The Growing Risks of ESG Regulation and Climate Litigation on D&O Liability

In its 2023 report on trends in directors & officers (D&O) liability insurance policies, Allianz Global Corporate & Specialty highlighted risks associated with evolving ESG regulation and the increasing pace of climate change litigation.

According to the report, "companies continue to see pressure around ESG issues as regulations are implemented around the world. Failure to disclose and lack of implementation could potentially lead to increased litigation for carriers as organizations navigate company policies to lessen their environmental impact surrounding greenhouse emissions and exposures."

With respect to regulatory activity in particular, the report observed that while criminal fines and penalties are not covered in D&O policies, a policy can cover defense costs unless and until unlawful conduct has been established.

The report also cited as risks for carriers increasing climate-focused litigation against companies and their boards, noting that "the cumulative number of climate change-related litigation cases has more than doubled since 2015."