Legal impact of climate change:
What “risk & liability” really means for corporations
Jan 6, 2026
Synopsis
Infrastructure projects face new legal risks due to climate change. Courts, regulators, and lenders now expect companies to foresee and manage climate impacts. Failing to do so can lead to compliance failures, contractual breaches, and significant liabilities. Companies must integrate climate risk assessment into their core operations and governance to ensure future resilience and avoid legal repercussions.
In infrastructure, we build for decades. Roads, metros, ports, power plants, logistics parks, transmission lines - these are long-life assets that sit at the intersection of geography, engineering, regulation, finance, and public trust. Climate change unsettles all five.
2024 was confirmed as the warmest year on record globally, and notably, the first calendar year where the annual global average temperature exceeded 1.5°C above pre-industrial levels. In 2025, the world stayed in that elevated risk zone, continuing an exceptionally high warming trend, accompanied by cascading impacts from floods, heat and wildfires.
What has changed in the last few years is not merely the science of climate risk, but the legal and liability architecture around it. Courts, regulators, lenders, insurers, and communities are converging on a simple proposition: if climate risk was foreseeable and material, failing to assess and manage it can become a compliance failure, a contractual breach, or a liability event.
This article offers a practical way for corporations, especially in infrastructure, to think about climate change as a risk-and-liability assessment problem, not a “CSR chapter” problem.
Climate risk is now a legal risk
Three main legal developments are tightening the loop between climate and liability.
1. First, courts are explicitly linking climate harm to fundamental rights.
In M.K. Ranjitsinh v. Union of India (2024 INSC 280), the Supreme Court recognised that the “right to be free from the adverse effects of climate change” is intertwined with Articles 14 and 21 of the Constitution. For corporations, the point is not academic: the constitutional framing encourages deeper scrutiny of state action and project impacts, especially where vulnerable communities and ecosystems are involved.
2. Second, NGT’s remedial toolbox is built for environmental harm and restitution.
Section 15 of the National Green Tribunal Act, 2010, empowers the Tribunal to award relief, compensation, and restitution of the environment. In infrastructure disputes, where the impact may be geographically concentrated and highly visible, this liability pathway becomes meaningful.
3. Third, disclosures are moving from “nice to have” to “regulated statements.”
SEBI’s BRSR Core framework and the move towards standardised ESG reporting show that sustainability data is no longer just a “good-to-have” narrative but rather, increasingly being treated as information that investors rely on and regulators may scrutinise. As a result, when companies publish climate or ESG metrics in formal, regulated disclosures (often with expectations of verification), inaccuracies can shift from being a reputational problem to a compliance and enforcement risk. Combined with global disclosure standards such as IFRS S2, the direction is clear: climate-related information is fast becoming decision-grade data used for capital allocation, risk pricing and corporate accountability.
The ‘Climate change liability’ triangle
For practical risk assessments, it may be useful to treat climate liability as a triangle:
1. Regulatory and statutory liability (permissions, conditions, penalties)
Infrastructure lives and dies by approvals and ongoing conditions: environmental clearance, consents, forest and wildlife permissions, coastal rules, local permits, and operating conditions.
The EIA Notification, 2006, remains a cornerstone of pre-project scrutiny - prior environmental clearance is required for listed projects and expansions. Once conditions attach to an approval, non-compliance can become a direct enforcement issue, often with site stoppages, remediation directions, and adverse orders. And the “teeth” exist in statute. Section 15 of the Environment (Protection) Act, 1986 provides for penalties that can include imprisonment and fines for contraventions of the Act/rules/directions.
2. Contractual liability (EPC, PPP, O&M, supply chain)
Climate change shows up in contracts as:
• Time and cost overruns triggered by extreme weather disruptions
• Design and performance failures where assets are not resilient to foreseeable climate stressors
• Force majeure disputes (and the more uncomfortable cousin: “foreseeability” arguments)
• Interface risk: where multiple contractors/authorities contribute to a failure, and liability allocation becomes contentious
In infrastructure, contractual liability is amplified by two realities: long duration and thin tolerances. A few days of outage can cascade into liquidated damages, termination events, and financing covenant stress.
3. Litigation and reputation liability (courts, communities, “social licence”)
Climate litigation is rising globally; in India, environment and land-use disputes routinely attract PIL/NGT attention. When projects are perceived to externalise harm - flooding, dust, heat impacts, coastal vulnerability - community action often becomes a litigation trigger. Even where the project is lawful, documentation quality (risk assessment, mitigation plans, consultations, monitoring) often decides how defensible the project feels under scrutiny.
Why is infrastructure uniquely exposed?
Climate risk often has two faces:
• Physical risks: heat, intense rainfall, floods, storms, sea-level rise, landslides, drought and water stress
• Transition risks: policy shifts, carbon constraints, disclosure duties, technology change, financing standards
Infrastructure is a front-line sector because it is:
• Asset-heavy and location-locked (you can’t “pivot” a port)
• Systemically connected (roads, power, water, telecom are often interdependent)
• Public-facing (failures are visible and politically salient)
• Long-lived (design assumptions made today must hold under future climate conditions)
And the liability is not theoretical. Tribunals have shown willingness to impose penalties and remediation directions where environmental processes are bypassed, or violations are established, for instance, the NGT’s penalty and afforestation directions in an illegal road construction matter in the Spiti Valley.
Governance as part of the legal defence
One under-appreciated Indian legal hook is corporate governance itself.
Section 166 of the Companies Act, 2013 states that directors must act in good faith in the best interests of stakeholders and “for the protection of environment.” This matters because climate risk management is increasingly viewed as a board-level diligence issue: if the risk was material, what did the board know, and what controls did it mandate?
In parallel, SEBI’s sustainability reporting architecture (including BRSR Core and standardisation) pushes companies toward stronger internal controls over ESG data and claims. Once climate disclosures form part of regulated reporting, weak data governance is no longer merely a reputational risk - it becomes a potential compliance and enforcement issue.
What does a defensible climate risk & liability assessment look like?
It would be useful to evaluate the readiness of infrastructure companies across four layers:
1. Materiality and mapping
• Identifying physical and transition risks across the entire asset lifecycle: design → construction → operations → decommissioning.
• Pinpointing legal touchpoints: approvals, consent conditions, safety norms, disclosure obligations.
2. Controls thatmatch the risk
• Documented, formal climate-resilient design assumptions (as opposed to informal practices that are inconsistently employed).
• Clear allocation of risks in contract clauses that reflect climate realities rather than wishful thinking.
• Monitoring systems that can prove compliance, not just state it.
3. Disclosure discipline
• Treating climate statements as regulated communications.
• Ensuring ESG metrics have an audit trail.
• Aligning internal reporting with external claims, because often, it is within the marketing functions that greenwashing risk begins.
4. Incident readiness and remediation playbooks
• A climate-linked disruption is not only problem for the Operations team. Because beyond fixing operations it triggers coordinated action across legal, contracts, finance, insurance, compliance and communications to manage notices, evidence, and liability
• Early investigation, evidence preservation, regulator engagement, and community communication can reduce escalation.
Closing thought
Infrastructure is where climate risk becomes human: a flooded underpass, a cracked embankment, a community cut off after a landslide. In those moments, liability is rarely decided by intention but rather by foreseeability, diligence, documentation, and response.
If we build for the future, our legal risk frameworks must also live in the future, not in last decade’s assumptions.
[By Ruchi Agnihotri,
The writer is an Advocate, Legal Consultant, Arbitrator & Independent Director.]
[The Economic Times]
