Australia: Heat remains on climate change – climate risk and directors duties

The importance of Australian company directors paying close attention to their directors' duties, particularly in the context of climate risk exposure, continues to feature strongly on the governance agenda. The impact of climate change on both national and international levels came to a head with the implementation of The Paris Agreement, taking effect in 2016. Australia's aspirational target under The Paris Agreement sees Australia committing to reduce its greenhouse gas-emissions from 26-28% on 2005 levels by 2030.

More recently and of concern, the 2018 Global Risks Report at the World Economic Forum indicated that a failure of climate-change mitigation and adaptation was one of the top five threats to the global economy in 2018.

Positively, some Australian companies, including the likes of Australia and New Zealand Banking Group, have come out in support of the Task Force on Climate-Related Financial Disclosures (TCFD). The TCFD is an international organisation seeking to develop recommendations for voluntary climate-related financial disclosures that are consistent, comparable, reliable, clear and efficient, and provide decision-useful information to lenders, insurers and investors. Although the Australian government has made it clear that the recommendations by the TCFD are non-binding and that no further law reform is required to adopt them, it has agreed in principle with two of six recommendations made by the Senate Economics Reference Committee, that:

  • the Australian Securities and Investments Commission (ASIC) should review its guidance to directors to ensure that it provides a proper understanding of the manifestations of carbon risk and reflects evolving asset measurement implications of carbon risk, and
  • ASIC should provide guidance regarding the circumstances in which a listed entity's exposure to carbon risk requires disclosure under Recommendation 7.4 of its Corporate Governance Principles and Recommendations.

Numerous other industry bodies including the Governance Institute of Australia, the Australian Council of Superannuation Investors and the Australian Prudential Regulatory Authority have also recently put company directors' liability for climate risks into focus. Directors should certainly not close their minds to the duties that they owe (both at general law, and under the Corporations Act 2001 (Cth) (Corporations Act)). It is also critical that directors' duties are duly considered in conjunction with the ASX Listing Rules (for listed entitles) to prevent and manage liability which may otherwise arise in the climate risk space.

Recap on directors' duty of care

Directors owe a general law duty of care, skill and diligence, as well as statutory duties arising under the Corporations Act. In particular, under section 180(1) of the Corporations Act, directors must exercise their powers and discharge their duties with due care and diligence.

A director breaching these duties can face numerous penalties, from pecuniary orders to compensate the company for the loss or damage arising from the breach, to the imposition of banning and disqualification orders (to remove a director from office and restrict them from managing corporations) from ASIC or the courts.

Intersection of directors' duties and climate change

In 2016, Noel Hutley SC and Sebastian Hartford-Davis wrote an opinion piece on the intersection of directors' duties of care and climate change, Climate Change and Directors' Duties. Hutley and Hardford-David note that 'climate change risks' are twofold, being:

  • physical risks – risks associated with rising aggregate global temperatures, and
  • transition risks – risks associated with the developments that may occur in the processing of adjusting towards a lower-carbon economy.

Key arguments put forward by the authors are that:

  • the foreseeability element of duty of care is satisfied because climate change risks are considered to be foreseeable by the courts, and
  • directors can and should consider theses risks, as a failure to consider them could amount to a breach of a director's duty of care.

Significantly, in the decision of ASIC v Cassimatis (No.8) [2016] FCA 1023, his Honour Edelman J suggested that section 180(1) of the Corporations Act was not confined to financial harm but also the foreseeable risk of harm, which includes harm to all the interests of the corporation (which captures sustainability practices).

In addition, as mentioned in one of our previous blogs, Shareholders turn the heat up on director suing over a failure to disclose climate change risk, shareholders have taken companies to court over a failure to disclose material risks that climate change poses to financial systems, being risks that investors reasonably require to make an informed assessment of a company's operations, financial position, business strategies and prospects under section 299A of the Corporations Act.

What is clear, therefore, is that directors must take active steps to inform themselves of climate-related risks, and appropriately disclose them in company material to reduce their potential liability (and exposure to investors, in light of recent case law).

For listed entities, ASX Listing Rule 4.10.3 (in conjunction with Guidance Note 9) makes clear that any material exposure to economic, environmental or social sustainably should be disclosed. This requirement has been followed closely by Australian companies including the likes of Woodside Petroleum, Rio Tinto, and BHP Billiton, in particular by disclosure of potential climate risk exposure in company annual reports.

The risk climate change presents to both national and international economies reinforces the importance of Australian directors carefully considering their strict duties of care. Even if environmental and climate risk reporting recommendations continue to remain non-binding in Australia, the issue has certainly remained on the radar of regulators and key industry stakeholders. As such, a compelling case can certainly be made that companies need to address climate change risk far more proactively, including by considering climate risk exposure in the same robust manner as any other issue, particularly with regards to disclosure (such as in a company's annual report).

As always, McCullough Robertson will continue to watch this space with great interest.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Australia
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Australia
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions