that emit less than their carbon budget (below permissible quantum (BPQ) countries). APQ countries are, barring exceptions explicated in several principles, required to reduce their emissions to the permissible quantum within one year (Principle 13). This reduction obligation, expressed in a percentage, extends to the activities of enterprises in that APQ country (Principle 2). BPQ countries do not have any primary GHG emission reduction obligations.14 Aligning the reduction obligations of enterprises to those of the country in which they operate means that enterprises in most developing countries do not have, or, for the time being, only have very few, reduction obligations (the common but differentiated responsibilities maxim), unless the relevant country has assumed reduction obligations under the Paris Agreement (Principle 2.1).15 The reason for this alignment is that countries cannot achieve their reduction obligations unless enterprises reduce theirs at least at the same pace. From there onwards, things get more complicated. One should be cautious of lumping all enterprises together. Some enterprises manufacture or provide basic goods and services, while others merely produce luxury products; some have already reduced their emissions significantly, while others have not; the enterprise’s emissions may be below or above those of its competitors. In our submission, it should be left to the relevant countries to cope with this ‘problem’. Principles 3 and 4 provide the necessary flexibility. These principles list a series of factors that must be taken into account when a country aims to reduce (or increase) the reduction percentage of one or more enterprises. States complying with their own obligations obviously have a wider margin of appreciation compared to non-complying countries. The latter still have some flexibility as long as all enterprises together have to comply with Principle 2. We realize that this may cause some injustice if a State is outright unwilling to apply Principle 3 or 4, as the case may be. In such a scenario, domestic law may offer solutions.16 We strongly believe that what we have labelled ‘global enterprises’—that are, the major multinational enterprises—have more obligations compared to most enterprises operating in BPQ countries.17 In our view, subsidiaries in developing countries of such enterprises have reduction obligations, even if the local enterprises do not. There are several reasons for this view. Among others, they are global players, and one cannot escape obligations by shifting production to developing countries.18 Enterprises belonging to this category have to reduce the emissions from their activities in BPQ countries (mostly developing countries) at the same rate that the world at large has to reduce its emissions (Principle 5). All enterprises have to take all measures to reduce GHG emissions as can be taken without incurring additional cost. Principle 7 lists a series of examples, such as switching off power-consuming equipment when not in use and switching from fossil fuel-based energy sources to renewable energy sources. In addition, Principle 8 requires measures to reduce GHG emissions that incur additional costs, if the costs will, beyond reasonable doubt, be offset by future financial savings or financial gains within a reasonable time period. In our view, both obligations are utterly reasonable in light of the deleterious consequences of unabated climate change. Any reasonable person would, or at least should, act accordingly. Principles 12 and 13 provide some relief if the obligations cannot be fulfilled, while Principle 15 emphasizes that the reduction obligations emanating from the principles cannot be set aside by less stringent domestic law. IV. Obligations concerning activities, products, and services Next to the primary obligations to reduce emissions from the enterprise’s activities to a certain percentage, the enterprises must avoid carrying out activities and/or making available products or services that cause excessive GHG emissions, without making countervailing measures to offset the excessive emissions (Principles 9 and 10). Some activities, such as operating coal-fired power plants, extracting oil from tar sands, and fracking to obtain shale gas, are so GHG intensive that they are in principle excessive. In less obvious cases, emissions will be excessive if they are higher than those of the competitors or if more efficient choices could have been made at an affordable cost. Affordable cost leaves enough room to cope with the different situations of APQ and BPQ countries.19 These Principles may—and probably do—imply that several, if not quite a few, products and services have to be redesigned, and if that is impossible they are doomed to disappear, unless countervailing measures are put in place. This may sound harsh, but it is by no means a novelty. Over time, some products and services, such as asbestos, are no longer allowed. This is an inherent business risk. Our principle aligns with the old saying that ‘motoring should pay its way’. The only difference with ‘motoring’ is that the interests at stake are much higher in relation to the excessive emissions of GHGs.20 Principle 11 provides an escape if the activity, the product, or the service can be shown to be indispensable. It follows from the text and the commentary that this Principle should be applied cautiously to avoid that it undermines the essence of Principles 9 and 10. For instance, water and road transport are indispensable around the globe. However, this does not mean that steps should not be taken to make these activities less carbon emitting, if they would otherwise emit excessive amounts of GHGs.21 With the exception of the least developed countries, the amounts to be incurred to lower emissions can be added to the price of the products or services, which would solve the problems that the suppliers might otherwise face.22 V. Minimal causation The mere fact that the GHG emissions of almost all enterprises are minimal, seen from a global angle, does not relieve them from compliance with our Principles (Principle 14). This is not self-explanatory, but any other approach would mean that climate change would be a lawless realm or, put differently, that the law could only play a role in relation to relatively trivial issues.23 That said, minimal causation is an easy way out for courts unwilling to enter this field.24 Minimal causation may serve as a serious obstacle if enterprises are sued for damages, but our Principles are not about liability for damages. Both the members of the Oslo Group and the Enterprises Group do not express a view on the desirability of claims for damages.25 Instead, they focus on prevention, which is by far the most urgent challenge. The causation problem would be solved, or at least become less intrusive, if past and present GHG emissions could be attributed to a small number of enterprises. That view, fuelled by Richard Heede and others, is gaining ground.26 This position incorporates past emissions and believes that enterprises are responsible for the emissions of their activities, products, and services down the chain. This is not our view. First, we did not incorporate historical emissions, although they play a role if one applies the formula of Principle 2.27 Second, we do not believe that there is a sufficiently sound legal basis for such a proposition. Even more importantly, the effect would be counter-productive. It would mean that ‘only’ a handful enterprises would have reduction obligations. The others would not. In such a scenario, there is not the slightest chance that the global reductions required to avoid passing the fatal threshold could be achieved.28 It is up to debate whether causation plays a role in relation to injunctive relief against enterprises that are unwilling to reduce their emissions or to take other steps legally required. In most countries, causation is not a requirement for injunctive relief. A threat of an unlawful act suffices, which means in this context a threat of serious damage that can and should be avoided. To some extent, the beast reappears in the context of unlawfulness,29 but not necessarily so.30 A related, equally thorny, issue is the idea that it does not matter whether single enterprises reduce their emissions and/or take other useful steps. Their reductions would not solve the global problem in any way. Be that as it may, arguing along these lines would mean that no enterprise would have obligations. Hence, climate change would be insolvable in the legal arena. Put differently, it would imply that climate change would be a lawless realm; the law would be reserved for nitty gritty cases only. Not surprisingly, even the not very overly progressive Supreme Court of the United States rejected this view in its groundbreaking judgment in Massachusetts v EPA.31 VI. Consideration of suppliers’ GHG emissions To the extent reasonably and feasibly possible, enterprises must also ascertain and take into account their suppliers’ emissions when selecting their suppliers: how the emissions of suppliers compare to alternative suppliers should be seriously investigated by the buying enterprise and the results of this investigation have to be reflected in the final choice (Principle 17). The mere fact that the products or services of a specific supplier are cheaper than those of others does not serve as a justification to buy them. Reasonability and feasibility allows for a kind of cost-benefit analysis. The larger the number of suppliers or goods and services, the more difficult it will be to assess the respective GHG emissions.32 VII. Disclosures and impact assessments Principles 18–23 are about an increasingly hot topic: disclosures.33Prima facie, these principles are merely of a procedural nature. In real life, they are very important. Disclosures urge enterprises to assess the impact of climate change from various angles. In many instances, they will require subsequent action to lower the impact. According to Principle 18, an enterprise must evaluate: the vulnerability of its facilities and property to climate change; the financial effect that climate change will, or is likely to, have on the enterprise; the enterprise’s actions to increase its resilience to climate change; and the technically and financially feasible and cost effective options available to reduce GHG emissions. Enterprises must also publicly disclose the information in Principle 18 and ensure, in particular, that it is readily accessible to those who are, or are likely to be, directly or indirectly affected by the enterprise’s activities, including investors, shareholders, clients, financiers, employees, securities regulators, and the public (Principle 19). In addition, they must publicly disclose information about their performance in complying with their obligations under the Climate Principles for Enterprises to reduce the GHG emissions from their activities and ensure, in particular, that this information is readily accessible to those who are, or are likely to be, directly or indirectly affected (Principle 20). An enterprise must also publicly disclose information about the GHG emissions connected to the enterprise’s products and services and show how these emissions compare to those connected to the products and services of other enterprises and ensure, in particular, that the information is readily accessible to users, consumers, and customers (Principle 21). Principle 22 adds that the content and manner of disclosure required by Principles 18–21 should be proportionate to the relevant products and services and the enterprises concerned. Hence, the obligations diverge between major and small enterprises and enterprises in developed and developing countries.34 With respect to Principle 20, which requires the disclosure of (non-)compliance with the Climate Principles for Enterprises, our group appreciates that our interpretation of the law—in particular, the part that concerns the reduction obligations of enterprises—may be mistaken, albeit that we believe that in such a scenario the reduction obligations of most enterprises in developed countries will likely be more stringent. An enterprise may challenge our submissions. If it does, it should explain (disclose) what it believes to be its reduction (and other) obligations. Enterprises in developed countries cannot argue that their obligations equate to nil, simply because it is extremely unlikely that such a view is right. If it were right, the inevitable consequence would be that global emissions cannot and will not be curbed to the extent required.35 That may sound like rhetoric, but we do not think it is. After all, both political and business leaders have emphasized the urgent need to take action to avoid the fatal threshold being passed. They openly admit that much more must be done to achieve that imperative. Hence, the law should align with this given, which unavoidably means fairly stringent obligations of all kinds. Since time immemorial, the law has been interpreted and reinterpreted to meet the demands of society. There is a strongly emerging view that most fossil fuels have to stay in the ground.36 This, in turn, will affect the value of the fossil fuel industry and the enterprises that are dependent on it. Principle 23 attunes with this view. It requires the disclosure of the risk of stranded fossil fuel assets, in that an enterprise whose activities include fossil fuel production must assess the impact that any limitations will impose on the future extraction or use of fossil fuels, consistent with the ‘carbon budget’ concept enunciated by the Intergovernmental Panel on Climate Change and others. Not surprisingly, this view is challenged, inter alia, by Exxon.37 The criticasters argue that there will be a significant demand for fossil fuels for a long period to come, partly because of the growing world population, economic growth, and the eradication of poverty in developing countries. As a matter of fact, they may have a point in light of the slow pace of progress to reduce global GHG emissions. More likely than not, the odds are against them. At some stage, the transition towards renewable energy will gain track, and from then onwards the stranded asset maxim may materialize much faster than envisaged. More and increasingly serious natural catastrophes may be required before the major players translate rhetoric into real action. But it will happen. The only question is when. In addition, the price of renewables is decreasing and is already lower than the price of fossil fuels. That said, enterprises cannot be denied the right to take a different stance. If they do, they also have to provide information based on the stranded assets concept.38 Principle 24 is about impact assessments if an enterprise aims to build a major new facility or expand an existing facility. The phenomenon is widely acknowledged, albeit that assessment of the proposed facility’s carbon footprint, the adverse upstream and downstream effects, the ways to reduce such effects, and the potential effects that future climate change may have on the proposed facility is not yet commonly accepted.39 Case law from various countries underscores the importance of this principle. VIII. The importance of a focus on obligations of enterprises An emphasis on legal obligations of enterprises can make a difference. If enterprises do not comply with their obligations, they can be sued before the courts and, contrary to the apparently prevailing view, not only before the courts of their ‘own’ country. In particular, global enterprises can often be sued around the globe. Some legal obstacles may have to be removed, while it may be a challenge to enforce the obligations of the group by suing a subsidiary or seizing the enterprise’s assets. Our group believes that enterprises betting on a favourable stance of ‘their’ own courts may have a rude awakening. In addition, their boards may face personal liability. Armies of lawyers are entering the scene to reap what they consider to be low hanging fruit. In addition, such enterprises will become increasingly unpopular among investors and financiers, which may have an adverse impact on new investments (expansion of production facilities, mergers, and take-overs). IX. Obligations of banks and major investors Unabated climate change will have a significant adverse impact on financiers and investors. This penny has dropped. They are increasingly active in putting pressure on enterprises to reduce their emissions and to take other useful steps to avoid surpassing the fatal threshold of two degrees Celsius.40 X. Obligations of financiers Providers of money (mostly banks) for new, or even existing, projects will have to ask themselves: will the money be repaid. An answer in the affirmative is no longer self-explanatory because society must—and will—change to keep global warming below the two degrees Celsius threshold. Principle 25 attunes with this truism: ‘[B]anks must ascertain and take into account the GHG emissions of any project that it considers financing, and the likelihood of the borrower’s ability to repay the loan granted in light of the GHG emissions caused.’ ‘Must ascertain and take into account’ does not mean that ticking the box suffices.41 The difficulty lies in trying to identify the future. This is a risky game anyway. As a rule of thumb, short-term loans will not be jeopardized by climate change. More likely than not, financing shale gas operations, coal-fired power plants, enterprises largely dependant on these activities, and, more generally, excessively emitting enterprises will be ridden with risk. Hence, financiers should be very cautious in providing money to this kind of enterprise. Investing in these activities requires a compelling justification.42 This principle is not only about the financial risk. All enterprises have to act responsibly, which means, perhaps with exceptions,43 that financing new coal-fired power plants is hugely irresponsible, even if it could be taken for granted that the loans will be repaid because they are secured by sureties. In this and other examples, ‘take into account’ means that banks should refrain from providing such loans, full stop. XI. Obligations of investors The principles put emphasis on investors in light of their power and influence to bring about the bitterly needed change. That is not say that we believe that investors should solve the entire problem. That can only be achieved if all of the major players—countries, enterprises, and others—join forces.44 I cannot escape the impression that the at times rather one-sided focus on investors is fuelled by either pragmatism or, worse, an unwillingness to discuss and accept far-reaching reduction obligations of enterprises.45 The Climate Principles for Enterprises focus on investors that should have a long-term view, such as (re)insurers46 and pension funds.47 Pension funds should be able to meet their long-term obligations. After all, many pensions have to be paid in the decades to come. By then, there should be enough funds to pay the retirement benefits. Insurers also have long-term obligations. They must be able to pay losses covered by their insurance policies; some of them have a very long tail. If society at large is unable to keep global warming (well) below two degrees Celsius, the economic toll will be very high, which will adversely affect investments.48 This, in turn, implies that these investors cannot be indifferent to the doom of climate change. To the extent reasonable and feasible, they must try to secure their investments to meet their future obligations, and this will unavoidably affect their investment decisions and the need to put pressure on non-complying countries and enterprises to meet their obligations. With respect to investors, the legal debate offers three rather diverging views: investors do not have obligations in the face of climate change; they are allowed, but not obliged, to take ‘sustainability issues’ into account; and they must divest from fossil fuel and related companies (the stranded asset maxim).49 None of these views is fully satisfactory. We stand firm that the submission that investors do not have legal obligations is mistaken. Our group has not the slightest doubt that major investors—probably with the exception of hedge funds and similar vehicles—must take sustainability issues into account in their investment strategies. That, we think, is not a finding without importance but that still leaves quite a bit of room for manoeuvring.50 Principles 26, 27, 29, and 30 focus on all investments: shares, bonds, and other equity. This explicitly includes bonds issued by countries (Principle 26). That is important. On paper, the low hanging fruit is to refrain from buying bonds issued by badly performing States (guess which). However, this is easier said than done. Those bonds may still generate returns, whereas arguably, if not probably, there are insufficient adequate return-generating alternative investments.51 An investor must ascertain and take into account whether or not the entity in which it aims to invest, or has already invested, complies with its obligations under these Principles, as part of its long-term strategy (Principle 26). According to Principle 27, investing in a non-complying entity requires a justification that the investor must provide on request to those who are, or are likely to be, directly or indirectly affected by the investment, including securities regulators. Both principles are cautiously drafted. ‘Must ascertain and take into account’ means that the relevant factors must be given genuine weight. We would overstate our case if we would have submitted an obligation to stay away from non-complying entities altogether. There are several reasons for that view. First, it is very much up to debate whether there are sufficient and sufficiently attractive alternative investments. Second, if all investors that should have a long-term view would sell the shares or bonds of non-compliers, these assets would be bought by hedge funds and other less scrupulous investors. The latter would acquire them at a bottom prices, and a return would be guaranteed. More likely than not, these investors will not even try to persuade the relevant entities to do a better job. Hence, society at large would be worse off. This leaves untouched, of course, the idea that long-term investors could—and, as a rule of thumb, should—refrain from buying or keeping equity issued by the worst in class, while the ‘best in class’ may offer attractive opportunities.52 There is an emerging trend that investors ought to, should, or even must refrain from investing in fossil fuel companies. There may well be sound economic/financial reasons for this stance. We do not think that there is a sufficiently sound legal basis for such a far-reaching position. That is not to say that we are admirers of this branch of industry but, rather, that our Principles are not a beauty contest. One of the reasons why the fossil fuel industry is so unpopular is, I think, that many people believe that they are the one and only cause of climate change. That is not our view. It is not a very promising view either. It would mean that only this branch of industry would have to reduce its emissions and would have to refrain from putting oil and gas on the market. Others would not have reduction obligations. In that scenario, there is not the slightest chance to achieve the reductions globally required. We are not suggesting that investing in the fossil fuel industry can, or cannot, be justified. Again, that is largely an economic question. In this respect, reasonable expectations about the demand for fossil fuels carry weight. We fully and unconditionally endorse the view that the very greater part of fossil fuels should stay in the ground. But that does not mean that this will happen. The latter also counts for investors. Let us assume that, say, Shell could be persuaded to lower its production of oil and/or gas; what will happen? Others, such as Gazprom, Aramco, Petrobas, and the like will step in as long as renewable energy is not readily available. Would that make the world a safer place? Do not make a mistake, we realize very well that our view is, in a sense, not very principled. We have struggled with this issue. So do many investors. In our view, it would be of little avail to submit principles based on daydreams. The law is doomed to reconcile ambition and realism. So are our principles. We could have been more courageous. Even if there was a sound legal basis for a much more pronounced set of principles—which I do not believe there is—they would not fall on fertile ground. Hence, they would be rather meaningless. Do not get me wrong. All I am saying is: for the time being, there is insufficient legal basis for the submission that, to put it bluntly, all problems have to be solved by investors. As a whole, our principles are courageous. If States would comply with the Oslo Principles and enterprises with the Climate Principles for Enterprises, we could keep global warming below the fatal threshold of two degrees Celsius. Principle 28 is the corollary of Principle 23. It reads: ‘Investment by a prospective investor in coal-fired power plants or enterprises engaged in energy generation from other comparatively excessively emitting fossil fuels requires a compelling justification’ (emphasis added). I already mentioned that there may be sound reasons to keep investments in non-complying entities. That is only allowed if the relevant investor promotes compliance by the entities in point with the obligations under the Climate Principles for Enterprises by making use of its power as an investor (Principle 29). Ever more major investors already liaise with their investees. Finally, Principle 30 paints disclosure requirements of pension funds. The disclosure is about its investment portfolio, its investment strategy in light of the threat of climate change, and to whom it has entrusted the asset management as well as its guidelines or instructions to the asset manager, unless it provides a justification for not disclosing such information. XII. Legal basis of the Climate Principles for Enterprises I already mentioned that both the Oslo Principles and the Climate Principles for Enterprises are based on an amalgamation of legal sources.53 The same can be said in particular for Principles 2–17. They serve as a sound basis for the submission that the world at large must reduce its GHG emissions to the effect that global warming will not exceed two degrees Celsius at most. The next step is to figure out what that means for countries and enterprises. We do not deny that the obligations laid down in Principles 2–5 do not necessarily follow from the earlier-mentioned legal sources. However, it is the logical consequence of the per capita approach. The better option is to tie the reduction obligations of enterprises to those of the States in which they operate, with some flexibility for the respective countries to modify them. Hence, we believe that our approach is a sensible interpretation of the law as it stands or will likely develop. It is much easier to derive the additional obligations, emanating from Principles 7–10 and 17, from the earlier-mentioned legal sources. The urgent need to come to grips with climate change and the cataclysmic consequences if we cannot keep global warming below two degrees Celsius barely leaves room for a (much) more lenient interpretation of the law. The Principles about disclosure and impact assessment are in line with legislation in ever more countries, listing requirements, codes of governance, and authoritative reports.54 Last but not least, Principles 25–30 align with the urgent need to mobilize investors to do everything reasonably possible to put pressure on enterprises to comply with their obligations and to protect themselves against the adverse consequence of their assets in case global warming would exceed the fatal threshold. From there onwards, it is only a small step to interpret an enterprise’s fiduciary duty, or its non-common law equivalent, along the lines of our Principles.55 XIII. As concrete as possible We have tried to be as concrete as possible, including in the examples we have used. We are mindful that several principles are, to some extent, open-ended or are based on legal notions that have to be interpreted in a case in point. We very much welcome suggestions, criticism, and, of course, endorsements. We do not think that our Principles are the final word. But, at the very least, we hope that they will stimulate debate. We are more than happy to engage in discussions both on the Climate Principles for Enterprises, avenues to improve them, and other initiatives to the same or similar effect. XIV. Final observations Our group is not a legislator. Hence, our Principles are not ‘law’; they are an interpretation of the law as it stands or, in our view, will likely develop. Our Principles may—and probably will—be challenged. We may be mistaken in one or more respects, but, even so, this would not mean that enterprises and investors do not have legal obligations. It would only mean that they have different obligations. During the final stage of drafting, my associate reporter Daniel Witte and I had the privilege to discuss our ideas with senior experts from the financial world, industry, pension funds, and prudential authorities. With a few exceptions, there was not much appetite in the business community for the idea that enterprises have legal obligations in the face of climate change. Most discussion partners preferred non-binding rules and voluntary pledges. I appreciate that stance, but I do not think that it serves their interests and those of society best. Only clear and binding rules create a level playing field and, more importantly, give us a chance to reach our goal: staying (well) below two degrees Celsius. Major investors are much more inclined to accept that they have an important role to stem the tide. In particular, the reactions at the discussions after the launch of the Climate Principles for Enterprises in Amsterdam in January 2018 are very encouraging. We would be delighted, of course, if major players would endorse our Principles. What really matters is that they will take the necessary steps to achieve the almost universally embraced need to avoid global catastrophes, either by means of ‘voluntary’ steps or not. The result counts. There is much reason to believe that the courts will step in in the unfortunate scenario that enterprises and investors will lean backwards or confine themselves to clearly insufficient action. It can only be hoped that those keen to start litigation—probably non-governmental organizations—will choose the ‘right’ cases. Bad precedents may work counter-productively. The Urgenda judgment56 and a few other judgments in other European countries have shown that (even) courts in this part of the world are prepared to issue bold, imaginative, sound, and convincing judgments.57 An Austrian court voided the permit to erect a third runway at the Vienna airport in light of the impact on climate change.58 The judgment was reversed on appeal, and the same may, or may not, be the fate of the Urgenda judgment. Unlike a distinguished Austrian colleague, I do not think that the disappointing position taken by the Austrian Constitutional Court implies that court cases do not stand a favourable chance. Time will tell.59 My firm impression, based on discussions with senior judges from around the globe and the at times miraculously courageous and impressive judgments issued by courts in Asia, Australia, Latin America, and, to a lesser extent, in other countries, seems to suggest that those who believe that they can safely stick to business as usual or that they can create their own legal world by means of self-acclaimed bold, but insufficient, voluntary action are mistaken.60 It is perhaps telling that our Principles are endorsed by—at the time of writing—68 distinguished experts from around the world, including retired and still active senior judges from five continents. In a very recent judgment in the case between Ashgar Leghari and the Federation of Pakistan et al., the chief justice of the Lahore High Court ruled: Environmental Justice 20. On a jurisprudential plane, a judge today must be conscious and alive to the beauty and magnificence of nature, the interconnectedness of life systems on this planet and the interdependence of ecosystems. From Environmental Justice, which was largely localized and limited to our own ecosystems and biodiversity, we have moved on to Climate Justice. Our environmental jurisprudence from Shehla Zia case to Imrana Tiwana case … has weaved our constitutional values and fundamental rights with the international environmental principles. The environmental issues brought to our courts were local geographical issues, be it air pollution, urban planning, water scarcity, deforestation or noise pollution. Being a local issue, evolution of environmental justice over these years revolved around the national and provincial environmental laws, fundamental rights and principles of international environmental laws. The solutions entailed penalties and shifting or stoppage of polluting industries based on a precautionary approach leading to the recognition of the Environmental Impact Assessment (EIA). Climate Justice 21. Enter Climate Change. With this the construct of Environmental Justice requires reconsideration. Climate Justice links human rights and development to achieve a human-centered approach, safeguarding the rights of the most vulnerable people and sharing the burdens and benefits of climate change and its impacts equitably and fairly. Climate justice is informed by science, responds to science and acknowledges the need for equitable stewardship of the world’s resources. The instant case adds a new dimension to the rich jurisprudence on environmental justice in our country. Climate Change has moved the debate from a linear local environmental issue to a more complex global problem. In this context of climate change, the identity of the polluter is not clearly ascertainable and by and large falls outside the national jurisdiction. Who is to be penalized and who is to be restrained? On the global platform the remedies are adaptation or mitigation.61 ‘In order to facilitate the working of the Federal Government’, the Court ‘constitutes a Standing Committee on Climate Change, which will act as a link between the Court and the Executive and will render assistance to the above mentioned Governments and Agencies in order to ensure that the Policy and the Framework continue to be implemented’. Other Asian, in particular, Indian, superior courts have delivered similarly courageous judgments. That may—and, in my view, probably will—not easily happen in most developed countries. But I have little doubt that courts around the globe will soon come to understand that they do not have a choice in issuing thought-provoking judgments if countries and enterprises refrain from taking the bitterly needed steps. Believe me, a lot is in the pipeline.62 Footnotes 1 See for references Expert Group on Climate Obligations of Enterprises, Principles on Climate Obligations of Enterprises (Eleven Publishing International, 2018), p. 13, 14 and 52 ff. The Principles and the Commentary (hereinafter the Commentary) are also put on the group’s website: https://climateprinciplesforenterprises.org. See also U.S. Global Change Research Program, Highlights of the Findings of the U.S. Global Change Research Program: Climate Science Special Report, https://science2017.globalchange.gov/chapter/executive-summary/; Kevin Anderson and John Broderick, Natural Gas and Climate Change (2017), https://www.foeeurope.org/sites/default/files/extractive_industries/2017/natural_gas_and_climate_change_anderson_broderick_october2017.pdf. 2 See the Commentary (n 1) p. 52 with further references and U.S. Global Change Research Program (n 1). Strikingly, that view was already embraced by the U.S. Supreme Court in Massachusetts v. EPA, 549 U.S. 497 at 521-2. 3 Energy & Climate Intelligence Unit, Heavy Weather, http://eciu.net/assets/Reports/ECIU_Climate_Attribution-report-Dec-2017.pdf. 4 See https://insideclimatenews.org/news/12112017/climate-change-carbon-co2-emissions-record-high-2017-cop23. 5 Commentary (n 1) p. 15 with further references. Paris Agreement on Climate Change, UN Doc. FCCC/CP/2015/L.9/Rev.1, 12 December 2015. 6 I am not suggesting that these phenomena are pointless; they are definitely useful in concrete cases. Intergenerational equity, for instance, should serve as an underpinning of injunctive relief to stop drilling in the Arctic region if this would have deleterious consequences in, say, eighty years. The polluter pays maxim is useful in case of pollution that can easily be traced to a specific source. 7 Eleven Publishing, 2015; also available at the website mentioned in n 1 under resources. 8 Nonetheless, some are mentioned (Principles 27–30). They were a source of inspiration for the ‘Enterprises Group’. 9 For further elaboration, see the Commentary (n 1) p. 66ff. 10 Also available at the website mentioned in n 1. 11 For the reasons why we have opted for two degrees, see the Commentary (n 1) p. 50ff. 12 See in more detail the Commentary (n 1) p. 41 ff. See for elaboration Jaap Spier, Shaping the Law for Global Crises (Eleven International Publishing, 2012), p. 181 ff. 13 For the reduction obligations under the Oslo Principles, see the Commentary (n 1) p. 67. 14 Some have no-cost and other obligations and the obligation to take all reduction measures where no additional cost or where offset financially. 15 For a discussion on the consequences of the ‘voluntary’ pledges under Paris Agreement, see the Commentary (n 1) p. 112ff. 16 See in more detail the Commentary (n 1) p. 123ff. 17 Principle 1 defines global enterprises as follows: ‘an enterprise or a group of enterprises that manufactures products or offers services that are, for a significant part, consumed in multiple APQ countries. However, an enterprise in a BPQ country is considered to be a global enterprise only if it is, directly or indirectly, a subsidiary of an enterprise based in an APQ country.’ 18 For elaboration, see the Commentary (n 1) p. 129ff. 19 See in more detail the Commentary (n 1) p. 141ff. 20 See in more detail the Commentary (n 1) p. 146ff. 21 Desalination of water, for instance, may emit rather high GHGs; see Jiabong Liu, Silan Chen, Hao Wang, and Xiangdong Chen, ‘Calculation of Carbon Footprints for Water Diversion and Desalination Projects’, 75 (2015) Energy Procedia, 2483-94, https://ac.els-cdn.com/S1876610215010073/1-s2.0-S1876610215010073-main.pdf?_tid=abe65862-090b-11e8-af5b-00000aacb35e&acdnat=1517680817_5fc59be5ed690e1e7ab9254e5f1280bb. 22 See the Commentary (n 1) p. 149 and 150. 23 I am by no means suggesting that other cases are unimportant. Many are, and most are to the parties concerned. But that is not the point. 24 See for elaboration the Commentary (n 1) p. 153 ff and Jaap Spier, in Jaap Spier and Ulrich Magnus (eds), Climate Change Remedies (Eleven International Publishing, 2014), p. 10ff. The many initiatives, conferences and writings by—among many others—senior members of the judiciary underscore that ever more judges do understand that they cannot abstain. The Global Pact for the Environment, http://www.leclubdesjuristes.com/wp-content/uploads/2017/05/Draft-project-of-the-Global-Pact-for-the-Environment-24-June-2017.pdf, the growing number of Environmental (Green) courts and the Global Judicial Institute on the Environment may serve as partes pro toto. See, e.g., Michael Wilson, ‘Climate Change: Judge as Water Trustee’; the author kindly provided me with his article before being published; it is not yet available on the internet. In addition, quite a few very senior members of the judiciary have endorsed the EP. 25 Commentary (n 1) p. 43. This does not mean that the individual members do not have a view on this important topic. Speaking for myself, I quite strongly believe that damages will do more evil than good, although liability should perhaps not be barred lock stock and barrel. For elaboration, see Spier (n 12) p. 181ff. 26 See e.g. Richard Heede, ‘Tracing Anthropogenic Carbon Dioxide and Methane Emissions to Fossil Fuel and Cement Producers’, (2014) Climatic Change, 1854-2010, https://link.springer.com/content/pdf/10.1007%2Fs10584-013-0986-y.pdf and CDP, The Carbon Majors Database, CDP Carbon Majors Report 2017, https://b8f65cb373b1b7b15feb-c70d8ead6ced550b4d987d7c03fcdd1d.ssl.cf3.rackcdn.com/cms/reports/documents/000/002/327/original/Carbon-Majors-Report-2017.pdf?1499691240. 27 For further elaboration, see the Commentary (n 1) p. 63ff. 28 For the attribution of emissions, refer to the Commentary (n 1) p. 32ff. 29 This is a somewhat colloquial expression which refers to the required standard of care as defined in art. 4:102 Principles of European Tort Law, reading: ‘(1) The required standard of conduct is that of the reasonable person in the circumstances, and depends, in particular, on the nature and value of the protected interest involved, the dangerousness of the activity, the expertise to be expected of a person carrying it on, the foreseeability of the damage, the relationship of proximity or special reliance between those involved, as well as the availability and the costs of precautionary or alternative methods. (2) ... (3) Rules which prescribe or forbid certain conduct have to be considered when establishing the required standard of conduct.’ 30 I quite strongly believe that minimal causation does play a role, also in the realm of injunctive relief. If minimal contributions do not suffice for damages, it is quite a step to label the relevant acts ‘unlawful’. See in much more detail Spier (n 24) p. 13ff. 31 549 U.S. 497 (2007). 32 For further elaboration, see the Commentary (n 1) p. 160ff. 33 For references, see the Commentary (n 1) p. 166ff; see also the ground-breaking TCFD report, Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017), https://www.fsb-tcfd.org/. 34 Commentary (n 1) p. 186. 35 Commentary (n 1) p. 184 and 185. 36 See for more details https://www.carbontracker.org/ (accessed 28 February 2018). 37 Quoted in the Commentary (n 1) p. 190 and 191. 38 For elaboration, see the Commentary (n 1) p. 187ff. 39 Commentary (n 1) p. 192ff. 40 For elaboration, see the Commentary (n 1) p. 198ff. 41 Commentary (n 1) p. 203–5. 42 See in more detail the Commentary (n 1) p. 203ff. 43 Such as coal-fired power plants in least developed countries if there are no feasible alternatives; see the Commentary (n 1) p. 208. 44 For a slightly different view, see EU High-Level Expert Group on Sustainable Finance, Financing a Sustainable European Economy (January 2018; Final Report), https://ec.europa.eu/info/sites/info/files/180131-sustainable-finance-final-report_en.pdf. 45 I.e. the belief that investors are the only, or most promising, way to get enterprises on the move. 46 These institutions are major investors. 47 Commentary (n 1) p. 208ff. 48 Commentary (n 1) p. 210ff. 49 See in more detail the Commentary (n 1) p. 218ff, 236 and 237. 50 See in considerable detail the Commentary (n 1) p. 208ff. 51 Pension funds also need a return on investments to pay the current pensions. 52 May, because prices may well skyrocket if investors would have to compete to buy this kind of equity. For elaboration, see the Commentary (n 1) p. 227ff. 53 See in considerable more detail the Commentary (n 1) p. 66 and under the respective Principles. 54 See in more detail the Commentary (n 1) p. 168ff; see also TCFD (n 33); Sean Whittaker, ‘The Right of Access to Environmental Information and Legal Transplant Theory: Lessons from London and Beijing’, 6/3 (November 2017) Transnational Environmental Law, p. 509 ff; GRI, Shining a Light on Human Rights: Corporate Human Rights Performance Disclosure in the Mining, Energy and Financial Sectors (2016); Frank Bold, Comparing the Implementation of the EU Non-financial Reporting Directive in the UK, Germany, France and Italy (November 2017), http://www.purposeofcorporation.org/comparing-the-eu-non-financial-reporting-directive.pdf. 55 See in much more detail, also for references, the Commentary (n 1) p. 218ff. 56 District Court of the Hague, 24 June 2016, ECLI:NL:RBDHA:2015:7145 and for an English translation https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2015:7196. See Marc Loth’s contribution to this special issue. 57 See for other examples Wilson (n 24). 58 Bundesverwaltungsgericht 2 February 2017, AFLG et al v Federal Government of Lower Austria, https://www.ris.bka.gv.at/Dokument.wxe?Abfrage=Vfgh&Dokumentnummer=JFT_20170629_17E00875_00. 59 See for a wealth of case law the website of the Sabin Center for Climate Change Law, Columbia University, http://columbiaclimatelaw.com. 60 See e.g. Atisha Sisodiya, The Role of Indian Judiciary in Protection of Environment in India, (2015), https://www.lawctopus.com/academike/role-indian-judiciary-protection-environment-india/; Antonio Herman Benjamin, ‘We, the Judges, and the Environment’, 29/2 (Winter 2012) Pace Environmental Law Review, p. 582ff; Brian Preston, ‘The Role of the Judiciary in Promoting Sustainable Development: The Experience of Asia and the Pacific’, 9 (2005) Asia Pacific Journal of Environmental Law, http://www.lec.justice.nsw.gov.au/Documents/preston_the%20role%20of%20the%20judiciary%20in%20promoting%20sustainable%20development.pdf; Gitanjali Nain Gill, Environmental Justice in India, and a review of that book by Michael Handtke, 6/3 (November 2017) Transnational Environmental Law, p. 557ff; Michael Wilson, Climate Change: The Role of Judges, https://www.eufje.org/images/docConf/ox2017/wilson.pdf; and Gabriel Wedy, Climate Legislation and Litigation in Brazil (October 2017), http://columbiaclimatelaw.com/files/2017/10/Wedy-2017-10-Climate-Legislation-and-Litigation-in-Brazil.pdf. 61 Case no. W.P. No. 25501/2015, http://www.pja.gov.pk/system/files/2018LHC106.pdf. 62 For the avoidance of doubt: I am not involved in litigation. © The Author(s) (2018). Published by Oxford University Press on behalf of Unidroit. All rights reserved. For permissions, please email journals.permissions@oup.com This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/about_us/legal/notices)

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Uniform Law Review/Revue De Droit UniformeOxford University Press

Published: Apr 26, 2018

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