2016 Hutley Opinion on directors duties and climate change



A shot of skyscrapers in mist, from ground. 2016 Hutley Opinion on Directors Duties and Climate Change header

The 2016 Hutley opinion [PDF] is the first in a series of landmark legal opinions by Noel Hutley SC and Sebastian Hartford-Davis on the duties of company directors and climate change, commissioned by the Centre for Policy Development.

The 2016 Hutley opinion was provided by Noel Hutley SC and Sebastian Hartford-Davis on instruction from Sarah Barker and Maged Girgis of MinterEllison.

It was launched at a business roundtable in Melbourne on 21 October 2016 where participants discussed the opinion and its implications for boards and directors.

It is likely to be only a matter of time before we see litigation against a director who has failed to perceive, disclose or take steps in relation to a foreseeable climate-related risk that can be demonstrated to have caused harm to a company.

– 2016 Hutley Opinion

Download the 2016 Hutley Opinion

The landmark 2016 Hutley Opinion found that company directors are permitted – and in some cases required – to consider climate change in their decision-making. 

It was followed by supplementary opinions in 2019 and 2021 exploring the topic in greater depth

2016 Hutley Opinion findings

The 2016 Hutley opinion found that the bar for directors is rising as the links between social and environmental factors and financial risks and performance come into sharp focus.

It demonstrates that directors who fail to consider the impact of foreseeable climate change risks on their business properly could be held personally liable for breaching the duty of due care and diligence they owe to their companies.

Its key findings are:

  • Climate change risks would be regarded as foreseeable by courts, and relevant to a director’s duty of care and diligence to the extent that those risks intersect with the interests of the company (for example, by presenting corporate opportunity or risks to the company or its business model).
  • Company directors are not legally restricted from taking into account climate change and related economic, environmental and social sustainability risks, where those risks are, or may be, material to the interests of the company.
  • Company directors certainly can, and in some cases should be considering the impact on their business of climate change risks – and that directors who fail to do so now could be found liable for breaching their duty of care and diligence in the future.

2016 Hutley Opinion impact

The 2016 Hutley Opinion  affirms that directors can take a wide range of considerations into account when deciding what is in the best interests of a company, rather than focusing solely on immediate shareholder value maximisation.

This includes climate risks and a range of other environmental, social and governance issues that influence the near and long-term performance of companies and of wider economy.

By exploring directors’ duties and sustainability through the prism of climate risk, it highlighted how crucial it is to elevate these issues to the boardroom level – and opened up conversation about the skills, tools and strategies directors and boards need to improve sustainability risk management and disclosure.

Encouraging and supporting directors to have proper regard to these issues is a key step towards ensures that business is geared towards creating sustainable, long-term value and building an economy that recognises the interrelated economic, social, human and environmental drivers of prosperity and wellbeing.

2016 Hutley Opinion Roundtable

The 2016 Hutley Opinion was the subject of a roundtable discussion of more than 30 business leaders, fund managers, legal experts and regulators in Melbourne on 21 October 2016.

Participants heard from former Bank of England Executive Director Dr Paul Fisher, who highlighted international developments in how markets and regulators understand and respond to climate-related risks.

Comments from 2016 Hutley Opinion roundtable participants

2016 Hutley Opinion in the media

Although the alarm for business leaders has been sounding for some time, the release of the opinion by senior barristers and leading solicitors confirms the potential liability for Australian company directors.
Legal advice issued this week warns directors risk personal liability for breach of duty if they fail to properly consider the impact of climate change
Managing climate change risks is now a key boardroom responsibility. Directors who tackle climate change have the law's protection. Directors who fail to do so risk legal liability for negligence.
This week the Centre for Policy Development released a new legal opinion that warned directors who did not adequately consider the impact of climate change risks on their business could be held personally liable for breaching their duty of care
Australia's fall from grace as a global leader in the fight against dangerous climate change was rapid and inglorious.
November 4 will go down in the history books as a watershed moment for corporate Australia. It is the day the Paris Agreement on climate change takes effect, putting into law a commitment to a low-carbon economy. As large corporations face