As a retired solicitor, I receive a regular email from the Law Society Gazette, drawing my attention to stories appearing in the online version of that publication. This week, one story in particular attracted my attention:
What does climate change mean for your practice?
It doesn’t matter what you think of climate change – the biggest threat to our future, or the biggest hoax to impoverish us. The growing law and regulation around climate change is already bringing changes to the legal profession, changes of which we are a part, whatever our views.
It’s an interesting sketch of the implications, not of climate change per se (after all, what’s the climate going to do to Smith & Jones solicitors of Leges Parva, Midlandshire, any time soon?), but of the increasing tranche of legislation, both national and at EU level, and of policies adopted by big business and regulators with a view to nudging behaviour. In short, it provides opportunities for lawyers, as well as burdens for businesses.
Opportunities for Solicitors
The UK Government’s Ten Point Plan for a Green Industrial Revolution and the EU’s “Fit for 55” climate package, both have implications for the legal advice to be given to clients. Just because the UK has left the EU, it doesn’t mean that UK solicitors can ignore EU legislation – plenty of clients do business there and need to understand their legal obligations. Of course, it’s very much worth noting that every opportunity for lawyers to advise clients involves with red tape and business burdens for their clients.
In the context of financial services, for example, UK financial regulators and supervisors have indicated that regulated companies and their advisers are expected to start identifying, managing and disclosing climate-related financial risks. Reporting guidelines are already vast, and include:
Streamlined Energy and Carbon Reporting (SECR) requirements;
UK Government Green Finance Strategy;
the UK Stewardship Code; and
the UK Government Green Finance Strategy.
Being retired, I confess I hadn’t heard of half of these. Take SECR as a single example. The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 implement the government’s policy on SECR. They even apply to Academy Trusts, as well as to large unquoted companies that have consumed (in the UK), more than 40,000 kilowatt-hours (kWh) of energy in the reporting period. The Government’s website claims:
The 2018 Regulations are designed to increase awareness of energy costs within organisations, provide them with data to inform adoption of energy efficiency measures and to help them to reduce their impact on climate change. They also seek to provide greater transparency for stakeholders.
Large companies, as defined in sections 465 and 466 of the Companies Act 2006, are companies that meet two or more of the following criteria:
turnover (or gross income) of £36 million or more,
balance sheet assets of £18 million or more,
250 employees or more.
Note that if academy trusts report at a group level, the thresholds should consider these figures at aggregate level, including subsidiaries.
In assessing whether the 40,000 kWh threshold is met, academy trusts must consider, as a minimum, all the energy from gas, electricity and transport fuel usage in the UK that they are responsible for.
As a minimum, any organisation caught within the above definition must publish
…its annual UK energy use (in kWh), as a minimum relating to gas, purchased electricity and transport fuel and associated greenhouse gas emissions (in tonnes of carbon dioxide equivalent (CO2e))
I thought part of this Government’s rationale in leaving the EU was to reduce red tape and to create a more business-friendly environment, with a view to growing jobs and the nation’s wealth. Confronted with the above reporting requirements (representing one small part of the Government’s climate red tape) I have to ask why anyone would seek to set up a business, grow a business, or even set up an Academy, given all that hassle, none of which is of any help to your business.
And that’s as it relates to businesses and academies. Pension fund trustees are also burdened, being expected to identify and manage climate risks in their investment portfolios, and advise stakeholders accordingly.
That’s not the end of legal opportunities (and risks), however. The Gazette also advises:
Smaller firms will now be expected to advise on legal risks related to greater flood risks, air quality and environmental issues in relation to development transactions, which may have an impact on property values, and therefore on investor and insurer risks.
Certainly there’s money to be made, but get it wrong and you could be looking at a substantial professional negligence claim.
How Does all this Affect Solicitors?
Well, if legal firms wish to remain on the panels of large clients, they may well find themselves having to tick lots of climate boxes. Large organisations, public bodies, banks, insurance companies, etc. are increasingly requiring those in their supply chain to share their climate objectives, so as to be able to demonstrate that they are “doing their bit” all down the line. Regardless of whether or not any particular law firm is legally obliged to take measures, keeping large clients who help to generate the firm’s profits may well involve “carbon” audits and an active demonstration of a “carbon-reduction” strategy. Remaining on the panels of banks may well involve a great deal of effort here.
Fortunately(!) help is at hand in the form of the Legal Sustainability Alliance (“The leading sustainability network for law firms and the UK legal sector”):
There are two conclusions. The first is that offered up by the Law Society Gazette (whose official position is clear – note the reference to “deniers”):
[F]or all of us, whether believers or deniers, the work related to climate change is already here and needs to be dealt with. For some, it is an opportunity to help save the world. But even for cynics, it provides at the very least huge opportunities for new growth, since there are new laws and regulations all the time.
Secondly, I’m glad that I have retired.