Public authority directors duties and climate change



A picture of a boardroom discussion silhouetted against sun from the windows - public authority directors duties header

Public authority directors’ duties and climate change is a discussion paper from the Centre for Policy Development’s Sustainable Economy program on the legal obligations of public sector corporate boards and directors to consider climate-related risks.

It concludes that public authority directors duties are at least as stringent as the duties of private corporation directors.

It was written by Dr Arjuna Dibley, Sam Hurley and Joshua Sheppard, and forms part of Centre for Policy Development work on directors duties and climate risk.

Download Public Authority Directors Duties discussion paper

Public authority directors duties and climate change is a discussion paper that examines the duties of public authority directors regarding climate risk

Why does this matter?

While the bar has been rising in the private sector, the responsibilities of directors in public sector authorities to consider climate in their decision making have attracted less attention.

However, like major companies, many public sector authorities play a critical role in our economy: they build and maintain infrastructure, oversee superannuation portfolios, provide insurance and manage water resources, among many other activities.

And just like private sector counterparts, many are likely to be subject to financial risks associated with climate change, not to mention reputational and other risks should they fail to take appropriate action

Key findings of Public Authority Directors Duties and Climate Change paper

The paper finds that:

  • Public authorities are important institutions for managing Australia’s economy, and are both potential contributors to climate change and subject to climate risks.
  • Public authority directors likely have duties of care and diligence to consider climate risk in their activities, which are at least as stringent as the duties of private corporation directors (detailed in Hutley Opinion).
  • Despite impediments to enforcement, public sector directors are now increasingly likely to be closely scrutinised and held to account for climate risk management – especially given rising standards demanded of private corporations.

Four recommendations of the Public Authority Directors Duties and Climate Change paper

The Public authorities directors duties and climate change paper makes four recommendations. 

These are:

  • Create a whole-of-government toolkit and implementation strategy for considering and managing financial risks arising from climate change. This might include specific approaches for training and supporting directors to account for climate risk in decision making.
  • Use existing public authority accountability mechanisms to strengthen management of climate-related financial risks. This might include using institutions such as the public sector or public service commissioners and/or Auditors General to review the extent to which climate risk is accounted for in directors’ decision making.
  • Issue formal ministerial statements of expectations to clarify how public authorities and their directors should manage climate-related risks and policy priorities.
  • Consider legislative or regulatory changes to ensure consistent consideration, management and disclosure of climate risk by public sector decision makers

These findings and recommendations were discussed and refined as part of a roundtable hosted by CPD, Minter Ellison and the Office of the Commissioner for Environmental Sustainability, Vitoria, which drew on insights from public sector board directors, governance experts and climate specialists.

The research which underpins the paper was developed in part through an internship program supported by Monash University’s Faculty of Law.

Background to Public Authority Directors Duties and Climate Change paper

Centre for Policy Development work has explored the obligations of company directors in the private sector to respond to climate-related risks.

The highly influential Hutley-Hartford Davis legal opinion on climate risks, emphasised that directors who do not properly consider and disclose foreseeable climate-related risks could be held liable for breaching their legal duties.

This finding has been echoed by Australia’s financial and corporate regulators, including the Australian Securities and Investments Commission, whose Commissioner John Price told a Centre for Policy Development audience in 2018 that company directors should take a “proactive and probative” approach to climate risk.