Legal Strategy Disrupted: Managing Climate Change and Regulatory Transformation

Abstract

The effects of climate change on the natural, economic, political, and social environments of business will be broad and substantial. The legal environment of business is not immune from these forces. In fact, as this article explores, law is both a necessary means to address climate change disruption and itself a source of disruption. Regulatory measures to buffer the shocks of climate change and facilitate the innovation necessary to mitigate and adapt to it are likely to disrupt industries and firms. Drawing on legal and management theory, the field of legal strategy identifies the conditions and actions through which firms can engage with the legal environment to protect as well as enhance their value. However, as this article shows, the legal strategy literature does not adequately account for the legal, regulatory, and other transition risks arising from the expanding scope and changing modes of regulatory responses to climate change. Accordingly, to adapt legal strategy to the impending age of regulatory change and transformation, this article advances a conception of legal strategy that embraces resilience as an indicator of firm value.

Keywords: legal strategy, climate change, transition risk, corporate sustainability, sustainable finance, ESG, financial regulation, private standards, resilience