COP26: Moving Money, Banks and Lawsuits

In our final conversation with CEO of ClientEarth, James Thornton, the role environmental NGOs play in speeding up actions and moving money in the right direction is explored – with examples of how being unafraid to take on the big guns could reap the desired rewards.

David: Law can unquestionably play an important role in environmental activism. What, in your view, is the role of environmental NGOs today?

Banks and money

James: The role of environmental NGOs is very important. They are able to speed up society’s understanding of these problems and then speed up the action of politicians, corporations in dealing with them.

Even though people are now pretty well on track to understand that there are problems, the movement that we’re making towards solving them is just too slow. Some will take action in the form of demonstrations. Some, like me, will take action in the form of bringing lawsuits.

David: There’s such pragmatism to the approach with ClientEarth, like constantly trying to work out what way you can get to this ideal end point. But, it seems that you have to keep the horizons so broad because a one-channel approach isn’t going to necessarily get you there.

James: If you’re going to save the environment, you have to move the money in the right direction. So you have to move trillions of dollars away from investment in fossil fuels, coal, oil, gas and all of that. You have to move all that money to renewable energy, for example. So, how do you do that?

Environmental law on its own isn’t enough because it regulates bad behaviour, but it doesn’t go to the heart of the money – and the decisions about where money go and the responsibilities of how to spend money in the right way.

So you need to think, how do you look at securities law as if it were environmental law? How do you look at banking as if it were environmental law? And we’ve been doing very cool things. We just wrote a letter to 17 of the world’s biggest banks, because they want to give a lot of money to Shell to develop new oil and gas field.

We wrote to the banks saying, look, you are going to be encouraging the development of the oil and gas field in such a way that it will make it harder to meet the Paris Agreement. You will, we think, be violating your fiduciary duty to your shareholders. You may be liable to lawsuits from your shareholders for this behaviour. So withdraw from this deal now.

Now that was very public and I made it very simple, but it’s a very long legal letter. If they’re smart, they’ll decide ‘well, we’re not going to fund this’. If they don’t, there is the potential then for litigation against them to stop the funding. Now, six years ago, I wouldn’t have thought that we could do that.

But now, we look at all of these other specialities, areas of law that can be used just as much for the environment as environmental law itself. I love the synergies that you get when you bring all these areas of law. It’s very dynamic.

David: That type of process of writing a letter to send to the bank that sounds like quite fun to me.

Well, it is – you’re right. Law can seem very dry and on its own – it is dry. But what I can do with it is very exciting. Just so powerful. I’ll give you another example, since we’re talking about banks.

So, you know we were saying, how do you move the money in the right direction? Well, the EU has something called the Green Deal. Everything we do as the EU must look at the environment and give an environmental benefit. It’s a beautiful concept – and then the question, as always, is what does it mean in the real world? So a nice idea, but does it actually mean anything?

Then the EU decided it was going to do what’s called quantitative easing, where they were going to put a lot of money in to help the economy post-COVID – and a lot of money, €750 billion.

A good idea from an economic point of view; to help the economy after COVID-19, so we said, is it actually going to meet the terms of the Green Deal? With all that money, will it help Europe move towards being greener?

We looked at analysis from the London School of Economics and the European Central Bank, which was simply going to buy bonds, which is how you do this, according to a standard formula.

The London School of Economics Grantham Institute looked at that and said, well actually that standard formula would mean that over 60% of this money went to fossil fuel in one way or another – to oil companies, or to other possibly related entities – so it’s not green at all.

And so €750 billion, you put towards the green economy. But within that €750 billion, more than 60% is put towards the fossil fuel economy and you’re moving backwards. So we said, what can we do about that? We said, we think this is illegal under the Green Deal and under the Treaty of Europe. We’ve looked at how the bonds are actually bought and then the bonds would be bought by six central banks.

James Thonton and David McKeown

So we sued the central Bank of Belgium and said this bond purchase that you’re about to do violates the Green Deal and violates the Treaty of Europe. You’re an entity of the government and you’re required to look at the environmental impact of this. You just can’t do it.

It also kind of met a lifetime goal of mine, of suing a central bank! So we’ll see where we go.  But if we go to the European court and win, then what will happen is cool.

One of the interesting things about using law the way we do is it’s like playing 60 chess games, looking ahead and playing this very good game. Because what we’re trying to do is ask, how do you influence that quantitative easing decision?

The woman who runs the European Central Bank, Christine Lagarde, wants to do the right thing. She actually wanted that bond purchase to foster the Green Deal, but the bank governors said,

“No, we have a very narrow mandate. We can’t look at the real-world impact of our decision, only the fiscal impacts, the financial impact.” Which is just madness.

We said sorry, no, took them to court. And if we win in the European court, then Christine Lagarde will get the space to do what she wanted to do, but didn’t have the power to do.

So again, if you go into the system and look at it holistically, how can you move that money to get a good green result? You put all these pieces together and then find a lever, which just happened to be banking law.

Let’s see if we win. But win or lose it’s a very good shot.


Find out more about our ClientEarth Conversation Series online where you can also book your place on the Environment and Energy Law Society roundtable to discuss the issues raised in the series with fellow staff and students.

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