Climate-Related Legal Risks for Financial Institutions: Executive Brief

  • Janis Sarra, Professor, Peter A. Allard School of Law,
    The University of British Columbia & Principal Co-Investigator,
    Canada Climate Law Initiative
  • Elisabeth (Lisa) DeMarco, Senior Partner and CEO, Resilient LLP
Bronze statue of Lady Justice in front of a background of trees.


Financial sector risk leaders, risk managers, and board risk committees are increasingly aware of climate-related legal risks to financial institutions. In Canada, the Office of the Superintendent of Financial Institutions (OSFI) has identified liability risk as a source of climate-related financial risk facing deposit-taking institutions, insurance companies, and pension funds. These risks include regulatory orders and/or fines, enforcement of securities disclosure and financial supervisory capital adequacy requirements, and lawsuits by investors alleging the directors failed in their fiduciary duties to manage material risk, among others.

Globally, financial risk arises for financial institutions as investors, government authorities, and civil society groups seek monetary damages from companies for alleged misrepresentation, breach of directors’ duties, tort/nuisance liability, or violation of securities laws for failure to disclose material financial risks. In some cases, firms are being held to account for historic and current contributions to global warming.

This executive note briefly examines a number of different types of liabilities that may arise for financial institutions, provides illustrative case examples, and offers ideas for effective governance.