Directors’ Duties and Climate Risks
When CPD set out on this work in early 2016, we began with the premise that performance and leadership on sustainability-related risks in the Australian corporate sector were lagging – but that the time was ripe for business leaders and regulators to make a more constructive, forward-looking contribution on long-term sustainability challenges like climate change.
The centrepiece of this work was a ground-breaking legal opinion on directors’ duties and climate risk commissioned by CPD in partnership with the Future Business Council. The opinion found that company directors who ignore or mismanage climate-related risks could be held personally liable for breaching their legal duties under the Corporations Act. This analysis has been highly influential in the business community, and helped to spur major statements by Australian regulators APRA and ASIC on the importance of properly managing climate risks in the financial system. Together, the opinion and these developments have ensured that climate risks are firmly on the agenda for Australia’s leading corporates, financial institutions and regulatory bodies.
Our follow-on work has focussed on frameworks for better understanding climate risk, and understanding how this new emphasis on climate and other sustainability issues can help reshape finance across the board. Our award-wining research on climate scenarios gave investors and corporates new tools for understanding climate risk at a critical time. New work on how directors and decision makers in government board’s and authorities are obliged to respond to climate risk highlights the key role the public sector must play in this area. Meanwhile, we are working closely with stakeholders in the private sector, public sector and civil society on building a roadmap for a more sustainable Australian financial system, in line with exciting developments in Europe, the United Kingdom and elsewhere.