In association with The Prince's Accounting for Sustainability Project (A4S)
Climate Change: to what extent are company directors and trustees exposed to legal liability?
Anthony Hobley, Carbon Tracker
Alice Garton, ClientEarth
Mark Lewis, Barclays
Philippe Joubert, Prince's Corporate Leaders Group
Pamela Castle OBE
As business steels itself to deal with seismic changes in the world’s climate, what is legally expected of directors is becoming more stringent. The Paris Climate talks in December 2015 confirmed what we already knew – that more serious action is required from the corporate world in future. Business leaders must understand how to respond to this cultural, regulatory and economic shift – which means legal and financial experts must collaborate to elucidate the law and give the right information to business leaders.
As the Bank of England's Prudential Regulation Authority and others have recently warned, there is the potential for company directors to be exposed to liabilities in relation to:
i) their company's contribution to anthropogenic climate change,
ii) a failure to adequately manage the risks associated with climate change and
iii) inaccurate disclosure or reporting of these factors.
These emerging exposures have implications for corporate governance in climate-risk exposed industries (from financial services to mining, infrastructure, agriculture, and beyond), and for the insurance sector (in terms of professional indemnity and directors' and officers' insurance). Despite these risks, there remains little in-depth analysis of how prevailing corporate governance laws and fiduciary duties facilitate - or constrain - the actions of company directors confronted with complex climate change challenges.