2021 Hutley opinion on directors duties and climate change



Skyscrapers shot from the ground up surrounded by mist - 2021 Hutley opinion header

 The 2021 Hutley opinion on directors duties and climate risk is a new supplementary legal opinion by Noel Hutley SC and Sebastian Hartford Davis on climate change and directors’ duties. It was released by the Centre for Policy Development in April 2021.

It was provided on instruction from Sarah Barker of MinterEllison, and builds on earlier Hutley-Hartford Davis opinions released by the Centre for Policy Development 2016 and 2019.

The 2021 Hutley opinion emphasises that the bar for directors continues to rise amidst surging global action on climate, and highlights legal risks associated with “greenwashing” – including around corporate net zero emissions commitments – as scrutiny of climate-related targets grows.

Accelerating impacts of climate change, and responses to climate change overseas and domestically, are profoundly influencing, positively and negatively, the interests of many Australian businesses. It is now perfectly clear that reasonable directors and firms should foresee these risks. We would caution against any misrepresentation about the steps such directors and firms may be taking in response.

– 2021 Hutley Opinion

Download the 2021 Hutley Opinion

The 2021 Hutley opinion on directors duties and climate change expands on the issues explored in earlier opinion in 2019 and 2016.

It highlights legal risks associated with greenwashing as scrutiny of climate-related targets grows.

2021 Hutley Opinion findings

The 2021 Hutley Opinion emphasises the increasing standard of care expected of directors in managing climate-related risks and opportunities, and highlights legal risks surrounding “greenwashing”, especially as scrutiny of climate-related disclosures and commitments grows.

Its key findings are:

  • The standard of care to be exercised by directors with respect to climate change has “risen and continues to rise”;
  • Net zero commitments by companies are becoming common and appear to be regarded by many directors as an appropriate or necessary step in the discharge of their duties;
  • Companies making net zero commitments should have “reasonable grounds” to support the representations contained within them – otherwise, a company (and its directors) could be found to have engaged in misleading and deceptive conduct; 
  • There are practical steps companies and directors can take to reduce the likelihood of liability arising from a net zero commitment.​

Previous Hutley Opinion findings

The landmark 2016 Hutley opinion found that directors who do not properly manage climate risks could be held liable for breaching their legal duty of due care and diligence. 

The 2019 Hutley opinion emphasised that the standard of care expected of directors in addressing climate risks had been raised by a series developments, and that directors’ exposure to climate change litigation was “increasing, probably exponentially, with time”. 

2021 Hutley Opinion key passages

The 2021 Hutley Opinion and the 2020 roundtable on climate risk and directors duties

The 2021 Hutley opinion follows a 2020 roundtable with Noel Hutley SC and colleagues on directors’ duties and climate change.

The roundtable examined critical challenges and flashpoints for directors and trustees seeking to meet their climate-related obligations.

The 2021 Hutley Opinion in the media

Companies and their directors could be sued for “greenwashing” their commitments to achieve their net zero carbon pledges or emissions reductions targets, according to a legal opinion backed by some of Australia’s top business leaders.
Company directors that rush to make net zero pledges without fully examining the firm’s ability to meet the goals could be guilty of “misleading or deceptive conduct” and vulnerable to regulatory or legal penalties.
Australia’s business leaders are taking more of the lead on tackling the global issue – and hence more of the political and regulatory risk – when that responsibility should be led by government.