Directors’ Duties & Climate Risks Business Panel in Sydney | EVENT | June 2017

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On June 8, CPD and EY convened an expert panel to discuss the role company directors need to play in response to climate-related risks to their business, and what this means for other sustainability and long-term challenges.une

The panel was moderated by the ABC’s The Business presenter Elysse Morgan and built on our earlier work on directors’ duties and climate risk. This includes the breakthrough legal opinion commissioned by CPD and the Future Business Council in 2016, which found that Australian company directors who fail to consider and disclose foreseeable climate-related risks may be liable for breaching their statutory duties. This opinion and its implications were specifically cited by APRA in its recent statement on the financial implications of climate-related risks, which set a new higher bar for leadership on and disclosure of the business impacts of climate change.

Our panel featured four prominent Australian leaders and experts in this field:  Sam Mostyn (one of Australia’s leading independent directors)Pru Bennett (BlackRock’s regional head of investment stewardship), Maged Girgis (partner at MinterEllison) and Matthew Bell (Oceania Managing Partner Climate Change and Sustainability Services, Ernst & Young).

Key points of the discussion 

The opinion’s profound impact was made plain during the panel’s discussion.

Maged Girgis, who was an instructing solicitor on the Hutley opinion, said that the potential links between directors duties and climate risk had been apparent for some time. He said the Hutley opinion had taken this conversation to a new level, grabbing the attention of senior business leaders, legal experts, regulators and the media. This had been reinforced by the brave leadership of APRA in what continued to be a difficult political and media environment for leadership on climate change. 

Sam Mostyn agreed that the impact of the opinion had been substantial. Together with other developments like ARPA’s clear statement on the importance of climate risk, it had contributed to much greater awareness of the risks faced by corporate leaders and companies who don’t manage climate risk properly, and a greater focus on the skills and capabilities boards require to do better. She noted that its findings were relevant not only for climate change but on a whole range of other sustainability and long-term challenges that have clear implications for corporate performance in the near and long term.

Pru Bennett provided a perspective from one of the world’s largest and most influential institutional investors. In 2017 BlackRock elevated climate risk as one of its top priorities for engagement with company boards. She said there is still a significant gap between leaders and laggards on management of climate risk and sustainability performance – and that it was very easy for experts in the field to recognise the difference between quality sustainability strategy and superficial statements and reports written with public relations in mind. Disclosures and engagement had definitely improved but many large Australian companies still had a long way to go.

Matthew Bell highlighted recent EY research showing that a growing number of company directors were buying into BlackRock’s and other institutional investors’ focus on climate risk management and effective long-term governance. He said that signs of forward-looking leadership by business on these issues were very encouraging and that the commercial sector could play a crucial role in driving better long-term environmental outcomes even if policy and political leadership continues to lag.

CPD would like to thank Adam Carrel, Matthew Bell and the team at EY for hosting the event, and participants who contributed to an engaging and insightful discussion.

 

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