Issue 4 Q4 2025
FEATURING
Resilience to environmental change
Risks and opportunities in our collective response
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Introduction I am pleased to introduce the fourth edition of Risk Quarterly, our global publication offering timely insights into the fast-changing risk landscape. This issue brings together perspectives from Clyde & Co lawyers worldwide, alongside expert contributions from external voices, to explore the most pressing risks facing senior business leaders. Published to coincide with COP30 (10–21 November 2025, Belém, Brazil), this edition features multidisciplinary analysis on how climate change and ESG are reshaping governance, regulation, litigation, and insurance. Our lead article—by Dr Mark Bernhofen, Roberto Spacey Martín, and Professor Nicola Ranger of the Grantham Research Institute—examines the evolving regulatory landscape around environmental change. We explore how multinationals are responding to tariff turbulence by harnessing AI, restructuring supply chains, and rethinking business models. Additional topics include the legal risks of plastics, greenwashing litigation, the nuclear energy transition, and the surge in social inflation-related claims. We also examine emerging challenges around AI liability, copyright, and regulation. Finally, we share findings from the second part of our Corporate Risk Radar report, with market disruption of paramount concern, from new market entrants, technology and AI in the coming years. We hope you find this edition insightful and thought-provoking. Thank you to all contributors. If there are topics you’d like to see in future editions, please contact us at riskquarterly@clydeco.com.
Neil Beresford Partner
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multiple global tipping thresholds (Armstrong McKay et al, 2022). A well-researched tipping point that reinforces the synergy between climate and nature is Amazon Forest dieback. Although the central estimate of the tipping threshold of this system is 3.5°C warming, deforestation amplifies these risks. Interactions between climate and deforestation could see the threshold passed at 20-25% deforestation, down from previous estimates of 40% (Lovejoy and Nobre, 2018), while impacts are estimated at USD 3.6 trillion (Lapola et al, 2018). However, other tipping points may materialise sooner with significant impact for finance. New research estimates USD 8 trillion of value at risk from water scarcity by 2050 for Global Systemically Important Banks alone, which would result in the collapse of some of these (Sabuco et al, forthcoming).
2024 marked not just another record-breaking year, but a fundamental shift in the velocity of change – global temperatures exceeded 1.5°C above pre-industrial levels for the first time over a 12-month period. We are approaching the Paris Agreement’s lower temperature threshold, which will result in more severe climate impacts. These impacts are already being felt today. Last year saw global losses of USD 320 billion from natural disasters (Figure 1), USD 140 billion of which were insured: the third most expensive year for the insurance industry since 1980 (Munich RE, 2025). These impacts extend beyond insurance, touching every corner of the global economy. Last summer, floods in central Europe shut down retailers and factories and disrupted critical infrastructure, impacting businesses not even directly affected by flooding (Reuters, 2024). Climate attribution analysis found that climate change made these floods twice as likely (Kimutai et al, 2024). In 2023, a record drought disrupted millions of tonnes of goods passing through the Panama Canal, with global supply chain impacts felt as far as Asia (IMF, 2023). Climate-related maritime trade impacts are estimated to exceed USD 80 billion annually (Verschuur et al, 2023). Climate risks are increasingly material business risks for all companies, regardless of location, because disruptions ripple through supply chains and
Current climate science and emerging physical risk trends
Key messages:
Compliance to competitve advantage
By Dr Mark Bernhofen, Roberto Spacey Martín, Professor Nicola Ranger
e are living in a period of accelerating environmental change. With this change comes risks and
W
opportunities. For businesses, the question is no longer whether to respond, but how. This article examines the evolving landscape of environmental resilience: from emerging physical risks to the shifting regulatory landscape, growth of resilience opportunities, and the evolving role of litigation, finance, and insurance. Organisations that take resilience seriously today will be best positioned to secure a competitive advantage as environmental risks intensify.
The risks from environmental change are becoming more apparent and businesses are increasingly feeling their effects.
Climate and nature risks interact and reinforce each other, raising concerns about passing critical tipping thresholds that could have substantial financial implications.
Data is vital and increasingly plentiful. Building capacity to interpret and use data is a strategic imperative.
shared infrastructure networks. As these risks intensify, organisations that prioritise climate preparedness will be better positioned to manage future challenges.
Beyond these observable climate impacts, two categories of emerging risk demand attention: the compound and cascading effect of climate change and nature loss, and the potential threat of earth system tipping points. Global nature and biodiversity loss are at an all-time high. Habitat destruction, overexploitation, and climate change are some of the drivers that have caused a 73% decline in wildlife populations since 1970 (WWF, 2024). The relationship between business and nature is one of double materiality; companies both contribute to environmental degradation and rely on the ecosystem services that nature provides. Take agriculture, for example. This sector is highly dependent on nature: 75% of all global flood crops rely on pollination, valued at hundreds of billions of dollars annually (Potts et al, 2010), while soil health and water
View Figure 1 here
regulation underpin all crop production. Nature loss also increases vulnerability to climate shocks, and the combined impacts of nature loss and climate change are macro-critical. Under compound climate and nature shock scenarios, the costs to the global economy could be upwards of USD 5 trillion (Ranger et al, 2023). The price impacts and resulting cascading risks should also not be underestimated. For example, recent empirical research shows that food price spikes can trigger food insecurity, public health risks, inflation, and political upheaval (Kotz et al, 2025).
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Earth system tipping points may exponentially exacerbate these threats: the potential for sudden, cascading system failures that could reshape entire regions and sectors. Unlike gradual environmental change, tipping points represent thresholds where systems shift abruptly into new states that may be irreversible on human timescales. Tipping points exist for both climate and nature, and they can often interact and reinforce one another. Over 25 earth system tipping points have been identified using historical evidence and computer simulations (Lenton et al, 2023). We are nearing certain limits; global warming above the lower Paris Agreement limit of 1.5°C1 risks triggering
Model divergence is not inherently problematic; diversity in methodological approaches can illuminate uncertainty and reduce systemic risks (Heinrich et al, 2021). What is imperative is that organisations understand why models diverge and develop sufficient data literacy to integrate these data appropriately into decision-making. Initiatives such as the Climate Financial Risk Forum (CFRF) in the UK provide valuable guidance to support institutions in navigating the complexity of climate risk assessments. Recent guidance includes a scenario framework to assess risks and identify adaptation opportunities under uncertainty (CFRF, 2024)
Organisations cannot manage risks they do not measure. Effective risk management depends on robust data, and the landscape of available environmental data is expanding rapidly, with over 100 tools for assessing climate and nature risk detailed in UNEP FI’s latest Sustainability Risk Tool Dashboard (UNEP FI, 2025a). Yet this growth brings challenges: data divergence across providers, black-box methodologies, and limited quality oversight (Condon, 2023).
Policy & Regulatory Developments – Trajectories and Business Implications
Multilateral policy efforts are often slow but offset by relatively rapid deployment of domestic or regional policy whose impact can span across jurisdictions.
International, regional and domestic environmental policy has slowed down in 2025; however, industry trends continue to show signs of progress, and appetite remains for further action from business.
At COP30, Parties are expected to focus on three main areas: operationalising the Loss and Damage Fund; strengthening the Global Goal on Adaptation, including indicators for accountability; and advancing the fossil fuel transition agenda, last substantively addressed at COP28. Finance discussions will be anchored in the Baku-to-Belém Roadmap, which seeks to mobilise USD 300 billion annually by 2035 for climate action in developing countries, contributing to an overarching global target of USD 1.3 trillion mobilised by all actors (including the private sector). It is also hoped that parties submit updated National Adaptation Plans (NAPs), aligned with their revised NDCs, to better determine the adaptation finance gap, currently estimated at USD 387 billion/year until 2030 for developing countries alone (UNEP FI, 2024). However, submission of this too has been sluggish.
Attention is turning toward COP30 in Belém, Brazil, as the international community approaches a milestone moment: ten years since the Paris Agreement. One of the Agreement’s central enforcement mechanisms – states’ Nationally Determined Contributions (NDCs) - requires each Party to update its climate commitments every five years. Revised pledges made in 2020 narrowed the estimated temperature increase from around 4 °C to approximately 2.6–2.8 °C (UNEP FI, 2024). However, 2025 submissions have been more sluggish. As of 3rd October 2025, only 64 countries have submitted updated NDCs. Notable submissions include China’s commitment to reduce emissions 7–10% by 2035 from their peak, and the European Union’s indicative target of a 66–72 % reduction below 1990 levels. Collectively, these pledges indicate some progress but remain insufficient to align with the 1.5 °C trajectory (NZT, 2025; CAT, 2025). But it’s worth keeping in mind that trends outside of policy are promising – the International Energy Agency recently predicted that 50% of global electricity consumption for transport will come from renewables by 2030 (IEA 2025).
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Figure 1. Natural disasters losses (and insured losses) worldwide 1980-2024. Source: Munich Re, 2025.
The International Court of Justice’s (ICJ) advisory opinion on climate change, delivered in July 2025, has added further momentum to climate governance this year and raised hopes for some (e.g. LSE, 2025). The Court provided an expansive interpretation of states’ obligations under international law, which, though non-binding, is expected to inform policy development, judicial reasoning, and corporate due diligence expectations.
Alongside the multilateral climate negotiations, the Kunming–Montreal Global Biodiversity Framework continues to inform international action and national regulation on nature. 55 countries have now developed National Biodiversity Strategy and Action Plans (the nature-equivalent of NDCs) with over 3,300 national targets set (CBD 2025). These trends at the international stage are likely to guide the domestic and regional policy developments that shape the operating environment for business.
In the regulatory sphere, developments now span financial, sectoral, fiscal, and environmental instruments. Disclosure standards remain a core pillar. The International Sustainability Standards Board (ISSB)’s IFRS S1 and S2 have been adopted or are under consideration in more
than 36 jurisdictions (IFRS, 2025), while the Transition Plan Taskforce (TPT) recommendations are increasingly referenced by regulators and investors (e.g. Australia’s Treasury (2025), the European Banking Authority (2025) and the Hong Kong Monetary Authority (2024)). Beyond disclosure, governments are deploying complementary tools:
Fiscal measures, such as carbon pricing, tax credits, and green procurement, are steering capital flows. More than 70 national or subnational carbon pricing initiatives are now in operation or development (World Bank, 2025).
Sector-specific regulation is expanding, from the Carbon Border Adjustment Mechanism (CBAM) to mandatory climate-resilient water resource planning in England and national energy-efficiency standards for buildings and transport in several jurisdictions (Environment Agency, 2024).
Market-based mechanisms are evolving, including the consolidation of voluntary carbon markets under new integrity frameworks (e.g. the Carbon Offsetting and Reduction Scheme for International Aviation) and regional emissions-trading schemes being refined in Asia and Latin America, under Article 6 of the Paris Agreement.
Public finance and blended-capital models are increasingly being used to address adaptation and resilience gaps, creating new opportunities for insurers, lenders, and infrastructure investors (Convergence, 2024).
For corporates, these developments signal a growing overlap between climate, nature, and financial regulation. The slow but steady progress of multilateral agreements at the international level is complemented by often comparatively rapid development of domestic regulation, whose impact can span across sectors and value chains. 2025 has witnessed a change of pace across the board, as suitable regulation is being reflected on, consolidated and reappraised in light of other policy priorities. However, recent data shows that 98% of companies find climate change to be a material topic for disclosure (EFRAG 2025). This trend is echoed by the financial sector’s growing appetite for non-financial information disclosure and performance (PWC, 2024; Larcker et al, 2024; Krueger et al, 2024; IOSCO, 2024). Despite some slowdown, the overarching march of regulation coupled with growing industry trends, and the evolving risk landscape are therefore incentivising companies to act on climate- and other nature-related risks and opportunities.
The economic rationale for adaptation and resilience investments
Investment in resilience has been demonstrated to provide a triple dividend of benefits.
Financing opportunities for adaptation and resilience are expected to improve given the underlying economics and emerging financial innovation.
As providers of goods, services, employment and investment, the private sector plays a crucial role in building resilience to environmental change. In adapting to environmental change, firms can secure wider resilience benefits for society by generating resilience services, jobs and growth, while failing to adapt effectively can also harm our collective resilience. Investment into resilience is therefore argued to deliver three types of benefits: avoiding losses from acute or chronic risks; generating economic benefits by stimulating economic activity; and strengthening social and natural capital for wider social and environmental benefits (Surminski and Tanner, 2016; GCA, 2019; Heubaum et al, 2022). The latter two are particularly important as they materialise even without a risk event occurring. A recent quantitative analysis of these benefits has found that every USD 1 invested into adaptation can yield USD 10.53 over a 10-year time period with average returns of 27% (Brandon et al, 2025).
Recent developments in tools used to assess the risks and opportunities emerging from environmental change equip corporates to pursue adaptation and resilience opportunities. Influential platforms such as the Network for Greening the Financial System (NGFS) and the UK Climate Financial Risk Forum (CFRF) have driven effective use of scenarios in forward-looking risk assessments for regulators, financial institutions and corporates (NGFS 2025, CFRF 2024). Other frameworks have begun to integrate nature-related risks into these assessments (Ranger et al 2023, Ranger et al 2024), enhancing understanding of the specific ways in which the links between climate, nature and society serve as sources of risk and opportunity. Targeting corporates in particular, the Physical Climate Risk Appraisal Methodology (PCRAM) provides authoritative guidelines for integrating climate-related physical risk into investment decision-making and understanding how adaptation actions can modulate asset value losses (IIGCC, 2025). Further guidance for corporates has also been issued on how adaptation and resilience can be integrated into transition plans and broader business planning (CFRF 2024, WBCSD 2025, UNEP FI 2025b). Together, these frameworks and methodologies have equipped corporates with the tools to make economic and rational cases for taking action in response to climate change.
At the same time, financing opportunities are also likely to improve for adaptation and resilience due to the underlying economic rationale. Exposure to climate-related physical risk has been empirically shown to affect credit ratings (Capiello et al, 2025), and as a result, modelled adaptation actions can have positive effects on credit ratings (Bernhofen et al, 2024). Although corporate disclosure on adaptation and resilience is limited (Spacey Martín et al, 2025), research has shown that even the current limited volume of information is vastly under-utilised for sustainability-linked finance (Resendiz et al, 2025a). Similar empirical results have been found in relation to nature (Resendiz et al, 2025b). These trends, together with further innovations in risk transfer, liquidity arrangements and other areas, are poised to strengthen the economic benefits for firms and financial institutions taking action on adaptation and resilience.
The evolving role of litigation, finance, and insurance
Climate litigation is no longer just about emissions; it’s increasingly targeting inadequate preparedness for physical climate impacts.
Adaptation and nature financing gaps represent not just a funding challenge, but a major market opportunity that sophisticated investors are beginning to capture.
Rising climate risks are putting the insurance industry under increasing strain. Its role in absorbing residual risk remains vital, but the sector can also incentivize adaptation through risk-based pricing and cross-industry partnerships.
Litigation Over the last decade, climate litigation has grown in importance and now plays an increasingly central role in combating the climate crisis. By the end of 2024, the number of climate litigation cases globally (see Figure 3) reached nearly 3,000 (Setzer and Higham, 2025). Climate litigation has evolved from challenges to administrative procedures in the US and Australia in the 1980s to a global effort to hold governments and private actors to account for climate inaction today (Bradeen, 2024). Recent growth in litigation cases has been catalysed by the signing of the Paris Agreement in 2015 as well as recent advances in attribution science, which can establish the causal link between a country or corporation’s historic emissions and climate impacts (Stuart-Smith et al, 2021). In July 2025, this trajectory of expanding legal accountability reached the highest level of international law when the ICJ issued its landmark statement on the obligation of states with respect to climate.
View Figure 3 here
While the ICJ opinion (discussed in the previous section) addressed states’ obligations, it has significant implications for businesses (see Lawrence and Williams, 2025). The Court confirmed states must regulate private actors under their jurisdiction, particularly regarding fossil fuel activities and emissions, while affirming the IPCC as the “best available science” and that emissions can be legally attributed to specific actors. Financial markets are already pricing these risks (Sato et al, 2024). Research surveying 800 investors found that 80% consider climate litigation at least moderately important to firm value, and 41% believe it already affects financial performance (Gostlow et al, forthcoming, cited in CETEX, 2025).
Companies are also facing growing litigation for inadequate adaptation (Setzer and Higham, 2025). Legal action can either occur before any physical impacts, such as for inadequate disclosure or for failing to comply with adaptation regulation, or it can come after a physical impact, for failing to mitigate the risks that have been incurred (UNEP FI, 2021).
The Figure 4 claimants alleged that directors failed to adequately plan for the foreseeable impacts of wildfires and misled shareholders as a result. The case resulted in significant financial losses for the company and led to several subsequent lawsuits (Smoleńska et al, 2025).
For businesses, the message is unambiguous: climate litigation will continue to accelerate in scope and sophistication, making climate risk management and credible action strategic necessities rather than voluntary commitments.
Finance Despite the compelling economic case for resilience, public finance continues to flow at a fraction of what is needed. Current annual financing gaps until 2030 stand at USD 387 billion for adaptation in EMDEs (UNEP FI, 2024) and USD 700 billion for biodiversity globally (Convention on Biological Diversity, 2022). Notwithstanding the suitability constraints of private finance to secure adaptation and resilience benefits (see Figure 4), there is a need for private finance to step up. The challenge will not be solved only by mobilising new types of finance for adaptation, resilience and nature. Existing financial flows must also be aligned with resilience and nature, as part of sound management of uncertain yet systemic risks. This means that institutions must move beyond defensive risk management to actively building resilience in the systems and societies in which they operate (Mullan and Ranger 2022).
View Figure 4 here
Figure 4
Figure 4. Types of adaptation actions and associated financing considerations. Source: UNEP Adaptation Gap Report 2024.
Portfolio management of climate- and nature-related risk, coupled with the strengthening economic rationale for adaptation and resilience investment, has translated into tangible investor interest. Multiple investment frameworks have been published to guide investors seeking portfolio exposure to resilience opportunities (Standard Chartered 2024, Goldman Sachs 2023, BlackRock 2023). Adaptation and resilience are also being introduced into sustainable investment taxonomies at the jurisdictional level (Spacey Martín et al, 2024). The London Stock Exchange Group (2025) recently estimated that USD 1 trillion in corporate revenue is derived from adaptation and resilience activities, with a compound annual growth rate of 5% since 2016. These trends are reflective of a financial sector increasingly hungry to enter the adaptation and resilience market, representing a significant opportunity for corporates. New innovative financing instruments are emerging (e.g. adaptation-smart credit ratings, sustainability-linked financing), and support from government (i.e. through blended financing) is pushing frontiers on investability.
Insurance Insurance is a critical enabler of resilience – both directly and indirectly. Not all risks can be adapted away, and insurance can play an important role in absorbing the residual risks and supporting governments, households and businesses in recovering from disasters. In speeding recovery, insurance can reduce the overall costs of disasters. It also provides an important risk signal – risk-based pricing can create rewards for resilience, catalysing adaptation investment.
The reframing of environmental change from a risk to an opportunity has the potential to unlock capital at scale, creating a powerful tailwind for companies that can demonstrate not just adaptation plans but investible resilience solutions.
However, as climate change increases risk exposure, the insurance sector faces growing challenges. Demand could grow as risks rise, but rising risks can also make insurance unaffordable. At the same time, greater uncertainty in risk or pricing pressures from government can make it more difficult for insurers to offer coverage. Examples include the withdrawal of some major insurers from California’s wildfire-exposed market. In response, the insurance industry is innovating rapidly. Parametric insurance products, which pay out based on predefined triggers (such as wind speed or rainfall levels) rather than assessed losses, are gaining traction due to their rapid payouts, reduced administrative costs, and ability to cover risks that are difficult to insure through traditional models. The parametric insurance market is projected to grow from US$18 billion in 2023 to US$34.4 billion by 2033, driven by increasing climate losses and the development of new technologies that enable these products (Allied Market Research, 2024).
USD 18 billion in 2023 to USD 34.4 billion by 2033, driven by increasing climate losses and the development of new technologies that enable these products (Allied Market Research, 2024).
Beyond risk transfer, the insurance industry may choose to do more to catalyse resilience through pricing mechanisms that reward adaptation investments (OECD, 2023). For example, in the US, some insurance companies offer discounts to homes that meet hurricane-resilient building standards. A study following Hurricane Sally in Alabama found that the hurricane-resilient homes reduced the frequency of claims by up to 74% (Alabama Department of Insurance, 2025). The sector can also extend its impact on adaptation and resilience through initiatives such as the Insurance Development Forum (IDF), which is a public-private partnership that supports the use of insurance and risk modelling to support resilience and close the protection gap in emerging and developing economies. The IDF’s footprint is in 30 countries, it has built technical capacity through training programs for over 100 supervisors, invested USD 900,000 in open-access risk data, and co-financed USD 30 million in disaster risk financing mechanisms in EMDEs (Mahoul and Ranger, 2024).
Environmental change is accelerating, and the distinction between leaders and laggards will increasingly hinge on preparedness. Organisations that integrate climate and nature risks into strategy, build robust data capabilities, and pursue resilience as a competitive advantage will be best positioned for long-term success. The regulatory trajectory is clear despite recent slowdowns, and the economic case for adaptation is strengthening. The question is no longer whether to act, but how quickly and strategically organisations can transform risk into opportunity.
CONCLUSION
Bibliography
Alabama Department of Insurance & Center for Risk and Insurance Research. (2025, May 5). Performance of IBHS FORTIFIED Home Construction in Hurricane Sally. University of Alabama. https://www.aldoi.gov/pdf/news/performanceibhsfortifiedhomeconstructionhurricanesally.pdf Allied Market Research. (2024). Parametric Insurance Market Size, Share, Competitive Landscape and Trend Analysis Report, by Type (Natural Catastrophes Insurance, Specialty Insurance, Others), by Industry Vertical (Agriculture, Aerospace and Defense, Mining, Construction, Energy and Utilities, Manufacturing, Others): Global Opportunity Analysis and Industry Forecast, 2023–2033. Allied Market Research. https://www.alliedmarketresearch.com/parametric-insurance-market-A14966 Alvarez, J., et al. (2025). Evidence review on the financial effects of nature-related risks. TNFD Discussion Papers. https://tnfd.global/publication/evidence-financial-effects-of-nature-related-risks/ Armstrong McKay, D. I., et al. (2022). Exceeding 1.5 °C global warming could trigger multiple climate tipping points. Science. https://www.science.org/doi/10.1126/science.abn7950 Australian Government. (2025, August). Climate-related Transition Planning Guidance: Consultation Paper. Australian Government. https://consult.treasury.gov.au/c2025-683229 Bernhofen, M., et al. (2024). The Impact of Physical Climate Risks and Adaptation on Sovereign Credit Ratings. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4950708 BlackRock. (2023). Climate resilience: An emerging investment theme. BlackRock Investment Institute. https://welectric.pt/wp-content/uploads/2023/12/bii-megaforces-december-2023.pdf Bradeen, E. (2024). What is climate litigation? Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science. https://www.lse.ac.uk/granthaminstitute/explainers/what-is-climate-change-litigation/ Brandon, C., et al. (2025). Strengthening the investment case for climate adaptation: A triple dividend approach. World Resources Institute. https://files.wri.org/d8/s3fs-public/2025-06/strengthening-investment-case-climate-adaptation.pdf?VersionId=een52ahEiIO4IaOA6e8ps4fQCN4xTtph Capiello, L., et al. (2025). From words to deeds – Incorporating climate risks into sovereign credit ratings. European Central Bank. https://www.ecb.europa.eu/press/research-publications/resbull/2025/html/ecb.rb250730~ebfb33d43c.en.html CETEX. (2025). Submission to the UK Government consultation ‘Climate-related transition plan requirements’. Centre for Economic Transition Expertise, TPI Global Climate Transition Centre, and Grantham Research Institute, London School of Economics and Political Science. https://cetex.org/publications/submission-to-the-uk-government-consultation-climate-related-transition-plan-requirements/ CFRF. (2024). Mobilizing adaptation finance to build resilience. Climate Financial Risk Forum Adaptation Working Group. https://www.fca.org.uk/publication/corporate/cfrf-mobilising-adaptation-finance-build-resilience-2024.pdf Climate Action Tracker [CAT]. (2025). Mid-year check on 2035 climate plans. Climate Action Tracker. https://climateactiontracker.org/publications/mid-year-check-on-2035-climate-plans/ Condon, M. (2023). Climate services: The business of physical risk. Arizona State Law Journal. https://arizonastatelawjournal.org/2023/08/01/climate-services-the-business-of-physical-risk/ Convention on Biological Diversity. (2022). Kunming–Montreal Global Biodiversity Framework. CBD Secretariat. https://www.cbd.int/gbf Convention on Biological Diversity. (2025). Online reporting tool. CBD Secretariat. https://ort.cbd.int/?_gl=1*v2amiq*_ga*MTE5ODkyNjg3Mi4xNzU5NjA3NDgz*_ga_7S1TPRE7F5*czE3NTk5MzY4NDckbzMkZzAkdDE3NTk5MzY4NDckajYwJGwwJGgw#0.4/0/0
MEET THE AUTHORS
Professor Nicola Ranger Executive Director, Earth Capital Nexus, and Professor in Practice of Natural Capital, Risk and Finance, The London School of Economics and Political Science
Roberto Spacey Martín Resilience Alignment Lead, Earth Capital Nexus, The London School of Economics and Political Science
Dr. Mark Bernhofen Post-Doctoral Researcher, University of Oxford and The London School of Economics and Political Science
Mark is a post-doctoral academic researcher working at the University of Oxford and the London School of Economics. His research focuses on climate risk and adaptation, with a particular emphasis on the use of climate risk data for decision-making. Mark’s work spans multiple sectors: modelling physical climate risk impacts on sovereign credit ratings, developing asset and firm-level climate financial risk methodologies for financial institutions, and creating climate risk assessment approaches to support humanitarian organisations.
Roberto Spacey Martín is a researcher focused on aligning financial systems with the resilience of ecosystems and societies. As Resilience Alignment Lead within HYPERLINK “https://www.lse.ac.uk/granthaminstitute/ecn/”Earth Capital Nexus at the London School of Economics and Political Science, he develops evidence-based tools and metrics to integrate climate and nature into financial decision-making. His research explores the use of resilience and nature-alignment metrics in transition plans, industry benchmarks, investment decision-making, financial policy, and regulatory supervision.
Professor Nicola Ranger is Executive Director of Earth Capital Nexus and Professor in Practice of Natural Capital, Risk and Finance in the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science. She is a global expert and leads interdisciplinary research and policy engagement at the nexus of finance, investment, natural capital, resilience and sustainable development with a global focus.
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Convergence. (2024). State of blended finance 2024: Climate edition. Convergence. https://ppp.worldbank.org/sites/default/files/2025-06/State%20of%20Blended%20Finance%202024-%20Climate%20Edition.pdf Environment Agency. (2024). A summary of England’s revised draft regional water resources management plans. Environment Agency. https://www.gov.uk/government/publications/a-review-of-englands-draft-regional-and-water-resources-management-plans/a-summary-of-englands-draft-regional-and-water-resources-management-plans European Banking Authority [EBA]. (2025). Final Report on Guidelines on the Management of Environmental, Social and Governance (ESG) Risks (EBA/GL/2025/01). EBA. https://www.eba.europa.eu/sites/default/files/2025-01/fb22982a-d69d-42cc-9d62-1023497ad58a/Final%20Guidelines%20on%20the%20management%20of%20ESG%20risks.pdf European Financial Reporting Advisory Group [EFRAG]. (2025). EFRAG 2025 State of Play. EFRAG. https://insights.efrag.org/dashboard Global Commission on Adaptation [GCA]. (2019). Adapt now: A global call for leadership on climate resilience. Global Commission on Adaptation. https://gca.org/reports/adapt-now-a-global-call-for-leadership-on-climate-resilience/ Goldman Sachs. (2025). GS SUSTAIN: Adaptation, Mitigation, Physical Risk – Where We Expect to See Investment Tailwinds and Why. Goldman Sachs Research. https://www.goldmansachs.com/insights/goldman-sachs-research/where-we-expect-to-see-investment-tailwinds-and-why Heinrich, Y., et al. (2022). A simulation of the insurance industry: The problem of risk model homogeneity. Journal of Economic Interaction and Coordination. https://link.springer.com/article/10.1007/s11403-021-00319-4 Heubaum, H., et al. (2022). The triple dividend of building climate resilience: Taking stock, moving forward. World Resources Institute. https://files.wri.org/d8/s3fs-public/2022-11/triple-dividend-climate-finance.pdf?VersionId=eWpTL9Q41jtpDXqg98FFdF6x8V.Fyqo1 Hong Kong Monetary Authority [HKMA]. (2024). Annex: Good practices on transition planning. HKMA. https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20241218-2-EN Hughes, T. P., et al. (2017). Coral reefs in the Anthropocene. Nature. https://www.nature.com/articles/nature22901 IFRS. (2025). IFRS Foundation publishes jurisdictional profiles providing transparency and evidencing progress towards adoption of ISSB Standards. IFRS. https://www.ifrs.org/news-and-events/news/2025/06/ifrs-foundation-publishes-jurisdictional-profiles-issb-standards/ International Court of Justice. (2025, July 23). Obligations of States in Respect of Climate Change: Advisory Opinion. ICJ. https://www.icj-cij.org/case/187 International Energy Agency [IEA]. (2025). Renewables 2025. IEA. https://www.iea.org/reports/renewables-2025 Institutional Investors Group on Climate Change [IIGCC]. (2025). Physical Climate Risk Appraisal Methodology (PCRAM) 2.0. IIGCC. https://www.iigcc.org/resources/consultation-physical-climate-risk-appraisal-methodology-2.0 International Monetary Fund [IMF]. (2023). Climate change is disrupting global trade. IMF. https://www.imf.org/en/Blogs/Articles/2023/11/15/climate-change-is-disrupting-global-trade International Organization of Securities Commissions [IOSCO]. (2024). IOSCO Report on Transition Plans. IOSCO. https://www.iosco.org/library/pubdocs/pdf/IOSCOPD772.pdf
Kimutai, J., et al. (2024). Climate change and high exposure increased costs and disruption to lives and livelihoods from flooding associated with exceptionally heavy rainfall in Central Europe. World Weather Attribution. https://www.worldweatherattribution.org/climate-change-and-high-exposure-increased-costs-and-disruption-to-lives-and-livelihoods-from-flooding-associated-with-exceptionally-heavy-rainfall-in-central-europe/ Kotz, M., et al. (2025). Climate extremes, food price spikes, and their wider societal risks. Environmental Research Letters. https://iopscience.iop.org/article/10.1088/1748-9326/ade45f Krueger, P., et al. (2024). The effects of mandatory ESG disclosure around the world. Journal of Accounting Research. https://onlinelibrary.wiley.com/doi/10.1111/1475-679X.12548 Lapola, D. M., et al. (2018). Limiting the high impacts of Amazon forest dieback with no-regrets science and policy action. PNAS. https://www.pnas.org/doi/10.1073/pnas.1721770115 Larcker, D. F., et al. (2024). 2024 Institutional Investor Survey on Sustainability. Stanford University, CGRI Survey Series. https://www.gsb.stanford.edu/faculty-research/publications/2024-institutional-investor-survey-sustainability Lawrence, W., & Williams, L. (2025). The development of international law on climate change. Clyde & Co Insights. https://www.clydeco.com/en/insights/2025/09/the-development-of-international-law-on-climate-ch Lenton, T., et al. (2023). The Global Tipping Points Report. University of Exeter. https://report-2023.global-tipping-points.org/?_gl=1%2A1t9x2qo%2A_gcl_au%2ANDIzNjI0MDc1LjE3NTk4MzI3NDY.%2A_ga%2AMTk1NjI2MzUwNS4xNzU5ODMyNzQ2%2A_ga_D45K1N753J%2AczE3NTk4MzI3NDUkbzEkZzEkdDE3NTk4MzM0NzkkajYwJGwwJGgw Lovejoy, T. E., & Nobre, C. (2018). Amazon tipping point. Science Advances. https://www.science.org/doi/full/10.1126/sciadv.aat2340 London School of Economics [LSE]. (2025). Institute responds to International Court of Justice advisory opinion. LSE Press Release. https://www.lse.ac.uk/granthaminstitute/news/institute-responds-to-international-court-of-justice-advisory-opinion/ London Stock Exchange Group [LSEG]. (2025). Investing in the green economy 2025: Navigating volatility and disruption. LSEG. https://www.lseg.com/content/dam/lseg/en_us/documents/sustainability/investing-in-green-economy-2025.pdf Mahoul, O., & Ranger, N. (2024). How insurance fuels action for development, climate and biodiversity goals. Oxford Martin School. https://www.oxfordmartin.ox.ac.uk/blog/how-insurance-fuels-action-for-development-climate-and-biodiversity-goals Mullen, M., & Ranger, N. (2022). Climate-resilient finance and investment: Framing paper. OECD. https://www.oecd.org/en/publications/climate-resilient-finance-and-investment_223ad3b9-en.html Munich Re. (2025). Climate change is showing its claws: The world is getting hotter, resulting in severe hurricanes, thunderstorms and floods. Munich Re. https://www.munichre.com/en/company/media-relations/media-information-and-corporate-news/media-information/2025/natural-disaster-figures-2024.html#-1537950557 Net Zero Tracker [NZT]. (2025). Net Zero Stocktake 2025. Net Zero Tracker. https://zerotracker.net/analysis/net-zero-stocktake-2025 Network for Greening the Financial System [NGFS]. (2025). NGFS Scenarios Portal. NGFS. https://www.ngfs.net/ngfs-scenarios-portal/ Organisation for Economic Co-operation and Development [OECD]. (2023). Enhancing the insurance sector’s contribution to climate adaptation. OECD. https://www.oecd.org/en/publications/enhancing-the-insurance-sector-s-contribution-to-climate-adaptation_0951dfcd-en.html
otts, S. G., et al. (2010). Global pollinator declines: Trends, impacts and drivers. Trends in Ecology & Evolution. https://www.cell.com/trends/ecology-evolution/fulltext/S0169-5347(10)00036-4?cc=y PricewaterhouseCoopers [PWC]. (2024). PwC’s Global Investor Survey 2024. PwC. https://www.pwc.com/gx/en/issues/c-suite-insights/global-investor-survey.html Ranger, N., et al. (2023). The Green Scorpion: The macro-criticality of nature for finance – Foundations for scenario-based analysis of complex and cascading physical nature-related risks. University of Oxford. https://www.ngfs.net/system/files/import/ngfs/medias/documents/ngfs_occasional_paper_green-scorpion_macrocriticality_nature_for_finance.pdf Ranger, N., et al. (2024). Toward greening finance for nature: Assessing the materiality of nature-related financial risk for the UK. Green Finance Institute. https://www.greenfinanceinstitute.com/wp-content/uploads/2024/06/GFI-GREENING-FINANCE-FOR-NATURE-FINAL-FULL-REPORT-RDS4.pdf Resendiz, J. L., et al. (2025a). Sustainability-linked finance: A lever for firm-level resilience innovation. Grantham Research Institute. https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2025/09/working-paper-429-Resendiz-et-al.pdf Resendiz, J. L., et al. (2025b). Sustainability-linked finance: Bridging nature disclosure gaps in Southeast Asia. Grantham Research Institute. https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2025/06/working-paper-427-Resendiz-et-al.pdf Reuters. (2024). Central Europe factories and retailers shut in flood-hit areas. Reuters. https://www.reuters.com/world/europe/central-europe-factories-retailers-shut-flood-hit-areas-2024-09-16/ Sadler, A., et al. (2024). The impact of COVID-19 fiscal spending on climate change adaptation and resilience. Nature Sustainability. https://www.nature.com/articles/s41893-024-01269-y Setzer, J., & Higham, C. (2025). Global Trends in Climate Change Litigation: 2025 Snapshot. Grantham Research Institute, London School of Economics and Political Science. https://www.lse.ac.uk/granthaminstitute/publication/global-trends-in-climate-change-litigation-2025-snapshot/ Smoleńska, A., et al. (2025). Banks and climate litigation risk: Navigating the low carbon transition. London School of Economics and Political Science. https://cetex.org/publications/banks-and-climate-litigation-risk-navigating-the-low-carbon-transition/ Spacey Martín, R., et al. (2024). The (in)coherence of adaptation taxonomies. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4874598 Spacey Martín, R., et al. (2025). Empirically assessing corporate adaptation and resilience disclosures using AI. Grantham Research Institute. https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2025/09/working-paper-430-Spacey-Martin-et-al.pdf Standard Chartered. (2024). Guide for Adaptation and Resilience Finance. Standard Chartered. https://www.sc.com/en/adaptation-resilience-finance-guide/ Stuart-Smith, R., et al. (2021). Attribution science and litigation: Facilitating effective legal arguments and strategies to manage climate emissions. FILE Foundation. https://www.smithschool.ox.ac.uk/sites/default/files/2022-03/attribution-science-and-litigation.pdf Surminski, S., & Tanner, T. (2016). Realising the “Triple Dividend of Resilience”: A new business case for disaster risk management. Springer. https://link.springer.com/book/10.1007/978-3-319-40694-7
Verschuur, J., et al. (2023). Systemic risks from climate-related disruptions at ports. Nature Climate Change. https://www.nature.com/articles/s41558-023-01754-w United Nations Environment Programme [UNEP]. (2024). Emissions Gap Report 2024. UNEP. https://lsecloud-my.sharepoint.com/personal/r_spacey-martin_lse_ac_uk/Documents/-%20https:/www.unep.org/resources/emissions-gap-report-2024 United Nations Environment Programme Finance Initiative [UNEP FI]. (2021). Liability risk and adaptation finance. UNEP FI. https://www.unepfi.org/themes/climate-change/liability-risk-and-adaptation-finance/ United Nations Environment Programme Finance Initiative [UNEP FI]. (2024). Adaptation Gap Report 2024. UNEP FI. https://www.unep.org/resources/adaptation-gap-report-2024 United Nations Environment Programme Finance Initiative [UNEP FI]. (2025a). Database: Sustainability Risk Tool Dashboard. UNEP FI. https://www.unepfi.org/themes/climate-change/the-sustainability-risk-tool-dashboard/ United Nations Environment Programme Finance Initiative [UNEP FI]. (2025b). Practical Guidance on Implementing Adaptation and Resilience for Banks. UNEP FI. https://www.unepfi.org/industries/banking/adaptation-resilience-guidance/ World Business Council for Sustainable Development [WBCSD]. (2025). Adaptation planning for business: Navigating uncertainty to build long-term resilience. WBCSD. https://www.wbcsd.org/resources/adaptation-planning-for-business-navigating-uncertainty-to-build-long-term-resilience/?submitted=true World Wide Fund for Nature [WWF]. (2024). Living Planet Report 2024 – A system in peril. WWF.
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Figure 2. Global temperature trajectories by 2100 under different policy scenarios. Figure reflects policies up to November 2024.
Figure 3. Number of climate litigation cases filed in national courts, globally (to end of 2024). Source: Setzer and Higham, 2025.
References: The Paris Agreement, adopted by 195 countries in 2015, is a treaty that aims to limit global temperature increase to well below 2°C, with efforts to limit warming to 1.5°C. Global warming levels are calculated relative to a pre-industrial (1850-1900) climate and averaged over a period of at least 20 years.
What’s the state of play for multinationals today?
ESG in 2025:
Stakeholder impetus remains strong
Mitigating risk and building resilience
In Asia, recent moves by countries including China, Japan and Singapore to implement the sustainability disclosure standards set out by the International Sustainability Standards Board (ISSB) highlight a desire among many regional administrations to raise the bar on ESG.4 Meanwhile, in the Middle East, 2025 has seen both the UAE5 and Jordan6 launch mandatory climate reporting frameworks.
ESG still very much matters in 2025 but it is evolving rapidly and presenting multinationals with new challenges. This is reflected in our latest Corporate Risk Radar research findings, which reveal that more CEOs, board members and General Counsel in 2025 rated climate change and societal risks as “high-impact” than in 2024 (rising to 44% from 31%, and 29% from 23%, respectively).10 In the current climate, companies with global operations and supply chains must not only comply with divergent and changeable sets of regulations. They may also need to reassess whether their risk frameworks remain fit for purpose, while rethinking how to demonstrate the value of their ESG activities and maintain consistency of messaging across the board. All while being alert to the heightened sensitivities that exist among different stakeholder groups around the world. It’s a fine line to tread.
Rethinking ESG?
Importantly for multinationals, the changes seek to create consistency across the EU by aligning the rules with other legislation and preventing member states from imposing stricter rules on a national basis. However, concerns have emerged in some quarters over the uncertainty that could be created, and the potential for non-EU companies to come within scope of the rules.
In the US, federal regulations requiring companies to report on the environmental impact of their operations and their climate-related risk mitigation activities (under the SEC’s Climate Disclosure Rules) have been cancelled.1 That doesn’t mean, however, that businesses will necessarily be exempt from reporting requirements, since states such as California2 (not to mention many other countries around the world) are planning and implementing their own disclosure laws. It’s estimated that around half of companies that would have fallen within the scope of the SEC’s rules will still face compliance requirements imposed by other jurisdictions. 3
Rowing back on regulations?
In 2025, the rules and rhetoric around ESG are in flux. Having risen rapidly up the corporate agenda in recent years as companies came under pressure to show leadership on environmental protection, social responsibility and good governance, suddenly the outlook for multinationals has become much more uncertain.
How can corporations with global footprints balance the retreat of ESG in some markets with rising regulatory and stakeholder expectations in others?
In some jurisdictions, terms like ESG, sustainability and climate change have become negatively charged, while in others, policy-makers are pressing on with raising ESG standards. At the same time, scrutiny over ESG performance from an influential segment of investors and other stakeholders remains intense, and the value such commitments are judged to deliver is evolving from a compliance-based definition to one tied to operational efficiencies or cost reduction.
In the European Union, regulations around ESG reporting and risk management remain rigorous, despite proposed measures to streamline EU sustainability rules, ease the burden on businesses and boost competitiveness. The “Omnibus Simplification Package” includes steps to harmonize directives relating to corporate sustainability reporting with those on due diligence, reduce the number of companies caught within the reporting requirements and postpone some obligations.
Click here to download the EU’s Omnibus Simplification Package
Against this backdrop, many multinationals today are questioning whether, and to what extent, they should rethink their ESG strategy. Here, we look at how the landscape is changing in different parts of the world and what multinational business leaders need to bear in mind as they chart a course through it.
Regulatory obligations are not the only consideration here. While there are significant reputational benefits from leading on sustainability with customers, staff and other stakeholders in many parts of the world, multinationals are acutely aware that this is no longer the case everywhere. ESG narratives must be consistent across the board, while not coming across as overzealous, or underwhelming, to different audiences.
With this in mind, some companies are choosing to focus on how ESG delivers business value from an operational efficiency or risk mitigation point of view, rather than framing it as a purely compliance exercise, or promoting its “worthiness”. Importantly, when it comes to capital allocation, demand from investors for ESG-focussed opportunities in public and private markets remains strong: not least due to their potential for value creation.7 According to a recent study, 64% of global private equity leaders said they see ESG as a viable value lever.8 No wonder global ESG assets are predicted to be worth as much as $50 trillion by the end of the decade.9 In light of this, shareholder activism is unlikely to abate.
Reference list
(2025, March 27). SEC Votes to End Defense of Climate Disclosure Rules. U.S. Securities and Exchange Commission. https://www.sec.gov/newsroom/press-releases/2025-58 Shonerd, D. (2025, July 8). State Climate Disclosure Laws: All Eyes on California…and Brussels? MultiState. https://www.multistate.us/insider/2025/7/8/state-climate-disclosure-laws-all-eyes-on-californiaand-brussels Ainsworth, W. (2025, July 1). The SEC eliminated climate rules. Other governments are doing the opposite. Harvard Business School, Institute for Business in Global Society, quoting research by non-profit organisation Ceres. https://www.hbs.edu/bigs/federal-climate-rules (2025, March 25). Asia’s Evolving ESG Disclosure Rules: Latest Updates. Compliance and Risk https://www.complianceandrisks.com/blog/asias-evolving-esg-disclosure-rules-latest-updates/ Shihabi, F. The move to mandatory reporting: Survey of Sustainability Reporting 2024. KPMG. https://kpmg.com/sa/en/insights/esg/the-move-to-mandatory-reporting.html#:~:text=The%20UAE%20has%20issued%20a,akin%20to%20other%20regional%20markets (2025, January 25) Jordan stock exchange mandates climate-related disclosures aligned with ISSB standards. XBRL. https://www.xbrl.org/news/jordan-stock-exchange-mandates-climate-related-disclosures-aligned-with-issb-standards/#:~:text=The%20Amman%20Stock%20Exchange%20(ASE,disclosures%20starting%201%20January%202027. Giese, G. and Shah, D. (2025, September 19). ESG Ratings in Global Equity Markets: A Long-Term Performance Review. MSCI https://www.msci.com/research-and-insights/paper/msci-esg-ratings-in-global-equity-markets-a-long-term-performance-review. Quoted here: https://corpgov.law.harvard.edu/2025/07/29/esg-mid-year-update-who-still-cares-and-why-you-should/#1 Wrobel, M. and Fishman, A. (2025, July 29). ESG Mid-Year Update: Who Still Cares, and Why You Should. Harvard Law School Forum on Corporate Governance. https://corpgov.law.harvard.edu/2025/07/29/esg-mid-year-update-who-still-cares-and-why-you-should/#1 Parrish, P. (2024, October 10). Why ESG assets are heading toward $50 trillion despite attacks on ‘woke capitalism’. Fortune. https://fortune.com/2024/10/10/why-esg-assets-grow-despite-attacks-on-woke-capitalism/ (2025, July 17). Corporate Risk Radar Report 2025: Operating in a web of complex risks. Clyde & Co in association with Winmark. https://www.clydeco.com/en/reports/2025/06/crr-operating-in-a-web-of-complex-risks
Richard Power Partner, London
Richard Power is a leading disputes lawyer with over 15 years’ experience in the energy sector. He specialises in complex cross-border and domestic disputes across arbitration, litigation, mediation and other ADR processes. Richard advises on commercial, corporate, regulatory and climate-related disputes, including greenwashing and Energy Charter Treaty claims.
Click here to learn more about our full 2025 findings and download the 2025 Corporate Risk Radar report.
MEET THE HOST
Seaton Gordon Partner, London
Navigating greenwashing risk in a shifting ESG landscape
Abandoning ESG reporting is a non-starter for some companies
Failure to comply with these laws and regulations can expose a company to fines — for example, CSDDD includes provisions for fines of 5% of a company’s net worldwide turnover for breaches. In August 2024, a UK energy company was fined GBP 25 million by the UK’s energy regulator Ofgem for inaccurately reporting environmental and sustainability data for 2021/2022.
Claims might be contractual, too. Large companies subject to regulations like CSRD and CSDDD are inserting climate-conscious terms in their contracts, requiring counterparties to provide accurate emissions data, backed by warranties and indemnities. Government and local authority requests for proposals (RFPs) often have comprehensive ESG sections; awarded contracts contain warranties regarding the accuracy of information presented. Breaching these warranties can lead not only to contract termination but also exclusion from future public contracts.
Conclusion
Notwithstanding reports to the contrary, there remains a plethora of legislation requiring companies to report on climate-related issues. For example, the EU’s Corporate Sustainability Reporting Directive (CSRD), and forthcoming Corporate Sustainability Due Diligence Directive (CSDDD) have recently been diluted, but still require many large companies to report on environmental and sustainability-related opportunities and risks; carry out and report on due diligence on ESG issues; and put into effect transition plans for climate change mitigation, to align with climate-neutrality. These rules affect large companies headquartered in the EU or with sufficient turnover in the EU even if registered overseas. Moreover, to the extent that they require the reporting and reduction of Scope 3 emissions, companies in the supply chain may be indirectly required to report on their emissions.
This can lead to companies postponing or reconsidering the implementation of net zero and emissions reduction strategies. Adjusting or discontinuing environmental policies can carry legal risk, particularly if the company is subject to regulations that mandate the reporting and reduction of GHG emissions or climate-related risks. But there is potentially greater risk of continuing to report/advertise emissions reduction goals and net zero plans without taking substantive steps toward implementation, as this can expose the company to the financial and reputational risk of greenwashing claims.
Misrepresentations about sustainability or emissions reductions can trigger greenwashing damages claims under many legal systems. Most jurisdictions recognise rights of action for misrepresentation or deceit — especially if these claims induce parties to enter contracts. Misstatements about environmental matters can be misrepresentations as much as misstatements about, say, asset value. Where there is deliberate falsehood, the risk is evident, but companies which report and advertise their emissions reduction plans, but don’t actually implement them, can be exposed to claims where such behaviour is considered reckless, and, in some cases, negligent.
In some jurisdictions, class actions are increasingly being brought against companies that market products as “green” or “sustainable,” such as airlines whose customers allegedly paid premiums based on misleading environmental claims.
ompanies are faced with varied signals regarding greenhouse gas (GHG) emissions reduction
and the adoption of “clean” energy like renewables. In some jurisdictions, years of consumer pressure, government legislation and regulation to encourage or require companies to report on efforts to reduce emissions and net zero initiatives have been followed by changes in policy direction, such as reduced emphasis on emissions reduction measures.
C
Greenwashing — an increasing risk
Green finance and investment further magnify the risks. Preferential loan terms may be tied to achieving specific sustainability targets, and investors increasingly avoid companies deemed pollutive or unsustainable.
Greenwashing can be caught under these laws — even where misleading claims are not explicit. For instance, oil companies might overvalue reserves based on future consumption projections that conflict with stated commitments to reduce emissions.
Under UK law (specifically sections 90 and 90A of the Financial Services and Markets Act), investors have rights to claim losses from reliance on misstatements or omissions in financial disclosures, listing particulars, or prospectuses. Civil liability may arise for companies—and individuals with managerial responsibility—where misleading statements are made in market disclosures, press releases, or financial reports, particularly if such statements are found to be knowing, reckless, or dishonest.
Recent changes in ESG reporting requirements and shifts in regulatory focus may lead some companies into thinking that ESG reporting is of no concern anymore. The truth is far more nuanced, and various legal and reputational risks may still arise from limited or inconsistent approaches to emissions reporting and the implementation of net zero policies, including potential exposure to fines, reputational harm and damages claims.
Many legal frameworks allow for action if investments are made in reliance on misleading financial statements or prospectuses, which now often include environmental data.
MEET THE AUTHOR
Is nuclear energy the key to the energy transition?
Nuclear’s second wind
here is a renewed interest in nuclear power generation given surging demands for energy. As various
governments pledge to commit more to nuclear energy, some have described the current climate as a nuclear renaissance. While this new attitude to nuclear has been touted as having the potential to revolutionise the transition to clean energy, remnants of past scepticism towards nuclear power persist. This article looks at the current state of nuclear power generation and focuses on the impact that the UK Government’s new policy statement on nuclear energy might have on the sector.
T
Small Modular Reactors: Small Modular Reactors (“SMRs”), a subset of Advanced Modular Reactors that have less power capacity than traditional nuclear reactors, are included alongside other large-scale nuclear reactors at power plants. This suggestion is made given SMRs, in comparison to traditional larger reactors, require less initial capital investment, offer scalability to manage growing power needs and can be more easily installed at nuclear power plants.
This is not the first time in modern history that interest in nuclear energy has spiked. The Blair and Bush administrations of the early 2000s invested substantially in nuclear but saw little return from their investment. For example, of the 30 nuclear reactors that were ordered by utility companies in the US under Bush, only four went into construction. Of those four, two were ultimately abandoned after more than USD 9 billion had been spent on their construction.2
Other statistics show that power generated by nuclear energy globally has been declining since the 1990s. From generating 17% of all power in the mid-1990s, only 9% of global power is generated by nuclear energy today. Although more countries have signed the COP28 Declaration to triple nuclear energy capacity by 2050, there are questions as to whether this aspiration is reasonable.
General concerns around Nuclear Energy
Is there potential for a nuclear middle ground?
However, as SMRs are still a relatively new technology, we have not yet seen their results in practice and so the total cost per unit can only be an estimate at this stage. Due to their modular nature, SMRs should have a lower upfront capital cost per unit as they can be mass manufactured and then installed locally on-site. This makes them cheaper to build and install than traditional reactors.4 However, some argue that the per unit cost of a small reactor will actually be higher because they lose out on the benefits of economies of scale.5
Delay: When compared to other sources of renewable energy such as wind, nuclear energy takes a significant amount of time to become fully operational. Each stage of the planning and construction of a nuclear power plant takes ten years to complete, and it then takes a further ten years for the plant to break even on a carbon basis.6
Another issue the power grid in England and Wales faces is that of ‘dunkelflaute.’ This is a German term to describe periods when ‘the wind does not blow and the sun does not shine.’ Whilst a slightly sombre phrase, it highlights the need to find an alternative source of green energy for when unfavourable weather conditions mean wind and solar cannot provide the energy society needs.
As a result, and given the crucial role uranium plays in nuclear power generation, efforts should be focused to ensure that there are sufficient uranium resources in the medium term. 7
As the world revolves more around big tech and the increasing energy requirements that come with it, governments and private companies alike are looking for a clean energy solution.
Therefore, whilst a nuclear power plant takes around 30 years to build and break even on its carbon emissions, a wind turbine would do the same in around 18 months. In this sense, nuclear energy, and specifically SMRs, should be understood as a long-term commitment to climate change, rather than a short-term solution.
Costs: Traditional power plants are notoriously expensive to build and operate. Recent plants, such as the Vogtle reactor in the US and Hinkley Point C in the UK cost an estimated USD 37 billion and GBP 46 billion respectively to get up and running. From this perspective, there is clearly a need for change and it is hoped that deployment of SMRs will provide this. Steps are being taken in this regard, with Rolls Royce recently being chosen as the preferred bidder to work with Great British Energy - Nuclear on its SMR solution at three sites in the UK.3
What’s next?
Department for Energy Security and Net Zero. (2025, February). National Policy Statement for nuclear energy generation (EN-7): Response and new consultation [PDF]. GOV.UK. https://assets.publishing.service.gov.uk/media/67a4e0a68259d52732f6ae08/national-policy-statement-en7-nuclear-consultation.pdf Gunter, L. P. (2021, September 26). The record-breaking failures of nuclear power. Beyond Nuclear International. https://beyondnuclearinternational.org/2021/09/26/the-record-breaking-failures-of-nuclear-power/ and McLeod, H. (2017, August 1). Utilities ditch reactors that launched U.S. nuclear renaissance. Reuters. https://www.reuters.com/article/world/utilities-ditch-reactors-that-launched-us-nuclear-renaissance-idUSKBN1AG22R/ Department for Energy Security and Net Zero. (2025, June 10). Rolls-Royce SMR selected to build small modular nuclear reactors. GOV.UK. https://www.gov.uk/government/news/rolls-royce-smr-selected-to-build-small-modular-nuclear-reactors GOV.UK International Atomic Energy Agency. (n.d.). What are Small Modular Reactors (SMRs)? IAEA. https://www.iaea.org/newscenter/news/what-are-small-modular-reactors-smrs Beyond Nuclear International. (2024, April 10). The record-breaking failures of nuclear power. Financial Times. https://on.ft.com/4jKkjOh Beyond Nuclear International. (2024, April 10). The record-breaking failures of nuclear power. Financial Times. https://on.ft.com/4jKkjOh Austria, V. (2025, April 8). Sufficient uranium resources exist, however investments needed to sustain high nuclear energy growth. IAEA. https://www.iaea.org/newscenter/pressreleases/sufficient-uranium-resources-exist-however-investments-needed-to-sustain-high-nuclear-energy-growth Beyond Nuclear International. (2024, April 10). The record-breaking failures of nuclear power. Financial Times. https://on.ft.com/4jKkjOh Beyond Nuclear International. (2024, April 10). The record-breaking failures of nuclear power. Financial Times. https://on.ft.com/4jKkjOh Water Power Magazine. (2025, May 6). Drax confirms strong outlook, rules out participation in cap and floor scheme for Cruachan II. WaterPower. https://www.waterpowermagazine.com/news/drax-confirms-strong-outlook-rules-out-participation-in-cap-and-floor-scheme-for-cruachan-ii/
Earlier this year, the UK government published an updated draft National Policy Statement for Nuclear Energy Generation (“EN-7”).1 EN-7 emerged from a consultation which assessed the reforms that could be made to the UK’s power grid through the use of nuclear energy, though notably, it extends only to exercise of powers in England and Wales, given devolution of powers to Scottish and Northern Irish Ministers. The consultation closed in April 2025, with a final version of EN-7 expected to be laid before Parliament in Autumn 2025.
National Policy Statement for Nuclear Energy Generation
EN-7 proposed three key changes to the nuclear energy system, with the aim of bringing greater dynamism and flexibility to the nuclear power industry in England and Wales:
Criteria-based approach: The previous National Policy Statement (“EN-6”), imposed a strict criteria system for nuclear power plant development, identifying a set number of locations where nuclear power plants could be developed by a specified date. EN-7 encourages a less constricted development approach by allowing plant developers to select their own sites based on a specified, but less rigid, set of criteria.
Removal of deployment deadline: EN-7 has removed the 2025 deployment deadline that was implemented under EN-6. The UK Government cited the reason for this change as giving more flexibility to nuclear projects, in the hope that the overall development process would be expedited.
It is therefore not surprising that the proposals made under EN-7 are facing scepticism. The main hesitations are:
We will, therefore, not be able to say if SMRs truly represent a low-carbon, lower-cost solution to the energy problem until their capabilities have been tested in practice.
Uranium resources: Long-term investment into nuclear energy raises questions around the suitability of current uranium extraction efforts. According to projections set out in Uranium 2024: Resources, Production and Demand (the latest edition of the uranium reference produced jointly by the OECD Nuclear Energy Agency and the International Atomic Energy Agency), there are sufficient uranium resources to power society’s growth needs through to 2050. However, there are a number of factors which may hinder uranium exploration in the future. These include stricter regulatory processes and technical difficulties in the exploration process.
A suggested solution to ‘dunkelflaute’ is to utilise nuclear power in parallel to other sources of renewable energy, given nuclear energy is constant and does not depend on the same external factors. Some say that SMRs are actually not needed; rather, we should aim to extend the life of old nuclear reactors which would bridge the renewable energy gap for the time being.8
To this end, some countries have already started recommissioning their older nuclear reactors, with Japan reopening 14 plants since the Fukushima disaster in 2011.9
While nuclear power is an option, it remains to be seen whether policymakers will overcome the challenges that come with the nuclear power generation. We must not forget that other alternatives are also competing to balance power systems that are reliant on variable renewable generation. It may be possible that the development of large-scale battery energy storage systems overtake nuclear in the shorter term. In addition, pumped hydro storage might provide other solutions although they have their own cost challenges, as the recent decision by Drax to pause its Cruachan expansion project shows.10 However, it is likely that nuclear energy will play a key role in both domestic and global power generation moving forward.
Victoria Peckett Partner, London
Ross Deuchars Associate, London
Ariana Chis Associate, London
Marianne Anton Partner, London
Ariana is an Associate in the Commercial and Professional Disputes team, specialising in advising accountants, auditors, and insolvency practitioners on professional negligence claims and regulatory investigations. She has experience in commercial litigation, including defending civil claims against auditors, and frequently assists firms with regulatory matters involving bodies such as the FRC and ICAEW. During her training contract, Ariana developed expertise in international arbitration, (re)insurance coverage disputes and commercial litigation, and advised on energy sector disputes and grid connection arrangements.
Ross is an Associate in the Energy, Marine and Natural Resources team. He has represented corporations involved in arbitrations under a variety of rules and in litigation before the English Court. Ross has particular experience in international disputes involving commodities, energy, mining, natural resources, and shipping disputes.
MEET THE Authors
Laura Ranz Senior Associate, Madrid
David Ktshozyan Senior Counsel, Los Angeles
Miguel Lozano-Salazar Associate, London
Neil Beresford Partner, London
Miguel is a Colombian qualified lawyer in our IFPD department in London. He works on complex and cross-jurisdictional disputes, including domestic and international arbitration across Latin America.
Laura joined Clyde & Co’s Madrid office in 2020, bringing experience from leading national firms. She specialises in litigation and dispute resolution, handling domestic and international claims. Her focus includes construction, fire-related matters, insurance coverage disputes, tort law, and professional indemnity. Laura advises clients through pre-litigation stages and out-of-court settlements, and collaborates with lawyers and experts globally to monitor cross-border claims.
Environmental impact of AI
It is perhaps well known now that the quality of AI depends on the volume of data it has access to, and AI companies are seeking larger and larger data centres to facilitate their programs. These data centres are often located in temperature-controlled buildings that house a wide variety of computing infrastructure, such as servers, data storage drives and network equipment. Further, the use of Large Language Models - machine learning models designed to respond to and generate human language for uses such as response or code generation, language translation or tool use with external applications, to name just a few use-cases - currently requires around ten times more electricity than a standard web search.
The environmental impacts associated with AI use also have implication for businesses, including insurers. Failing to account for the environmental impact of AI can expose businesses to a range of risks.
In the first instance, there is the risk of reputational damage, if stakeholders perceive a lack of environmental responsibility, potentially eroding customer trust and brand value. Secondly, there is a genuine risk of regulatory breaches, as governments and international bodies consider varying environmental reporting and sustainability requirements.
What are the associated risks for businesses
What could be the next steps?
In the EU, the recently introduced AI Act does seek to improve transparency regarding AI’s environmental impact but does not (yet) establish a full set of standards and requirements.
When it comes to creating and using sustainable artificial intelligence, the challenge lies in striking a balance between environmental protection and avoiding the deceleration of AI development.
Does the EU AI Act tackle environmental impacts and related risks?
Finally, businesses may face liability risks if AI-related operations contribute to environmental harm, leading to litigation or regulatory penalties.
What are the environmental impacts?
The overall environmental impact of AI can be divided into two key categories: direct emissions, which includes those from the energy consumed during computing, as well as consumption of other resources such as water, mineral extraction, pollution and the production of e-waste; and indirect emissions, which arise from the related tasks AI has to undertake in order for the tool to be readily available, including the development of AI applications and machine learning.
This calculation does not yet take into account the energy needed to train artificial intelligence or the water consumption in order to cool the data centres.
The environmental impact of AI and its related risks therefore cannot be overlooked.
Environmental regulatory reporting requirements can require businesses to account for environmental impact in a business’ supply chain and while there may not yet be specific language in most regulatory rules that takes account of the impact of AI use, this may change in the future as the environmental impact of AI increasingly becomes the subject of public debate.
Even though the AI Act does not contain reporting obligations and foresees solely limited disclosure, companies need to be aware that the AI Act cannot be seen in isolation. In particular, the EU Energy Efficiency Directive already focusses on energy efficiency in the information and communication technology sector and, in particular, on energy consumption of data centres. Moreover, the non-financial reporting obligations under the EU framework remain of relevance. With the current uncertainty regarding the level and scope of non-financial reporting obligations that the EU will commit to in the long term, it remains crucial for businesses to stay up to date with the regulatory developments in the EU.
rtificial Intelligence (AI) has become an integral part of daily business operations in companies.
While the most common risks of using AI, such as false information or hallucinations, are widely discussed, a more subtle yet equally important risk for businesses to consider is the impact of their usage of AI on the environment.
A
Notably, the EU AI Act requires the providers (being the developer) of general-purpose AI models (in simple terms being AI models which are trained with a large amount of generalized data, and which are capable of performing a wide range of distinct tasks and allowing a variety of applications, GPAI) to maintain technical documentation, including an energy consumption breakdown. Such information can be requested by the AI Office and national competent authorities. This obligation does not extend to “deployers”, that is, those who use GPAI.
In other parts of the AI Act, considerations of sustainability and environmental impact are treated in a non-binding manner, with Article 95 of the EU AI Act stating that “deployers” of AI should be subject to a (voluntary) code of conduct which includes an obligation to assess and minimise the impact of AI systems on environmental sustainability. These codes have not yet been created, thus businesses should closely monitor future developments and consider draft codes, once published.
Are there any positive impacts which should also be considered?
It should not be discounted that AI can also facilitate the mitigation of environmental risks. It can identify patterns, detect anomalies and anticipate and forecast future results, helping governments, organisations and individuals to make more sustainable decisions.
A promising field is the optimisation of efficiency and resources in agriculture or in transportation, as well as power grids, which are becoming increasingly complex due to a growing range of contributors via private solar energy generators.
AI systems can improve environmental monitoring by spotting emerging patterns when analysing large datasets, and can be used to track climate change, deforestation, air and water quality, biodiversity, and wildlife. Such monitoring can assist in preventing disasters through adequate warnings and risk mitigation, and in doing so, help businesses forecast risk and help, for example, insurers provide adequate and targeted insurance cover.
While it is necessary for companies to stay up to date regarding the use of AI, companies should also consider the regulatory and reputational risks that might result from the environmental impact of AI.
For businesses, it is important not to discount the impact that AI usage has, and to consider whether current environmental policies or laws require the impacts associated with AI use to be disclosed. However, while the environmental impact of AI is a challenge that must be navigated with due care and consideration, embracing its potential responsibly is key to staying innovative, competitive, and prepared for the future.
Jasmine Zamprogno Associate, Munich
Dr. Sophia Henrich, LL.M. Counsel, Munich
Dr. Sven Förster Partner, Munich
Jasmine is an Associate and Australian-qualified lawyer with experience in multi-party, high-value litigation, including class actions, construction claims and reinsurance disputes. She has represented insurers as both coverage and defence counsel, primarily in financial lines. Since joining Clyde & Co, Jasmine has advised on complex cross-border insurance coverage issues, litigation before the European courts, and mergers and acquisitions involving international insurers and brokers.
(...)These codes have not yet been created, thus businesses should closely monitor future developments and consider draft codes, once published.
Jorge Carrasco Managing Director of Blockchain and Digital Assets at FTI Consulting
Lucy Nash Legal Director, Dubai
Vyasna Mahadevey Associate, Dubai
Jorge Carrasco is a blockchain and digital assets consultant based in Dubai, advising financial institutions, regulators, and enterprises on strategy, compliance, and innovation. With 15+ years of experience, he specialises in tokenisation, stablecoins, and Web3 adoption across the Middle East, delivering impactful solutions at the intersection of tech and finance.
From production to disposal:
Navigating the legal risks of plastics
Plastics pose risks throughout this lifecycle. During production, emissions and chemical spills can harm workers and nearby communities. In the use phase, micro- and nanoplastics are released through everyday activities such as tire wear, textile washing, and marine operations. Disposal is equally problematic, with mismanaged waste leading to widespread environmental contamination and health hazards. Research has linked chemical additives like bisphenols, phthalates, and flame retardants to serious health issues, including endocrine disruption, reproductive harm, and cognitive disorders. Micro- and nanoplastics are also under increasing scrutiny for their potential to cause gastrointestinal and systemic harm, although the science is still developing.
To better understand the social and economic costs of plastics, the Minderoo Foundation collaborated with Boston College and Clyde & Co. Their research found that the harms caused by certain chemicals are well-established, with global costs exceeding USD 100 billion annually. Other harms, particularly those related to microplastics, are still emerging but are expected to be significant. For instance, microplastics may severely impact wastewater treatment systems and ecosystem services. Some harms, such as those affecting marine natural capital, remain under-researched, but could have profound long-term consequences.
Liability pathways
Several hypothetical case studies can be used to illustrate how these claims might unfold.
Employees exposed to phthalates at work could develop diseases and sue their employers. While the duty of care is clear, proving causation is challenging due to widespread exposure and multiple potential sources. Courts may consider relaxing causation standards, as they have in asbestos litigation, but this is not guaranteed.
In conclusion, plastics liability is a rapidly evolving area of risk with significant implications for insurers, regulators, and corporations. As scientific understanding deepens and legal frameworks adapt, the potential for large-scale litigation and regulatory action grows. Stakeholders are encouraged to monitor developments closely, support transparency, and prepare for a future where plastics-related liabilities may become as prominent as those related to asbestos or climate change.
Employee claims
From a legal perspective, plastics-related claims may arise through several pathways: health risks, harm to nature, economic harm, and corporate wrongs. Health risks involve individuals exposed to harmful chemicals through their work, consumer products, or environmental factors. Harm to nature includes environmental contamination and biodiversity loss. Economic harm encompasses damage to infrastructure, such as water treatment plants. Corporate wrongs involve greenwashing, shareholder claims, and failures to mitigate known risks.
Surfers Against Sewage. (2025, August). Plastic pollution: Facts & figures. https://www.sas.org.uk/plastic-pollution-facts-figures/ Clean Growth Fund. (2025, April). More than trash: The carbon cost of plastic. https://www.cleangrowthfund.com/more-than-trash-the-carbon-cost-of-plastic/ UN Environment Programme. (2023, May). Chemicals in plastics: A technical report. https://www.unep.org/resources/report/chemicals-plastics-technical-report
The lifecycle of plastics begins with the production phase involving oil and gas extraction, followed by petrochemical processing and polymer creation. Plastics are then used across a wide range of industries, including consumer goods, packaging, textiles, electronics, and construction. Finally, the disposal phase includes recycling, incineration, landfilling, and, in many cases, mismanagement.
The scale of the issue is significant: approximately 400 million tonnes of plastic are produced annually, yet only 9% is recycled1. The remainder is either incinerated, landfilled, or mismanaged, contributing significantly to environmental degradation. Moreover, the production of plastics accounts for 4–5% of global greenhouse gas emissions2 and involves over 13,000 chemicals3, many of which are toxic.
Consumers exposed to microplastics through food packaging, for example, would face significant hurdles in bringing product liability claims. They would need to prove that the product was defective, that the microplastic caused their illness, and that it came from a specific product and manufacturer. These claims are currently difficult to substantiate, although proposed EU product liability reforms may shift the burden of proof to manufacturers in complex cases.
Communities near landfills contaminated by microplastics could bring public liability claims. These claims also face causation challenges, though class actions may be attempted. However, establishing a valid class and linking exposure to harm remains difficult.
Polluters, including municipal entities and manufacturers, may face claims from regulators, NGOs, and the public. While primary polluters, such as landfill operators, are more directly liable, manufacturing polluters may also be targeted, especially if their products contributed to contamination. Alternative legal theories, such as market share causation—where liability is apportioned based on market share—are being explored but are not yet widely accepted.
ith growing awareness of the environmental, health, and legal implications associated with the production, use, and disposal of plastics, plastics liability is an increasingly pressing concern.
Why are plastics a concern?
Claim scenarios
Consumer claims
Public liability claims
Environmental liability claims
Legal landscape
NGO activism is increasing, with lawsuits being brought against major corporations like Coca Cola, Danone, Exxon, Nestlé, and PepsiCo for failing to manage plastic risks. Regulators are also using environmental laws to demand remediation and impose restrictions. Meanwhile, international negotiations are underway to establish a legally binding plastics treaty, which would cover the entire lifecycle of plastics and address both environmental and health impacts.
The potential for plastics-related claims is growing. If we return to the claim pathways discussed above, most of those pathways are only expected to result in moderate claims activity due to the challenges of proving causation. However, the potential severity of claims is expected to be high, particularly if legal standards shift or scientific consensus strengthens. The exception is harm to nature, which is seen as having moderate severity due to its typically localised impact.
MEET THE AUTHORs
Natasha Lioubimova Legal Director, London
Patrick Murphy Partner, London
Chris Hill Partner, London
Litigation surge and insurer strain:
Navigating the social inflation crisis
ocial inflation is the trend of significant increases in verdicts and costs associated with civil litigation – increases that exceed general economic inflation without a demonstrable change in legal or factual bases to substantiate it. Often, these
increases are best characterised by large awards of USD 10 million or more, which have become known as “nuclear verdicts.” These rising litigation costs and unpredictable verdicts can have an enormous impact on businesses and industries, including higher insurance premiums.
S
Between 2016 and 2022, United States tort costs grew at an average annual rate of 7.1%. This far exceeded the average annual inflation rate of 3.4% and the average annual GDP growth of 5.4% over the same time period.1 According to a study published in May 2024 by the US Chamber of Commerce Institute for Legal Reform, approximately half of the nuclear verdicts reached in the United States between 1 January 2013 and 31 December 2022 were between USD 10 million and USD 20 million; over one-third were between USD 20 million and USD 50 million, and the remaining 19% exceeded USD 50 million. 115 of these verdicts were for USD 100 million or more. Nuclear verdicts in product liability cases are increasing in size far more quickly than in other cases. The median value of nuclear verdicts in product liability cases increased by 50% between 2013 and 2022. Four states accounted for half of the United States’ nuclear verdicts: Florida, California, Texas, and New York.2
Rising verdicts
This has a direct impact on insurers, who have experienced a notable uptick in claims costs across various lines of business, including automotive and trucking liability, product liability, commercial liability, and professional liability. For example, a 2022 study attributed USD 20.7 billion in commercial auto losses from 2010 to 2019 (14% of the total claims paid during that period) to loss development factors unexplainable by regular increases in economic inflation.3 Social inflation has also contributed to a decline in underwriting profitability, as higher claim payouts outpace revenue growth. Casualty underwriters, in particular, have had to balance the long tail of claims that have been developing for a number of years (such as asbestos or opioid claims) against claims occurring in the present.4
Social inflation is typically blamed on three main factors: (1) increased involvement of third-party litigation funding, especially in personal injury and wrongful death claims; (2) shifts in the societal perception of litigation, including negative public sentiment regarding corporations; and (3) the use of psychological tactics by plaintiffs’ attorneys to influence jury decisions by playing to their emotions and pre-existing biases.
The impact on liability lines
Shifts in the Societal Perception of Litigation
Use of Psychological Tactics
While the tactic of pitting the “greedy corporation” defendant against the “sympathetic individual” plaintiff is hardly a new tactic for plaintiffs’ attorneys, recent changes in societal perception have made this strategy even more effective.
First, the public is shifting towards a more negative view of corporations. A recent Pew Research survey showed that 71% of United States adults feel that corporations are negatively affecting the country’s trajectory.6 It is anticipated that this trend will only continue as the composition of jury pools shift to Millennial and Gen Z age groups.
One common example that has seen increased use in litigation is the “reptile theory,” wherein plaintiffs’ attorneys rely on Golden Rule arguments (e.g., asking the jurors to put themselves in the shoes of a plaintiff, and make decisions based on what they would want to occur, were they the individual requesting relief) to encourage jury decisions based on personal interest and bias rather than the presented evidence. In essence, plaintiffs’ attorneys will attempt to convince jurors to react emotionally, with sympathy and empathy, regardless of the factual evidence presented in a given case.
Similar to their use of “small individual” plaintiff pitted against “big greedy corporation” defendant arguments (above), plaintiffs’ attorneys have increasingly engaged in further psychological tactics to appeal to jurors’ emotions.
While the above may paint a grim picture of the escalating trends of social inflation and nuclear verdicts, there is no denying that businesses, insurance professionals, and defence attorneys are aware of the issues at this point. Defence attorneys have strategies in place to combat both social inflation and nuclear verdicts, including looking at early claims resolution, defining clear litigation strategies at the start of litigation, and developing strong trial themes to convince juries to follow the facts rather than their emotions. Additionally, while the supreme courts of many states have recently rolled-back prior legislation limiting or capping non-economic damages, others, such as Florida and Texas, have recently enacted tort reform measures specifically aimed at insurance markets in an effort to alleviate their status as “judicial hellholes.”
Second, the public is becoming desensitised to large amounts of money. From the claims of plaintiffs’ firms about settlement amounts, to lottery jackpots, to the sale of Twitter (now X) to Elon Musk, the public is inundated with large numbers in the media. That has an effect on how the public quantifies and perceives money. In a recent YouGov survey, respondents believed that 10% of households have an annual income of USD 1 million or more, and that 20% of households earn USD 500,000 or more. However, the US Census Bureau has reported that less than 0.5% of households earn USD 1 million or more, and 1% of households earn USD 500,000 or more.7
Increasing Third-Party Litigation Funding
The United States is the largest third-party litigation funding (“TPLF”) market, accounting for a 52% share of this global, multi-billion-dollar industry. A December 2021 publication by the Swiss Re Institute identified TPLF as a contributing factor to the trend of social inflation in the United States, noting that it increased the frequency of large claims, reduced insurability, contributed to the surge in plaintiffs’ attorney advertising, and increased litigation costs by extending the timeline of cases before resolution could be reached.5
U.S. Chamber of Commerce Institute for Legal Reform. (2024). Tort costs in America: An empirical analysis of costs and compensation of the U.S. tort system (3rd ed.). U.S. Chamber of Commerce Institute for Legal Reform. (2024). Nuclear verdicts: An update on trends, causes, and solutions. Lynch, J., & Moore, D. (2022). Social inflation and loss development. Casualty Actuarial Society and Insurance Information Institute. Moorcraft, B. (2020, January 3). What is social inflation, and why is it hurting insurance? Insurance Business. https://www.insurancebusinessmag.com/us/news/breaking-news/what-is-social-inflation-and-why-is-it-hurting-insurance-194478.aspx Swiss Re Institute. (2021). US litigation funding and social inflation: The rising costs of legal liability. Dunn, A., & Cerda, A. (2022, November 17). Anti-corporate sentiment in U.S. is now widespread in both parties. Pew Research. https://www.pewresearch.org/short-reads/2022/11/17/anti-corporate-sentiment-in-u-s-is-now-widespread-in-both-parties/ Orth, T. (2022, March 15). From millionaires to Muslims, small subgroups of the population seem much larger to many Americans. YouGov. https://today.yougov.com/topics/politics/articles-reports/2022/03/15/perceptions-size-muslims-millionaires-united-states Moriarty, J. P. (2023, January 17). Social inflation: Fighting back against the rise in nuclear verdicts. DRI. https://www.dri.org/newsletters/2023/social-inflation
Jestina Mascaro Associate, Boston
Another common example is “anchoring,” where plaintiffs’ attorneys request an exorbitantly high and arbitrary damage award to manipulate the jury’s sense of expected fair compensation. While the use of “reptile theory” tactics are generally disfavoured by Courts, a defence attorney must actively object to their use before the Court can act (through motions in limine and/or oral objections during trial). Most jurisdictions, however, do not have any rules against anchoring unless the number given is truly arbitrary, and strategies to deal with this tactic must be planned by defence attorneys based on the rules of the jurisdiction.8
Natasha Lioubimova Partner, London
Navigating the AI risk frontier:
Liability, copyright & regulation
There are already several dozen reported decisions around the world in which legal professionals have faced warnings and/or been sanctioned in such contexts, from being referred to disciplinary bodies, to having to compensate other parties or lawyers, to being fined. Websites such as AI Hallucination Cases Database – Damien Charlotin1 track these decisions.
We are also now seeing claims arising from the unauthorised use of copyrighted material to train AI platforms.
For example, in February 2025, Thomson Reuters (owner of the legal research platform Westlaw) sued Ross Intelligence, a new competitor, for copyright infringement alleging that, after Thomson Reuters denied Ross’s request to license its content, Ross trained its AI using LegalEase Bulk Memos, which were built from Westlaw’s headnotes.
Copyright Infringement
Regulation
As companies increasingly release their own AI technology, and use content to train that AI technology, insurers are likely to see an increase in claims related to the use of copyrighted material to train AI technology.
The recent proliferation in the use of AI in cyber-attacks, including by deep fake technology, voice clones, and phishing attacks, raises concerns about increased frequency and severity of claims.
CYBER-ATTACKS: Frequency and Severity
More recently, on 4 June 2025 Reddit, Inc. sued Anthropic, PBC in California Superior Court for breach of contract, unjust enrichment, trespass to chattels, tortious interference, and unfair competition because Anthropic allegedly used, without authorisation, Reddit’s content to train its AI technology.
Charlotin, D. AI hallucination cases database. Damien Charlotin. https://www.damiencharlotin.com/hallucinations/
Click here to watch the webinar Navigating the AI risk frontier
rtificial Intelligence (AI) presents tremendous opportunities for organisations and professionals to
Professional Liability
However, AI tools are imperfect and their unchecked and undisclosed use creates risks of professional liability and copyright infringement. What’s more, the use of AI in cyber-attacks may lead to greater frequency and severity of claims, and risk of exposure of private information. As a result, AI regulation is at the forefront of many jurisdictions, each of which will need to grapple with how best to control its use and growth.
Professionals face exposure to liability when using AI tools, particularly when they are not allowed to do so or when they have not addressed the use and risks of these tools with their clients and others who may be adversely affected by AI-generated errors.
Legal professionals who appear before the courts and are therefore subject to regular external oversight and published warnings and sanctions in judgments are perhaps the most visible example of this exposure to
Non-existent authorities or quotations; or
Significant and obvious mischaracterisations of existing authorities.
AI-generated errors are not caught before a professional’s work or advice is used in large-scale projects or widely disseminated, or perhaps relied upon by a Court in a published decision.
The examples of the decisions involving legal professionals suggest that education is required amongst professionals of all types about the unchecked and undisclosed use of AI.
In granting Thomson Reuters summary judgment, the United States District Court, District of Delaware, found that Ross infringed on 2,243 of Westlaw’s headnotes. The district court further found that Ross’s defences of innocent infringement, copyright misuse, merger, scenes à faire, and fair use all failed. In May 2025, the district court stayed the case and certified an interlocutory appeal to the Third Circuit Court of Appeals to answer the questions of: (1) whether the Westlaw headnotes and Key Number System are original as a matter of law, and (2) whether Ross’s alleged use of the Westlaw headnotes was fair use.
For instance, Threat Actors utilise Generative AI models to create phishing emails which appear more convincing than those written without the use of AI. Threat Actors can often mimic the tone and language of a target organisation to trick victims into social engineering attacks, which continue to be the most common method of cyber-attacks.
Deep fake technology has also created opportunities for large-scale attacks. In Hong Kong, a deep fake of a company’s Chief Financial Officer was used to convince a finance worker at a multinational firm into sending USD 25 million to a Threat Actor. The scheme involved the worker attending a video call with whom he believed to be the CFO and other staff, but all of whom were, in fact, deep fake clones.
AI is not infallible. In the deep fake example, for instance, there are certain “tells” when the technology is being used (for instance, there may be mismatches between speech and mouth movement). However, as AI technology improves, organisations will need to be alert to the nefarious use of such programs.
professional liability. Despite warnings in recent years from various regulators of legal professionals about the use of AI in producing legal work, legal professionals around the world have been caught bringing before the courts, legal authorities or arguments hallucinated by generative AI, generally in the form of:
In the above cases, the quantum of damages is often limited because the use of the AI-generated error is caught early and has limited negative consequences on others. However, there are situations in which the exposure could be far greater. For example, if the
Dave Dhillon Senior Counsel, Toronto
Daniel B. Palmer Senior Counsel, New Jersey
Prachi Shah Senior Counsel, Montréal
Meredith White Associate, London
Steven Crocchi Senior Associate, Phoenix
digest, process and compute large amounts of information.
Typically, victims can prevent such attacks by being alert to poor grammar or an awkward turn of phrase in correspondence. However, with the use of AI, Threat Actors have an opportunity to clean up messages before sending them through. What’s more, AI can automate the process of creating and sending phishing emails, allowing Threat Actors to launch large-scale campaigns with minimal effort.
The European Union’s AI Act (“AI Act”) is considered the world’s first comprehensive legal framework on AI, aiming to regulate the development, deployment, and use of AI systems in the EU. Specifically, the AI Act uses a risk-based classification system for AI systems, with different levels of compliance requirements depending on the potential harm they pose which are categorised as: (1) unacceptable risk; (2) high risk; (3) limited risk and (4) low risk. Another one of the main objectives of the AI Act is to address the challenges of combating algorithmic bias and ensuring robust protection against discrimination in high-risk AI systems—such as those used in hiring, credit scoring, or healthcare. In contrast, there currently is no comprehensive federal legislation or regulations in the United States that regulate the development of AI or specifically prohibit or restrict its use. Many states though, including California, Colorado and Maryland, have introduced or enacted AI-related legislation concerning areas like algorithmic discrimination, deepfakes, and transparency requirements.
But it is crucial to note that the regulatory landscape in the US is constantly evolving, with ongoing developments and new guidance emerging including those set forth in President Trump’s proposed H.R. 1, the One Big Beautiful Bill Act.
James Frake Ph.D., CPhys, MSaRS - Managing Scientist - Materials Science and Electrochemistry, Exponent
Climate change and insurability:
A growing challenge for the insurance sector
Both courts emphasised the duty of nation states to regulate private actors, including corporations. This has direct implications for corporates including insurance companies, as it signals increased scrutiny of corporate climate impacts and emissions reporting. The Inter-American Court went further, setting out expected legislative measures that nation states can take for companies to conduct climate due diligence and reduce emissions, mirroring trends in European sustainability regulation.
Another notable case, Lliuya v. RWE AG, attempted to link corporate emissions to climate harm abroad. While ultimately unsuccessful, the court recognised the potential for transboundary liability and affirmed that private companies can be held accountable for their climate contributions.
US Litigation
Insurers should also note the emergence of coverage disputes, such as Aloha Petroleum Ltd v. National Union Fire Insurance Company of Pittsburgh et al, which addressed the applicability of pollution exclusions in climate-related claims.
Canada’s climate policy landscape is currently unsettled, with key initiatives like carbon pricing and EV mandates under review. While climate litigation remains nascent, cases against governments are gaining traction, and pressure is mounting for actions against private actors. The insurability crisis is particularly acute in Canada, where 10% of households are highly exposed to flooding but lack access to flood insurance.
CANADA
In the United States, climate litigation is unfolding on multiple fronts. Municipalities have filed suits against fossil fuel companies for allegedly concealing climate risks, with the Honolulu v. Sunoco case potentially heading to trial in 2026. Meanwhile, states like New York and Vermont have introduced “climate Superfund” laws, imposing fees on major emitters to fund adaptation projects. These laws are now facing federal challenges on constitutional grounds.
Two landmark advisory opinions from the Inter-American Court of Human Rights and the International Court of Justice have reinforced the notion that climate change is a human rights issue. While these opinions are not legally binding, they carry significant persuasive authority and are expected to influence national courts, planning decisions, and climate policy.
Europe has emerged as a hub for strategic climate litigation. Historically focused on governments, recent cases increasingly target corporations. The Milieudefensie v. Shell case in the Netherlands, for example, saw the court impose a duty of care informed by human rights and climate science, although a fixed emissions reduction target was later overturned on appeal. Nonetheless, the principle of corporate accountability remains intact.
Globally, climate-related insured losses have exceeded USD 100 billion annually since 2020, with 2025 projections surpassing USD 200 billion. This has led to rising premiums and reduced availability of cover, particularly in high-risk regions such as California, Florida, and parts of Canada. In the UK, average home insurance premiums rose by 20% in 2024.
Despite the challenges, the transition to a net-zero economy presents opportunities for insurers. Regulatory bodies, including the UK’s Prudential Regulation Authority, are urging insurers to assess transition risks and align underwriting with climate goals. Initiatives like the Partnership for Carbon Accounting Financials (PCAF) offer frameworks for measuring and reducing insurance-associated emissions.
Innovative products such as parametric insurance and carbon credit cover are gaining traction, while insurers are increasingly involved in supporting climate technology and renewable infrastructure projects. The Geneva Association has set out a vision of how early engagement with green tech project developers can improve insurability and accelerate commercialisation.
limate change is influencing the liability landscape, with insurers experiencing
evolving challenges. Rising litigation and increasing concerns around insurability, especially in higher-risk areas, are contributing to a more complex environment.
Human Rights and Corporate Accountability
Opportunities in the Transition
As courts expand their scrutiny of corporate climate conduct and regulatory expectations grow, insurers must adapt their underwriting strategies to address both emerging legal risks and the volatility of a rapidly changing market.
European Litigation
Climate change is influencing legal, regulatory, and market dynamics, with potential implications for insurability and underwriting. As litigation trends evolve and financial impacts increase, insurers must adapt, both to mitigate risk and to seize the opportunities associated by the transition to a low-carbon economy.
Konrad Krebs Senior Counsel, New Jersey & San Francisco
Wynne Lawrence Partner, London
Insurability
Sam Tate Partner and Global Head of Regulatory & Investigations, London
Ben Knowles Partner & Chair of the Global Arbitration Group, London
Jared Kangwana Managing Partner, Nairobi
Rebecca Kelly Managing Partner, Brisbane
Eva-Maria Barbosa Partner & Chair of the Global Corporate & Advisory Group, Munich
The evolving risk landscape through the lens of leading decision-makers
Corporate Risk Radar
Risk around the world
Click here to download the report
The Corporate Risk Radar 2025: Part 2
ach year we conduct research among more than 400 business leaders from around the world
on the risks they face and their preparedness to mitigate against them for our Corporate Risk Radar report. The second part of this report delves deeper into a multitude of interlinking risks, from geopolitical instability, regulatory complexity, and economic challenges to AI and cybercrime, and zooms in on attitudes across geographies and industries.
E
When it comes to views on risk around the world, our research reveals that while there is consensus among business leaders on some threats, the impact of many others varies significantly across regions, including the potential for business disruption and the onus of regulatory requirements. Multinational companies and those with cross-border operations are grappling with a range of solutions as they seek to bolster resilience.
In the UK, businesses are more concerned than the global average about the risk of market disruption, technology and AI over the next five years (78% of UK respondents versus 67% globally). One way to get ahead of these threats is to build flexibility into contracts, such as by including tariff, sanctions, inflation or currency adjustment clauses.
Dealing with disruption
Meanwhile in the Middle East, disruption stemming from geopolitical volatility looms large. Over half (55%) of businesses are worried about unexpected trade route blockages (higher than any other region), while the same proportion cited complex global sanctions as a major challenge. As a result of tariff and policy decisions, a higher proportion than the global average is actively considering making changes to where they operate (51% of respondents in the Middle East versus 46% globally).
Climate change and environmental, social and governance (ESG) issues are key areas of regional divergence. More than half (54%) of US respondents said they expect a lower focus on ESG compliance and reporting, due to changes instigated by the government. At the same time, climate change has slipped down the agenda in the country, with 44% saying it will be a second order concern until there is a sustained or material impact to their business.
Sustainability in the spotlight
The inclination to do so is even more pronounced in the Asia Pacific region, where 58% of respondents said their businesses are reconsidering where they operate for the same reasons. Rising labour costs are seen as a critical issue here too (as in several other parts of the world): which may also influence decision-making around where operations should be located.
Other potential risk mitigation options include reconfiguring supply chains, honing business continuity plans, and even acquiring assets along the value chain to increase control and reduce third party exposure.
By contrast, meeting different climate change obligations and ESG reporting rules is seen as particularly challenging in Europe, where 56% of business leaders said navigating US and EU requirements is negatively impacting their business (against a global average of 46%).
It’s interesting to compare this with responses from the Middle East and the UK, where respondents reported lower levels of concern about the impact of climate and ESG-related regulatory change and said that climate change continues to be an area of focus.
Being prepared
As with other regulations, meeting a patchwork of changeable ESG rules means businesses must be agile. Strategies include regularly reassessing risk so resources can be prioritised appropriately and taking a nuanced approach to how regulations are interpreted.
Some are shifting from reactive compliance to proactive engagement, and turning regulatory knowledge into a strategic asset that can deliver competitive advantage, or deploying technology to implement compliance programmes effectively. Above all, it’s vital to recognise that, today, a ‘one-size-fits-all’ approach does not guarantee adherence to rules across different regimes.
Just as the challenges and opportunities vary across regions, so too does preparedness. With risks taking new shape and changing direction all the time, we are seeing a diverse range of strategies being deployed to embed resilience and drive growth opportunities.
Evolving regulation is also an issue when it comes to AI. For example, 62% of respondents in Latin America believe their business is struggling to cope with rapidly evolving AI, data privacy and cybersecurity regulations. Multi-layered governance is required to ensure that policies, safeguards and controls keep pace with technological change, while training, investment in skills and technology, and clear direction from leadership are vital.
Learn more about these issues – and discover many other fascinating findings – in the Corporate Risk Radar Report Part 2.
Eva-Maria Barbosa Partner and Chair of the Global Corporate & Advisory Group, Munich
Tariff turbulence
Agility is key and thanks to their large balance sheets and global reach, MNCs are often better-placed than smaller companies to pivot their operations in rapidly evolving conditions by switching to alternative trade routes or negotiating agreements with suppliers in new geographies. Beyond helping them manage risk, this can be a source of opportunity and competitive advantage.
Seizing advantage: AI insights and agility
While at the start of the year, tariffs were being targeted at countries, now specific industry sectors and types of products have come into the frame, marking a return to how tariffs have traditionally been imposed. How this will play out is as yet unclear, but there could be both positives and negatives.
Where next?
Undertaking a contractual review process is another important step well-prepared MNCs can take. Companies need to understand how they are protected (or not) in the event of tariffs being imposed on certain products or countries – i.e. how any additional costs will be borne, and what their liabilities (or rights) are should they or their counterparties be prevented from performing their obligations. Armed with this knowledge, businesses can better map risk and take steps to renegotiate terms where possible.
(2025, September 1) Uncertainty is the new tariff, costing global trade and hurting developing economies. UN Trade and Development (UNCTAD). https://unctad.org/news/uncertainty-new-tariff-costing-global-trade-and-hurting-developing-economies (2025, Oct 8). Why Donald Trump’s tariffs are failing to break global trade. The Economist. https://www.economist.com/finance-and-economics/2025/10/08/why-donald-trumps-tariffs-are-failing-to-break-global-trade Shalal, A. (2025, October 8). IMF chief says global economy doing ‘better than feared,’ downside risks dominate. Reuters https://www.reuters.com/world/china/imf-chief-says-global-economy-doing-better-than-feared-risks-remain-2025-10-08/
2025 has certainly been a turbulent time for global trade, and with changes to tariff regimes around the world hitting the headlines with unprecedented regularity, maintaining stability amid the upheaval has become business-critical. As the year draws to a close, there’s a sense that the situation with regard to the introduction of retaliatory tariffs has calmed down somewhat compared to the frenetic activity of the spring, but that the era of volatility is far from over. Across continents, multinational corporations (MNCs) we speak to have largely accepted that the unpredictable nature of the macroeconomic environment – whether from tariffs or other geopolitical forces – is here to stay. That doesn’t mean, however, that they are either passive or powerless in the face of it.
Restructuring supply chains and business models
Nevertheless, plenty of mechanisms are being deployed to enable them to cope with the situation they find themselves in, from planning for future tariff premiums by adjusting pricing, to reevaluating and restructuring supply chains, to re-thinking their business strategy.
Increasingly, companies are harnessing the power of artificial intelligence (AI) to try to plan ahead and mitigate risk. Using both historical and real-time data, AI models can perform complex tasks such as demand forecasting, predictive analytics, inventory optimisation, or risk modelling, providing vital insights which in turn inform decision-making. So, even though the outlook remains unclear, companies are empowered to plot out options to maintain business continuity as they look forward, or even identify previously unseen ways to derive benefit as circumstances change.
Of course, new tariffs may come out of leftfield, and staying ahead of the game is extremely challenging. Yet businesses can still bolster their resilience by keeping track of tariffs as they happen using their own or dedicated third party resources (such as Clyde & Co’s Tariff Tracker) to monitor developments in near real-time, or participating in business continuity planning exercises, where different scenarios are simulated to test and hone responses and/or develop action plans.
Alongside higher prices and reduced profitability for affected businesses, there’s the potential for greater retaliatory action by national governments where its economy relies heavily on a particular sector. On the other hand, targeting certain industries (such as steel) may suggest that other sectors (e.g. textiles) are not in focus, giving businesses in those sectors a degree of certainty to allow them to plan accordingly.
could benefit from much-needed trade flows. According to the International Monetary Fund (IMF), the global economy has weathered 2025 reasonably well considering it was only forecasted to grow by 3% this year. Does this resilience bode well for next year? Who knows – but as the head of the IMF recently warned: “Don’t get too comfortable.”3
For businesses with international footprints or global supply chains, the outlook on tariffs is far from benign, and uncertainty is the only certainty. However, there are several levers MNCs can pull to safeguard their interests, build greater resilience into their operations and spot ways to take advantage. From logistical changes to legal protections, tariff tracking to AI-powered data analytics, risk modelling and business continuity planning: in 2026 MNCs may need them all.
It’s been said that uncertainty over where tariffs will go next acts as a “de facto” tariff in itself1: the unpredictability of policy shifts raises costs, creates additional risks for business investment, and in turn undermines growth. Indeed, we are seeing many multinationals taking a “wait and see” approach when it comes to major investment decisions.
When it comes to reorganising supply chains, tactics include diversifying to suppliers in new locations where the tariff burden is lower, such as in Latin America, or Southeast Asia via the adoption of a ‘China Plus One’ strategy, where producers in other Asian countries are brought in alongside Chinese manufacturers to reduce reliance on Chinese exports. Alternatively, MNCs are looking at onshoring production by switching the emphasis to local supply lines to make production ‘tariff light’. Some MNCs are going further and shifting their business models from an international to a more country-based structure by establishing individual subsidiaries in different jurisdictions.
Facing up to headwinds
From harnessing AI to restructuring supply chains and re-thinking business models, multinationals are taking a proactive approach to tariff turbulence despite ongoing uncertainty
Scenario planning and contractual protections
Overall, despite the challenges, there is cause for cautious optimism. Higher prices have not triggered spiralling inflation and, at the time of writing, the feared repercussions of an all-out trade war have failed to fully materialise.2
Stay up to date when new tariffs are announced with our Tariff Tracker – which lists countries and products affected by new tariffs, sends alerts to your inbox and links to relevant articles giving perspectives from around the world.
Policy-makers may be prompted to take further steps to safeguard their economies by negotiating more free trade agreements. Meanwhile emerging economies
Leon Alexander Partner, APAC
Robbie Pilcher Associate, APAC
A sector in motion:
Insights from the MGA market
This value is being recognised by carriers, with 57% expecting to increase their MGA capacity over the next two years, while 46% say they have already increased their allocation in the past 12 months. Crucially, nearly three-quarters (74%) have not reduced their deployment of capacity despite rising capital costs, underscoring the strategic importance of MGAs in helping insurers adapt to evolving market conditions.
Key challenges persist
At the same time, broader economic uncertainty is adding pressure. Over half of MGAs (54%) and 69% of carriers report a negative impact on business from current market conditions. Yet rather than slowing momentum, this is prompting firms to rethink operations, accelerating digital adoption and driving greater efficiency.
Optimism around the benefits of emerging technologies and the value they can provide continues to grow, however. Around two-thirds of MGAs (65%) and carriers (66%) believe AI will play a supportive role in improving decision-making and operational performance. Whether through automated underwriting or faster claims triage, MGAs are increasingly using technology to deliver leaner, smarter, and more scalable solutions that meet the demands of a modern market.
A positive outlook on innovation
Among both MGAs and carriers, dissatisfaction expressed with the claims process over previous years has escalated, now representing a clear point of tension which needs to be addressed. Despite ongoing efforts across the market, 77% of MGAs say the claims process needs improvement - up sharply from 59% in our previous report in 2023. This view is even more pronounced among carriers, with 91% acknowledging the need for clearer, faster, and more customer-focused handling.
MGAs are increasingly viewed by carriers as essential partners, valued for their ability to respond quickly to market demands, underwrite specialist risks, and bring agility to complex and evolving insurance environments.
The report also explores emerging growth areas such as parametric insurance, climate risk solutions, and expansion into underdeveloped European markets. With growing investment in AI and data, MGAs are increasingly differentiated by their ability to deliver tailored, tech-enabled insurance solutions.
The sector continues to thrive
This year’s MGA Opinion report, produced in collaboration with the Managing General Agents’ Association (MGAA) to canvass the views of carriers and MGAs from across the market, highlights a maturing MGA sector that is not only navigating change but actively shaping it.
This continued support is also reflected in the appetite for innovation. Carriers are not only backing MGAs with capacity, but also increasingly turning to them to develop new lines of business. Specialty lines (29%), financial lines (20%) and property (17%) are among the top areas where carriers expect to provide capacity to MGAs in 2025.
Regulation is still seen as a major constraint on growth. Nearly half of MGAs (46%) and a third of carriers (34%) cite regulatory demands, particularly around Consumer Duty and Fair Value, as the biggest barriers to MGAs entering new markets or launching new products.
This year’s report reflects a sector that remains dynamic and forward-looking, even as it faces mounting pressure from both economic volatility and regulatory scrutiny. MGAs continue to stand out for their ability to adapt, innovate, and deliver specialist solutions in a market that demands speed, precision and resilience. Rob Crossingham, Partner at Clyde & Co
This report confirms what we’re seeing across the market - MGAs are now integral to the insurance value chain. Far from being solely a niche channel, they drive product innovation, accelerate digital transformation, and provide carriers with the specialist insight needed to navigate today’s complex risk landscape. As trusted partners, MGAs are well-placed to help insurers adapt, grow, and deliver greater customer value in a rapidly evolving environment. Mike Keating, CEO of the MGAA
Click here to download the MGA report 2025.
Michael Payton Chairman, London
Marcella Hill Partner, London
Isabel Simpson Partner, London
Henry Kirkup Partner, Manchester
Rob Crossingham Partner, London
Rosehana Amin Partner, London
Tom Tippett Partner, London
Mike Keating CEO, Managing General Agents’ Association (MGAA), London
Mike has been CEO of the Managing General Agents’ Association (MGAA) since September 2020, bringing with him a successful and diverse career in the insurance industry. Mike’s leadership and influence have been recognised on a global scale, with his inclusion in the Insurance Business Global 100 list for the second consecutive year in 2024.
GUEST
of carriers set to increase MGA capacity in the next two years, despite growing market pressures
57%
Almost half (46%) of insurance carriers said they had increased capacity to MGAs in the past 12 months
46%
of MGAs say the claims process needs improvement, a concern echoed by 91% of carriers
77%
MGAs (46%) and more than a third (34%) of carriers cite regulation as the biggest barrier to growth for MGAs
MEET THE CONTRIBUTORS
Sam Lawton Ph.D., CSci - Managing Scientist - Materials Science and Electrochemistry, Exponent
GUEST SPEAKERS
Dr Frake is an engineering physicist with extensive experience in technical consulting across product development, failure analysis, safety, and regulatory compliance. He has worked on technologies including batteries, medical devices, sensors, and metrology systems, and across sectors from healthcare to energy and consumer goods. His PhD focused on quantum semiconductor devices, developing expertise in precision measurement, cryogenics, and RF electronics. Before joining Exponent, Dr. Frake worked as a consultant at Sagentia Ltd., a science, technology and product development consultancy in Cambridge, UK.
Virtual assets, such as cryptocurrencies and digital tokens, offer fast, low-cost payment solutions, often outperforming traditional banking systems in speed and efficiency. However, these benefits come with significant risks.
The report estimates that illicit addresses received nearly USD 41 billion in 2024, with the true figure potentially nearer USD 51 billion. Stolen funds also increased by 21% to USD 2.2 billion, with private-key compromise accounting for nearly 44% of stolen crypto, predominantly by North Korean hackers.
The evolving risk landscape
In Dubai, the Virtual Assets Regulatory Authority (VARA) regulates virtual asset activities, while the Dubai International Financial Centre (DIFC) has its own crypto regime overseen by the Dubai Financial Services Authority (DFSA). The Abu Dhabi Global Market (ADGM), Abu Dhabi’s financial centre and free zone, is regulated by the financial services regulatory authority (FSRA).
Case study: The Bybit attack
Recent research by blockchain company Chainalysis1 demonstrates that cryptocurrencies are a prime target for cybercriminals.
While some jurisdictions have taken steps to regulate or ban virtual assets altogether, others are favouring a more deregulated approach aimed at fostering investment and innovation.
Cryptocurrencies, such as Bitcoin and Ethereum, are particularly attractive to cybercriminals due to their liquidity. Hackers can swiftly convert tokens into cash, without significantly impacting their value, reducing the risk of detection or seizure.
The lack of harmonised regulation globally has allowed cybercriminals to launder money anonymously and move assets across borders with ease and minimal oversight.
A stark reminder of the sector’s vulnerabilities came with the recent cyber theft by North Korea’s Lazarus Group of 401,000 Ethereum (equivalent to approximately USD 1.5 billion) from a cold “offline” wallet belonging to Dubai-based cryptocurrency exchange Bybit.
Although Bybit’s main vaults were not breached in the cyber incident, hackers exploited third-party software to manipulate the user interface seen by exchange employees. This enabled seemingly routine transactions to be redirected to wallets controlled by the threat actors.
“The UAE is definitely ahead of other countries in this space, and it seems likely that regulators will continue to monitor and update their laws and regulations, so that they can align with a rapidly developing virtual assets environment,” says Ms Jones. “In Dubai, VARA has created regulations and rule books, which put a lot of focus on cyber security. For example, crypto platforms are required to appoint a chief information security officer, as well as implementing a cyber security policy, which has to be updated annually.”
Lessons and repercussions of the Bybit attack
The Bybit incident highlights the critical importance of supply chain security and the need to audit cybersecurity systems of third-party vendors.
The incident also underscores the need for greater global cooperation between law enforcement agencies and regulators to create a safer and more secure ecosystem for virtual assets.
While such incidents may dent market confidence in the short term, they also pave the way for greater transparency, stronger regulation, and enhanced international collaboration in the long run.
Rebekah Jones Senior Associate, Dubai
Global regulation lags behind risk
As virtual assets grow in popularity, so too does the threat of cyber theft, both in value and sophistication. At the same time, fragmented regulatory approaches and uneven enforcement across jurisdictions are leaving critical gaps that cyber criminals are continuing to exploit.
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“Crypto operates on blockchain technology, which is essentially a ledger where everything is recorded,” explains Rebekah Jones, a senior associate at Clyde & Co’s Dubai office. “While this allows for the tracking of ownership and movement of digital currency, it also creates anonymity, as a wallet address does not display a name. This makes it very challenging to trace cyber criminals.”
Regulation in the UAE
The UAE provides an example of a jurisdiction that has gone to great lengths to implement specific regulations, rules and guidance relating specifically to cybersecurity measures for virtual asset firms.
The theft, believed to be the largest cryptocurrency theft on record, caused the price of major tokens to drop significantly and prompted regulators worldwide to revisit the cyber resilience of cryptocurrency exchanges.
Chainalysis. (2025). 2025 Crypto Crime Report introduction. Retrieved from https://www.chainalysis.com/blog/2025-crypto-crime-report-introduction/
In Dubai, VARA has created regulations and rule books, which put a lot of focus on cyber security.
Tokenising the real world
Latest insurance news and opinions to help you navigate the unknown
Emerging Risk
Title
By XX
Partner
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of respondents saying their organisations now use it in at least one business function, up from 33% IN 2023.
A global AI survey by McKinsey found that genAI usage jumped sharply last year, with
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AI is often described as a “force multiplier”3 – meaning that early adopters can make progress faster and faster as AI augments their capabilities, leaving the rest falling further behind. This applies to every industry, not just ‘high-tech’ sectors. For example:
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Organisations without AI capabilities may struggle to meet evolving legal expectations, risking fines, sanctions, or reputational harm
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Singla, A., Sukharevsky, A., Yee, L., Chui, M., & Hall, B. (2025, March 12). The state of AI: How organizations are rewiring to capture value. McKinsey. https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai (2023, June 1). Generative AI to become a $1.3 trillion market by 2032, research finds. Bloomberg Intelligence. https://www.bloomberg.com/company/press/generative-ai-to-become-a-1-3-trillion-market-by-2032-research-finds/ Ringdahl, K. (2025, April 14). Generative AI is the greatest force multiplier in agile history. Forbes. https://www.forbes.com/councils/forbestechcouncil/2025/04/14/generative-ai-is-the-greatest-force-multiplier-in-agile-history/
Jan Spittka Partner, Düsseldorf
Lamisse Bajunaid Partner, Jeddah
Contributors
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yber threats are one of the fastest-evolving risks companies face, so staying ahead of regulatory compliance and being prepared for whatever malicious actors may have in store next is vital and challenging in equal measure.
Our podcast series is designed to enhance organisations’ visibility over key developments, upcoming issues and emerging threats, providing critical insights and analysis to help mitigate risk and improve preparedness, should a data breach or cyber attack occur.
Rosehana Amin Partner
Authors
5 key steps
employers should take when using AI in the workplace
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Contents
