In November, members of the Philippines’ House of Representatives introduced a draft law that proposes a “loss and damage-focused legal framework”. If passed, this would be a world first. Emily Bradeen, Tiffanie Chan and Catherine Higham outline the bill’s innovative provisions and explain how it reflects broader trends in climate change laws and litigation.  

The Climate Accountability Act (CLIMA), a bill currently before the Philippines Congress, seeks to hold corporate actors to account for their contributions to climate change. Given that the Philippines is a nation extremely vulnerable to the harmful impacts of the climate crisis, Filipino legislators are proactively seeking to establish mechanisms to help alleviate loss and damage from climate change (forecast by the Philippines Department of Finance to reach close to $10 billion over the next decade) while also pursuing calls for climate justice.

What is the Climate Accountability Act?

To the best of our knowledge, CLIMA is the first Southeast Asian bill that sets a minimum due diligence standard for corporate actors with respect to climate change. However, CLIMA in its proposed form goes far beyond the disclosure and due diligence obligations seen in climate change legislation elsewhere. One of the innovative features of the bill is the way in which it brings together wide-ranging elements from legal scholarship, practice and activism on climate issues. First introduced before the Philippines Congress on 22 November 2023, proposals for the bill began circulating just under a year ago after COP27. In a speech on loss and damage and fossil fuel companies’ accountability, one of the bill’s proponents remarked that the proposed legislation should be recognised as a translation of “our resolute call for climate justice” into law. The proposals also coincided with the publication of an independent legal opinion commissioned by the Commonwealth Climate and Law Initiative (CCLI), which found that under the Corporation Law of the Philippines, directors have a duty to consider the risks posed by climate change when determining shareholders’ best interests.

The bill incorporates the concept of due diligence, explicitly referring to the UN Guiding Principles on Business and Human Rights, the climate-related application of which is also currently being debated by European legislators in the context of the EU’s Corporate Sustainability Supply Chain Due Diligence Directive.

Arguably, however, the Philippines bill has a much clearer focus on mandating businesses to proactively address the impacts of their activities on climate change and “do no harm” than its European comparator does. Under Sections 4 and 5, businesses must adopt measures to quantify, report and reduce their greenhouse gas emissions throughout their value chains to comply with standards set by the most recent scientific evidence and reports from the Intergovernmental Panel on Climate Change, shifting away from business-as-usual activities that exacerbate climate change impacts. Taking a carrot and stick approach, CLIMA proposes a tax credit regime for businesses that comply with the due diligence standard of care set out in the bill and contribute to the Philippines’ clean energy transition (Section 7). Failure to comply with various provisions may lead to fines and penalties equivalent to 15% of a business’ gross income (Section 21).

A reflection of the climate change litigation movement

In many ways, the provisions in CLIMA also reflect themes that have emerged in recent examples of climate change litigation cases that aim to force companies to take responsibility for their contributions to climate change. Of particular importance is the 2015 petition made by survivors of Typhoon Yolanda, with the support of civil society organisations, to the Commission on Human Rights of the Philippines, requesting an investigation into whether the ‘Carbon Majors’ (major corporate emitters) have violated the human rights of Filipinos through their causal contributions to climate change. Seven years later, the Commission issued a final report on its investigation, recommending that the Carbon Majors should be compelled to undertake due diligence and be held accountable for their failure to remediate human rights abuses arising from their business operations.

Over the past year, we have also seen climate change litigation against corporate actors such as Asmania et al v. Holcim merge previously distinct arguments based on corporate human rights responsibilities to reduce emissions (as seen in the case of Milieudefensie v. Shell) with arguments seeking financial damages for past and current losses suffered, along with arguments seeking contributions to help vulnerable communities adapt to climate impacts in the future.

The ‘polluter pays principle’, which is central to many climate cases (e.g. Luciano Lliuya v. RWE AG), is clearly addressed in Sections 10, 13 and 21 of the bill. Section 10 expressly states that polluters will pay for the damage they cause to the environment while the Climate Change Reparations Fund (CCRF) established under Section 13 is designed to finance claims raised by the victims and survivors of climate-related loss and damage (in both retrospective and prospective senses). The bill thus seeks to expressly recognise and provide remedies for harm that is already being suffered by citizens, including negative impacts on mental health, as well as harm that is likely to be unavoidable in the near future. Fines paid by businesses that engage in greenwashing, climate denialism, SLAPP suits [strategic lawsuits against public participation] or exceed the threshold for acceptable emissions will all accrue to the CCRF (Section 21).

Sections 11 and 12 are also innovative reflections of emerging concepts tested in court. The bill clarifies the application of the Doctrine of Last Clear Chance, manifesting in an obligation for the Carbon Majors to “substantially reduce greenhouse gas emissions to be faithful to their duty of care” owing to their knowledge of their “significant contribution” to climate change. Failure to do so “implicates” them in exacerbating the climate crisis, thereby making them accountable. The bill also specifies that attribution science will be used as one of the bases for assessing the degree to which a company is liable.

Finally, Section 22 of the bill also tries to mitigate the risk of ‘just transition litigation’, through addressing some of the negative social consequences that an energy transition away from fossil fuels may generate for employees of the sector. It authorises the Department of Labour and Employment to establish a compensation and reemployment relief package.

Aligning with and pushing the boundaries in global climate change legislation

In February 2023, we published a commentary analysing contents of the Climate Change Laws of the World database that signalled how mandatory net zero requirements might be the next trend in global legislation. Switzerland’s Federal Act on Climate Protection Goals, Innovation and Strengthening Energy Security, to our knowledge, remains the only country so far to include a legal requirement for companies to become net zero. However, the Act does not strictly require companies to produce transition plans, nor does it offer substantive guidance on how to meet this target with emission reductions (e.g. how the use of offsets or carbon capture, usage and storage may be treated in meeting this target). The proposed EU Corporate Sustainability Due Diligence Directive (CSDDD) noted above takes a different approach and does not require companies to transition by a certain date. Instead, companies must adopt transition plans to ensure that their activities are “compatible with” limiting global warming to 1.5 °C, which still leaves considerable room for interpretation.

CLIMA pushes this trend much further. The bill combines requirements of transition planning and due diligence with substantive emission reduction obligations, alongside stringent accountability mechanisms and a novel approach to redress for those suffering loss and damage. Although it remains unclear whether the bill will pass into law in its current form, the mechanisms proposed are potentially precedent-setting. They are both a reflection of and are likely to have broader impacts on the global regulatory landscape around corporate obligations on climate.

The authors would like to thank Joana Setzer for her helpful review of this commentary.

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