In recent years, we have observed a steep increase in climate-related and environmental litigation, which has more often than before been successful. Most examples have so far involved litigation against non-financial corporates[10] and governments[11]. However, also central banks and supervisors can become exposed to this kind of litigation risk just like the financial institutions that they supervise.
For instance, the average return on assets (ROA) of banks in Mauritius last year was 1.8 per cent, 2 as compared to an ROA of 1.3 per cent in our neighbourhood giant, South Africa. While strong earnings are important and the higher ROA could point to greater operational efficiency, it could also reflect higher costs being levied on the customer.