Banking Industry Faces Legal Scrutiny: The Potential Impact of Climate Change Lawsuits on the Financial Sector, Encouraging Systemic Transformation

In a significant development, a coalition of NGOs is pursuing a case against BNP Paribas in France, alleging that the bank's continued support for fossil fuel expansion violates its obligation to prevent human rights and environmental harms linked to its business activities, under the French corporate duty of vigilance law. This case mirrors a similar lawsuit against ING Bank in the Netherlands, demanding that the bank aligns its portfolio with a 1.5°C warming limit and stops financing businesses that continue to expand fossil fuel projects.

The outcomes of these cases will determine how climate risks are recognized as a financial liability and whether financial institutions will be legally required to phase out high-emission investments. If courts uphold the claims, banks could be mandated to reduce their financed emissions, creating a legal duty to prevent and phase-out high-carbon investments.

Successful litigation could influence financial regulators and central banks, reinforcing the need for tougher oversight of climate risks in the financial system. Moreover, high-carbon projects rely heavily on external funding and other financial services. If banks are legally responsible for the emissions they finance, companies seeking financing will face stronger demands for emissions transparency and credible climate transition plans.

Climate advocates are applying the same logic to banks, arguing that if fossil fuel companies must reduce their emissions, then financial institutions bankrolling them should also do so. This shift in perspective could potentially transform the global investment landscape, placing the financial sector squarely in the frame of climate accountability.

These lawsuits rest on an evolving legal foundation, using national tort laws, corporate responsibility statutes, and human rights frameworks to argue that banks have a duty of care towards their clients, society, and the environment. A binding court decision could inform emerging policy frameworks on sustainable finance, providing legal justification for measures that steer capital away from high-emission sectors.

Notably, the International Court of Justice has issued an advisory opinion confirming that climate change leads to infringements of human rights and that the law has a role in addressing these issues. This opinion suggests that the climate due diligence and duty of care of banks may be subject to increased litigation.

Since the Paris Agreement, the world's 65 largest banks have financed fossil fuels by a staggering US$7.9tn. In 2024, a Dutch court of appeal ordered Shell to reduce its emissions, affirming that companies can be held legally accountable for their contribution to global warming. If successful, these cases against banks could shift the ground rules of global investment and hold the financial sector accountable for its role in the climate crisis.

However, the name of the plaintiff in the 2025 lawsuit against ING Bank in the Netherlands is not publicly disclosed. Successful litigation against banks exposes them to increased litigation risk, regulatory scrutiny, and reputational damage. ING is currently being summoned to appear in court in the Netherlands to be held accountable for its role in financing the fossil fuel companies driving climate change.

A number of cases against financial institutions around the world are raising questions about the extent of the responsibility of banks for reducing emissions of their financial services. These legal battles promise to reshape the financial landscape, potentially pushing banks to align more closely with the Paris climate accord's scientific urgency to reduce greenhouse gas emissions. Every year of delay makes it more difficult and costly to avoid irreversible damage.

Banking Industry Faces Legal Scrutiny: The Potential Impact of Climate Change Lawsuits on the Financial Sector, Encouraging Systemic Transformation