Primer on Climate Change:
Directors’ Duties and Disclosure
Obligations
In support of the Principles for Effective Climate
Governance2nd edition, July 2022

Executive Summary
The evolution of our understanding of climate change from an ethical or environmental issue to one that
presents foreseeable financial and systemic risks (and opportunities) over short, medium and long-term
investment horizons has significantly changed its relevance to the governance of both corporations andinvestors. This evolution means there are serious implications for the duties of directors and officers,
and potential disclosure obligations for companies.
This second edition of the Primer on Climate Change: Directors’ Duties and Disclosure Obligations
provides an overview of contemporary evidence that climate change presents foreseeable, and in manycases material, financial and systemic risks that affect corporations and their investors. It then discusses:
1) general climate obligations in the jurisdictions where The Climate Governance Initiative ispresent though its global network of national Chapters;2) how company law and directors’ duties in these jurisdictions require directors to incorporate
climate change into their strategies, legal oversight, and supervision of the companies entrusted
to their care;3) disclosure obligations; and
4) advice to directors.
While legal frameworks vary between jurisdictions, it is generally the case that directors act as fiduciariesof the company in discharging their functions, and owe duties of loyalty and care and diligence to thecompany.
The content of these duties varies as the factual context in which the directors act changes. A
reasonable decision for a director fifty, ten or even five years ago might not look so reasonable today.
Understanding these duties in the context of a changing external context is particularly relevant in thecase of climate change, where the evidence of climate-related risks and opportunities is becoming evermore apparent, and changes in regulation are gathering momentum such that the likelihood of adisorderly and disruptive transition increases.
To discharge their duties, therefore, directors must integrate climate risks and opportunities into theirgovernance roles.
Similarly, directors are generally subject to duties to disclose material risks facing the company to thecompany’s investors. Climate risks are now understood by regulators and investors as being potentiallymaterial financial risks to a company, and therefore directors may need to consider whether they should
be disclosed. Additionally, regulatory measures requiring disclosure of climate and other sustainabilityrelated risks are increasingly being put in place by governments and regulators.
Litigation challenging companies’ contributions to climate change is becoming a reality in many
countries. Over 2,000 cases have been filed as of 31 May 2022, seeking to recoup some of the damage
caused by climate change or the costs of adaptation, or to challenge governments’ or corporations’actions or failure to act. Challenges to the actions—and inactions—of companies and their directors arestarting to emerge, evidenced in stark form by the judgment in the Netherlands on 26 May 2021,
ordering Royal Dutch Shell to reduce its CO2 emissions by 45% from 2019 levels by the end of 2030.
Where directors fail to meet the standards of good governance, they may be exposed to litigation risks
themselves. In the UK, an environmental NGO, ClientEarth, has begun the process to bring a claim
against the board of Shell, alleging that the board has failed in its duties to act in the best interests ofthe company and to act with due care, skill and diligence by failing to develop and implement a climate
strategy that aligns with the Paris Agreement goals, increasing its risk of stranded assets and having to
make write-downs (due to both physical and transition risks).
We have produced this Primer for board directors so they can be informed and prudent advocates,
encouraging their boards to integrate the issue of climate change issues in the development of theircompanies’ corporate strategy, risk management oversight, governance and disclosure. This, alone, isthe most effective thing directors can do to fulfil their obligations to their companies while steering wellclear of any personal liability exposure from the potential increase of litigation.

2

Foreword
Climate change poses an existential risk to humanity, the planet andthe global economy on a scale never before seen. This is prompting
governments and businesses around the world to take serious action
to accelerate the transition to a new economic model that delivers on
the commitments taken in the COP21 Paris Agreement signed in2015. These unprecedented commitments were then further
reinforced with the signing of the Glasgow Pact at COP26 in
November 2021 following the release of the IPCC’s Sixth
Assessment Report, which warned of the need to lift ambition evenfurther within the next decade. Doing so means recalibrating all
economic activity to achieve net-zero greenhouse gas emissions by
2050 or earlier, with clear interim milestones in 2040 and 2030,
consistent with an average temperature rise above the pre-industrial
age of no more than 1.5°C.
This new economic model also requires a wholesale shift in how companies are governed: for board
directors, it means placing the climate transition at the heart of corporate strategy, ensuring that board
decision-making processes properly embed climate considerations, and that boards drive a marked
cultural change across their organisations.
However, despite this growing awareness of the scale and urgency of the climate crisis, far too few
directors possess the specific interdisciplinary skills necessary to effect this wholesale change of culture
and behaviour. It is for this very reason that the Climate Governance Initiative (CGI) came into being: in
2019, the World Economic Forum unveiled the Principles for Effective Climate Governance (the CGI
Principles), a comprehensive set of guidance principles that lay out best practice for boards and theirdirectors in respect of the climate. To facilitate their promotion and implementation, local CGI“Chapters” have been set up around the world to serve as centres of expertise and venues for directors
to exchange with each other as well as with a wide range of subject matter experts.

The first of these eight CGI Principles, entitled ‘Climate accountability on boards’, concerns an issue
that has frequently stood in the way of board directors factoring climate concerns into their decisions:
how their legal duties and obligations apply in the context of the now-universal recognition of theextreme threat that climate change poses to the global economy and therefore to individual businesses.
Too often, boards are concerned that “leaving profitable business on the table”, or acting according to“how we wish the world to be, rather than how it is ” will place them in breach of their legal obligations
3

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Forewords

to shareholders, or worse, result in litigation or removal. This Primer, now in its second edition, tackles
precisely this issue, and provides a succinct, easily accessible summary that non-lawyers who serve on
boards can readily understand and act on. It will serve as a valuable resource to the global network of
CGI Chapters, and enable directors around the world to act in a fully-informed manner on their legal
obligations as they confront this historic challenge.
The Climate Governance Initiative currently has 22 active Chapters in Australia, Brazil, Brussels,
Canada, Central America and the Caribbean, Chile, France, Germany, Greece, Italy, Ireland, Malaysia,
Mexico, the Nordic region, New Zealand, Poland, Romania, Russia, Singapore, Switzerland, the United
Kingdom and the United States. Additional Chapters in Europe, Africa, South-East Asia, the Middle Eastand Latin America are currently in formation, bringing the total to some 29 national and regional
members by the end of 2022.
This Primer would not be possible without the deep expertise of the Commonwealth Climate and Law
Initiative and our many contributing legal experts, or the support with the World Economic Forum, towhich I extend our deepest thanks on behalf of the CGI Governing Board and Secretariat.

Karina Litvack
Chairman, Climate Governance Initiative

Foreword(CCLI and CGI Secretariat)

Since the publication of the first edition of
the Primer on Climate Change: Directors’
Duties and Disclosure Obligations in June
2021, there have been substantial
developments in the way in which climate
risks, impacts and opportunities areperceived by governments, regulatorsand debt and equity investors. These have been catalysed by landmark political events such as COP26,
but also the increasingly stark impacts of climate change, with floods, fires and heat waves disrupting
infrastructure, supply chains and communities.
We are pleased to issue this second edition to the Primer, which draws together regulatory
developments and authoritative legal analyses on the way in which directors’ duties are interpreted. We
have worked with local legal experts in each jurisdiction to provide an overview of climate risk perceptionin each jurisdiction, as well as setting out what this means for directors in terms of their duties anddisclosure obligations. We have also provided practical steps to help directors meet their legal
responsibilities to their companies and mitigate the risk of potential personal liability.
We have provided updates to each jurisdiction covered in the June 2021 edition of the Primer, with the
exception of Russia and Ukraine, due to the current geopolitical circumstances, and for which the 2021
sections remain unchanged. We have also included six additional jurisdictions (Egypt, Greece, Ireland,
the Philippines, Romania and Turkey) in which new CGI Chapters have recently been established or are
currently emerging.
We hope that the Primer continues to provide a valuable resource for directors when considering how
best to steer their companies through the dynamic and radical uncertainty that climate change and thenet-zero transition poses to companies.

Ellie Mulholland
Director, Commonwealth Climate and Law Initiative

Emily Farnworth
Head of the Secretariat, Climate Governance Initiative
4

Table of contents
Executive Summary
Foreword
Acknowledgments
List of abbreviations
Climate Change as a Financial and Systemic Risk
Directors’ Duties and Climate Change
Directors’ Disclosure Obligations and Climate Change
Climate Litigation
Questions to Assist Directors
Jurisdictional Overviews
Australia
BrazilBrazil (Portuguese)
CanadaCanada (French)
Chile
Chile (Spanish)
Egypt
European Union
FranceFrance (French)
Germany
GreeceHong Kong
India
IrelandItaly
Japan
Malaysia
MexicoMexico (Spanish)
New ZealandPhilippines
Romania
RussiaSingapore
South Africa
Switzerland
Switzerland (French)
Switzerland (German)
TurkeyTurkey (Turkish)
United Kingdom
United States
Ukraine

2
3
6
9
12
17
18
21
24
25
26
31
35
39
43
48
51
54
57
63
66
70
75
80
84
89
94
96
101
109
115
122
127
132
136
138
142
145
149
154
159
163
167
171
176

5

Acknowledgments
This Primer is the result of a collaboration between many organisations and individuals. The Climate
Governance Initiative and the Commonwealth Climate and Law Initiative are grateful to all those whohave contributed, and in particular, would like to acknowledge the contributions of the following people
in producing this Primer:
CCLI and CGICGIKarina LitvackDr. Sabrina Bruno, Full Professor of Comparative
Corporate Law

University of Calabria, Chapter Zero
Italy

Emily Farnworth
Nick Scott
Rachel Allen
CCLIProf. Cynthia Williams, Professor of Law

York University, Canada Climate
Law Initiative

Ellie Mulholland

MinterEllison

Sarah Barker

MinterEllison

Dr. Janis Sarra, Professor of Law

University of British Columbia,
Canada Climate Law Initiative

Dr. Ernest Lim, Professor of Law

National University of Singapore

Umakanth Varottil, Associate Professor of Law

National University of Singapore

Sonia li Trottier

Canada Climate Law Initiative

Alex Cooper
Julie Luanco
Christy O’Neil
Sonia Kovacevic

Contributors to the jurisdictional overviews
BrazilLina Pimentel Garcia

Mattos Filho

Tábata Boccanera Guerra de Oliveira

Mattos Filho

Chile

Franco Acchiardo

Grasty Quintana Majlis

Egypt

Dr. Ziad Bahaa-Eldin

Thebes Consultancy

Nora Harb

Thebes Consultancy

Ismail Ramadan

Thebes Consultancy

Blanche Balian

BakerMcKenzie

Clotilde Guyot-Rechard

BakerMcKenzie

Guillaume Nataf

BakerMcKenzie

Dr. Henning Schaloske

Clyde & Co

Christoph Pies

Clyde & Co

Stathis Potamitis

PotamitisVekris

Dimitra Rachouti

PotamitisVekris

Natalia Nicolaidis

Dynamic Counsel Ltd.

Anchal Dhir

Cyril Amarchand Mangaldas

Ganesh Gopalakrishnan

Cyril Amarchand Mangaldas

FranceGermany
GreeceIndia

6Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Acknowledgments

IrelandJapan
Malaysia

Ann Shiels

FinLexSus

Eugenée Mulhern

A&L Goodbody LLP

Liam Murphy

A&L Goodbody LLP

Dr. Masafumi Nakahigashi, Professor of Law

Nagoya University

Dr. Yoshihiro Yamada, Professor of Law

Ritsumeikan University

To’ Puan Janet Looi

SKRINEFrancine Ariel PaulSKRINEBar Council Environment & Climate Change Committee
MexicoEnrique Salcedo R.

Nader, Hayaux & Goebel

Yves Hayaux du Tilly L.

Nader, Hayaux & Goebel

Lloyd Kavanagh

MinterEllisonRuddWatts

Stephanie de Groot

MinterEllisonRuddWatts

Shaanil Senarath-Dassanayake

MinterEllisonRuddWatts

Cesar L. Villanueva

Villanueva Gabionza & Dy Law

Lily K. Gruba

Zambrano Gruba
Advincula Law

Caganda&Angelo Patrick F. Advincula

Zambrano Gruba
Advincula Law

Caganda&Joyce Anne C. Wong

Romulo Mabanta Buenaventura
Sayoc & de los Angeles Law

Cristina Reichmann

CMS Cameron McKenna Nabarro
Olswang LLP SCP

Mircea CiutăCMS Cameron McKenna Nabarro
Olswang LLP SCP

RussiaNikita Shabalin

DLA Piper

Switzerland

Corinne Nacht

Baker McKenzie

Philippe Reich

Baker McKenzie

Emre Durgun

Nazali Tax & Legal

Süreyya Korkmaz

Nazali Tax & Legal

Kateryna Soroka

DLA Piper

Oleksandr Kurdydyk

DLA Piper

New
Zealand
Philippines

Romania

TurkeyUkrainePhoto credits
Front cover – AbsolutVision – Unsplash
Back cover – Ivan Bandura - Unsplash

7

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Acknowledgments

About the Climate Governance Initiative
The Climate Governance Initiative (CGI) mobilises boards of directors around the world to address
climate change in their businesses. We do this by developing and supporting national associations that
equip their members with the skills and knowledge needed to make climate a boardroom priority,
building on the World Economic Forum’s Principles for Effective Climate Governance.
About the Commonwealth Climate and Law Initiative
The Commonwealth Climate and Law Initiative (CCLI) is a legal research and stakeholder engagement
initiative founded by the University of Oxford’s Smith School of Enterprise and the Environment,
ClientEarth and Accounting for Sustainability (A4S). It is a U.K. non-profit organisation funded byenvironmental philanthropy and research grants.
The CCLI examines the legal basis for directors and trustees to consider, manage, and report on climatechange and broader environmental risks, opportunities and impacts, and the circumstances in which
there may be liability for failing to do so. It also works to advance knowledge on effective sustainable
governance practice.
The CCLI commissions legal opinions from independent experts within a jurisdiction to build anauthoritative evidence base on the requirements of company and trust law as it relates to the nature
crises. The CCLI works with leading academics, law firms and civil society entities to carry out our own
legal research and disseminate the findings. The CCLI’s Canadian partner, the Canada Climate Law
Initiative, convenes 60 experts to educate Canadian boards on climate change under the Canadian
Climate Governance Experts project. They also provide an online knowledge hub for climate risk andsustainable finance resources.
Disclaimer
Any errors or omissions, including differences between linguistic translations, in this primer are theauthors' own. The paper reflects the law as at July 2022.
This primer has been prepared for educational purposes only. This document is not, and is not intended
to be, legal advice. The Climate Governance Initiative, the Commonwealth Climate and Law Initiative,
their partner organisations and collaborators make no representations and provide no warranties inrelation to any aspect of this publication, including regarding the liability of any individual person orentity or the advisability of investing in any particular company or investment fund or other vehicle. While
we have obtained information believed to be reliable, we shall not be liable for any claims or losses of
any nature in connection with information contained in this document, including but not limited to, lost
profits or punitive or consequential damages.
The information contained in this Primer is of a general nature and it should not be relied upon as legal
advice. Board directors should seek legal advice on the unique circumstances of their company andjurisdiction.

8

List of abbreviations
A4S
AASB
AFORES
AIFM
AktG
APRA
AR6
ASIC
ASX
ATHEX
AUASB
AUM
BaFin
BCB
BIVA
BNDES
BNM
BoJ
BRR
BRSA
BRSR
BSE
CAPSA
CBE
CBES
CBI
CBRT
CCLI
CDP
CEO
CGI
CMB
CMF
CO
CO2
COD
COP21
COP26
CPG 229
CRE
CRISA
CSA
CSR
CSRD
CVM
DCGK
DDTrO
DPEF
EBA
ECB
ECHR
EFRAG
EQA
ESG
ESRS
EES
EESG
EU
F4GBM Index
FCA
FDIC
FIEA
FINMA
FMA

Accounting for Sustainability
Australian Accounting Standards Board
Retirement Funds Administrators of Mexico (Administradoras de Fondos Para el Retiro)
Alternative Investment Fund Manager
Stock Corporation Act
Australian Prudential Regulation Authority
Sixth Assessment Report of the IPCC
Australian Securities and Investments Commission
Australian Securities Exchange
Athens Stock Exchange
Auditing and Assurance Standards Board
Assets under management
German Federal Financial Supervisory Authority
Central Bank of Brazil (Banco Central do Brasil)
Mexico’s Bolsa Institucional de Valores stock exchange
Social and Economic Development Bank of Brazil (Banco Nacional do Desenvolvimento Econômico e
Social)Bank Negara Malaysia
Bank of Japan
Business Responsibility Reporting
Turkey’s Banking Regulation and Supervision Agency
Business Responsibility and Sustainability Report
Bucharest Stock Exchange
Canadian Association of Pension Supervisory Authorities
Central Bank of Egypt
Climate Biennial Exploratory Scenario
Central Bank of Ireland
Central Bank of the Republic of Turkey
Commonwealth Climate and Law Initiative
Carbon Disclosure Project
Chief Executive Officer
Climate Governance Initiative
Turkey’s Capital Markets Board
Financial Markets Commission of Chile (Comisión para el Mercado Financiero)
Swiss Code of Obligations
Carbon Dioxide
Proposal N.2021/0104 or Corporate Sustainability Reporting Directive Proposal, EU
2015 UNFCCC Climate Change Conference
2021 UNFCCC Climate Change Conference
Prudential Practice Guide CPG 229 Climate Change Financial Risks
Climate Reporting Entity
Code for Responsible Investing in South Africa
Canadian Securities Administrators
German Council for Sustainable Development
Corporate Sustainability Reporting Directive
Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários)
German Corporate Governance Code (Deutscher Corporate Governance Kodex)
Swiss Ordinance of 3 December 2021 on Due Diligence and Transparency in relation to Minerals andMetals from Conflict-Affected Areas and Child Labour
French Extra-Financial Performance Report (Déclaration de Performance Extra-Financière)
European Banking Authority
European Central Bank
European Convention on Human Rights
European Financial Reporting Advisory Group
Malaysian Environmental Quality Act 1974
Environmental, social, and corporate governanceEuropean sustainability reporting standards
Economic, environmental and social
Economic, environmental, social and governanceEuropean Union
FTSE4Good Bursa Malaysia Index
Financial Conduct Authority
Federal Deposit Insurance Corporation
Japanese Financial Instruments and Exchange Act
Swiss Financial Market Supervisory Authority
New Zealand’s Financial Markets Authority
9Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Abbreviations

FMCA
FRA
FRC
FSA
FSOC
FTE
FY
G7
GFANZ
GHG
GmbHG
GRI
HCGC
HCMC
HGB
HKEX
HKMA
HLEG
ICDR
IEA
IFRS
IFSCA
IFSC
IIGCC
IIRC
INDC
IORP
IOSCO
IPCC
ISSB
ISE B3
JC3
KPI
MAS
MCCG
MD&A
MESTECC
METI
MEWA
NBR
NCMO
NDC
NECP
NFRD
NGFS
NGO
NZE2050
NZX
OECD
OMB
OSFI
PA
PACTE
PACTT
PLC
PRA
RBA
RBI
RBNZ
REST
RG
SASB
SC
SC Guidelines

New Zealand’s Financial Markets Conduct Act 2013
Financial Regulatory Authority
Financial Reporting Council
Japan’s Financial Services Agency, Romania’s Financial Supervisory Authority
The U.S. Financial Stability Oversight Council
Full-time Employee
Financial Year
Group of Seven, an inter-governmental political forum consisting of Canada, France, Germany, Italy,
Japan, the United Kingdom and the United States.
Glasgow Financial Alliance for Net Zerogreenhouse gas
German Act on Limited Liability Companies (Gesetz betreffend die Gesellschaften mit eschränkter
Haftung)Global Reporting Initiative
Hellenic Corporate Governance CodeHellenic Capital Market Commission
German Commercial Code (Handelsgesetzbuch)
Hong Kong Stock Exchange
Hong Kong Monetary Authority
UN High-Level Expert Group on Net-Zero Pledges
Issue of Capital and Disclosure Requirements
International Energy Agency
International Financial Reporting Standards
International Financial Services Centre Authority
International Financial Services Centre
Institutional Investors Group on Climate ChangeInternational Council on Integrated Reporting
Intended National Determined Contribution
Institutions for Occupational Retirement ProvisionInternational Organization of Securities Commissions
Intergovernmental Panel on Climate ChangeInternational Sustainability Standards Board
Corporate Sustainability Index (Índice de Sustentabilidade Empresarial)
Joint Committee on Climate Change
Key performance indicator
Monetary Authority of Singapore
Malaysian Code on Corporate GovernanceManagement discussion and analysis
Ministry of Energy, Science, Technology, Environment and Climate Change
Japan’s Ministry of Economy, Trade and Industry
Ministry of Environment and Water
National Bank of Romania
Romania’s National Committee for Macroprudential Oversight
Nationally Defined Contribution
Greece’s National Energy and Climate Plan
Non-Financial Reporting Directive
Network of Central Banks and Supervisors for Greening the Financial System
Non-Governmental Organisation
The Net-Zero Emissions by 2050 scenario released by the IEA in May 2021
New Zealand’s Exchange
Organisation for Economic Co-operation and Development
The U.S. Office of Management and Budget
Office of the Superintendent of Financial Institutions
South Africa’s Prudential Authority
French Action Plan for Business Growth and Transformation (Plan d'Action pour la Croissance et laTransformation des Entreprises)
Prudential Authority Climate Think Tank
publicly-listed company
Bank of England Prudential Regulation Authority
Reserve Bank of Australia
Reserve Bank of India
Reserve Bank of New Zealand
Retail Employees Superannuation Trust
Regulatory Guide
Sustainability Accounting Standards Board
Securities Commission Malaysia
Guidelines on Conduct of Directors of Listed Corporations and their Subsidiaries, Securities
Commission Malaysia

10Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Abbreviations

SEBI
SEBI LODR
Regulations
SEBI ICDR
Regulations
SEC
SFB
SFC
SFDR
SGX
SME
SNB
SOC
SREP
SSE
STAGE
TCC
TCFD
TEG
TPR
TPT
TSO
UBC
UCITS
UN
UNFCCC
UNGC
WEF
WMO
XRB

Securities & Exchange Board of India
SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, India
SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018
U.S. Securities and Exchange Commission, Securities and Exchange Commission for the Philippines
Sustainable Finance Committee of German Federal Government
Hong Kong Securities and Future Commission
Sustainable Finance Disclosure Regulation
Singapore Exchange
Small and medium-sized enterprise
Swiss National Bank
Say on Climate
Supervisory Review and Evaluation Process, EU
United Nations Sustainable Stock Exchanges
Hong Kong Sustainable and Green Exchange
Turkish Commercial CodeTask Force on Climate-related Financial Disclosures
Technical expert group on sustainable finance, EU
UK’s Pensions Regulator
Transition Plan Taskforce
Turkish Standards Institute
University of British Columbia
Undertakings for the Collective Investment in Transferable Securities
United Nations
United Nations Framework Convention on Climate Change
United Nations Global Compact
World Economic Forum
World Meteorological Organisation
New Zealand’s External Reporting Board

11

Climate Change as a Financial and Systemic Risk
In November 2021, the 197 parties to the Paris Agreement met in Glasgow at the 26 th Conference of
the Parties (COP26) to the United Nations Framework United Nations Framework Convention on
Climate Change (UNFCCC). COP26 culminated with the parties reaffirming the goals of the Paris
Agreement, in particular resolving to pursue efforts to limit global temperature rise to 1.5°C above preindustrial levels, in the Glasgow Climate Pact.1
The Intergovernmental Panel on Climate Change (IPCC) published its Sixth Assessment Report (AR6)in three tranches between August 2021 and April 2022, covering the physical science behind climatechange and its impacts, the vulnerabilities of the global system to climate change and the required
adaptations, and the actions needed to mitigate its worst impacts, including limiting global temperaturerise to 1.5°C2 – an increase which the World Meteorological Organisation (WMO) has predicted has a
50% chance of occurring in the next five years.3 Floods (such as that of the Rhine in February 2021),
freezes (such as the Texas winter freeze in February 2021) and fires (such as those in British Colombia
between June-October 2021) have caused disruption to supply chains,4 and analysis has found that
increased damages climate-related physical risks have led to increased exposure for insurers. 5
As the effects of climate change and the actions needed to address them increasingly materialise, thelinks between climate change and financial risk are becoming increasingly evident and inextricable. Our
understanding of climate change has evolved from a purely “ethical issue” or “environmental
externality” to an issue that poses foreseeable financial risks and opportunities for companies acrossshort, medium and long-term horizons.
Indeed, the World Economic Forum’s 2022 report on global risks found that that ‘environmental risks
are perceived to be the five most critical long-term threats to the world’, with climate action failure
perceived to be a critical threat to the world within 2-5 years.6 The ‘top three most severe risks’ were‘extreme weather’, ‘climate action failure’ and ‘biodiversity loss’. 7
The scale and speed of climate change risks and opportunities in the transition to a zero-carbon
economy received heightened attention in May 2021 with the long-anticipated release of theInternational Energy Agency (IEA)’s first-ever attempt to model a feasible pathway to net-zero GHG
emissions by 2050 (NZE2050), and the implications of the NZE2050 scenario for companies in theindustry sectors facing either accelerated decline or rapid growth are momentous. The NZE2050
scenario has formed the basis for a number of shareholder resolutions, court cases, and engagementswith government bodies.
Companies operating in industries facing structural decline can expect heightened pressure frominvestors to stress-test their businesses against these new data, and to demonstrate their ability to

1

2

3

4

5

6
7

UNFCCC, The Glasgow Climate Pact – Key Outcomes from COP26 <https://unfccc.int/process-and-meetings/the-paris-agreement/the-glasgowclimate-pact-key-outcomes-from-cop26>.
IPCC, Sixth Assessment Report Working Group I: Climate Change 2021 – The Physical Science Basis (6 August 2021)<https://www.ipcc.ch/report/sixth-assessment-report-working-group-i/>; IPCC, Sixth Assessment Report Working Group II: Climate Change 2021
– Impacts, Adaptation and Vulnerability (27 February 2022) < https://www.ipcc.ch/report/sixth-assessment-report-working-group-ii/>; IPCC, Sixth
Assessment Report Working Group I: Climate Change 2021 – Mitigation of Climate Change (4 April 2022) < https://www.ipcc.ch/report/sixthassessment-report-working-group-3/>; See also: Intergovernmental Panel on Climate Change (IPCC), Global warming of 1.5°C: An IPCC Special
Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context
of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty (Geneva, World
Meteorological Organization, 2018); IPCC, 'Climate change widespread, rapid, and intensifying – IPCC’ (9 August 2021); The Nature
Conservancy, ‘The Latest IPCC Report: What is it and why does it matter?’ (4 April 2022) www.nature.org/en-us/what-we-do/ourinsights/perspectives/ipcc-report-climate-change/. United Nations Climate Change, ‘The Glasgow Climate Pact – Key Outcomes from COP26’,<https://unfccc.int/process-and-meetings/the-paris-agreement/the-glasgowclimate-pact-key-outcomes-from-cop26>. See also IPCC, Global
warming of 1.5°C: An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhousegas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts
to eradicate poverty (Geneva, World Meteorological Organization, 2018).
WMO, WMO update: 50:50 chance of global temperature temporarily reaching 1.5°C threshold in next five years (9 May 2022)<https://public.wmo.int/en/media/press-release/wmo-update-5050-chance-of-global-temperature-temporarily-reaching-15%C2%B0cthreshold>.
Yale Environment 360, How Climate Change Is Disrupting the Global Supply Chain (10 March 2022) <https://e360.yale.edu/features/how-climatechange-is-disrupting-the-global-supplychain#:~:text=Scientists%20say%20that%20such%20climate,and%20perhaps%20more%20%E2%80%94%20by%202100.>.
EIOPA, European Insurers’ Exposure to Physical Climate Change Risk (20 May 2022) <https://www.eiopa.europa.eu/documentlibrary/discussion-paper/discussion-paper-physical-climate-change-risks_en>.
World Economic Forum, The Global risks Report 2022 (17th edn, 2022) 7 <https://www.weforum.org/reports/global-risks-report-2022/> .
Ibid.`

12

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Climate Change as a Material Financial Risk

remain resilient in the face of uncertainty regarding the pace of change, failing which access to capitalwill continue to suffer headwinds. For directors, this adds yet another factor they must consider in theboardroom when modelling risk and strategic options.
According to the 2017 recommendations of the Task Force on Climate-related Financial Disclosures(TCFD), climate change is one of the most significant and complex risks facing organisations. 8 The TCFD
recommendations have attracted the support of over 2,600 organisations, which demonstrates reflects
the growing consensus among the business, financial and regulatory communities of the financial andsystemic risks presented by climate change and of the necessity of embedding climate change infinancial risk management, disclosure and supervisory practices. 9

Figure 1: Climate-related financial risks to entities.
(Source: TCFD Final Recommendations (2017) p. 8)

In 2018, the Bank of England Prudential Regulation Authority explained that these financial risks havedistinctive elements. The risks are far-reaching in breadth and magnitude across the economy, involve
uncertain and extended time horizons, are foreseeable, and – crucially – the magnitude of futurefinancial risks depends in large part on decisions taken today. 10
Moving beyond company-specific financial risks, climate change is now recognised as a systemic risk.
This was made clear in 2019 by The Network of Central Banks and Supervisors for Greening the
Financial System (NGFS), a global coalition of over 110 central banks and supervisors, in its firstcomprehensive report, A Call to Action, which stated:

Climate-related risks are a source of financial risk. It is therefore within the mandates ofcentral banks and supervisors to ensure the financial system is resilient to these risks.11

8

9

10

11

TCFD, ‘Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures’ (June 2017), ii.<https://www.fsbtcfd.org/publications/final-recommendations-report/>.
Ibid, 5-6; Mercer, ‘Investing in a time of climate change’ (2015): <https://www.mercer.com.au/content/dam/mercer/attachments/asiapacific/australia/investment/sustainable-growth/mercer-climate-change-study-2015.pdf>; TCFD, 2021 Status Report: Task Force on Climaterelated Financial Disclosures (14 October 2021)<http://www.fsb-tcfd.org/press/fourth-tcfd-status-report-highlights-greatest-progress-to-date-on-tcfd-adoption/>.
Bank of England Prudential Regulation Authority, Transition in Thinking: The impact of climate change on the U.K. banking sector (September2018) <https://www.bankofengland.co.uk/prudential-regulation/publication/2018/transition-in-thinking-the-impact-of-climate-change-on-the-ukbanking-sector>.
NGFS, ‘A Call for Action: Climate Change as a Source of Financial Risk’ (April 2019), 4 <https://www.banquefrance.fr/sites/default/files/media/2019/04/17/ngfs_first_comprehensive_report_-_17042019_0.pdf>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Climate Change as a Material Financial Risk

According to the Banque de France and the Bank for International Settlements, known as the 'central
bank of central banks', the radical uncertainty of climate change and society's responses to it mean thatclimate change poses 'green swan' systemic risks that could lead to a financial crisis. 12 Stress tests
which cover climate-related risks are planned or have already been conducted by central banks aroundthe world, including the European Central Bank, the Reserve Bank of New Zealand, De Nederlandsche
Bank and the Bank of England, which published the findings of its Climate Biennial Exploratory Scenario
in May 2022.13

Figure 2: Climate-related systemic risks arising from transition risks.

(Source: NGFS Guide for Supervisors: Integrating climate-related and environmental risks into prudential
supervision (2020) p. 13)

Figure SEQ Figure \* ARABIC 2: Climate-related systemic risks arising from physical risks.Source: NGFS
Guide for Supervisors: Integrating climate-related and environmental risks into prudential supervision(2020) p 13.
12

13

Bank of International Settlements and Banque du France, The green swan - Central banking and financial stability in the age of climate change(January 2020) <https://www.bis.org/publ/othp31.pdf>.
Reserve Bank of New Zealand, Climate Change Report 2021 (26 October 2021) <www.rbnz.govt.nz/financial-stability/climate-change/climatechange-report>;
Green
CentralBanking,‘ECB
launchesclimaterisk
stresstest’(28
January2022)<https://greencentralbanking.com/2022/01/28/ecb-climate-risk-stress-test/>;De
Nederlandsche
Bank,‘Stress
test
model’,<www.dnb.nl/en/research/dnb-s-econometric-models/stress-test-model/>. See also Environmental Finance, ‘Denmark’s central bank to conduct
climate stress test in 2020’, <www.environmental-finance.com/content/news/denmarks-central-bank-to-conduct-climate-stress-test-in2020.html>; Bank of England, Results of the 2021 Climate Biennial Exploratory Scenario (CBES) (24 May 2022)<https://www.bankofengland.co.uk/stress-testing/2022/results-of-the-2021-climate-biennial-exploratory-scenario>.

14

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Climate Change as a Material Financial Risk

As a now widely-recognised financial and systemic risk, as well as a factor that is integral to value
creation, climate change squarely engages directors’ duties and disclosure obligations. In line with thesedevelopments, financial regulators have increasingly insisted on effective climate risk disclosure andgovernance.14
So, too, investors have set normative expectations of director conduct. 15 A new coalition of financial
institutions with over launched at COP26, the Glasgow Financial Alliance for Net Zero (GFANZ), haspublished guidance for its members on expectations for real-economy transition plans, portfolioalignment with achieving a net-zero by 2050 goal, and managing a phaseout of high-emission assets.16
The Institutional Investors Group on Climate Change (IIGCC), a membership body with over €51tn asset
under management (AUM), has published policies and guidance for members on engaging withinvestee companies on climate matters;17 and the Net Zero Asset Managers initiative, a group of asset
managers with more than US$61.3tn AUM has published its initial targets for managing its assets in linewith achieving net-zero by 2050 or sooner.18
Investors are also becoming increasingly vocal in communicating these expectations in their voting andstewardship activities. In 2021, shareholders at large oil and gas companies brought resolutions
requesting that these companies set and report on climate targets, 19 and, notably, investors voted toreplace three of ExxonMobil’s board members with alternative candidates with experience in thetransition of oil and gas companies.20 2021 was not an exceptional year. This year, over 215 resolutions
relating to climate change have been filed by shareholders, and the Follow This movement, comprised
over 8,000 shareholders of oil and gas companies, has started a campaign for more extensive climate
disclosures.21
Investors, regulators and governments are also increasingly asking companies to produce net-zerotransition plans, setting out items including the company’s ambition, the activities covered by the plan,targets and dates, proposed use of offsets, financial impacts, and plans to engage through their value
chain.22 First-mover companies have already begun to produce climate transition plans, and investor
groups including GFANZ have published guidance on what they expect investee companies to include
in their business plans.23 The U.K. government has stated that it will introduce regulations to require

14

15

16
17
18

19

▪
▪
▪
▪
▪
20

21

22

23

See TCFD, ‘Final Report: Recommendations of the Task Force on Climate-Related Financial Disclosures’ (2017) 5-6: <https://www.fsbtcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf>; Mercer, ‘Investing in a time of climate change’ (2015):,https://www.mercer.com.au/content/dam/mercer/attachments/asia-pacific/australia/investment/sustainable-growth/mercer-climate-changestudy-2015.pdf>;
See, e.g., BlackRock, Larry Fink’s 2021 Letter to CEOs (January 2021) <https://www.blackrock.com/corporate/investor-relations/2021-larry-finkceo-letter>; BlackRock, Larry Fink’s 2022 Letter to CEOs (January 2022) <https://www.blackrock.com/corporate/investor-relations/larry-fink-ceoletter>.
GFANZ, Publications <https://www.gfanzero.com/publications/>.
See, e.g., IIGCC, IIGCC Net Zero Stewardship Toolkit (21 April 2022) <https://www.iigcc.org/resource/iigcc-net-zero-stewardship-toolkit/>.
Net Zero Asset Managers initiative, Net Zero Asset Managers initiative publishes initial targets for 43 signatories as the number of asset managers
committing to net-zero grows to 273 (31 May 2022) <https://www.netzeroassetmanagers.org/net-zero-asset-managers-initiative-publishes-initialtargets-for-43-signatories-as-the-number-of-asset-managers-committing-to-net-zero-grows-to-273/>.
Among shareholder resolutions proceeding to vote in the U.S. were resolutions proposing that:
ConocoPhillips and Chevron set and report on emission reduction targets covering the greenhouse gas emissions of the company’s operations
as well as their energy products (Scope 1, 2 and 3) (with 59.3% and 60.7% of the vote, respectively);
Chevron report on the implications of the International Energy Agency’s October 2020 Net Zero 2050 scenario (failed with 47.8% of the vote);
Phillips 66 set and report on GHG reductions targets as well as the alignment of its lobbying activities with the objectives of the Paris Agreement(passed with 80.28% of the vote);
General Electric evaluate and disclose if and how the company has met the criteria of the ‘Net Zero Indicator’ produced by the Climate Action
100+ (passed with 97.97% of the vote);
Exxon Mobil evaluates and reports on the alignment of its lobbying activities with the objectives of the Paris Agreement, on the basis that “corporate
lobbying that is inconsistent with the goals of the Paris Agreement presents regulatory, reputational and legal risks to investors” (passed with 63.8
% of the vote).
ExxonMobil,
ExxonMobil
updatespreliminary
resultsonelectionofdirectors
(2
June
2021)
<https://corporate.exxonmobil.com/News/Newsroom/News-releases/2021/0602_ExxonMobil-updates-preliminary-results-on-election-ofdirectors>.
Amena Saiyid, ‘ExxonMobil board recommends “no vote” on reducing Scope 3 GHG emissions’, Clean Energy News (11 April 2022)<https://cleanenergynews.ihsmarkit.com/research-analysis/exxonmobil-board-recommends-no-vote-on-reducing-scope-3-ghg-em.html>;
Climate Action 100+, ‘As 2022 Proxy Season Begins, Record Numbers of Climate Resolutions and Agreements Bode Well for Action’ (27 April
2022) <www.climateaction100.org/news/as-2022-proxy-season-begins-record-numbers-of-climate-resolutions-and-agreements-bode-well-foraction>.
See Transition Plan Taskforce, A Sector-Neutral Framework for private sector transition plans Call for Evidence (May 2022), Table 2<https://transitiontaskforce.net/call-for-evidence/>.
CDP, 'Are companies being transparent in their transition?': 2021 Climate Transition Plan disclosure (March 2022)<https://www.cdp.net/en/guidance/guidance-for-companies/climate-transition-plans>; GFANZ, Introductory Note on Expectations for Realeconomy Transition Plans (June 2022) <https://www.gfanzero.com/publications/>; GFANZ, Recommendations and Guidance on Financial
Institution Net-zero Transition Plans (June 2022) <https://www.gfanzero.com/publications/>.

15

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Climate Change as a Material Financial Risk

asset managers, regulated asset owners and listed companies to publish net-zero transition plans on a‘comply or explain’ basis from 2023, and has established the Transition Plan Taskforce (TPT) to develop
guidance and standards for these plans.24
Investors are also encouraging companies to increase the ambition of their net-zero targets, which
moving towards increased standardisation between targets. Race to Zero, an a global campaign withsupport from businesses, cities, regions, investors, has published criteria for its members, which include
a net-zero pledge, covering scope 1, 2 and material scope 3 emissions, made from the top level of thecompany.25 Sustainability standards requiring disclosure of metrics and targets are steadily converging
towards similar requirements, and in March 2022, the UN launched its High-Level Expert Group on NetZero Pledges (HLEG), which will address current standards for setting net-zero targets, verification of
net-zero pledges and work on translating standards and criteria into international and national-level
regulations.26

24

25

26

HM Treasury, Fact Sheet: Net Zero-aligned Financial Centre (November 2021) <https://www.gov.uk/government/publications/fact-sheet-netzero-aligned-financial-centre/fact-sheet-net-zero-aligned-financial-centre>.
Race to Zero, Starting Line and Leadership Practices 2.0 (June 2021) <https://racetozero.unfccc.int/wp-content/uploads/2021/04/Race-to-ZeroCriteria-2.0.pdf>.
UN, Secretary-General Will Push Business, Investors, Cities to ‘Walk the Talk’ on Net-Zero Pledges, Launching Expert Group as Climate Crisis
Worsens (31 March 2022) <https://press.un.org/en/2020/sga2109.doc.htm>.

16

Directors’ Duties and Climate Change
Directors act as fiduciaries of the company in discharging their functions: overseeing corporate
performance, strategy, and risk management; ensuring robust legal compliance systems are in effectin the company; approving significant transactions; and approving corporate reporting and disclosure.
Duty of loyalty and duty of care
As fiduciaries, directors owe two core duties to the company: the duty of loyalty and the duty of careand diligence. The precise nature and contours of these duties vary by jurisdiction. In common law
jurisdictions, directors’ fiduciary duties are articulated in statutes and in the case law, as developed overtime by courts. In civil law jurisdictions, these duties are set out in statutory provisions that govern the
conduct of directors.
While subject to variation across jurisdictions, the overarching concepts of loyalty and care in corporate
governance are widespread. In general terms, the duty of loyalty requires that directors act honestly
and in good faith in the best interests of the company, typically, but not exclusively, defined in financial
terms. The duty of care requires that directors exercise reasonable care, skill, and diligence in the
discharge of their stewardship functions, including by taking reasonable precautions against reasonably
foreseeable harms.
What these duties require as a matter of good governance and prudent risk management is constantly
evolving, in line with changes in the factual context in which directors act, knowledge of foreseeable
risks, changes in regulations and market practices. A reasonable decision for a director fifty, ten or evenfive years ago might not look so reasonable today. Understanding these duties in the context of achanging external context is particularly relevant in the case of climate change, where the evidence ofclimate-related risks and opportunities is becoming ever more apparent, and changes in regulation aregathering momentum such that the likelihood of a disorderly and disruptive transition increases.
To discharge their duties, therefore, directors must integrate climate risks and opportunities into theirgovernance roles.
The ‘business judgment rule’
The courts in many jurisdictions will defer to directors’ knowledge and expertise in making businessdecisions, and directors are unlikely to face liability as a result of simply a bad decision. This is known
in some jurisdictions as the ‘business judgment rule’. This may not protect directors in cases where they
have failed to act in good faith (which could be done, for example, by completely failing to consider
climate risks facing the company which the company has disclosed), but may operate to protect
directors where they take actions to ensure the long-term success of the company which may not be
the most profitable in the short-term.

17

Directors’ Disclosure Obligations and Climate Change
Public companies in most jurisdictions have existing obligations under national laws to assess, manage,
and report on financially-material climate risks.
Requirements for climate-related risks to be reported are becoming increasingly common
Mandatory climate-related disclosures are increasingly being introduced in jurisdictions around theworld. In June 2021, the G7 issued a communique announcing its support for moving towards
mandatory disclosures aligned with the recommendations of the Taskforce on Climate-related Financial
Disclosures (TCFD),1 and regulators and governments have begun to introduce rules requiring certain
companies to make TCFD-aligned disclosures.2 The requirements differ between jurisdictions, butcommon themes include reporting on climate-related risks and opportunities, the mechanisms for
identifying and managing these risks and opportunities, and metrics and targets for greenhouse gas
emissions. For example, the Hong Kong and Singapore stock exchanges have introduced requirementsin the listing rules for issuers to disclose climate-related financial risks on a ‘comply or explain’ basis;3
the U.K. and New Zealand governments have passed regulations requiring financial institutions (and, inthe case of the UK, all large companies) to disclose climate-related risks;4 in the US, the Securities andExchange Commission has proposed rules to enhance and standardise climate-related disclosures.5
International standards have also begun to be developed. The IFRS Foundation’s International
Sustainability Standards Board (ISSB) produced its first exposure drafts of standards in March 2022,
which are designed to meet investors’ information needs in assessing an issuer’s enterprise value,
enabling efficient allocation of resources through the capital market.6 These draft standards require
disclosures which are generally aligned with the recommendations of the TCFD, including narrative
disclosures on governance, strategy, risk management, and metrics and targets. If the ISSB standards
become mandatory, as indicated by the G7 nations,7 disclosing on these aspects will effectively require
reporting entities to put governance systems in place to identify and manage sustainability risks andopportunities generally, and in particular, climate change-related risks and opportunities. The European
Financial Reporting Advisory Group (EFRAG) has published a set of exposure drafts of European
sustainability reporting standards (ESRS), in line with the requirements of the upcoming Corporate
Sustainability Reporting Directive (CSRD), which will increase the scope and quality of the existing EU
sustainability reporting regulations.8

1

2

3

4

5

6

7

8

HM Treasury, G7 Finance Ministers and Central Bank Governors Communiqué (5 June 2021) <https://www.gov.uk/government/publications/g7finance-ministers-meeting-june-2021-communique/g7-finance-ministers-and-central-bank-governors-communique>.
For example, in the UK, large companies and limited liability partnerships are required to disclose climate-related risks under the Companies(Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 and the Limited Liability Partnerships (Climate-related Financial
Disclosure) Regulations 2022’; in New Zealand, financial institutions are required to make climate-related disclosures under the Financial Sector(Climate-related Disclosures and Other Matters) Amendment Act 2021; in Brazil, the Securities and Exchange Commission of Brazil has
introduced rules requiring publicly-listed companies to disclose certain climate-related information; in Malaysia, financial institutions will be
required to make climate-related disclosures in line with the principles set out in the Bank Negara Malaysia (BNM) Exposure Draft on Climate Risk
Management and Scenario Analysis. See, for a general overview, TCFD, 2021 Status Report (October 2021) <https://www.fsbtcfd.org/publications/>.
HKEX, ‘Amendments to the Main Board Listing Rules: Update No.128’ (2019) <https://en-rules.hkex.com.hk/rulebook/update-no-128>; SGX,ClimateandDiversity:
The
Way
Forward(15
December
2021)<https://api2.sgx.com/sites/default/files/202112/Response%20Paper%20on%20Climate%20and%20Diversity%20-%20The%20Way%20Forward_0.pdf>.
The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022; Financial Sector (Climate-related Disclosures andOther Matters) Amendment Act 2021.
SEC, SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors (21 March 2022)<https://www.sec.gov/news/press-release/2022-46>.
IFRS, Exposure Draft IFRS Sustainability Disclosure Standard: Basis for Conclusions on [Draft] IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Information (March 2022) <https://www.ifrs.org/content/dam/ifrs/project/general-sustainability-relateddisclosures/basis-for-conclusions-exposure-draft-ifrs-s1-general-requirements-for-disclosure-of-sustainability-related-financial-information.pdf>.
; IFRS, Exposure Draft IFRS Sustainability Disclosure Standard: Basis for Conclusions on [Draft] IFRS S2 Climate-related Disclosures (March2022)<https://www.ifrs.org/content/dam/ifrs/project/climate-related-disclosures/issb-exposure-draft-2022-2-basis-for-conclusions-climaterelated-disclosures.pdf>.
G7
Germany, G7 Finance
Ministers and Central
Bank
Governors’Petersberg
Communiqué(20
May 2022)<https://www.bundesfinanzministerium.de/Content/DE/Downloads/Internationales-Finanzmarkt/G7/g7-meeting-bonn-koenigswintercommunique-en.pdf?__blob=publicationFile&v=11>.
EFRAG, Public consultation on the first set of Draft ESRS <https://www.efrag.org/lab3>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Directors’ Disclosure Obligations

Investors are calling for climate-related risk disclosures
Investors are increasingly calling for specific climate-related financial disclosures in the financial filings,
in line with the TCFD recommendations. The TCFD 2021 Status Report issued in October 2021 statesthat the TCFD reporting framework has been supported by “ over 2,600 supporters globally, including
1,069 financial institutions, responsible for assets of $194 trillion.”9
In 2021, BlackRock, an investor with $8.67 trillion assets under management, 10 called on investee
companies to disclose a plan for how their business model will be compatible with a net-zero economy,
to state how this plan is incorporated into the company’s long-term strategy, and to confirm that it has
been reviewed by the board of directors.11 These disclosure requests are in addition to BlackRock’s
2020 policies that ask its investee companies to report in alignment with the TCFD recommendations
and the Sustainability Accounting Standards Board (SASB). 12 In January 2022, Larry Fink, BlackRock’s
CEO, restated the importance of climate risk to its investment and its request for investee companies toissue TCFD-aligned reports.13
Investors are also requesting that their investee companies produce financial statements which show
how the climate risks and impacts which the company has identified will affect its finances, including by
making adjustments to critical assumptions, including sensitivity analysis, and the implications on thecompany’s dividend-paying capacity.14 The extent to which companies’ CAPEX is aligned with theirstated transition plans and net-zero goals is also under scrutiny from investors.15
Climate risk is a material risk
While jurisdictional specificities exist, corporate reporting and securities law frameworks generally
require listed companies to disclose information that is materially relevant to their financial performanceand prospects in narrative reports and financial statements.
A materiality requirement also covers disclosures in the financial statements. In November 2019,
International Accounting Standards Board member Nick Anderson explained how climate risks fallwithin the existing principles-based requirements under International Financial Reporting Standards(IFRS):

Climate-related risks and other emerging risks are predominantly discussed outside
the financial statements. However, as set out in [IFRS Practice Statement 2] Making
Materiality Judgements, qualitative external factors, such as the industry in which thecompany operates, and investor expectations may make some risks ‘material’ and may
warrant disclosures in financial statements, regardless of their numerical impact. 16
In November 2020, the IFRS Foundation published guidance titled the Effects of climate-related matterson financial statements, which states that material climate-related financial information should bereported under IAS 1 Presentation of Financial Statements, IAS 2 Inventories, IAS 12 Income Taxes,
IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets, IAS 36 Impairment of Assets, IAS 37
Provisions, Contingent Liabilities and Contingent Assets, IFRS 7 Financial Instruments: Disclosures,
IFRS 9 Financial Instruments, and IFRS 13 Fair Value Measurement; and, in addition to this specific

9

10
11

12
13
14

15

16

TCFD, 2021 Status Report, (October 2021), 2 <https://www.fsb.org/2021/10/2021-status-report-task-force-on-climate-related-financialdisclosures/>.
As at January, 2021.
BlackRock, Larry Fink’s 2021 Letter to CEOs (January 2021) <https://www.blackrock.com/corporate/investor-relations/2021-larry-fink-ceoletter>.
Ibid.
BlackRock, Larry Fink’s 2022 Letter to CEOs (January 2022) < https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter>.
IIGCC, Investor Expectations for Paris-aligned Accounts (16 November 2020) <https://www.iigcc.org/resource/investor-expectations-for-parisaligned-accounts/>; Sarasin & Partnership, Investor Expectations for Paris-Aligned Accounting (16 November 2020)<https://sarasinandpartners.com/stewardship-post/investor-expectations-for-paris-aligned-accounting/>.
See CA100+, Net Zero Company Benchmark: Structure and Methodologies <https://www.climateaction100.org/net-zero-companybenchmark/methodology/>
Nick Anderson, ‘IFRS Standards and climate-related disclosures, In Brief’ (November 2019), 3 <https://www.ifrs.org/news-andevents/2019/11/nick-anderson-ifrs-standards-and-climate-related-disclosures/>.

19

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Directors’ Disclosure Obligations

disclosure, that companies whose financial position or financial performance is particularly affected byclimate-related matters must provide overarching disclosure. 17
These climate-related disclosure standards have significant consequences for boards. Directors haveobligations to approve or attest to the accuracy and completeness of disclosures made in financial
filings. Directors on audit committees will likewise have additional responsibilities to engage in testingand overseeing the robustness of the climate scenario assumptions underpinning key aspects of theaudit process.18
While some directors may be concerned about liability exposure from making disclosures in accordancewith the TCFD reporting framework, a 2017 report by the CCLI explained how such concerns aremisplaced:

It is true that under some disclosure regimes, directors may be primarily liable where
they are involved in misleading disclosures by their company. In others, liability may beaccessorial (i.e., to that of the company), or as an adjunct of the directors’ duties toexercise due care and diligence in the best interests of their company. However, thisconcern about liability exposure both misunderstands the nature of the TCFD
recommendations and potentially misrepresents the application of securities disclosure
laws in many jurisdictions.19
Simply put, disclosure in accordance with the TCFD recommendations could in fact be used as a
strategy to ensure compliance with directors’ duties and disclosure obligations.
In short, disclosure of forward-looking risks associated with climate change – with adequate specificity
and relevance, and with appropriate cautionary language around associated limitations or uncertainties– is the best (if not only) way to minimise liability exposure for misleading disclosure. Whilst appropriate
analysis and disclosure will be company-specific, the TCFD recommendations represent an influential
touchstone for the processes required to robustly assess climate risks (and opportunities), and tocommunicate them to the market in a true and fair manner.20

17

18

19

20

IFRS, ‘Effects of climate-related matters on financial statements’, (20 November 2020), 1, <https://cdn.ifrs.org/-/media/feature/supportingimplementation/documents/effects-of-climate-related-matters-on-financial-statements.pdf?la=en>.
For audit committee guidance, see Janis Sarra, Canada Climate Law Initiative, Audit Committees and Effective Climate Governance, A Guide for
Boards of Directors (December 2020) <https://ccli.ubc.ca/wp-content/uploads/2021/04/Guide-for-Audit-Committees-on-Effective-ClimateGovernance.pdf> ; and A Closer Look, a Primer for audit committee members produced by Deloitte U.K. for Chapter Zero, the CGI’s U.K. Chapter
and made available to the global network of Chapters. The Primer is also available in Spanish through the CGI’s Latin American Chapters.
Sarah Barker, Alexia Staker and Alice Garton, Commonwealth Climate and Law Initiative (CCLI), Concerns Misplaced: Will compliance with the
TCFD recommendations really expose companies and directors to liability risk? (September 2017), 9 <https://ccli.ouce.ox.ac.uk/wpcontent/uploads/2017/10/CCLI-TCFD-Concerns-Misplaced-Report-Final-Briefing.pdf>.
Ibid., 13.

20

Climate Litigation
As of 31 May 2022, over 2,000 climate change cases had been filed globally, with approximately aquarter of these being filed in the last two years.1
While earlier waves of climate litigation were centred around the quantification of actions by polluters,
many newer cases involve fiduciary duty or securities claims, and this is likely to continue as this fieldof litigation expands.2
Fiduciary duty claims against board members may be tested in court soon
Fiduciary duty and securities claims that have been brought to date clearly show the risks to companies,
and their directors and officers, from failing to incorporate climate change into strategy, oversight, risk
management and disclosure. It is important to note that the physical and transition risks that catalyse aslegal risks transcend geographic boundaries, with the possibility to give rise to multiple legal actions
across different jurisdictions.
A claim raising the fiduciary duty implications of climate risks on an asset level has already been brought.
In 2018, a successful claim was brought against Polish power generation company Enea SA seeking
the annulment of a board resolution consenting to the construction of the €1.2bn 1GW Ostrołęka C coalfired power plant, on the basis that construction would harm the economic interests of the company byfailing to consider the transition risks posed by climate change. 3
Now, the relevance of climate risk to fiduciary duty on a strategy-wide level may be tested. In March
2022, a NGO ClientEarth wrote to the board of Shell plc, in its capacity as a shareholder of the company,
alleging that Shell’s directors have breached their duty to act in the best interests of the company byfailing to develop and implement a climate strategy that aligns with the Paris Agreement goals, allegedly
increasing its risk of stranded assets and having to make write-downs (due to both physical andtransition risks).4 It appears ClientEarth will argue for a ‘heightened duty’ interpretation of directors’
duties under the U.K. Companies Act 2006, citing a speech made by Lord Sales in 2019, while acting
as a Justice of the U.K. Supreme Court:

As things stand, there is much force in the view that directors may, and increasingly, must take
into account and accord significant weight to climate change in their decision-making … Undercertain circumstances, however, their companies’ interests may be so implicated by climatechange effects that their general fiduciary and due care obligations actually require them tocause their companies to take action to reduce their contribution to climate change activity.
Investors, corporate lawyers, the boards of high-emitting and financial companies, and other strategic
litigants are watching developments closely.
Investors are also facing fiduciary claims
Investor fiduciaries have also faced challenges regarding their fiduciary duties. In Australia, thecorporate trustee of A$50 billion AUM pension fund Retail Employees Superannuation Trust (REST)
was sued for breach of its duty of care for failing to integrate climate change considerations into its
investment strategy.5 The case was settled in November 2020 on favourable terms to the plaintiff. REST
issued a press release recognizing climate change as a material financial risk, and undertook to be net-

1

2

3

4
5

Joana
Setzer,Catherine
Higham,Globaltrendsinclimatechangelitigation:2022
snapshot
(June
2022)
<https://www.lse.ac.uk/granthaminstitute/publication/global-trends-in-climate-change-litigation-2022/>.
Joana
Setzer,Catherine
Higham,Globaltrendsinclimatechangelitigation:2022
snapshot
(June
2022)
<https://www.lse.ac.uk/granthaminstitute/publication/global-trends-in-climate-change-litigation-2022/>.
ClientEarth v Enea, District Court of Poznań [31 July 2019] http://climatecasechart.com/non-us-case/clientearth-v-enea/>. The Court found in
ClientEarth’s favour on the first ground (the board resolution approving the power plant was legally invalid under Polish company law) so the judge
did not need to formally determine the second ground (climate risk).
See ClientEarth, Redirecting Shell <https://www.clientearth.org/redirecting-shell/#theclaim>.
McVeigh v REST NSD1333/2018, Federal Court of Australia, <http://climatecasechart.com/non-us-case/mcveigh-v-retail-employeessuperannuation-trust/>.

21

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Climate Litigation

zero by 2050 and to ensure that its investment managers “ take active steps to consider, measure, andmanage financial risks posed by climate change and other relevant ESG risks. ”6
A case with possible implications for both company and investor fiduciary duties was brought in October
2021. Beneficiaries of the U.K. University Superannuation Scheme (USS) pension fund filed a claim
against the directors of the fund management company, claiming that by continuing to invest in fossil
fuels, while acknowledging that climate change is a material financial risk to the returns of assets is abreach of fiduciary duties.7 This case was dismissed on procedural grounds.
While claims relating to breaches of fiduciary duty in respect of climate risks are becoming morecommon, conversely, boards may take comfort that no fiduciary duty claims challenging ‘pro-climate’
actions of boards are noted in the main climate litigation databases.
Greenwashing claims are developing
Claims around greenwashing, which can lead to personal liability for directors, are also on the rise. In
August 2021, shareholder activist group, the Australasian Centre for Corporate Responsibility (ACCR)
sued Santos alleging misrepresentations under consumer protection and corporation laws. Claims by
Santos include that their natural gas is “clean fuel” that provides “clean energy” and that it has a“credible and clear plan” towards achieving “net-zero” emissions by 2040.8 The case is ongoing.
Greenwashing risks can increase the risks of a fiduciary claim. In the U.S., ExxonMobil and its officers
have been sued for breach of fiduciary duty and securities fraud. The earliest of these claims, Ramirez
v ExxonMobil, passed a key hurdle in 2018 when the case regarding the company’s liability and that ofindividual officers and directors was permitted to go forward.9 The court held that the plaintiffs’
allegations supported a strong inference that the defendants had actual awareness or knowledge that
ExxonMobil had materially misrepresented the value of its assets (which the plaintiffs alleged thecompany and its individual officers Tillerson, Swiger, and Rosenthal knew would need to be written
down as oil prices started to collapse in 2014, and as oil sands investments looked increasingly likely to
become “stranded assets.”)10 In addition, there is an ongoing claim from 2019 against Exxon Mobil’s
directors alleging that they have breached their fiduciary duties by allowing misleading disclosuresabout stranded assets.11
Litigation against companies and governments can have significant impacts on business models
Litigation has also been brought which may significantly affect company’s business models. In May
2021, the District Court in The Hague ordered Royal Dutch Shell to cut its CO 2 emissions by 45% by theend of 2030, compared to 2019 levels.12 That decision is being appealed.13 In coming to this decision,
the court considered the impacts of Shell’s actions on the ECHR rights of the claimants, based on a
successful claim against the Dutch government in 2020. 14 The claimant, Milieudefensie, has now
informed 30 other multinational companies that it is willing to take them to court, using the same typeof claim as used against Shell, if they do not produce transition plans. 15

6
7

8

9
10
11
12

13

14
15

See Statement of REST, available at <https://equitygenerationlawyers.com/cases/mcveigh-v-rest/>.
As the company had not suffered a financial loss as a result of the investments, the claimants were unable to bring a common law claim:
McGaughey v Universities Superannuation Scheme Limited [2022] EWHC 1233 (Ch). The pleadings are available at<http://climatecasechart.com/non-us-case/mcveigh-v-retail-employees-superannuation-trust/>.
See ACCR, Australasian Centre for Corporate Responsibility files landmark case against Santos in Federal Court (26 August 2021)<https://www.accr.org.au/news/australasian-centre-for-corporate-responsibility-files-landmark-case-against-santos-in-federal-court/>.
Ramirez v Exxon Mobil, 334 F.Supp.3d 832, 839-841 (N.D.Tex.2018) (Memorandum Opinion and Order).
Ibid.
Climatecasechart.com, In re Exxon Mobil Corp. Derivative Litigation (2019) <http://climatecasechart.com/case/von-colditz-v-exxon-mobil-corp/>
The decision in English is available at: Milieudefensie et al. v. Royal Dutch Shell PLC C/09/571932 / HA ZA 19-379 (engelse versie),<https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2021:5339>.
Shell, Shell confirms decision to appeal court ruling in Netherlands climate case (20 July 2021) <https://www.shell.com/media/news-and-mediareleases/2021/shell-confirms-decision-to-appeal-court-ruling-in-netherlands-climate-case.html>.
Urgenda v Netherlands 19/00135 (20 December 2019).
Reuters,
ActivistsbehindShellclimateverdict
target30
multinationals(13
January2022)<https://www.reuters.com/markets/commodities/activists-behind-shell-climate-verdict-target-30-multinationals-2022-01-13/>.

22

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Climate Litigation

Similarly, following the judgment in a German case against the government, which found that theGerman government’s statutory targets for greenhouse gas reductions by 2030 were insufficient toavoid it having to take significant actions after 2030 in order to meet its reduction targets, a German
NGO has brought claims against Volkswagen, BMW and Mercedes-Benz. The NGO alleges that thesecompanies are violating citizens’ fundamental right to climate protection and impinging on the rights
and freedoms of future generations by not adhering to a ‘fair’ carbon budget, and has asked the court
to order the companies to stop bringing internal combustion engine cars onto the market after 31
October 2030, unless they can prove that they will be greenhouse gas-neutral.16
Company directors may also be liable for climate damages litigation, whereby claimants seek damages
as a result of the effects of climate change.
The case of Luciano Lliuya v RWE AG17 was brought in November 2015 by a Peruvian farmer against
Germany’s largest electricity producer and greenhouse gas emitter for harms arising from climatechange, and how RWE’s actions, despite being in a different jurisdiction, contributed to the risk andthreat of flooding from melting mountain glaciers near his town of Huraz. The case is ongoing. A similar
claim has recently been brought by four Indonesian fisherman against Swiss cement company Holcim,
seeking proportional damages for the cost of flood protection measures and a reduction in CO 2
emissions.18
With climate litigation increasing and the first claims being brought against directors an officers,
governance mechanisms to mitigate the risks of liability ought therefore to be prioritized by forwardthinking boards.19 This Primer is being published in order to help guide thinking about those governancemechanisms.

16

17
18

19

Deutsche Umwelthilfe (DUH) v Bayerische Motoren Werke AG: see Climate Change Laws of the World (https://climatelaws.org/geographies/germany/litigation_cases/deutsche-umwelthilfe-duh-v-bayerische-motoren-werke-ag-bmw), DUH v Mercedes-Benz(https://climate-laws.org/geographies/germany/litigation_cases/deutsche-umwelthilfe-duh-v-mercedes-benz-ag); DUH v. Volkswagen AG(https://climate-laws.org/geographies/germany/litigation_cases/kaiser-et-al-v-volkswagen-ag).
Climatecasechart.com, Luciano Lliuya v. RWE AG (2015) <http://climatecasechart.com/non-us-case/lliuya-v-rwe-ag/>
European Center for Constitutional and Human Rights, Groundbreaking climate case against Swiss cement company Holcim (12 July 2022)<https://www.ecchr.eu/en/press-release/an-island-demands-justice/>.
Comprehensive databases discussing climate litigation to date are available from the Sabin Centre at Columbia University, Climate Change
Litigation Database, <http://climatecasechart.com/>, and from the Grantham Centre at the London School of Economics, <https://climatelaws.org/>.

23

Questions to Assist Directors
The actions required to fulfil directors' duties and disclosure obligations will depend on the laws of thejurisdiction and unique circumstances of the company and situation.
To assist directors, we offer some high-level questions:•

Does my board actively consider the foreseeable and material financial risks to thecompany associated with climate change (including those risks arising across our value
chain) and the potential impacts on corporate risk management and strategy?

•

Do I meaningfully engage with and scrutinise information and advice concerning climaterelated risks presented to the board? Do I need to seek independent advice?

•

If climate change is never on the board agenda or in management reports, do I ask why
not?

•Does my board consider climate risks, both in relation to general strategic planning and risk
management, and in relation to specific projects or acquisitions that require board oversightor approval?

•

Has my company embedded robust procedures to ensure that foreseeable and financiallymaterial climate risks are identified, dynamically managed, and appropriately reported tothe board and in the financial statements and external reporting?

•

Has the board considered whether to set a net-zero target by 2050 or sooner? If so, howwill we ensure the target based on robust and credible plan to navigate the financial risks
and opportunities as my company and the global economy transitions to net-zeroemissions? How is this information communicated to our investors?

•

Is my company’s capital expenditure aligned with our emissions reduction targets and/or aParis-aligned 1.5℃ scenario? If not, does management have a plan to do so?

•

Have any of my company’s peers been subject to climate-related shareholder proposals forwhich the company received criticism from influential investors or the proxy advisors, or
lower than expected votes on director or auditor appointment which was publicly attributed
to dissatisfaction on climate issues? Have any of my company’s peers been subject toregulatory investigations or climate litigation?

•

Do I have a sufficient level of knowledge on the physical, transition, liability, and systemicrisks associated with climate change to fulfil my duties to govern the management of theserisks? Does my board identify potential knowledge gaps among board members andorganise appropriate training, and/or commission independent expert advice, to addressthem?

In each country section, experts offer their views about corporate governance practices and actions
that boards can adopt to mitigate climate change risks, and to better identify opportunities.

24

Jurisdictional Overviews
This section summarises the law on directors’ duties and disclosure obligations in respect of climate change across some important commercial jurisdictions
around the world. In a growing number of jurisdictions, published legal opinions and regulatory guidance have clarified that financially material climate-relatedrisks can and should be integrated into board strategy and risk management practices in order to fulfil directors' duties and form an increasingly central part oftheir disclosure responsibilities.
To read a specific jurisdictional overview, please click on the name of the country or jurisdiction on the map or navigate using the contents page above.

25

Australia
In Australia, regulator statements acknowledge
the foreseeability of climate-related financial
risks.
The Reserve Bank of Australia’s (RBA) Deputy
Governor described the physical and transition
risks associated with climate change as “likely
to have first-order economic effects”.1 The
RBA’s 2019 half-yearly Financial Stability
Review devoted a section to climate change,
and its October 2021 edition contained a focus
on financial regulators’ actions on climaterelated risks.2
The Australian Securities and Investments
Commission (ASIC) has similarly characterised
climate change as a “systemic risk that could

have a material impact on the future financial
position, performance or prospects of entities”.3
The Council of Financial Regulators has
established a working group on the financial
implications of climate change to help
coordinate agencies' actions.4

The Australian Prudential Regulation Authority(APRA) has emphasised that climate risks
should be managed like any other risk, in linewith existing prudential risk management
standards,5 as well as the new Prudential
Practice Guide CPG 229 Climate Change
Financial Risks (CPG 229). 6 APRA and the RBA
have announced that they will increase theincorporation of climate-related issues into theirsupervisory roles, including increasing thescrutiny of institutions' climate risk management
and factoring this into ongoing stress tests.7
APRA has also carried out a climate
vulnerability assessment of the five largest
Australian banks, and has announced avoluntary assessment for other financial
entities.8
Additionally, in October 2021, the Australian
government published policy outlining its
approach to reaching net-zero emissions by
2050, including a goal of reducing emissions by
26-28% by 2030 from 2005 levels, submitted as
its Nationally Determined Contribution for
COP26.9 With a change of federal government,

1

2

3

4

5

Guy Debelle, ‘Climate Change and the Economy,’ Speech at
the Public Forum hosted by the Centre for Policy Development,
Sydney(March2019)<https://www.rba.gov.au/speeches/2019/sp-dg-2019-0312.html>.
Reserve Bank of Australia, Financial Stability
Review(October
2019)<https://www.rba.gov.au/publications/fsr/2019/oct/box-c-financial-stability-risks-from-climatechange.html>; Reserve Bank of Australia, Financial
Stability
Review(October
2021)<https://www.rba.gov.au/publications/fsr/2021/oct/contents.html>.
ASIC, ‘RG 247 Effective disclosure in an operating and financial
review’(August2019)<https://download.asic.gov.au/media/5230063/rg247published-12-august-2019.pdf>.
Reserve Bank of Australia, Financial Stability Review (October
2018)<https://www.rba.gov.au/publications/fsr/2018/oct/regulatorydevelopments.html>.
Summerhayes G, ‘Australia's new horizon: Climate change
challenges and prudential risk’, Speech at the Insurance
Council of Australia Annual Forum, Sydney (17 February 2017)
and Summerhayes G, ‘Financial exposure: the role ofdisclosure in addressing the climate data deficit’, Speech at
ClimateWise and University of Cambridge Institute for
Sustainable Leadership, London, (22 February 2019); APRA,‘APRA releases guidance on managing the financial risks ofclimate change’ (22 April 2021) APRA Website

6

7

8

9

<https://www.apra.gov.au/news-and-publications/aprareleases-guidance-on-managing-financial-risks-of-climatechange>.
APRA, Prudential Practice Guide Prudential Practice Guide
CPG 229 Climate Change Financial Risks November 2021
(November
2021)<
https://www.apra.gov.au/sites/default/files/202111/Final%20Prudential%20Practice%20Guide%20CPG%202
29%20Climate%20Change%20Financial%20Risks.pdf>.
APRA, ‘Information Paper: APRA’s Supervision Priorities’(February
2021)
APRA
Website<https://www.apra.gov.au/sites/default/files/202101/Information%20Paper%20%20Supervision%20Priorities%202021.pdf>; APRA, ‘NGFS
Pledge – Combined statement from APRA and the RBA’ (4November 2021) <https://www.apra.gov.au/ngfs-pledge%E2%80%93-combined-statement-from-apra-and-rba>.
See APRA, APRA publishes new details on Climate Vulnerability
Assessment(3
September
2021)<https://www.apra.gov.au/news-and-publications/aprapublishes-new-details-on-climate-vulnerability-assessment>;
APRA, APRA releases letter on upcoming climate risk selfassessment
survey
(2
March
2022)
<https://www.apra.gov.au/news-and-publications/aprareleases-letter-on-upcoming-climate-risk-self-assessmentsurvey>.
Australian Government, Australia’s Long-term Emissions
Reduction
Plan(26
October
2021)<https://www.industry.gov.au/sites/default/files/October%202

26

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Australia

Australia’s NDC was updated in June 2022 totarget a reduction in emissions of 43% by 2030
from a 2005 baseline, as part of a movement
towards net-zero by 2050.10
In short, the position in Australia is clear: climatechange is a financial risk that must be
addressed by directors through governanceand disclosure practices.
Directors' Duties and Climate Change

directors certainly can, and in some cases
should be considering the impact of climatechange risks on their company – and those
directors who fail to do so now could
conceivably be found liable for breaching their
duty of care in the future.14
In June 2018, ASIC Commissioner John Pricemade public remarks foreshadowing that
directorial liability could arise from a failure toconsider risks related to climate change. 15 In
September 2018, ASIC recommended that:

directors and senior managers
of listed companies need tounderstand and continually
reassess
existing
andemerging risks that may be
applicable to the company’sbusiness, including climate
risk.16Australia is a common law jurisdiction. In
Australia, directors’ common law and equitableduties have been codified in the Corporations
Act 2001 (Cth).11 However, the general law
duties continue to apply concurrently.12
Directors must exercise their powers anddischarge their duties in “good faith in the bestinterests of the corporation”, and for a “proper
purpose”. The general duty of due care anddiligence requires directors to “exercise theirpowers and discharge their duties with thedegree of due care and diligence that areasonable person would exercise” in therelevant circumstances. A legal opinion
commissioned by the AICD has confirmed that
directors have considerable latitude indischarging their best interests duty, and thatenvironmental and stakeholder perspectives
are legitimate considerations.13
In October 2016, Australian barrister Noel
Hutley SC released a seminal legal opinion on
directors’ statutory duty of care as it applies toclimate change (the Hutley opinion). Hutley SC
concluded that, as a matter of Australian law,
“climate change risks would be regarded as

In March 2019, Hutley SC updated his 2016
legal opinion, concluding that there had been ademonstrable shift since 2016 in the way inwhich Australian regulators, firms and the
public perceive climate risk which “elevate[d]the standard of care that will be expected of areasonable director” in discharging their duty ofcare.17
In November 2019, former Australian High
Court judge and financial services royalcommissioner Kenneth Hayne stated that it isincumbentoncompany
directors,indischarging their duty to act in the company’s
best interests, to consider, address and reporton climate-related risks:[A] director acting in the best interestsof the company must take account of,and the board must report publicly on,

foreseeable by courts, and relevant to a
director’s duty of care to the extent that thoserisks intersect with the interests of thecompany”. Accordingly, Australian company

10

11
12
13

14

021/document/australias-long-term-emissions-reductionplan.pdf>; Australian Government, Australia’s Nationally
Determined
Contribution
2021(October
2021)<https://unfccc.int/sites/default/files/NDC/202206/Australia%20Nationally%20Determined%20Contribution%
20Update%20October%202021%20WEB.pdf>.
Australian Labour Party, Powering Australia (December 2021)<https://www.alp.org.au/policies/powering-australia>.
Corporations Act 2001 (Cth) ss. 180-183.
Ibid, s. 185.
Brett Walker, Gerald Ng, Australian Institute Of Company
Directors: The Content Of Directors’ “Best Interest” Duty Memorandum
Of
Advice(24
February2022)<https://www.aicd.com.au/content/dam/aicd/pdf/newsmedia/research/2022/AICD-walker-opinion-feb-2022.pdf>.
Noel Hutley SC and Sebastian Hartford-Davis, ‘Climate Change
and Directors' Duties: Memorandum of Opinion’ (October2016),
2-3<https://cpd.org.au/wp-

15

16

17

content/uploads/2016/10/Legal-Opinion-on-Climate-Changeand-Directors-Duties.pdf>.
John Price, ‘Climate Change’, Speech at the Australian
Securities and Investments Commission, Centre for Policy
Development: Financing a Sustainable Economy, Sydney, (18
June
2018)
<https://asic.gov.au/about-asic/newscentre/speeches/climate-change/>. ASIC Commissioners
Sean Hughes (Canberra, 7 February 2019) and Cathie Armour(Sydney, 21 February 2019) also made public addresses
concerning climate change risk.
ASIC, ‘Report 593: Climate risk disclosure by Australia’s listedcompanies’(September2018),
12<https://download.asic.gov.au/media/4871341/rep593published-20-september-2018.pdf>.
Noel Hutley SC and Sebastian Hartford-Davis, ‘Climate Change
and Directors' Duties: Supplementary memorandum of opinion’(March 2019) <https://cpd.org.au/2019/03/directors-duties2019/>.

27

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Australia

climate-related risks
relevant to the entity.18

andissuesIn April 2021, Hutley SC published a further
update to the 2016 legal opinion, stating that:[i]t is no longer safe to assume that
directors adequately discharge theirduties simply by considering anddisclosing climate-related trends andrisks; in relevant sectors, directors oflisted companies must also takereasonable steps to see that positive
action is taken: to identify and manage
risks, to design and implement
strategies, to select and use
appropriate standards, to makeaccurate assessments and disclosures,and to deliver on their company’s
public commitments and targets.19
Counsel further opined that in relevant sectors,
consideration of net-zero emissions targets arean “appropriate and necessary” step todischarge duties. In setting such targets, acompany need not have all the answers about
how the target will be achieved. However, anannouncement of a net-zero target carries withit a representation that a company does have agenuine intention, formed on reasonablegrounds at the time of making the commitment,
to pursue strategies to achieve the target ingood faith. Misalignment between that intention
and operational strategy places the company,
and its directors and officers, at risk of‘greenwash’, and potentially liable formisleading and deceptive conduct in relation toa ‘future matter’ under the Corporations Act,

Australian
Securities
andInvestments
Commission Act 2001, and the Australian18

19

Kenneth Hayne, 'What Kenneth Hayne says about climatechange'(9
December
2019)<https://www.afr.com/politics/federal/what-kenneth-haynesays-about-climate-change-20191206-p53hiw>;
James
Fernyhough, ‘Hayne rebukes directors on climate risk failure’ (9December 2019) <https://www.afr.com/policy/energy-andclimate/hayne-rebukes-directors-on-climate-risk-failure20191206-p53hnd>; Ben Hayne, 'No more room for excusesonclimate'(9
December
2019)<https://www.afr.com/politics/federal/no-more-room-forexcuses-on-climate-20191208-p53hwk>. Centre for Policy
development, ‘Full text of Kenneth Hayne AC QC remarks to
CPD climate roundtable’, Speech delivered to Centre for Policy
Development Roundtable in Sydney, 21 November 2019 (9December 2019) <https://cpd.org.au/2019/12/full-text-ofkenneth-hayne-ac-qc-remarks-to-cpd-climate-roundtable/>.
Noel Hutley and Sebastian Hartford Davis, ‘Climate Change
and Directors’ Duties: Further Supplementary Memorandum ofOpinion’ (23 April 2021) [4] <https://cpd.org.au/wpcontent/uploads/2021/04/Further-Supplementary-Opinion2021-3.pdf>. See further, MinterEllison, ‘New Hutley Opinion:
What does it mean for directors?’, (28 April 2021)

Consumer Law. This may, in turn, lead to‘stepping stone’ liability for a breach of thedirectors’ duty of care. Indeed, Counsel’s viewthat “there is reason to think that‘greenwashing’ claims of the kind outlined inthis memorandum will become an acute sourceof risk”20 has played out, with a claim lodged in

2021 against an oil and gas company, 21 and a'books and records' claim (an application by ashareholder seeking access to documents, in
this
case
those
demonstrating
theimplementation of an environmental policy)
against a bank.22
Directors' Disclosure
Climate Change

Obligations

and

The
securities
regulator
ASIC
has
recommended that listed companies disclose
meaningful and useful climate risk-related
information to investors, and strongly
encouraged listed companies with material
exposure to climate change to consider
reporting voluntarily under the TCFD
framework.23
The
Australian
Securities
Exchange (ASX) Corporate GovernanceCouncil recommends that a listed entity should
disclose (on a comply or explain basis) whether
it has any material exposure to environmental
risks and, in particular, climate-related risk, andif it does, how it manages or intends to manage
those risks.24
In August 2019, ASIC revised its regulatory
guidance to incorporate climate-related
disclosures. RG228 now refers to the types ofclimate change risk described by the TCFD as
key risks that may need to be disclosed in

20

21

22

23

24

<https://www.minterellison.com/articles/new-hutley-opnionwhat-does-it-mean-for-directors>.
Noel Hutley and Sebastian Hartford Davis, ‘Climate Change
and Directors’ Duties: Further Supplementary Memorandum ofOpinion’ (23 April 2021) [50] <https://cpd.org.au/wpcontent/uploads/2021/04/Further-Supplementary-Opinion2021-3.pdf>.
ACCR v Santos (NSD858/2021, Federal Court of Australia)<http://climatecasechart.com/non-us-case/australasiancentre-for-corporate-responsibility-v-santos/>.
Abrahams v Commonwealth Bank of Australia (NSD864/2021,
Federal Court of Australia) <http://climatecasechart.com/nonus-case/abrahams-v-commonwealth-bank-of-australia2021/>.
ASIC, ‘Report 593: Climate risk disclosure by Australia’s listedcompanies’(September
2018)12<https://download.asic.gov.au/media/4871341/rep593published-20-september-2018.pdf>
The ASX Corporate Governance Council ‘Corporate
Governance Principles and Recommendations’ (4th Edition,
February 2019) 27-28.

28

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Australia

prospectuses.25 RG47 highlights climatechange as a “systemic risk” that could impact
an entity’s financial prospects for future years
and that may need to be disclosed in operating& financial reviews.26 ASIC included climaterelated risks, including national climate
commitments and relevant information under
the Task Force on Climate-related Financial
Disclosure (TCFD) recommendations as partof their recommended focus areas for 2022
reporting.27 In June 2022, it published specificguidance for financial institutions onsustainability-related labelling of products andservices: Information Sheet 271 - How to avoid

greenwashing when offering or promoting
sustainability-related products.28

In April 2019, the Australian AccountingStandards Board (AASB) and Auditing andAssurance Standards Board (AUASB) updated
their joint bulletin on integrating climate risk into
accounting estimate assumptions and making
climate risk disclosures in the financial
statements, squarely bringing climate risk
within the scope of external audit and the audit
committee role.29 These developments are

25

26

27

28

ASIC, Regulatory Guide G228 Prospectuses: Effective
disclosure for retail investors <https://asic.gov.au/regulatoryresources/find-a-document/regulatory-guides/rg-228prospectuses-effective-disclosure-for-retail-investors/>.
ASIC, Regulatory Guide 247 Effective disclosure in an
operatingandfinancialreview(August2019)<https://asic.gov.au/regulatory-resources/find-adocument/regulatory-guides/rg-247-effective-disclosure-in-anoperating-and-financial-review/>.
ASIC, 22-124MR ASIC highlights focus areas for 30 June 2022
reporting (1 June 2022) <https://asic.gov.au/about-asic/newscentre/find-a-media-release/2022-releases/22-124mr-asichighlights-focus-areas-for-30-june-2022-reporting>.
ASIC Information Sheet 271, How to avoid greenwashing whenoffering or promoting sustainability-related products | ASIC Australian Securities and Investments Commission (June2022)<https://asic.gov.au/regulatory-resources/financial-

relevant to the obligation on Australian directors
to give a declaration that the financial
statements and notes comply with theaccounting standards and give a 'true and fairview' of position and performance.30 In
December 2021, the AASB and AUASB
published a joint paper on the IFRSFoundation’sInternational
Sustainability
Standards Board (ISSB), stating that they would
maintain close links with the ISSB in thedevelopment of the ISSB framework andstandards.31 The AASB has since confirmedthat it will use the ISSB standards as thebaseline for the development of Australiansustainability
reportingstandards
withmodifications for Australian-specific mattersand requirements, which may come to be thesubject of regulation in the same manner as theAustralian Accounting Standards.32

29

30
31

32

services/how-to-avoid-greenwashing-when-offering-orpromoting-sustainability-related-products/>.
Australian Accounting Standards Board and Australian
Auditing and Assurance Standards Board, ‘Climate-related andother emerging risks disclosures: assessing financial statement
materiality using AASB/IASB Practice Statement 2’ (April 2019)<https://www.aasb.gov.au/admin/file/content102/c3/AASB_A
UASB_Joint_Bulletin_Finished.pdf>.
Corporations Act 2001 (Cth) ss. 295-297.
AASB and AUASB, Globally consistent reporting forsustainability-related
information(December
2021)<https://aasb.gov.au/media/o1wfhori/aasbauasb_sustainabilityreporting_12-21.pdf>.
AASB, Staff article: Developing sustainability-related financial
reporting standards in Australia (28 June 2022)
https://aasb.gov.au/news/project-insights-developingsustainability-related-financial-reporting-standards-inaustralia/.

29

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Australia

Practical Implications for Directors
The steps required to discharge duties to govern and disclose climate risk depend on the unique
circumstances of the company and governance situation.321However, given that Australia’s financial
regulators have become increasingly emphatic regarding the need for companies and their directors to
adopt climate risk and resilience measures in business practices and disclosure, and in particular theabove-noted Hutley opinions, actions by ASIC and the AASB and AUASB, well-counselled boards will,taking into account the unique circumstances facing each company: 332a) maintain systems so that the board and management have the skills and education to remain
abreast of material developments in this dynamic area, including access to expert advice where
necessary and when not available internally;b) delegate climate risk identification and evaluation to a clearly-identified team in managementthat reports directly to the CEO and board;c) put on the agenda for the board, within a reasonable time, a process to start developing a
climate transition roadmap to 2050 with transparent net-zero emissions targets (for relevant
sectors) or other robust emissions reduction targets, with clear interim targets (set with regard
to government targets and sectoral emission reduction pathways), and periodically thereafter
report back to the board;d) where board sub-committees are used, delegate to the appropriate committee(s) of the board,such as risk, audit, legal and governance, scenarios/strategy, nominations/remuneration, or
sustainability/corporate responsibility, the task of translating the long-term strategy into a clear
decision-making process for each aspect that is relevant to each committee; ande) examine reporting and disclosure frameworks and guidance so that disclosures are meeting
regulatory (and where relevant investor) expectations and oversee a communication andengagement plan so that there is accountability to stakeholders.
Contributors:

32

33

Sarah Barker, MinterEllison
Ellie Mulholland, CCLI, MinterEllison
CCLI

Australian Institute of Company Directors, Climate risk governance guide (24 August 2021) <https://www.aicd.com.au/riskmanagement/framework/climate/climate-risk-governance-guide.html>.
These include size and sector, the foreseeability and materiality of exposure to climate risks, and that the steps required to discharge duties will
be proportionate to that exposure.

30

BrazilBrazil is a signatory to the United Nations
Framework Convention on Climate ChangeInternational Climate Change Agreement (Paris
Agreement), which was transformed into afederal law by means of Federal Decree
No.9.073/2017. In December 2019, theEnvironmental Committee of the Federal
Senate conducted an evaluation of the National
Policy on Climate Change, to assess the maindifficulties facing its enforcement and to identify
the areas requiring amendment. This
assessment resulted, among others, inConstitutional Amendment Bill No. 233/2019,
which aims to include in the Brazilian Federal
Constitution a provision stating that all
economic activity in Brazil must be guided by
the need to “promote climate stability, by usageof mitigating measures to prevent climatechange and adapt to its negative effects”.

October 2021, Decree 10.846/2021
instituting the National Programme for Green
Growth was enacted, which establishes aIn‘green growth’ programme aiming to improvesustainable development, create green jobs,
promote the conservation of forests andbiodiversity, and reduce greenhouse gas
emissions with a view to facilitating a transition
to a low carbon economy. Other related policies
were enacted or are under discussion, such as
the Federal Strategy to Encourage theSustainable Use of Biogas and Biomethane(introduced by Decree 11,003/2022) and the
proposal of guidelines for the intended National
Hydrogen Program. Finally, the discussions
regarding Bill No. 2.148/2015 – which aims tocreate a regulated carbon market in Brazil –have recently intensified, and the perspective isthat it might be approved soon.

Directors' Duties and Climate Change
liability companies (sociedades
limitadas) and corporations (sociedades
anônimas) are the most common types ofLimitedcompanies in Brazil and are legally formed as
for-profit organizations. The Brazilian legal
framework, in particular (i) the Federal
Constitution of 1988, as amended (Brazilian
Federal Constitution), (ii) Law No.10.406, as of
10 January 2002, as amended (Brazilian Civil
Code),1 and (iii) Law No.6.404, as of 15
December 1976, as amended (Brazilian
Corporation Law), provide, at least indirectly,that companies must follow sustainability andclimate-related principles alongside theircorporate purpose.
The Brazilian legal system lays out a series ofprinciples that guide the conduct of economic
activity, such as the social function ofownership, the social function of contracts,
environmental protection, and the reduction ofregional and social inequities, as stated in theBrazilian Federal Constitution2 and in theBrazilian Civil Code.3 Generally speaking, theseprinciples apply to all entities comprising theBrazilian economy and, thus, it could be argued
that all corporations and limited liability
companies, including their directors andadministrators, have an implicit duty to employ
best efforts to, at least, minimize negative
sustainability impacts, including climatechange.
Moreover, Brazilian Corporation Law also
focuses indirectly on sustainability matters,
assigning fiduciary responsibility to managers
and controlling shareholders. In this regard,

1

2

Available
in
Englishat<http://conteudo.cvm.gov.br/export/sites/cvm/subportal_ingle
s/menu/investors/anexos/Law-6.404-ing.pdf> Retrieved on
November 17, 2020.
Article 170 of the Brazilian Federal Constitution. “The economicorder, founded on the appreciation of the value of human workand on free enterprise, is intended to ensure everyone a life with
dignity, in accordance with the dictates of social justice, with
due regard for the following principles: [...] III – the social

3function of ownership; [...] VI – environment protection, which
may include differentiated treatment in accordance with theenvironmental impact of goods and services and of theirrespective production and delivery processes; [...] VII –reduction of regional and social differences; [...]”.
Article 421 of the Brazilian Civil Code. ”The contractual
freedom shall be exercised within the limits of the social functionof the contract.”31

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Brazilarticles 1164 and 1545 of the Brazilian
Corporation Law contain provisions regarding
the need to harmonize the interest of eachcompany in generating profits with its socioenvironmental impacts.6 In this sense, Item VI ofarticle 170 of the Brazilian Federal Constitution
also states that all economic or financial activity
conducted in Brazil must be guided by theprinciple of environmental protection. 7
Additionally, Brazilian Environmental Policy
imposes a series of procedures to prevent,mitigate and repair environmental damage,which must be observed by all companies.
Although there are no specific duties for
directors on climate change, if companies fail toobserve these norms and contribute – evenindirectly – to environmental damage, they may
be liable in civil court for strict, joint and several
liability for environmental degradation.
Furthermore, Law No.9.605, of 12 February
1998, which establishes the Brazilian
environmental crimes and administrative
sanctions, imposes criminal and administrative
penalties on individuals and legal entities whose
conduct and activities are damaging to theenvironment. Individuals (such as directors)8 or
legal entities that commit a criminal offence
against the environment may also be punishedwith sanctions that range from fines toimprisonment (individuals) or dissolution (legal
entities). Administrative liability further includes
the imposition of fines and, in worst-casescenarios, the total suspension of activities. It is
important to note that, pursuant to Law
No.9.605, shareholders may be held liablethrough the piercing of the corporate veil, which
will be admitted whenever the corporate entity
becomes an obstacle to the recovery of

4

5

6

7

A controlling shareholder shall use its controlling power in orderto make the corporation accomplish its purpose and perform its
social role, and shall have duties and responsibilities towards
the other shareholders of the corporation, those who work forthe corporation and the community in which it operates, therights and interests of which the controlling shareholder must
loyally respect and heed.
An officer shall use the powers conferred upon him by law andby the bylaws to achieve the corporation’s corporate purposes
and to support its best interests, including the requirements ofthe public at large and of the social role of the corporation.
Article 154, paragraph 4 of the Brazilian Corporation Law. In
view of the corporation's social responsibilities, theadministrative council or the board of directors may authorize
the performance of reasonable gratuitous acts to benefit theemployees or the community to which the corporation belongs.
On this subject, the Brazilian Federal Supreme Court rendereda decision stating that “economic activity must not be enacted
in opposition to the principles established to enforce
environmental protection.” (Brazilian Federal Supreme Court,

environmental damages.
Therefore, despite the fact that most current
laws and regulations do not directly require
directors to consider climate change matters,
when analysing the Brazilian legal framework, it
is possible to argue that board directors andcontrolling shareholders, could, in some cases,
potentially be in breach of their fiduciary duties
in the event that they pursue goals that, in any
manner, are contrary to the long-term interestsof their community and society as a whole and,to this end, contrary to preventing climatechange.
Besideslegislation
andregulations,sustainability-related matters have gained
increasing prominence in the Brazilian financial
and capital markets, as several Brazilian
stakeholders have recently been taking
initiatives or shown their concern forsustainability and environmental impact. For
instance,
theSocialandEconomic
Development Bank (Banco Nacional do
Desenvolvimento Econômico e Social –BNDES) has recently included the generation of
positive sustainability impact in the qualification
requirements of its tendering processes, andhas also adopted a screening process to filter
projects with negative sustainability impact outof its portfolio.
In addition, in 2020 the Central Bank of Brazil(Banco Central do Brasil – BCB) released its
sustainability agenda for the coming years,
which expressly includes (i) incorporation ofclimate risk scenarios into new and improved
stress tests of the bank and (ii) increasingtransparency
based
on
TCFD
recommendations.

8

Direct Action for the Declaration of Unconstitutionality
No.3,540, Judge Rapporteur Justice Celso de Mello,
judgement rendered on 09.01.2005, published on 2 March
2006). Pursuant to Article 927 of the Brazilian Code of Civil
Procedure (Federal Law No.13,105, of 16 March 2015), this abinding precedent that must be observed by the courts.
It is important to mention that in the case of the Samarco’s dam
collapse, board directors of Vale and BHP were included as
defendants in a criminal proceeding regarding the accident.
However, according to public information, the action was
dismissed in respect of some of these directors because thejudge considered that they did not have the power to influence
the company’s management, so could not be regarded ashaving committed the crimes themselves. Furthermore, there isalso an administrative proceeding before the Brazilian
Securities Commission (CMV) to investigate any violation of thefiduciary duty of some of the board directors of Vale due to the
Brumadinho dam collapse. There is no public information
available regarding this proceeding.

32

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
BrazilDirectors’ Disclosure
Climate Change

Obligations

andBrazilian Corporation Law charges the board
directors and other bodies comprising limited
liability companies and corporations with theduty to disclose, in general and whenevernecessary, all information that may negatively
affect the environment, among others. The duty
to inform, in addition to best practices as
defined by Brazilian soft law, create theconditions for investors, the market andsupervisory bodies to conduct complex
analyses of the actions taken by companies andtheir impacts on the environment and othersustainability issues.
In this regard, Rule No.480/09 of the Securities
and Exchange Commission of Brazil (Comissão
de Valores Mobiliários – CVM) establishes anobligation for publicly-held corporations todisclose in their filings (i) risk factors related toenvironmental matters, (ii) the effects ofregulation on the company’s environmental
policy and compliance costs and (iii)
information related to the company’senvironmental policy.
In December 2021, the CVM issued CVM
Resolution 59, republished by CVM Resolution
87, which will come into effect on 2 January
2023. CVM Resolution 59 amends RuleNo.480/09 to oblige publicly-held corporations
to disclose, on a comply or explain basis, certain
ESG information, including (i) the main aspectsof their compliance with legal and regulatory
obligations, (ii) key performance indicators on
ESG metrics, (iii) description of the role of theadministrative bodies in the assessment,
management, and supervision of climaterelated risks and opportunities, (iv) a statementof whether the company carries out
greenhouse gas emissions inventories and thescope of the emissions inventoried, and (v) astatement of whether the disclosure on climaterisks
isconsistent
with
TCFD
recommendations, the SDGs, or otherrecommended sustainability-related financial
disclosures.

9

Banco Central Do Brasi, Report on Social, Environmental andClimate-related Risks and Opportunities: Volume 1 (September
2021)<https://www.bcb.gov.br/en/publications/report-riskopportunity>.

Voluntary disclosure standards continue toprovide frameworks for Brazilian companies’
sustainability disclosures. The Corporate
Sustainability Index (Índice de Sustentabilidade
Empresarial - ISE B3), a voluntary initiative thatclassifies publicly-held corporations with regard
to sustainability matters, also sets out a seriesof details that must be presented by theselected companies in relation to theenvironment, with a specific questionnaire on
climate change. Among other information,companies are required to disclose an
assessment of both their impact on the climate
and their exposure to climate-related impacts,
as well as their plans to manage and prevent
such impacts.
Another voluntary initiative is the CDP Brazil
Climate Resilience Index, created in March
2020 by the British NGO Carbon Disclosure
Project (CDP). This index aims to establish aconnection between companies’ disclosure ofenvironmental data and their financial
performance. It serves as a reference forinvestors
toassessthecompanies’
transparency regarding the policies and actions
adopted in relation to climate change,
reinforcing the drivers seen in Brazilian capital
markets for directors to take responsibility for
their decisions regarding climate-related
disclosures. In 2021, the questionnaire used
underwent specific changes, such as theinclusion of a question regarding net-zerotargets.
The BCB has recognised the risks posed byclimate change to financial stability, and has set
out its views and actions it is taking in its firstreport on Social, Environmental and Climaterelated Risks and Opportunities.9 The BCB has
also passed regulations requiring in-scopefinancial institutions to publish a Report on
Social, Environmental and Climate-related
Risks and Opportunities including information
on governance of climate-, environmental- andsocial-related risks, the real and potential
impacts of those risks, and the processes for
managing those risks.10

10

Banco Central Do Brasi, New regulations on social,environmental, and climate-related risk disclosures (15September
2021)<https://www.bcb.gov.br/content/about/legislation_norms_doc
s/BCB_Disclosure-GRSAC-Report.pdf>.

33

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
BrazilPractical Implications for Directors
Given that Brazilian representatives and regulators have become increasingly emphatic inrecommending – and soon regulating – the need for companies and their directors to adopt climate
resilience measures in business practices and disclosure, in particular the above-noted Constitutional
Amendment Bill No. 233/2019, the Brazilian Civil Code, Brazilian Corporation Law, Brazilian
Environmental Policy and the changes to CVM’s Rule No. 480/09, together with related public andprivate financial institutions initiatives, well-counselled boards will:a) delegate climate risk identification and evaluation to a clearly-identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to initiate the development of aclimate transition roadmap to 2050 with transparent carbon neutrality or reduction sciencebased targets, with clear interim targets to 2040, 2030 and the current rolling multi-year
strategic plan validated by internationally recognized organizations, and periodically thereafter
report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, in order to develop an external engagement andcommunications plan including qualitative and quantitative disclosures, to avoid publishingpotentially misleading information.

Contributors:

Lina Pimentel Garcia, Mattos Filho Brazil
Tábata Boccanera Guerra de Oliveira, Mattos
Filho Brazil

34

Brazil (Portuguese)
O Brasil é signatário do acordo internacional sobre
Mudanças Climáticas da Convenção-Quadro dasNações Unidas sobre Mudança do Clima (Acordo deParis), que foi incorporado ao ordenamento jurídico
nacional em caráter de legislação federal por meio do
Decreto Federal nº 9.073/2017. Em dezembro de2019, a Comissão de Meio Ambiente do Senado
Federal realizou uma avaliação da Política Nacional
sobre Mudança do Clima para verificar as principais
dificuldades enfrentadas para sua implementação,bem como para identificar os pontos que merecem
alterações. Tal avaliação resultou, dentre outros, no
Projeto de Emenda Constitucional nº 233/2019, quevisa incluir na Constituição Federal brasileira uma
disposição que estabelece que toda atividade
econômica no Brasil deve ser orientada pela
necessidade de "manutenção da estabilidade

climática, adotando ações de mitigação da mudança
do clima e adaptação aos seus efeitos adversos".

Em outubro de 2021, foi promulgado o Decreto nº
10.846/2021 instituindo o Programa Nacional de
Crescimento Verde, que estabelece um programa de"crescimento Verde" com o objetivo de aprimorar odesenvolvimento sustentável, criar empregos verdes,
promover a conservação de florestas e dabiodiversidade, e reduzir as emissões de gases deefeito estufa de modo a facilitar a transição para uma
economia de baixo carbono. Outras políticas
relacionadas foram promulgadas ou estão em
discussão, tais como a Estratégia Federal de Incentivo
ao Uso Sustentável de Biogás e Biometano(introduzida pelo Decreto nº 11.003/2022) e a
proposta de diretrizes para o pretendido Programa
Nacional de Hidrogênio. No mais, as discussões sobreo Projeto de Lei nº 2.148/2015 - que visa criar um
mercado de carbono regulado no Brasil - seintensificaram recentemente, e a perspectiva é que
possa ser aprovado em breve.

O dever dos diretores e as mudanças
climáticas
As sociedades limitadas e as sociedades anônimas
são os tipos mais comuns de companhias no Brasil esão legalmente constituídas enquanto organizações
de fins econômicos. O quadro legal brasileiro, em
especial (i) a Constituição Federal de 1988, conforme
alterações (“Constituição Federal”); (ii) a Lei nº
10.406, de 10 de janeiro de 2002, conforme
alterações (“Código Civil”)1; e (iii) a Lei nº 6.404, de
15 de dezembro de 1976, conforme alterações (“Leidas Sociedades Anônimas”) instituem, ainda que
indiretamente, que as companhias devem seguir
princípios
desustentabilidadeeprincípios
relacionados ao clima em conjunto com seuspropósitos corporativos.
O sistema jurídico brasileiro estabelece uma série deprincípios que norteiam a condução da atividade
econômica, tais como a função social da propriedade,a função social dos contratos, a proteção ambiental ea redução das desigualdades regionais e sociais,
conforme estabelecido na Constituição Federal 2 e no
Código Civil.3 De modo geral, tais princípios são
aplicáveis a todas as entidades que compõem aeconomia
brasileira;portanto,
poderia
serargumentado que todas as sociedades anônimas esociedades limitadas – incluindo seus diretores eadministradores –, têm o dever implícito de empregar
melhores esforços em, pelo menos, minimizar os
impactos negativos aos aspectos de sustentabilidade,incluídos aqueles relacionados a mudanças
climáticas.
Além disso, a Lei das Sociedades Anônimas também
foca indiretamente em aspectos de sustentabilidade,atribuindo responsabilidade fiduciária a gerentes eacionistas controladores. Nesse sentido, os artigos

12

Disponíveleminglês:<http://conteudo.cvm.gov.br/export/sites/cvm/subportal_ingle
s/menu/investors/anexos/Law-6.404-ing.pdf>.
Art. 170, Constituição Federal: “A ordem econômica, fundadana valorização do trabalho humano e na livre iniciativa, tem por
fim assegurar a todos existência digna, conforme os ditames
da justiça social, observados os seguintes princípios: [...] III –3função social da propriedade; [...] VI – defesa do meio
ambiente, inclusive mediante tratamento diferenciado
conforme o impacto ambiental dos produtos e serviços e deseus processos de elaboração e prestação; [...] VII – redução
das desigualdades regionais e sociais; [...]”.
Art. 421, Código Civil: “A liberdade contratual será exercida
nos limites da função social do contrato”.

35

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Brazil (Portuguese)1164 e 1545 da Lei das Sociedades Anônimas contêm
disposições sobre a necessidade de harmonizar ointeresse de cada empresa em gerar lucros com seus
impactos socioambientais.6 Da mesma forma, o inciso
VI do artigo 170 da Constituição Federal também
estabelece que toda atividade econômica ou
financeira conduzida no Brasil deve ser guiada pelo
princípio da proteção ambiental.7

Portanto, apesar de a maioria das leis e regulamentos
atuais não exigir diretamente que os diretoresconsiderem questões de mudanças climáticas, ao
analisar o quadro legal brasileiro é possível
argumentar
queconselheiros
eacionistas
controladores podem, em alguns casos, estar
potencialmente em descumprimento com seus
deveres fiduciários caso persigam objetivos que, dequalquer forma, sejam contrários aos interesses de
A Política Nacional de Meio Ambiente, por sua vez,longo prazo de sua comunidade e da sociedade comoimpõe uma série de procedimentos para prevenir,
um todo e, para tanto, contrários à prevenção das
mitigar e reparar danos ambientais, que devem ser
mudanças climáticas.
observados por todas as empresas. Embora não
existam deveres específicos para os diretores sobre Além da legislação e regulação, as questões
aspectos relacionados a mudanças climáticas, caso relacionadas à sustentabilidade têm ganhado
as empresas não cumpram as normas existentes e proeminência nos mercados financeiros e de capitais
contribuam - ainda que indiretamente - para o dano brasileiros, visto que uma série de stakeholders
ambiental, elas podem ser responsabilizadas no brasileiros têm adotado iniciativas ou demonstradoâmbito civil por responsabilidade objetiva e solidária sua preocupação com os impactos associados. Porpela degradação ambiental.
exemplo, o Banco Nacional de Desenvolvimento
Econômico e Social (“BNDES”) recentemente incluiu
Ademais, a Lei nº 9.605, de 12 de fevereiro de 1998,
a geração de impactos positivos de sustentabilidade
que estabelece os crimes ambientais e sanções
nos requisitos de qualificação de seus processos
administrativas, impõe penalidades criminais elicitatórios e também adotou um processo de triagem
administrativas a pessoas físicas e jurídicas cuja
para excluir de seu portfólio projetos com resultados
conduta e atividades sejam danosas ao meio
de impacto de sustentabilidade negativos.
ambiente. Pessoas físicas (como diretores)8 ou
pessoas jurídicas que cometam uma ofensa criminal Além disso, o Banco Central do Brasil (“BCB”)
contra o meio ambiente também podem ser punidas publicou em 2020 sua agenda de sustentabilidadecom sanções que variam desde multa até prisão para os próximos anos, em que há a previsão
(pessoas físicas) ou dissolução (pessoas jurídicas). A expressa (i) da incorporação dos cenários de riscos
responsabilidade administrativa inclui ainda a climáticos em novos e mais aprimorados testes deaplicação de multas e, no pior cenário, a suspensão estresse do banco; e (ii) do aumento de transparência
total das atividades. Importante observar que, nos com base nas recomendações da Força Tarefa sobre
termos da Lei nº 9.605, os acionistas poderão ser Divulgações Financeiras Relacionadas ao Clima (Task
responsabilizados mediante a desconsideração da Force on Climate Related Financial Disclosures –personalidade jurídica, que será admitida sempre que “TCFD”).
a pessoa jurídica se tornar um obstáculo àrecuperação de danos ambientais.

4

5

6

7

Um acionista controlador deve usar seu poder de controle parafazer com que a sociedade cumpra seu propósito edesempenhe seu papel social, e deve ter deveres e
responsabilidades para com os outros acionistas dasociedade, aqueles que trabalham para a sociedade e acomunidade na qual ela opera, cujos direitos e interesses oacionista controlador deve respeitar lealmente e se atentar.
Um dirigente deve usar os poderes a ele conferidos por lei epelos estatutos para atingir os objetivos corporativos dasociedade e para apoiar seus melhores interesses, incluindo asexigências do público em geral e do papel social da sociedade.
Art. 154, §4º, Lei das Sociedades Anônimas. Em vista das
responsabilidades sociais da sociedade, a conselho deadministração ou a diretoria podem autorizar a realização deatos gratuitos razoáveis em benefício dos funcionários ou dacomunidade à qual a sociedade pertence.
Sobre este assunto, o Supremo Tribunal Federal brasileiro
proferiu decisão declarando que "a atividade econômica não
deve ser decretada em oposição aos princípios estabelecidospara garantir a proteção ambiental". (Supremo Tribunal

8

Federal, ADI 3.540, Juiz Relator Juiz Celso de Mello, sentença
proferida em 09.01.2005, publicada em 2 de março de 2006).
Nos termos do artigo 927 do Código de Processo Civil
Brasileiro (Lei Federal nº 13.105, de 16 de março de 2015),
este é um precedente vinculante que deve ser observado pelos
tribunais.
É importante mencionar que, no caso do rompimento da
barragem da Samarco, os diretores da Vale e da BHP foram
incluídos como réus em um processo criminal referente ao
acidente. No entanto, segundo informações públicas, a açãofoi julgada improcedente em relação a alguns desses diretores
porque o juiz considerou que eles não tinham o poder deinfluenciar a gestão da empresa e, portanto, não poderiam serconsiderados como autores dos crimes. Além disso, hátambém um processo administrativo perante a Comissão de
Valores Mobiliários para apurar qualquer violação do deverfiduciário de alguns conselheiros da Vale em razão dorompimento da barragem de Brumadinho. Não há informações
públicas disponíveis sobre este processo.

36Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Brazil (Portuguese)

Obrigações dos diretores de transparência emudanças climáticas
A Lei Brasileira das Sociedades Anônimas atribui ao
conselho de administração e outros órgãos quecompõem as sociedades anônimas e sociedades
limitadas o dever de divulgar, em geral e sempre quenecessário, todas as informações que possam afetar
negativamente o meio ambiente, dentre outras. O
dever de informar, em adição às boas práticas, como
definido pela soft law brasileira, cria condições paraque os investidores, o mercado e os órgãos
fiscalizadores conduzam análises mais complexas dasações tomadas pelas companhias e seus impactos nomeio ambiente e outras questões de sustentabilidade.
Nesse contexto, a Instrução nº 480/2009 da Comissão
de Valores Mobiliários (“CVM”) estabelece aobrigação para as companhias abertas de divulgar em
seus registros (i) os fatores de risco relacionados aquestões ambientais; (ii) os efeitos da regulação sobrea política ambiental da empresa e custos decompliance; e (iii) informações relacionadas à política
ambiental da empresa.
Em dezembro de 2021, a CVM publicou a Resolução
CVM nº 59 – republicada posteriormente por meio da
Resolução CVM nº 87 –, que entrará em vigor em 2
de janeiro de 2023. Referida resolução altera a
Resolução nº 480/2009 para obrigar as empresas decapital aberto a divulgar, com base na ideia de“pratique ou explique”, determinadas informações deAmbiental, Social e Governança (“ESG”, na sigla eminglês), incluindo (i) os principais aspectos decompliance frente as obrigações legais e regulatórias;(ii) indicadores-chave de desempenho sobre as
métricas ESG; (iii) descrição sobre o papel dos órgãos
administrativos na avaliação, gestão e supervisão dos
riscos e oportunidades relacionados ao clima; (iv) uma
declaração a respeito da realização de inventários deemissões de GEEs e os escopos inventariados; e (v)uma declaração a respeito da existência decompatibilidade entre a divulgação de riscosclimáticos com as recomendações do TCFD, os
Objetivos do Desenvolvimento Sustentável (“ODS”),
ou outras divulgações financeiras relacionadas à
sustentabilidade recomendadas.

9

Banco Central Do Brasil, Report on Social, Environmental andClimate-related Risks and Opportunities: Volume 1 (September
2021)<https://www.bcb.gov.br/en/publications/report-riskopportunity>.

Os standards de declarações voluntárias continuam afornecer orientações para empresas brasileiras sobretransparência
relacionadaaquestões
desustentabilidade. O Índice de Sustentabilidade
Empresarial – ISE B3, iniciativa voluntária queclassifica as empresas de capital aberto em matériade sustentabilidade, também estabelece uma série dedetalhes que devem ser apresentados pelas
empresas selecionadas em relação ao meio ambiente,
com um questionário específico para mudanças
climáticas. Dentre outras informações, as empresas
devem divulgar avaliações sobre seus impactos sobreo clima e sobre sua exposição aos impactos
relacionados ao clima, bem como seus planos para
gerenciar e prevenir tais impactos.
Outra iniciativa voluntária é o Índice CDP Brasil deResiliência Climática, criado em março de 2020 pela
Organização Não Governamental britânica Carbon
Disclosure Project (“CDP”). Esse índice procura
estabelecer uma relação entre os dados ambientais
declarados pelas empresas e suas performancesfinanceiras, bem como serve como uma referência
para os investidores para avaliarem a transparência
das empresas em relação às políticas e ações
adotadas em relação às mudanças climáticas,
reforçando os drivers vistos nos mercados de capitais
brasileiros para que os diretores assumam a
responsabilidade por suas decisões em relação às
divulgações relacionadas ao clima. Em 2021, oquestionário utilizado passou por mudanças
específicas, como a inclusão de uma pergunta relativa
às metas net-zero.
O BCB reconheceu os riscos decorrentes das
mudanças climáticas à estabilidade financeira eapresentou suas metas e ações que vem adotando noseu primeiro Relatório de Riscos e OportunidadesSociais, Ambientais e Climáticas.9 O BCB também
aprovou regulações exigindo que certas instituições
financeiras publiquem um Relatório de Riscos e
Oportunidades Sociais, Ambientais e Climáticas,
incluindo informações sobre governança de riscosclimáticos, ambientais e sociais, os reais e potenciais
impactos de tais riscos e os processos degerenciamento destes.1010Banco Central Do Brasil, New regulations on social,environmental, and climate-related risk disclosures,
15/09/2021.
<https://www.bcb.gov.br/content/about/legislation_norms_doc
s/BCB_Disclosure-GRSAC-Report.pdf>.

37

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Brazil (Portuguese)

Implicações práticas para os diretores
Dado que os representantes e reguladores brasileiros têm se tornado mais enfáticos ao recomendar – e tãologo regular – a necessidade das empresas e seus diretores de adotar medidas de resiliência climática em
seus negócios e suas declarações, em particular o supracitado Projeto de Emenda Constitucional nº233/2019, o Código Civil, a Lei de Sociedades Anônimas, a Política Nacional do Meio Ambiente e as mudanças
na Instrução CVM nº 480/2009, junto de iniciativas de instituições financeiras públicas e privadas, conselhosde administração bem assessorados irão:a)Delegar a identificação e avaliação dos riscos climáticos para um time de gerenciamento bem
identificado que relataria diretamente ao CEO e ao conselho;b)inserir na agenda para o conselho dentro de 3 ou 6 meses um processo para iniciar odesenvolvimento de um roteiro de transição climática até 2050 com metas transparentes baseadas
na neutralidade de carbono ou na redução de emissões baseadas na ciência, com metas interinas
claras até 2040, 2030 e o atual plano estratégico plurianual validado por organizações
internacionalmente reconhecidas, para posterior reporte periódico ao conselho;c)delegar ao(s) comitê(s) apropriado(s) do conselho, tais como risco, auditoria, jurídico e degovernança, cenários / estratégias, nomeações / remuneração, ou sustentabilidade /responsabilidade corporativa, a tarefa de traduzir a estratégia de longo prazo em um processo claro
de tomada de decisão para cada aspecto que é relevante para cada comitê; ed)discutir com o conselho de transparência, a fim de desenvolver um plano externo de engajamento
e comunicação, incluindo divulgações qualitativas e quantitativas, para evitar a publicação deinformações eventualmente enganosas.

Contribuidores:

Lina Pimentel Garcia, Mattos Filho Brazil
Tábata Boccanera Guerra de Oliveira, Mattos
Filho Brazil

38

CanadaThe Canadian

Net-Zero
Emissions
Accountability Act, in force June 2021,
enshrines Canada’s commitment to achieve
net-zero emissions by 2050. 1 Building on
Canada’s 2020 climate plan2 and the 2016 PanCanadian Framework,3 in 2022, Canada
announced its 2030 Emissions Reduction Plan,
which provides a roadmap to how Canada willmeet its enhanced Paris Agreement target to
reduce emissions by 40-45% from 2005 levels
by 2030.4 Canada has also enacted carbonpricing legislation, the Greenhouse Gas
Pollution Pricing Act,5 which the Supreme Courtof Canada upheld as constitutionally valid in
2021.6
Federal regulators have acknowledged therisks to the Canadian economy if Canada fails
to address climate change. In May 2022, theOffice of the Superintendent of Financial
Institutions (OSFI) issued a draft Guideline on
ClimateRiskManagement,
introducing
mandatory climate-related financial disclosuresaligned with the Taskforce on Climate-related
Financial Disclosures (TCFD) framework.7 It will
require mandatory disclosure of climate-relatedrisks for federally-regulated financial institutionscommencing in 2024, aimed at incentivizing
improvements in the quality of the institutions’governance and risk management practices
related to climate, in turn promoting the safety
and soundness of the financial system. The
guideline was developed after a pilot programby the Bank of Canada and OSFI, which

1

2

3

4

5
6

Canadian Net-Zero Emissions Accountability Act, SC 2021, c
22, See also Government of Canada, “Net-Zero Emissions by
2050”<https://www.canada.ca/en/services/environment/weather/cli
matechange/climate-plan/net-zero-emissions-2050.html>.
Government of Canada, A Healthy Environment and a Health
Economy, Canada’s strengthened climate plan to create jobs
and support people, communities and the planet, (2020),<https://www.canada.ca/en/services/environment/weather/cli
matechange/climate-plan/climate-plan-overview/healthyenvironment-healthy-economy.html>.
Government of Canada, Pan-Canadian Framework on Clean
GrowthandClimateChange(2016)<https://www.canada.ca/en/services/environment/weather/cli
matechange/pan-canadian-framework.html>.
Government of Canada, “2030 Emissions Reduction Plan:
Clean
Air,
StrongEconomy”(2022)<https://www.canada.ca/en/services/environment/weather/cli
matechange/climate-plan/climate-plan-overview/emissionsreduction-2030.html>.
Greenhouse Gas Pollution Pricing Act, SC 2018, c 12.
Reference re Greenhouse Gas Pollution Pricing Act, 2021 SCC
11.

examined scenario analysis and stress testingin respect of climate-related financial risks.8
OSFI also published a study in 2021
recognizing that climate-related transition risks
can lead to reduced profitability, stranded
assets, inability to make loan repayments and/or
attract investments, and loss of market
capitalization.9
The Canadian Securities Administrators (CSA),
a coalition of all provincial and territorial
securities regulators, issued draft National
Instrument 51-107 Disclosure of Climaterelated Matters,10 aligned with the TCFD
framework. The CSA completed a consultation
period on the draft national instrument and thefinal version is expected to be promulgated inlate 2022.
In June 2022, the Canadian Association of
Pension Supervisory Authorities (CAPSA)
issuedthedraft“CAPSA
Guideline,
Environmental, Social and GovernanceConsiderations in Pension Plan Management”,
which states that as part of their fiduciary duties,
pension plan administrators should consider
environmental, social and governance (ESG)

7

8

9

10

Office of the Superintendent of Financial Institutions (OSFI),
draft Guideline B-15: Climate Risk Management, (26 May
2022)<https://www.osfi-bsif.gc.ca/Eng/osfibsif/med/Pages/b15-dft_nr.aspx>, expected to be finalized inlate 2022.
Bank of Canada and OFSI, Using Scenario Analysis to Assess
ClimateTransition
Risk(January2022)<https://www.bankofcanada.ca/wpcontent/uploads/2021/11/BoC-OSFI-Using-Scenario-Analysisto-Assess-Climate-Transition-Risk.pdf>.
OFSI,
Building
Federally Regulated Financial Institution Awareness andCapability to Manage Climate-Related Financial Risks (14January2022)<https://www.osfi-bsif.gc.ca/Eng/fi-if/inai/Pages/clrsk-mgm_let.aspx
OSFI, ‘Navigating Uncertainty in Climate Change, Promoting
Preparedness and Resilience to Climate-related Risks,(January 2021), 9 <https://www.osfi-bsif.gc.ca/Eng/Docs/clmtrsk.pdf>.
Canadian Securities Administrators (CSA), draft National
Instrument 51-107 Disclosure of Climate-related Matters, 51107 - Consultation Climate-related Disclosure Update and CSA
Notice and Request for Comment Proposed National
Instrument 51-107 Disclosure of Climate-related Matters(osc.ca) (hereafter NI 51-107).

39

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Canadacharacteristics, including climate risk, that may
have material relevance to the financial riskreturn profile of the pension fund’s investments,
and that pension plan administrators, as part oftheir standard of care, need to assess whether
their plan governance, risk management andinvestment decision-making practices are
sufficient to identify and respond to material
climate and other ESG information in a manner
proportionate to their plans and appropriate for
their investment beliefs.11
The federal government’s 2022 budget
included further policies and measures toaccelerate the transition to a net-zero economy,
including: putting in place a sales mandate toensure that 20% of new light-duty vehicles are
zero-emission by 2026, 60% by 2030 and 100%by 2035; and investing CAD$250 million overfour years to support clean electricity projects.12
In short, regulatory and government actions andpolicies on climate change risks and impacts
indicate that these are material financial risks
for companies.
Directors' Duties and Climate Change
The Canada Business Corporations Act and its
sister corporation statutes in the provinces andterritories codify and enhance directors’common law duties of loyalty and care. The
corporate statutory duty of loyalty requires the
directors and officers of a corporation to “acthonestly and in good faith with a view to the bestinterests of the corporation”.13 The Supreme
Court of Canada has held that the duty of carerequires the directors and officers to “ exercise

the care, diligence and skill that a reasonably
prudent person would exercise in comparable

11

12

13

14

15
16

Canadian Association of Pension Supervisory Authorities,
CAPSA Guideline Environmental, Social and GovernanceConsiderations in Pension Plan Management, (9 June 2022),<1914 (capsa-acor.org)>.
Government of Canada, 2022 Federal Budget, A Plan to Grow
Our Economy and Make Life More Affordable (April 2022), 91106 <https://budget.gc.ca/2022/home-accueil-en.html>.
Canada Business Corporations Act, note 24, s. 122(1) and its
sister provincial and territorial corporations statutes.
Peoples Department Stores Inc (Trustee of) v Wise, 2004 SCC
68, [2004] 3 SCR 461; BCE Inc v 1976 Debentureholders,2008 SCC 69 at [39], [2008] 3 SCR 560; Janis Sarra, Canada
Climate Law Initiative Fiduciary Obligations in Business andInvestment: Implications of Climate Change (April 2018)<https://ccli.ubc.ca/wp-content/uploads/2021/04/FiduciaryObligation-in-Business-and-Investment.pdf>.
Ibid.
Carol Hansell, Hansell LLP, ‘Legal Opinion: Putting Climate
Change Risk on the Boardroom Table’ (June 2020)

circumstances”.14 The court will defer to thereasonable business judgment of directors who
have been duly diligent in their oversight of thecompany.15
In June 2020, corporate board governanceexpert Carol Hansell issued a legal opinion on
directors’ obligations to address climate change
under Canadian law.16 The legal opinion
identifies both directors’ fiduciary duty ofloyalty17 and their duty of care18 as requiring
engagement and consideration of climaterelated risk. In order to discharge their duty to
act in the best interests of the company,
directors must consider the long-term interestsof the company and, to this end, anyenvironmental risks.19 Directors’ duty of carerequires that they solicit reports andrecommendations from management andexternal sources on climate-related risk asnecessary and be satisfied that the company isaddressing climate change risk appropriately.20
Hansell’s updated legal opinion in 2022 opinesthat the obligation of directors to consider the
implications of climate change risk is groundedin the duties each director owes to thecorporation, and in managing or overseeing themanagement of risk, directors must meet theobjective standard of what a reasonably
prudent person would do in comparable
circumstances; they must require reports andrecommendations from management andexternal sources as necessary and be satisfied
that the corporation is addressing climatechange risk appropriately.21
OSFI also issued a report that recognized that
directors of federally-regulated financial
institutions and trustees of federally-regulated
pension funds have a fiduciary duty to identify
and manage climate risks as part of their

17
18

19

20

21

<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>.
CBCA, s. 122(1)(a)Peoples Department Stores Inc (Trustee of) v Wise, 2004 SCC
68, [2004] 3 SCR 461.
Hansell LLP, ‘Legal Opinion: Putting Climate Change Risk on
theBoardroom
Table’(June2020),
16-17<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>.
Hansell,
2020
at
13-15
<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>. See also Janis Sarra, Duty toProtect: Corporate Directors and Climate-Related Financial
Risk(January2021)<https://ccli.ubc.ca/wpcontent/uploads/2021/04/Duty-to-Protect-CorporateDirectors-and-Climate-Related-Financial-Risk.pdf>.
Carol Hansell Legal Opinion, Climate Change Risk on the
Boardroom
Table,(7June2022),<https://www.hanselladvisory.com/publication/climatechange-risk-on-the-boardroom-table/>.

40

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Canadaeffectively quantify these types ofrisks.28

prudential duties, and failure to do so may giverise to liability risks.22
Directors' Disclosure
Climate Change

Obligations

andCanadian securities regulators have advisedthat climate change risk is now widely
recognised as a mainstream business issue andthat companies must disclose material climate
risks and how they are addressing them.23 A
CSA report states that despite the potential
uncertainties and longer time horizon
associated with climate change-related risks,boards and management should takeappropriate steps to understand and assess themateriality of these risks to their business.24
The CSA has given notice that the board andmanagement should assess their expertise withrespect to sector-specific climate-related risks,
and augment that expertise, as necessary.25
CSA Staff Notice 51-358 Reporting of Climate
Change-related Risks states that the audit
committee and the board should be provided
with appropriate orientation and information to
help members understand sector-specificclimate-related issues.26 It suggests that theboard ask itself whether directors have been
provided sufficient information, including
management’s materiality assessments in
respect of the issuer’s climate-related risks, toappropriately
overseeandconsidermanagement’s assessment of these risks.27
CSA Staff Notice 51-358 states:

An assessment of materiality in relation
to climate change-related risks may
require issuers to adapt their existing
approaches to risk assessments inorder to better understand the potential
impacts of climate change-related risks
and their materiality. In some cases,
this may involve adjusting theirapproaches to consider the longer time
horizon associated with and how to

22

23

24
25

OSFI, ‘Navigating Uncertainty in Climate Change, Promoting
Preparedness and Resilience to Climate-related Risks,(January 2021), 9 <https://www.osfi-bsif.gc.ca/Eng/Docs/clmtrsk.pdf>.
CSA Staff Notice 51-358 Reporting of Climate Change-related
Risks(2019),<https://www.osc.gov.on.ca/en/SecuritiesLaw_csa_20190801_51-358_reporting-of-climate-change-related-risks.htm>. See
also CSA Staff Notice 51-333 Environmental Reporting
Guidance (SN 51-333).
CSA Staff Notice 51-358, ibid at 4.
Ibid.

CSA proposed National Instrument 51-107
Climate Related Disclosures will apply to allreportingissuers.29
The
disclosure
requirements relate to the four core elements of
the TCFD recommendations: governance;
strategy; risk management; and metrics andtargets. With respect to governance, NI 51-107
will require reporting issuers to describe theboard’s oversight of climate-related risks andopportunities and management’s role inassessing and managing climate-related risks
and opportunities, irrespective of materiality. 30
With respect to strategy, reporting issuers will
be required to describe, where suchinformation is material: the climate-related risks
and opportunities the issuer has identified overthe short, medium, and long term, and theimpactofclimate-related
risks
and
opportunities on the issuer’s businesses,
strategy, and financial planning.31 With respect
to risk management, reporting issuers will be
required to describe their processes for
identifying, assessing and managing climaterelated risks, and how processes for identifying,assessing, and managing climate-related risks
are integrated into the issuer’s overall risk
management.32 Finally, with respect to metrics
and targets, reporting issuers will be required todisclose the metrics used by the issuer toassess climate-related risks and opportunities
in line with its strategy and risk management
process where such information is material.
Pursuant to proposed NI 51-107, issuers are todisclose Scope 1, Scope 2, and Scope 3
greenhouse gas emissions on a comply or
explain basis, although the CSA is considering
whether to make Scope 1 emissions reporting
mandatory.33 Issuers will also be required todisclose the targets used by the issuer tomanage climate-related risks and opportunities
and performance against targets where suchinformation is material.34

26
27
28
29

30
31
32
33
34

Ibid.
Ibid.
Ibid at 8.
Other than investment funds, issuers of asset-backed
securities, designated foreign issuers, SEC foreign issuers,
certain exchangeable security issuers and certain credit
support issuers; NI 51-107.
Proposed NI 51-107, at 7.
Proposed NI 51-107, at 7.
Proposed NI 51-107, at 7.
Proposed NI 51-107, at 7.
Proposed NI 51-107, at 8.

41

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
CanadaThe Hansell opinion concluded that publiccompanies’ disclosure obligations under
securities law extend to the disclosure ofclimate-related risks (and opportunities) andthat directors should be aware that theirdecisions regarding disclosure under securities
law are not subject to protection of the businessjudgement rule.35

Practical Implications for Directors
Given that Canada has adopted a stakeholder perspective on directors’ obligations, both by statute andby opinions of the Supreme Court of Canada, given the CSA’s assertion that material climate risks need
to be disclosed under current law, and given all of the new proposed rules and guidelines, wellcounselled boards will:a) delegate climate risk identification and evaluation to a clearly-identified team in managementthat reports directly to the CEO and board, always keeping in mind that directors retain overall
fiduciary responsibility for oversight of identification and management of climate-related risks
and opportunities;361b) put on the agenda for the board, as soon as possible, a process to initiate the development ofa climate transition roadmap to 2050 with transparent carbon neutrality or reduction targets,with clear interim targets to 2040, 2030 and the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/ corporate
responsibility, the task of translating the long-term strategy into a clear decision-making
process for each aspect that is relevant to each committee;d) consider aligning executive compensation to meeting the company’s targets and timetables
in transitioning to net-zero emissions; ande) discuss with disclosure counsel, to develop an external engagement and communications planand ensure rigorous securities disclosure.

Contributors:

35

36

Dr. Janis Sarra, Professor of Law,
University of British Columbia
Canada Climate and Law Initiative
CCLI

Hansell LLP, ‘Legal Opinion: Putting Climate Change Risk on
theBoardroom
Table’
(June
2020)
at
20,
<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>.
Janis Sarra, with contributing authors Roopa Davé, MeghanHarris-Ngae, and Ravipal Bains, Canada Climate Law Initiative,

Audit Committees and Effective Climate Governance, A Guide
for Boards of Directors, (December 2020) <https://law-ccli2019.sites.olt.ubc.ca/files/2020/12/CCLI-Guide-for-AuditCommittees-on-Effective-Climate-Governance.pdf>.

42

Canada (French)
La Loi canadienne sur la responsabilité enmatière de carboneutralité, entrée en vigueur
en juin 2021, entérine dans la loi canadiennel’engagement du gouvernement du Canada àatteindre la carboneutralité d’ici 2050.1 Misant
sur les mesures figurant dans le plan climatiquerenforcé du Canada2 de 2020 et le Cadrepancanadien3 de 2016, le Canada a annoncé,
en 2022, son Plan de réduction des émissions
du Canada pour 2030 qui fournit une feuille deroute décrivant la manière dont le Canada
atteindra sa cible revue à la hausse au titre del'Accord de Paris visant à réduire ses émissions
de 40% à 45% sous les niveaux de 2005 d'ici
2030.4 Le Canada a aussi adopté une loi sur latarification du carbone, la Loi sur la tarificationde la pollution causée par les gaz à effet deserre,5 que la Cour Suprême du Canada aconsidérée
commevalide en 2021.6

constitutionnellement

Les organismes de réglementation fédérale ont
reconnu que l’échec du Canada à prendre desmesures pour lutter contre les changements
climatiques représente un risque pourl’économie canadienne. En mai 2022, le Bureau
du Surintendant des Institutions Financières(BSIF) a publié une version à l’étude de la ligne
directrice Gestion des Risques Climatiques,
instaurant des obligations d’informations en
matièredechangements
climatiques
conformément au cadre élaboré par le Groupede travail international sur l’information
financière
relativeauxchangements
climatiques (GIFCC).7 Elle exigera la divulgation

1

2

3

4

5

6

Loi canadienne sur la responsabilité en matière decarboneutralité, L.C. 2021, ch. 22, voir aussi Gouvernement duCanada,“La
carboneutralité
d’ici
2050”
<https://www.canada.ca/fr/services/environnement/meteo/cha
ngementsclimatiques/plan-climatique/carboneutralite2050.html>.
Gouvernement du Canada, Un environnement sain et uneéconomie saine, Le plan climatique renforcé du Canada pourcréer des emplois et soutenir la population, les communautésetlaplanète(2020)<https://www.canada.ca/fr/services/environnement/meteo/cha
ngementsclimatiques/plan-climatique/survol-planclimatique/environnement-sain-economie-saine.html>.
Gouvernement du Canada, Cadre pancanadien sur lacroissance propre et les changements climatiques (2016)<https://www.canada.ca/fr/services/environnement/meteo/cha
ngementsclimatiques/cadre-pancanadien.html>.
Gouvernement du Canada, « Plan de réduction des émissions
pour 2030: Un air pur, et une économie forte » (2022)<https://www.canada.ca/fr/services/environnement/meteo/cha
ngementsclimatiques/plan-climatique/survol-planclimatique/reduction-emissions-2030.html>.
Loi sur la tarification de la pollution causée par les gaz à effetde serre, L.C. 2018, ch. 12.
Renvois relatifs à la Loi sur la tarification de la pollution causéepar les gaz à effet de serre, 2021 CSC 11.

obligatoire desrisques liés au climat pour les institutions
financières sous réglementation fédérale àpartir de 2024, afin d'encourager l'améliorationde la qualité des pratiques de gouvernance etde gestion des risques liés au climat desinstitutions, ce qui permettra de promouvoir lasécurité et la solidité du système financier. La
ligne directrice a été élaborée à la suite d'unprogramme pilote de la Banque du Canada et
du BSIF, qui a examiné l'analyse de scénarios
et les simulations de crise en ce qui concerne
les risques financiers liés au climat.8 Le BSIF aégalement publié en 2021 une étude
reconnaissant que les risques de transition liésau climat peuvent entraîner une réduction de larentabilité, des actifs échoués, l'incapacité derembourser des prêts et/ou d'attirer desinvestissements, et la perte de capitalisation
boursière.9
Les Autorités canadiennes en valeurs
mobilières (ACVM), une coalition de tous lesorganismes provinciaux et territoriaux deréglementation des valeurs mobilières, ont
publié le Projet de Règlement 51-107 surl’information liée aux questions climatiques ,10aligné au cadre du GIFCC. Les ACVM ont

7

8

9

10

Bureau du Surintendant des Institutions Financières (BSIF),
version à l’étude de la ligne directrice B-15 : Gestion desrisques climatiques (26 mai 2022) <https://www.osfibsif.gc.ca/fra/osfi-bsif/med/Pages/b15-dft_nr.aspx>,
quidevrait être finalisée fin 2022.
La Banque du Canada et le BSIF, Utiliser l’analyse de scénarios
pour évaluer les risques liés à la transition climatique (janvier
2022)<https://www.banqueducanada.ca/wpcontent/uploads/2021/11/BdC-BSIF-Utiliser-lanalyse-descenarios-pour-evaluer-les-risques-lies-a-la-transitionclimatique.pdf>. BSIF, Parfaire les connaissances et lescapacités des institutions financières fédérales en matière degestion des risques financiers liés au climat (14 janvier 2022)<https://www.osfi-bsif.gc.ca/fra/fi-if/in-ai/Pages/clrskmgm_let.aspx>.
BSIF, ‘Incertitude et changements climatiques : Déjouer lerisque lié aux changements climatiques par la préparation et larésilience’(janvier2021),
9<https://www.osfibsif.gc.ca/Fra/Docs/clmt-rsk.pdf>.
Les Autorités canadiennes en valeurs mobilières (ACVM),
Projet de Règlement 51-107 sur l’information liée aux questions
climatiques, Consultation Faits nouveaux concernant
l’information liée au changement climatique et Avis deconsultation des ACVM Projet de Règlement 51-107 surl’informationl liée aux questions climatiques (ci-après
Réglement 51-107).

43

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Canada (French)terminé une période de consultation sur leprojet d'instrument national et la version finale
devrait être promulguée à la fin de 2022.
En juin 2022, l'Association canadienne desorganismes de contrôle des régimes de retraite(ACOR) a publié le projet de "Ligne directrice
de l’ACOR Considérations Environnementales,
Sociales et de Gouvernance dans la Gestion
des Régimes de Retraite", qui stipule que dansle cadre de leurs obligations fiduciaires, lesadministrateurs de régimes de retraite doivent
tenir
comptedescaractéristiques
environnementales, sociales et de gouvernance(ESG), y compris le risque climatique, qui
peuvent avoir une incidence importante sur leprofilrisque-rendement
financierdesplacements du fonds de retraite. Les
administrateurs de régimes de retraite, dans lecadre de leur devoir de diligence, doiventévaluer si leurs pratiques de gouvernance, degestion des risques et de prise de décision en
matière d'investissement sont suffisantes pouridentifier et répondre aux informations
climatiques et autres informations ESG
importantes d'une manière proportionnée àleurs régimes et appropriée à leurs convictions
en matière d'investissement.11
Le budget 2022 du gouvernement fédéral
comprenait d'autres politiques et mesuresvisant à accélérer la transition vers uneéconomie nette zéro, notamment : la mise enplace d'un mandat de vente pour que 20 % desnouveaux véhicules légers soient zéro émission
d'ici 2026, 60 % d'ici 2030 et 100 % d'ici 2035;
et l'investissement de 250 millions de dollars
canadiens sur quatre ans pour soutenir les
projets d'électricité propre.12
En bref, les actions et les politiquesréglementaires
etgouvernementales
concernant les risques et les impacts deschangements climatiques indiquent qu'il s'agit

11

12

13

14

L’Association canadienne des organismes de contrôle desrégimes de retraite (ACOR), “Ligne directrice de l’ACOR
Considérations
Environnementales,
SocialesetdeGouvernance dans la Gestion des Régimes de Retraite”, (9 juin2022) <https://www.capsa-acor.org/Documents/View/1915>.
Gouvernement du Canada, Budget de 2022, Un plan pour fairecroître notre économie et rendre la vie plus abordable (avril2022), 91-106 <https://budget.gc.ca/2022/home-accueilfr.html>.
Loi canadienne sur les sociétés par actions (L.R.C. (1985), ch.
C-44), note 24, s. 122(1) et les statuts de ses sociétés sœurs
provinciales et territoriales.
Magasins à rayons Peoples inc. (Syndic de) c. Wise, 2004 CSC
68; [2004] 3 RCS 461; BCE Inc. c. Détenteurs de débenturesde 1976, 2008 CSC 69 [39], [2008] 3 RCS 560; Janis Sarra,
L’initiative canadienne de droit climatique, Fiduciaryde risques financiers importants pour lesentreprises.
Responsabilité des administrateurschangement climatiqueet

La Loi canadienne sur les sociétés par actionset les lois sur les sociétés sœurs dans lesprovinces et territoires codifient et renforcent
les obligations de loyauté et de diligence desadministrateurs en common law. L'obligation deloyauté imposée par la loi aux sociétés exige
que les administrateurs et les dirigeants d'unesociété agissent "avec intégrité et de bonne foi
au mieux des intérêts de la société ".13 La Coursuprême du Canada a statué que lesadministrateurs et les dirigeants doivent, dansl’exercice de leurs fonctions, agir "avec le soin,la diligence et la compétence dont ferait preuve,en pareilles circonstances, une personne
prudente."14 Le tribunal s'en remettra à
l'appréciation commerciale raisonnable desadministrateurs qui ont été dûment diligentsdans leur surveillance de la société.15

En juin 2020, Carol Hansell, experte en
gouvernance de conseils d'administration, apublié un avis juridique sur les obligations desadministrateurs en matière de changements
climatiques en vertu du droit canadien.16 L'avis
juridique identifie à la fois l'obligation fiduciairede loyauté17 des administrateurs et leur devoir
de diligence18 comme nécessitant un
engagement et une prise en compte desrisques liés au climat. Afin de s'acquitter de leurobligation d'agir au mieux des intérêts de lasociété, les administrateurs doivent tenir
compte des intérêts à long terme de la sociétéet, à cette fin, de tout risque environnemental.19
Le devoir de diligence des administrateurs
exige qu'ils sollicitent des rapports et desrecommandations de la direction et de sources
externes sur le risque lié au climat, si

15
16

17
18

19

Obligations in Business and Investment: Implications of Climate
Change(avril2018)<https://ccli.ubc.ca/wpcontent/uploads/2021/04/Fiduciary-Obligation-in-Businessand-Investment.pdf>.
Ibid.
Carol Hansell, Hansell LLP, ‘Legal Opinion: Putting Climate
Change Risk on the Boardroom Table’ (juin 2020)<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>.
Loi canadienne sur les sociétés par actions, s. 122(1)(a).
Magasins à rayons Peoples inc. (Syndic de) c. Wise, 2004 CSC
68; [2004] 3 RCS 461.
Carol Hansell, Hansell LLP, ‘Legal Opinion: Putting Climate
Change Risk on the Boardroom Table’ (juin 2020), 16-17<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>.

44Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Canada (French)nécessaire, et qu'ils soient convaincus que lasociété aborde le risque lié aux changements
climatiques de manière appropriée.20 L'avis
juridique de Hansell, mis à jour en 2022, indiqueque l'obligation des administrateurs de prendre
en compte les implications du risque lié auxchangements climatiques est fondée sur lesdevoirs de chaque administrateur envers lasociété, et qu'en gérant ou en supervisant lagestion du risque, les administrateurs doivent
respecter la norme objective de ce qu'une
personne raisonnablement prudente ferait dansdes circonstances comparables; ils doivent
demanderdesrapports
etdesrecommandations à la direction et à dessources externes si nécessaire et s'assurer quela société traite le risque lié aux changements
climatiques de manière appropriée.21
Le BSIF a également publié un rapport danslequel il reconnaît que les administrateurs desinstitutions financières fédérales et les
fiduciaires des caisses de retraite fédérales ont
l'obligation fiduciaire de déterminer et de gérer
les risques climatiques dans le cadre de leurs
obligations prudentielles, et que le fait de ne pas
le faire peut entraîner des risques deresponsabilité.22

conseils d'administration et la direction doivent
prendre les mesures appropriées pourcomprendre et évaluer l'importance de ces
risques pour leur entreprise.24
Les ACVM ont fait savoir que le conseild'administration et la direction devraientévaluer leur expertise en ce qui concerne lesrisques liés au climat propres à un secteur etaccroître cette expertise, au besoin.25 L'avis 51358 du personnel des ACVM - Déclaration desrisques liés aux changements climatiques
stipule que le comité de vérification et le conseild'administration devraient recevoir uneorientation et des informations appropriées
pour aider les membres à comprendre lesquestions liées au climat propres au secteur.26
Il suggère que le conseil se pose la question desavoir si les administrateurs ont reçu
suffisamment d'information, y compris lesévaluations de l'importance relative de la
direction à l'égard des risques liés au climat del'émetteur, pour superviser et examiner defaçon appropriée l'évaluation de ces risques parla direction.27 L'avis 51-358 du personnel desACVM précise ce qui suit :Pour apprécier l’importance relative àl’égard des risques liés au changement
climatique, les émetteurs pourraientdevoir adapter leurs approches
actuelles d’évaluation des risques pourmieux saisir leurs répercussions
potentielles ainsi que leur importance
relative. Dans certains cas, ils
pourraient devoir les ajuster afin detenir compte de l’horizon temporelétendu de ce type de risques et dedéterminer la manière efficace de lesquantifier.28

Obligationd’information
desadministrateurs et changement climatique
Les autorités canadiennes de réglementation
des valeurs mobilières ont fait savoir que lerisque lié aux changements climatiques est
désormais largement reconnu comme unproblème commercial courant et que lesentreprises doivent divulguer les risquesclimatiques importants et la manière dont elles
les abordent.23 Un rapport des ACVM indiqueque malgré les incertitudes potentielles etl'horizon temporel plus long associés aux
risques liés aux changements climatiques, les

20

21

22

Hansell,2020p.
13-15;<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>. Voir aussi Janis Sarra, Duty toProtect: Corporate Directors and Climate-Related Financial
Risk(janvier
2021)<https://ccli.ubc.ca/wpcontent/uploads/2021/04/Duty-to-Protect-CorporateDirectors-and-Climate-Related-Financial-Risk.pdf>.
Carol Hansell Legal Opinion, Climate Change Risk on the
Boardroom
Table,(7juin2022),<https://www.hanselladvisory.com/content/uploads/ClimateChange-Risk-on-the-Boardroom-Table00094165xD4A96.pdf>.
BSIF, ‘Incertitude et changements climatiques : Déjouer lerisque lié aux changements climatiques par la préparation et larésilience’(janvier2021),
9<https://www.osfibsif.gc.ca/Fra/Docs/clmt-rsk.pdf>.

Le projet de Règlement 51-107 sur l'information
relative au climat des ACVM s'appliquera à tousles émetteurs assujettis.29 Les obligations

23

24
25
26
27
28
29

ACVM, Avis 51-358 du personnel des ACVM Information sur
les risques liés au changement climatique (2019),<https://lautorite.qc.ca/fileadmin/lautorite/reglementation/vale
urs-mobilieres/0-avis-acvm-staff/2019/2019aout01-51-358avis-acvm-fr.pdf>. Voir aussi Indications en matièred’information environnementale (SN 51-333).
Avis 51-358 du personnel des ACVM, ibid p. 4.
Ibid.
Ibid.
Ibid.
Ibid p. 8.
Autres que les fonds d'investissement, les émetteurs de titres
adossés à des actifs, les émetteurs étrangers désignés, lesémetteurs étrangers de la SEC, certains émetteurs de titreséchangeables et certains émetteurs de soutien au crédit;Réglement 51-107.

45

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Canada (French)d'information portent sur les quatre éléments
fondamentaux des recommandations du GIFCC: la gouvernance, la stratégie, la gestion desrisques et les mesures et objectifs. En ce qui
concerne la gouvernance, le Règlement 51-107
exigera des émetteurs assujettis qu'ils décriventla surveillance par le conseil d'administration
des risques et des opportunités liés au climat etle rôle de la direction dans l'évaluation et lagestion des risques et des opportunités liés au
climat, indépendamment de l'importance
relative.30 En ce qui concerne la stratégie, lesémetteurs assujettis seront tenus de décrire,
lorsque cette information est importante : lesrisques et les opportunités liés au climat quel'émetteur a identifié à court, moyen et longterme, et l'impact des risques et desopportunités liés au climat sur les activités, lastratégie et la planification financière del'émetteur.31 En ce qui concerne la gestion desrisques, les émetteurs assujettis devront décrireleurs processus d'identification, d'évaluation etde gestion des risques liés au climat, ainsi quela manière dont les processus d'identification,d'évaluation et de gestion des risques liés au
climat sont intégrés dans la gestion globale desrisques de l'émetteur.32 Enfin, en ce qui
concerne les paramètres et les objectifs, lesémetteurs assujettis seront tenus de divulguer

30
31
32
33
34

Projet de Règlement 51-107, p. 7.
Projet de Règlement 51-107, p. 7.
Projet de Règlement 51-107, p. 7.
Projet de Règlement 51-107, p. 7.
Projet de Règlement 51-107, p. 8.

les paramètres utilisés par l'émetteur pourévaluer les risques et les opportunités liés au
climat conformément à sa stratégie et à sonprocessus de gestion des risques lorsque ces
informations sont importantes.
En vertu du projet de Règlement 51-107, lesémetteurs doivent déclarer les émissions degaz à effet de serre des champs d'application 1,
2 et 3 selon le principe « se conformer ou
s’expliquer », bien que les ACVM examinent lapossibilité de rendre obligatoire la déclarationdes émissions du champ d'application 1.33 Lesémetteurs seront également tenus de divulguer
les objectifs qu'ils utilisent pour gérer lesrisques et les opportunités liés au climat et laperformance par rapport aux objectifs lorsquecette information est importante.34
L'avis Hansell a conclu que les obligations dedivulgation des sociétés publiques en vertu dela législation sur les valeurs mobilièress'étendent à la divulgation des risques (et desopportunités) liés au climat et que lesadministrateurs doivent savoir que leursdécisions concernant la divulgation en vertu dela législation sur les valeurs mobilières ne sontpas protégées par la règle de l'appréciationcommerciale.35

35

Hansell LLP, ‘Legal Opinion: Putting Climate Change Risk on
theBoardroom
Table’(juin2020),
p.
20<https://www.hanselladvisory.com/content/uploads/HansellClimate-Change-Opinion.pdf>.

46

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Canada (French)

Implications pratiques pour les administrateurs
Étant donné que le Canada a adopté le point de vue des parties prenantes sur les obligations desadministrateurs, tant par la loi que par les avis de la Cour suprême du Canada, étant donné l'affirmation
des ACVM selon laquelle les risques climatiques importants doivent être divulgués en vertu de la loi
actuelle, et étant donné toutes les nouvelles règles et directives proposées, les conseils d'administration
bien conseillés:a) délégueront l'identification et l'évaluation des risques climatiques à une équipe de direction
clairement identifiée qui rendra directement compte au PDG et au conseil d'administration, en
gardant toujours à l'esprit que les administrateurs conservent la responsabilité fiduciaire globale
de la surveillance de l'identification et de la gestion des risques et des opportunités liés au
climat36;1b) inscriront à l'ordre du jour du conseil d'administration, dès que possible, un processus visant àlancer l'élaboration d'une feuille de route pour la transition climatique jusqu'en 2050, avec desobjectifs transparents de neutralité ou de réduction des émissions de carbone, ainsi que desobjectifs intermédiaires clairs pour 2040, 2030 et le plan stratégique pluriannuel actuel, et feront
ensuite régulièrement rapport au conseil d'administration;c) délégueront au(x) comité(s) approprié(s) du conseil d'administration, tels que le comité desrisques, le comité d'audit, le comité juridique et de gouvernance, le comité desscénarios/stratégie, le comité des nominations/rémunération ou le comité dedurabilité/responsabilité d'entreprise la tâche de traduire la stratégie à long terme en unprocessus décisionnel clair pour chaque aspect pertinent pour chaque comité;d) envisagerons d'aligner la rémunération des cadres supérieurs sur l'atteinte des objectifs et descalendriers de la société pour la transition vers des émissions nettes nulles; ete) discuteront avec un avocat spécialisé en divulgation, afin d'élaborer un plan d'engagement etde communication externe et assureront une divulgation rigoureuse des valeurs mobilières.

Contributeurs :36

Dr. Janis Sarra, Professor of Law,
University of British Columbia
Canada Climate and Law Initiative
CCLI

Janis Sarra, avec la contribution de Roopa Davé, Meghan Harris-Ngae et Ravipal Bains, L’initiative canadienne de droit climatique, Comitésd’audit et gouvernance climatique efficace, Guide à l’intention des administrateurs d’entreprise, (décembre 2020) <https://ccli.ubc.ca/wpcontent/uploads/2021/05/Comites-daudit-et-gouvernance-climatique-efficace-Guide-a%CC%80-lintention-des-conseils-dadministration.pdf>.

47

ChileThe Financial Markets Commission (Comisiónpara el Mercado Financiero, or CMF) issued astrategy on 25 September 2020 to address
climate change in the financial markets. The
main objective of this strategy is to promote thedisclosure of information related to climatechange, as well as to promote the developmentof a green financial market and integrate
climate risks into the risk assessments requiredof listed companies.
In this regard, the CMF recognized climatechange as a financial risk that financial market
participants must adequately manage. The
work plan proposed by the CMF includes thefollowing:

1●

The creation of a Climate Change
Working Group within the CMF todevelop a strategic climate change
initiative.

●

The participation of the CMF in theGreen Finance Public-Private Board of
the Ministry of Finance and in the workof the International Organization of
Securities Commissions (IOSCO), theInternational Association of Insurance
Supervisors, and the Network ofCentralBanks
andFinancial
Supervisors to Greening the Financial
System (NGFS).

●

A plan to boost information disclosure
through regulatory changes.

●

Development of a plan to promote agreen financial marketplace.

●

The integration of climate risks into risk
assessments. In the short term, thisinvolves defining an international bestpractice framework for climate risk
assessment,
monitoring
andmanagement (such as the Task Forceon Climate-related Financial Disclosure(TCFD) Recommendations, which are
expressly mentioned) based on thepartnerships the CMF has built.

See Convención Constitucional, Approved Standards, Oficio
N° 563 (4 March 2022) <https://www.chileconvencion.cl/wp-

There are several ongoing developments which
may affect the legal and commercial context inwhich Chilean companies carry out theirbusiness. Chile’s goal of achieving carbon
neutrality by 2050 forms part of the Climate
Change Framework Law, which was enacted on
13 June 2022. The law contains guidelines for
specific sectors on climate change adaptation
and risk assessment based on the vulnerabilityof each sector.
Further, proposed provisions for the newConstitution – which will be submitted to areferendum on 4 September 2022 – include
significant protections for the environment andclimate, including a proposed requirement for
the State to promote dialogue, co-operation andinternational solidarity to adapt, mitigate andconfront the climate and ecological crises.1
While these developments have not yet taken
legal effect, they may have implications for how
boards should best exercise their decisionmaking powers.
Directors' Duties and Climate Change

Law No.18046, known as the Corporations Law,establishes certain fiduciary obligations formembers of boards of directors to duly performtheir management functions. Among thesefiduciary duties, applicable to listed and nonlisted entities, are the duty of care, loyalty,
confidentiality, information, and accountability.
Chilean General Environmental Law No.19300
establishes a general legal statute forenvironmental damage in Chile in its article 51.
In relation to the liability of directors andofficers, Chile does not have a systematic

content/uploads/2022/03/Oficio-N%C2%B0563-que-informanormas-aprobadas-de-la-Com.-sobre-Medio-Ambiente.pdf>.

48

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Chile

framework regulating criminal
environmental damage.

liabilityforHowever, Chile’s regulation on securities andcorporations does establish specific duties andlevels of responsibility that directors must meetin acting as the governing body of acorporation. Firstly, Law No.18046 establishes
the liability of the board of directors as judicial
and extrajudicial representatives of acorporation, along with their civil, administrativeand criminal liability for acts or omissions of thecorporation acting as a legal entity. Additionally,
article 133 extends such liability to officers,
establishing their joint and several liabilities forany damages caused to the company, theshareholders or third parties, in breach of Law
No.18046, its Rules (contained in Ministry of
Finance Supreme Decree No.702 of 2011) andthe company by-laws.
Under the new General Rule No. 461, in-scope
entities must now undertake integrated
reporting of all relevant ESG factors in all
sections of their annual report, including
disclosures on the profile of the entity, risk
management system, strategy and businessmodel and corporate governance practices
similar to those contained in the now repealed
General Rule No. 385.
The integration of ESG factors in the annual
report, in particular the focus on climatechange-related risks (on which, see below islikely to gradually raise the level of diligencerequired for a director to discharge their duties
to their company as General Rule No.461
comes into effect.

Directors' Disclosure
Climate Change

Obligations

andThe CMF’s General Rule No.30 requires that
listed entities periodically publish an annual
report covering the information required in thementioned General Rule.
In November 2021, the CMF issued General
Rule No.461, which amends General Rule
No.30 (and replaces General Rule No.385 on
corporate governance issues) to require listed
entities, banks, insurance companies, generalfund managers and stock exchanges todisclose ESG-related issues in their annual
reports.2 The CMF has explained that theseissues are in line with international standards
establishedbyentities
includingtheInternational Integrated Reporting Council(IIRC), the Global Reporting Initiative (GRI), theTCFD, the Sustainability Accounting Standards
Board(SASB)
andtheInternational
Organization of Securities Commissions(IOSCO).
General Rule No.461 requires in-scope entities
to describe the systems put in place by theboard to manage ESG risks, in particular thephysical and transition risks arising from climatechange (including, for example, considerationof the risks which may arise in a world with morethan 2°C of warming); and to disclose thematerial risks and opportunities which thecompany may face, including the risks identified
by the TCFD.3 Entities are also required, on a‘comply or explain’ basis, to report on the SASB
sustainability metrics relevant to theirindustries.4
In-scope entities may comply voluntarily withthe requirement of General Rule No.461 fromfinancial year 2022, and the requirements will
become mandatory for large corporations from31 December 2022, and for small corporations
from 31 December 2023.

2

See CMF, CMF issues regulation incorporating sustainability
and corporate governance requirements in Annual Reports (12November
2021)<https://www.cmfchile.cl/portal/principal/613/w3-article49809.html>; CMF, CMF makes available to supervised parties
frequently asked questions and answers on the sustainability

34

and corporate governance regulation recently issued (23December
2021)<https://www.cmfchile.cl/portal/principal/613/w3-article50058.html>.
General Rule No.461, r. 3.6.
General Rule No.461, r. 8.2.

49

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Chile

Practical Implications for Directors
Given the increasing focus of the Chilean Government and securities and financial regulators on climatechange and sustainability issues, including developments in integrated reporting obligations andpotential legislation on national climate change goals, well-counselled directors of Chilean companies
should:a) delegate the identification and evaluation of ESG factors, in particular climate change-relatedrisks, to a clearly identified team in management which reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear
interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance,
scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, thetask of translating the long-term strategy into a clear decision-making process for each aspectthat is relevant to each committee; andd) discuss disclosure obligations and best practice with counsel, in order to develop an external
engagement and communications plan.

Contributors:

Franco Acchiardo, Grasty Quintana Majlis Chile

50

Chile (Spanish)
La Comisión para el Mercado Financiero (CMF)
publicó el 25 de septiembre de 2020 una
estrategia para abordar el cambio climático en
los mercados financieros. El principal objetivode esta estrategia es promover la divulgaciónde información relacionada con el cambio
climático, así como fomentar el desarrollo de un
mercado financiero ecológico e integrar losriesgos climáticos en las evaluaciones de riesgo
exigidas a las entidades bajo su supervisión.
En este sentido, la CMF reconoció que elcambio climático es un riesgo financiero quedebe ser gestionado adecuadamente por losparticipantes en los mercados financieros. El
plan de trabajo propuesto por la CMF incluye losiguiente:
•

•

•
•
•

La creación de un Grupo de Trabajo
sobre el Cambio Climático dentro de la
CMF para desarrollar una iniciativa
estratégica del cambio climático.
La participación de la CMF en la Mesa
Público-Privada de Finanzas Verdesdel Ministerio de Hacienda y en lostrabajosdelaOrganización
Internacional de Comisiones deValores (IOSCO, por sus siglas en
inglés), la Asociación Internacional de
Supervisores de Seguros y la Red deBancos Centrales y Supervisores
Financieros para la Ecologización delSistema Financiero (NGFS).
Un plan para impulsar la divulgación deinformación
mediantecambios
normativos.
Desarrollo de un plan para promover
un mercado financiero ecológico.
La integración de los riesgos climáticos
a las evaluaciones de riesgo. A corto
plazo, esto implica la definición de un
marco internacional de mejores
prácticas para la evaluación, el
seguimiento y la gestión de los riesgosclimáticos
(como
las
Recomendaciones del Grupo deTrabajosobre
Divulgaciones
Financieras relacionadas con el Clima(TCFD –por sus siglas en inglés –que
se mencionan expresamente) basado
en las asociaciones que el CMF ha
creado.

Existen varios avances que pueden afectar alcontexto legal y comercial en el que las
empresas chilenas llevan a cabo sus negocios.
El objetivo de Chile de alcanzar la neutralidad
de carbono en 2050 forma parte de la Ley
Marco de Cambio Climático, publicada el 13 dejunio de 2022. La ley contiene directrices para
sectores específicos sobre la adaptación alcambio climático y la evaluación de riesgos en
función de la vulnerabilidad de cada sector.
Además, las disposiciones propuestas para lanueva Constitución - que será sometida a unreferéndum el próximo 4 de septiembre de2022 - incluyen importantes protecciones parael medio ambiente y el clima, incluida la
propuesta de que el Estado promueva el
diálogo, la cooperación y la solidaridad
internacional para adaptarse, mitigar y afrontarlas crisis climáticas y ecológicas. Aunque estos
avances aún no han entrado en vigor, pueden
tener implicancias en la forma en que losdirectorios deben ejercer mejor sus poderes dedecisión.
Deberes deClimáticolosDirectoresyCambio

La Ley N° 18.046, conocida como Ley deSociedades Anónimas, establece ciertas
obligaciones fiduciarias para que los miembrosde directorios desempeñen debidamente sus
funciones de gestión. Entre estos deberes
fiduciarios aplicables a las entidades listadas en
bolsa y no listadas, se encuentran el deber dediligencia,
lealtad,confidencialidad,
información y responsabilidad.
La Ley N° 19.300 sobre Bases Generales delMedio Ambiente establece un estatuto jurídico
general para el daño ambiental en Chile en su
artículo 51. En relación con la responsabilidad
de los directores y funcionarios, Chile nocuenta con un marco sistemático que regule laresponsabilidad penal por daños ambientales.
Sin embargo, la regulación chilena sobre
valores y sociedades anónimas establece
deberes
específicos
ynivelesde51

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Chile (Spanish)responsabilidad que deben cumplir losdirectores al actuar como órgano deadministración de una sociedad anónima. En
primer lugar, la Ley N° 18.046 establece laresponsabilidaddeldirectorio
como
representante judicial y extrajudicial de una
sociedad anónima, así como su responsabilidad
civil, administrativa y penal por los actos u
omisiones de la sociedad como persona
jurídica. Adicionalmente, el artículo 133 haceextensiva dicha responsabilidad a losadministradores,
estableciendosu
responsabilidad solidaria por los daños yperjuicios causados a la sociedad, a losaccionistas o a terceros, en incumplimiento dela Ley Nº 18.046, su Reglamento (contenido enel Decreto Supremo Nº 702 de 2011 delMinisterio de Hacienda) y los estatutos sociales.
En virtud de la nueva Norma de Carácter
General N° 461 de la CMF (la NCG 461), lasentidades incluidas en el ámbito de aplicación
deben ahora informar de forma integrada todos
los factores ASG relevantes en todas las
secciones de su informe anual, incluyendo
información sobre el perfil de la entidad, elsistema de gestión de riesgos, la estrategia y elmodelo de negocio y las prácticas de gobierno
corporativo, similares a las contenidas en la ya
derogada Norma de Carácter General N° 385.
La integración de los factores ASG en el
informe anual, en particular la atención
prestada a los riesgos relacionados con elcambio climático (sobre los cuales, véase más
adelante), es probable que aumente
gradualmente el nivel de diligencia requeridopara que un director cumpla con sus deberespara con su empresa a medida que entre en
vigor la Norma General N° 461.

Obligación de Informar de los Directores yCambio Climático
La Norma de Carácter General N° 30 de la CMF
exige que las entidades transadas en bolsa
publiquen periódicamente un informe anual
que incluya la información requerida en lacitada norma.
En noviembre del año 2021, la CMF publicó la
NCG 461, la cual modificó la Norma de Carácter
General N° 30 (y sustituye a la Norma de
Carácter General N° 385 en relación con temas
de gobierno corporativo) para exigir a lasentidades, los bancos, las compañías deseguros, las gestoras de fondos generales y lasbolsas de valores que informen los temas
relacionados con los ASG en sus informes
anuales. La CMF ha explicado que estos temas
están en consonancia con las normas
internacionales establecidas por entidadescomo el Consejo Internacional de Reportes
Integrados (IIRC), la Iniciativa Global de Reporte(GRI), el TCFD, el Consejo de Normas
Contables de Sostenibilidad (SASB) y la
Organización Internacional de Comisiones deValores (OICV).
La NCG 461 exige a las entidades fiscalizadas
que describan los sistemas establecidos por el
directorio para gestionar los riesgos ASG, enparticular los riesgos físicos y de transición
derivados del cambio climático (incluyendo, por
ejemplo, la consideración de los riesgos que
puedan surgir en un mundo con más de 2 °C decalentamiento); y que informen los riesgos yoportunidades materiales a los que puede
enfrentarse la empresa, incluidos los riesgos
identificados por el TCFD. Las entidades
también están obligadas, sobre la base de"cumplir o explicar", a informar sobre lasmétricas de sostenibilidad de la SASB
relevantes para sus sectores.
Las entidades afectadas por esta regulación
pueden cumplir voluntariamente el requisito dela NCG 461 a partir del ejercicio 2022, y losrequisitos serán obligatorios para las grandes
empresas a partir del 31 de diciembre de 2022
y para las pequeñas empresas a partir del 31 dediciembre de 2023.

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Implicaciones Prácticas para los Directores
Dada la creciente atención del gobierno chileno y de los reguladores bursátiles y financieros a los temas
relacionados con el cambio climático y la sostenibilidad, incluida la evolución de las obligaciones depresentación de informes integrados y los objetivos nacionales en materia de cambio climático, losdirectores de las empresas chilenas bien asesorados deberían:a) delegar la identificación y evaluación de los factores ASG, en particular los riesgos relacionados
con el cambio climático, a un equipo claramente identificado en la dirección que informe
directamente al gerente general y al directorio;b) incluir en la agenda del directorio, en un plazo de 3 a 6 meses, un proceso para empezar adesarrollar una hoja de ruta para la transición climática hasta 2050 con objetivos transparentes
de neutralidad o reducción de carbono, con objetivos intermedios claros para 2040, 2030 ydentro del actual plan estratégico plurianual renovable, e informar periódicamente a partir deentonces al directorio;c) delegar al(los) comité(es) apropiado(s) del directorio, como el de riesgos y auditoría, deremuneración o al de sostenibilidad/responsabilidad corporativa, la tarea de traducir laestrategia a largo plazo en un proceso claro de toma de decisiones para cada aspecto que sea
relevante para cada comisión; yd) discutir las obligaciones de informar y las mejores prácticas con el abogado, con el fin dedesarrollar un plan de compromiso y comunicación externa.

Colaborador:

Franco Acchiardo, Grasty Quintana Majlis Chile53

EgyptGiven its geography and demography, Egypt
has been particularly supportive of international
actions taken to mitigate the effects of climatechange. Since Egypt’s ratification of the United
Nations Framework Convention on Climate
Change in 2005, Egypt has been continuously
attempting to integrate the required policies tomitigate the effects of climate change on Egypt.
The Egyptian Constitution, adopted in 2014,
confirms the right of each citizen to a healthy
environment and considers the protection of
the environment a national duty. It also requires
the State to take all necessary actions to protect
the environment and to use it with caution toensure the achievement of sustainable
development and the rights of future
generations therein. In light of this, Egypt Vision
2030 was announced in 2015 including a
Sustainable Development Strategy and the
National Climate Change Council wasestablished to oversee the developments in thisarea. Further, the Investment Law was issued in2017 requiring investments to be mindful of thesociety, environment and public health. In May
2022, a comprehensive National Climate
Change Strategy 2050 was also issued.1
In July 2021, the Financial Regulatory Authority(FRA), in charge of supervising non-bankfinancial institutions and markets, including thestock exchange, issued two decrees requiring
listed companies and non-bank financial
institutions – subject to a specific threshold – tomake annual disclosures pertaining to social,environmental and governance issues.2 During
the same month, the Central Bank of Egypt(CBE) issued a paper for discussion regarding
sustainable finance, as well as guiding
principles for sustainable finance.3 The CBE
requires banks to take all the necessary actions
to implement those guiding principles. Some ofthose principles set out new standards forchoosing projects for financing, which
companies (shareholders and directors) will
have to take into account.

1

2

Ministry of Environment, ‘Egypt National Climate Change
Strategy
2050’
(May
2022)
<https://www.eeaa.gov.eg/portals/0/eeaaReports/NCC/EgyptNSCC-2050-Summary-En.pdf>.
FRA Board of Directors decree number 107 issued on 5 July
2021 regarding the disclosure rules for companies working in
non-banking financial services of environmental, social andgovernance related to sustainability and the financial effects ofclimate changes; and FRA Board of Directors decree number
108 issued on the same date regarding the disclosure rules forcompanies that issued securities listed on the Egyptian stock

Directors’ Duties and Climate Change
While the Egyptian Companies Law No. 159 of1981 (the Companies Law) does not explicitly
state that directors have a fiduciary duty
towards the shareholders, the company, theemployees, the environment or any otherstakeholder, directors are considered agentsacting on behalf of the shareholders in their
managementofthecompany.
Suchunderstanding is explicitly stated in section oneof chapter two of the old commercial code4
issued by Royal Decree No 1 of 1883. This
understanding was also confirmed by various
court decisions and Council of State opinions
and rulings. Accordingly, under Egyptian Law,
directors are only required to act in accordancewith their mandate as determined by theshareholders of the company.
In addition to the above, non-bank financial
institutionsaresubject
toCorporate
Governance Rules issued by the FRA Decree
No 100 of 2020 (Corporate Governance Rules),which provide further explanation on directors’role as stated in the current law but do not
expand on the duties. The Corporate
Governance Rules provide that the byelaws of
the company must determine the competencesof the board of directors and the obligations of
its members in detail. Board members are
required to dedicate sufficient time to fulfil their
responsibilities and to observe the interests ofthe company and the shareholders.
Here, it must be noted that the Companies Law
gives minority shareholders (those holding 5%

34exchange of environmental, social and governance related tosustainability and the financial effects of climate changes.
The guiding principles for finance include, among others,
managing climate change risks.
See Article 34 of Royal Decree No 1 of 1883. This Royal Decree
was revoked by Law 17 of 1999 issuing the new Commercial
Code; however, the chapter (titled “About Companies”), whichcontains the abovementioned article, survived the revocation of
the old commercial code by virtue of an explicit provision of the
new Commercial Code.

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Egypt

or more of the capital) the right to request thesuspension of general assembly decisions thatwork in favour of certain shareholders to the
exclusion of others. Accordingly, board
decisions that are taken in light of such mandate
from the shareholders will be automaticallysuspended following the suspension of thegeneral assembly decision. It follows that
directors are expected to observe the interestsof the company (as defined by theshareholders’ mandate to the board of
directors) without prejudice to the interests ofthe minority shareholders.
In light of the above, directors will be required
to observe the risks associated with climatechange to the extent that they are required to
do so by virtue of their mandate as determinedby the company’s shareholders. In other words,
the shareholders will have to mandate thedirectors to observe the risks associated withclimate change in the management of thecompany and the directors will have to ensure
the executive management’s compliance withthis requirement. The extent to which the boardof directors will be considered to have fulfilled
its mandate is a matter that is determined by therelevant court.

Directors' Disclosure
Climate Change

Obligations

andAs mentioned above, the FRA has issued adecree according to which it requires boards of
directors of listed companies to disclose – intheir annual reports – the company’senvironmental,socialandgovernancepractices. Further, if the issued capital of thecompany or its net shareholder equity exceeds
500m Egyptian pounds, then the board of
directors will have to make certain climaterelated financial disclosures.
The above disclosures are not expected to bein the form of narrative reports written by thecompanies. Rather, the FRA prepared two
forms for the required disclosures and annexedthem to the above-mentioned decrees. Eachform includes a set of questions that reflect thestandards that are being evaluated. The
company is then required to answer eachquestion with ‘Yes’ or ‘No’, and to write aclarification or comment on its answer. For
example, the company may comment that it isin the process of taking specific procedures tocomply with this element and that it is expected
to finalise these procedures within a specificperiod. In some circumstances, the FRA
determines the information that is required to
be clarified.
The
environmental
disclosures
includequestions related to environmental operations
and supervision, carbon emissions, usedenergy sources, use of water and waste
management. Social disclosures include
questions related to gender diversity, wages,
turnoverrates
ofemployees,
nondiscrimination, professional health and safety,
children, forced labour, and labour rights.
Governance related disclosures include
diversity in the board of directors, anticorruption measures, codes of ethics, and data
privacy. As to climate-related financial
disclosures, they include elements ofgovernance, strategy, risk managements,
metrics and targets. The FRA has annexed tothe above decisions a third annex in which it
defines many of the terms used in the twodisclosure forms.
The FRA further requires listed companies,
targeted by these two decisions, to submit to
the FRA a quarterly report stating theprocedures that the company has taken or willtake in relation to the required disclosures
starting from the first of January 2022. The firstsuch disclosures are expected to be made withthe board of directors’ report prepared for the
fiscal year ending in 2022 – that is in the year2023.
It must also be noted that this decision does notdirectly require listed companies to comply withcertain standards; however, it requires them todisclose their policies and the extent to which
they comply with the standards set out in theforms prepared by the FRA.

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Practical Implications for Directors
In order to avoid breaching the FRA’s decree referred to above, boards of directors will have to(a) immediately commence reporting quarterly to the FRA on the actions their companies started toundertake to prepare the required disclosures, and (b) prepare the required disclosures as part of theirannual reports, the first being due for submission in 2023. Those annual reports are then required to bepresented to the shareholders in the annual general assembly meeting and will be an opportunity forthe directors and the shareholders to discuss the actions the company should take to mitigate climate
risks.

Contributors:

Dr. Ziad Bahaa-Eldin, Thebes Consultancy
Nora Harb, Thebes Consultancy
Ismail Ramadan, Thebes Consultancy

56

European Union
In 2018, the European Commission adopted an
Action Plan on Sustainable Growth to identify
future legislative steps on climate change.1 The
Commission drew renewed attention to theconcept of the ‘carbon bubble’, stating that:“Between 60 and 80 percent of the coal, oil andgas reserves of publicly-listed companies are‘unburnable’ if the world is to have a chance of
keeping global warming well below 2°C and as
closely as possible to 1.5°C, as agreed at the
COP21 in Paris. [...] a very substantial source of
global systemic risk [...] is currently embedded
within EU and global financial markets”.2
The EU has made substantial progress in
preparing and implementing climate changerelated policy and legislation. In June 2021,
European Regulation (EU) 2021/1119 (theEuropean Climate Law) entered into force,
which includes a legally-binding objective for
the EU to reach climate neutrality by 2050, a
commitment to negative emissions after 2050,
and a target of at least a 55% reduction of net
emissions of greenhouse gases by 2030
compared to 1990.3 The EU has also a set ofpolicies and legislation designed to meet thesegoals, including more stringent emissions
standards for vehicles, a carbon borderadjustment tax, and adjustments to the EU
emissions trading scheme.4 While the specifics
of how these policies may be implemented
remains to be seen, they may have significant
impacts on the legal and commercial contexts
in which companies operate. As developments
which are likely to take effect in the short andmedium-term, they affect directors’ governanceof their companies and disclosure of material
risks (on which see below).

Directors' Disclosure
Climate Change

Obligations

andWith specific reference to corporate law, theCommission has addressed the climate change
issue by imposing a disclosure obligation onlarge corporations (non-financial corporations
with over 500 employees) and banks andinsurance companies of any size. This was
defined by European Directive (EU) 2014/95,
also known as the Non-Financial Reporting
Directive (the NFRD) – in force since 2018 – andrequired the publication, either in the
management report or in a separate report, of
information on the impact of corporate activity
on, among other factors, “environmental
matters”, i.e. the “short-term, medium-term andlong-term implications” “based on the expected
impact of science-based climate change
scenarios on corporate strategies andactivities”; this information is to be madeavailable in the so-called ‘non-financial
statement’. The NFRD does not formally require
adoption of disclosure policies in the nonfinancial statement, but in cases where
corporations do not adopt any such policies,
their non-financial statement “shall provide aclear and reasoned explanation for not doingso”.5
Accordingly, boards of directors of all affected
EU-based corporations must, in the first
instance, analyse whether the short, medium
and long-term implications of climate change
could have any impacts on their corporate
strategies and activities, and if so, evaluate such

1

2

3

Regulation (EU) 2018/1999 of the European Parliament and of
the Council on the Governance of the Energy Union andClimate Action planning 2030 targets and a transition to a
climate neutral economy of 11 December 2018, L 328/1.
Committee on Economic and Monetary Affairs of the European
Parliament Draft Report, 2 February 2018.
Regulation (EU) 2021/1119 of the European Parliament and of
the Council of 30 June 2021 establishing the framework for

4

5achieving climate neutrality and amending Regulations (EC) No
401/2009 and (EU) 2018/1999, L 243/1.
European Commission, European Green Deal: Commission
proposes transformation of EU economy and society to meetclimateambitions
(14
July
2021)
<https://ec.europa.eu/commission/presscorner/detail/en/IP_21_3541>.
Article 1(1) inserting art. 19a(1), EU Directive 2014/95.

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impacts. If it is determined that there is no
impact, this must be disclosed in the nonfinancial statement, clarifying the precise
reasoning underpinning this conclusion. If
impacts have been identified and evaluated,
they must be disclosed together with themeasures adopted by directors to manage suchimpacts, unless they elect not to pursue any
policy with reference to climate change – inwhich case a clear and reasoned explanation ofsuch a decision must be reported as well. The
information is organised around four pillars:●●●●

the business model;
policies and due diligence;
the outcomes of such policies; andrisks and their management.6

In June 2019, the types of climate-related
information to be included in the non-financial
statement were specified through non-binding
Guidelines issued by the European Commission(the Guidelines).7 In particular, these clarify thescope of the climate information – which is not
limited to the impact that climate change poses
to the business (referred to as outside-in
impacts) but rather includes the impacts of thebusiness’ activities on the climate as well(inside-out impacts), known as ‘double
materiality’.
The
Guidelines
specificallyintegrate the recommendations of the Task
Force on Climate-related Financial Disclosure(TCFD), and are inspired by the proposals of theCommission’s Technical expert group on
sustainable finance (TEG).8
The seven key principles set out in the
Guidelines state that information shall be:
●
●
●
●
●
●
●

6
7

8

material;fair;balanced and understandable;
comprehensive but concise;strategic and forward-looking;stakeholder-oriented;
consistent and coherent.

Ibid.
European Commission Communication, ‘Guidelines on Nonfinancial Reporting: Supplement on Reporting Climate-relatedInformation’,
2019/C
209/1
(20
June
2019)
<https://ec.europa.eu/finance/docs/policy/190618-climaterelated-information-reporting-guidelines_en.pdf>.
In January 2019, the European Commission set up a Technicalexpert group on sustainable finance (TEG) to assist it in

The Guidelines are aimed at fostering bestpractice in climate reporting and are very
detailed, despite acknowledging the benefits ofcompanies taking a flexible approach. They also
encourage
reportingofclimate-related
information to be integrated with other financial
and non-financial information. Taking into
account the TCFD recommendations, they
identify typical climate-related risks andopportunities that should be considered acrossthe whole value chain, both upstream (e.g.
suppliers) and downstream (e.g. customers).

Directors' Duties and Climate Change
The NFRD does not expressly refer to directors’
duty of skill and care in relation to climatechange. However, in all European jurisdictions,directors are obliged to oversee the company incompliance with the duty of care and loyalty.
The apparent silence of the NFRD in respect of
directors’ duties is in fact deceptive: byrequiring disclosure on, among other factors,
climate-related risks and opportunities, the
NFRD effectively sets a clear and robust
standard for how the board must govern climatechange. It presumes an understanding of, andassessment by, the board of the impact ofclimate change on the company and likewise of
the company on the climate.
In particular, the description of the businessmodel – which is one of the four pillars of thereporting framework – assumes that the boardof directors has developed a corporate strategy
that takes account of climate change, among
other factors, in the short, medium and longterm. This is a time horizon that is notably longer
than the one boards usually consider instrategic planning, and to the extent it takes fullaccount of all risks and opportunities, it has
significant implications for financial planning, interms of both capital expenditures andrevenues. The core issue is whether thecompany’s business is resilient in different

developing, in line with the Commission's legislative proposalsof May 2018: an EU classification system – the socalled EU taxonomy – to determine whether an economic
activity is environmentally sustainable; an EU Green Bond
Standard; methodologies for EU climate benchmarks anddisclosuresforbenchmarks;
andguidancetoimprove corporate disclosure of climate-related information.

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European Union

climate change scenarios (ranging from 1.5°C
averageincreaseover
pre-industrial
temperatures to business-as-usual, given thehigh degree of uncertainty surrounding
regulatory policy, technology and physicalimpacts), and it falls to the board of directors tomake these determinations.
In addition, the disclosure requirement onpolicies and due diligence processes – thesecond pillar of the reporting framework – calls
for the board of directors, within its duty ofoversight, to institute effective internal controls
as regards climate factors. The same duty ofoversight likewise applies with respect to thethird pillar of the reporting framework:
disclosure of the metrics and targets that
underpin the climate strategy, which the board
must define and the delivery of which it mustoversee.
The fourth pillar of the reporting framework is
disclosure and management of top risks: theboard of directors is ultimately responsible forthe company’s risk management processes,
and in order to properly consider climaterelated risks, is expected to assess them overthe short, medium and long-term. The board is
expected to identify and fully disclose material
risks and opportunities, in line with therecommendations of the TCFD, which areechoed in the European Commission
Guidelines of 2019. Even though these
Guidelines are not binding, they represent themost up-to-date climate reporting standard
available. It follows, therefore, that, in order tofulfil their duty of skill and care – which, in all
Member States, includes the duty to be fully
informed – directors must properly understandand consider climate-related risks and theprocesses to manage them.

Due to its very nature, climate-related
information forces directors to reason in termsof medium and long-term horizons, because theimpacts of climate change extend over long
periods and cannot be fully understood andassessed by focusing on the typical three- tofour-year business planning cycle. This holds
even when a jurisdiction does not explicitly
contemplate the long term in the provisions
addressing directors’ duties. Because of thedisclosure requirements under the NFRD,
effective climate governance means boards arenaturally compelled to adopt a long-term
perspective in managing the company.
Therefore, although billed as disclosure
legislation, the NFRD effectively has anenormous impact on the manner in which theduty of skill and care are to be interpreted andacted upon: disclosure on climate implies arobust process for identifying and managing
risks and opportunities, and thus carries with it
the implied directors’ duty properly to manage
these risks and embed these opportunities
when defining the medium and long-term
strategy of the company.
It is therefore through the backdoor of
disclosure that climate change has penetrated
the management of big European corporations
across all industries. As for enforcement, under
the NFRD, Member States hold responsibility
for determining and enforcing sanctions for
non-compliance with disclosure requirements,
and regulations vary from one Member State toanother. For example, in the U.K. and Germany,
it is a criminal offence for directors not to
prepare or publish the statement of nonfinancial information, and not to disclose theactions taken in relation to each area (i.e.
including climate change) without giving ajustification. In Italy, the sanction is anadministrative monetary penalty applied tothose who verify the non-financial statement. In
France, the only consequence for noncompliance is that any interested party may
send a request to a judge for summary
proceedings asking for the information to beprovided; if the application is granted, thedirectors are liable to pay the penalty andprocedural costs.
Statutory audit boards and audit firms provide
an additional lever to drive the effectiveness ofclimate-related disclosure, insofar as they are
required to check whether the non-financial
statement or separate report have been
provided, although as of yet, their oversightdoes not extend to its actual contents. However,
Member States also have the option of requiringthat the information contained in the climate
disclosure statement be verified by anindependent assurance services provider.
Obviously, under general principles of law andprocedures of each Member State, in addition
to the specified sanctions, directors’ civil liability
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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
European Union

for damages applies in cases of material
misstatements or breach of the duty of skill andcare. Since the legislation is very recent, there
is no case law yet to gauge its practicalapplication.

In addition, reporting should address:●●●

Another relevant development is Proposal
N.2021/0104 (COD): Corporate Sustainability
Reporting Directive (CSRD), in respect of which
the Council and the European Parliament havereached a provisional political agreement,
meaning it is now very likely to enter into law.9
In order to enable the transformation of the EU
into a modern, resource-efficient andcompetitive economy with zero net emissions
by 2050, as envisioned in the European Green
Deal and the 2020 Work Programme (and since
entered into law by the European Climate Law),
the European Commission proposed a revisionof European Directive (EU) 2014/95: theCorporate Sustainability Reporting Directive
Proposal (the CSRD Proposal). Proposed on 21
April 2021, the CSRD Proposal aims to alignsustainability reporting requirements with the
Sustainable Finance Disclosure Regulation andthe Taxonomy Regulation.10 The CSRD
Proposal addresses the following:
●

●

●

●

9

it extends the scope of reporting
requirements to additional companies,
including all large companies and listedcompanies (listed micro-companies are
given until 1 January 2026);
itrequiresfull
assuranceofsustainability information by external
auditors;
it specifies in more detail theinformation that companies shouldreport, and requires them to report inline with mandatory EU sustainability
reporting standards; andit requires all information to be
published as part of companies’
management reports, and disclosed indigital, machine-readable format.

European Council, New rules on corporate sustainability
reporting: provisional political agreement between the Council
and theEuropean Parliament(21 June2022)<https://www.consilium.europa.eu/en/press/pressreleases/2022/06/21/new-rules-on-sustainability-disclosureprovisional-agreement-between-council-and-europeanparliament/>.

●

●
●
●

●

●

the resilience of the business modeland strategy to sustainability-related
factors;
opportunities related to sustainability;
plans to align the business model andstrategy with the transition to asustainable economy, defined aslimiting the rise in global averagetemperature to 1.5°C above preindustrial levels, in line with the Paris
Agreement;
stakeholder engagement practices andtheir implications for the businessmodel and strategy;
implementation of the strategy as it
relates to sustainability;
sustainability-related
targets
andprogress achieved against them;
the role of functional areas andbusiness units, as well as of the board,whether one-tier or two-tier as per local
practice in different Member States,with regard to sustainability;
principal actual or potential impacts
related to the company’s broader value
chain, and any action taken and results
achieved to prevent, mitigate or
remediate negative impacts; andindicators to measure and report on theabove.

In addition, the European Commission will
adopt sustainability reporting standards
regarding: climate change mitigation andadaptation, water and marine resources,
resource use and the circular economy,
pollution, and biodiversity and ecosystems. In
case of infringements of these provisions,
Member States are required, at a minimum, toprovide for the following administrative
measures and sanctions: a public statement
identifying the wrongdoer; an order requiring
the wrongdoer to cease the conduct and todesist from its repetition; and administrative
pecuniary sanctions. These provisions are

10

Regulation (EU) 2019/2088 of the European Parliament and of
the Council of 27 November 2019 on sustainability‐related
disclosures in the financial services sector; Regulation (EU)2020/852 of the European Parliament and of the Council of 18
June 2020 on the establishment of a framework to facilitatesustainable investment, and amending Regulation (EU)2019/2088.

60

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
European Union

expected to enter into force in 2023, following
final approval by the European Parliament.
An additional significant development is the
February 2022 proposal for a Directive on
Corporate Sustainability Due Diligence (the Due
Diligence Directive), which introduces a duty forcertain companies to conduct supply chain due
diligence on human rights and environmental
issues.11 The new obligations will apply to EU
companies with more than 500 employees andmore than €150 million in turnover, and non-EU
companies with turnover of more than €150
million generated in the EU. Smaller companies,
with over 250 employees and over €40 million
in turnover, in specific industries will need tocomply at a later stage. These companies will
be required to integrate due diligence into theirpolicies, identify actual or potential adverse
environmental and human rights impacts, andprevent, mitigate or minimise these, as well as
publicly communicate how they are fulfillingthese obligations.12

they will, if passed, explicitly incorporate acompany’s impact on the climate into the duties
of its directors.

Additional provisions for banks: In addition to
the foregoing, directors of European banks(regardless of size) shall consider the Guide on
climate-related and environmental risks issued
by the European Central Bank in November
2020, which sets out thirteen supervisory
expectations relating to risk management anddisclosure of climate risks. These all fall within
the board’s duty of oversight, and consist of:●●●Under the proposed Due Diligence Directive,
Member States are to provide for measures tomake directors of these companies responsible
for putting in place and overseeing theircompanies’ due diligence policies and related
actions.13 The Due Diligence Directive also
envisages Member States clarifying the scopeof directors’ duty to act in the best interest of
their companies, stating that for the companies
covered by the proposed Directive, directors
must take into account the consequences of
their decisions for sustainability matters,
including climate change and human rights, inthe short, medium and long term.14 Member
States are also required to ensure thatcompanies covered by the proposed Directive
shall adopt a plan to ensure that their businessmodel and strategy are compatible with thetransition to a sustainable economy and thelimiting of global warming to 1.5°C in line with
the
Paris
Agreement.15
While
these
developments remain a proposal at present,

11

12

Proposal for a Directive of the European Parliament and of theCouncil on Corporate Sustainability Due Diligence andamending Directive (EU) 2019/1937.
European Commission, Just and sustainable economy:
Commission lays down rules for companies to respect humanrights and environment in global value chains (23 February
2022)

●

●

●

●

●

●

●

13

14
15

understanding the impact of climaterelated risk on the business over the
short, medium and long term, in orderto make informed strategic andbusiness decisions;
integratingclimaterisk
whendeveloping and implementing thebank’s strategy;
considering climate risk in the context
of the overall business strategy andobjectives, and embedding it within therisk management framework;
ensuring the bank’s setting of risk
appetite framework properly accounts
for climate risk;
ensuring responsibility for climate risk
is properly allocated to management
within the organizational structure;
incorporating aggregate climate risk
data within internal reporting process
so as properly as to reflect the bank’s
exposure;
identifying, quantifying and integratingclimate risk within the overall capital
adequacy framework;embedding climate risk assessment
withinthebank’screditrisk
management process at all relevant
stages(fromcredit-grantingtoportfolio-monitoring);
integrating climate risk in theassessment of business continuity,
reputation and liability;
ongoing monitoring of the effect ofclimate risk on the bank’s market<https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145>.
Proposal for a Directive of the European Parliament and of theCouncil on Corporate Sustainability Due Diligence andamending Directive (EU) 2019/1937, art. 26.
Ibid, art. 25.
Ibid, art. 15.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
European Union

●

●

●

positions and future investments, andincorporating climate risk into stresstesting methodology;
evaluating, and where appropriate
revisiting, the bank’s stress testing
methodology to ensure that climate risk
is included in baseline and adverse
scenarios;
assessing whether climate risk could
cause net cash outflows or depletion ofliquidity buffers; andpublishing meaningful and material
information and key metrics inaccordance with the above-referenced

European Commission Guidelines of2019 and therefore aligning with TCFD
Recommendations.
In 2022, the ECB carried out a full supervisory
review of banks’ climate practices under the
SREP (Supervisory Review and Evaluation
Process), with a view to taking concrete
remedial measures where needed. The ECB
concluded that banks do not fully meet the
ECB’s expectations on disclosure of climate
and environmental risks, with significant gaps
remaining in disclosures.16

Practical Implications for Directors
Given the European Commission’s adoption of world-leading climate disclosure regulations for nonfinancial companies, and additional very detailed and advanced regulations governing the managementof climate risk by banks, well-counselled boards will:a) allocate identification of climate risks and opportunities and their evaluation to a clearlyidentified team in management that reports directly to the board;b) considering in particular the legal and policy developments in relation to EU climate goals, andthe potential direction of travel of these developments, put on the agenda for the board toreview, within 3 or 6 months, a process to initiate the development of a climate transition
roadmap to 2050, with transparent carbon neutrality targets, clear interim targets to 2040, 2030
and near-term within the current rolling multi-medium and long-term targets, and at least
annually thereafter report back to the board;c) ensure that all relevant departments, such as legal and compliance, risk management, scenarioplanning, strategy, audit, procurement, human resources, government relations, investor
relations, stakeholder relations, reach a clear understanding of their functional contribution to
the design and delivery of the company’s climate transition plan, coordinate their efforts under
the leadership of the CEO, and are jointly accountable to the board;d) allocate to the appropriate committee(s) of the board, such as risk, audit,
governance, scenarios/strategy,
nominations/remuneration,or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee before its final approval by the board as awhole; ande) discuss with disclosure counsel, in order to develop an external engagement andcommunications plan.
Contributors:

16

Dr. Sabrina Bruno, Full Professor of Comparative
Corporate Law, University of Calabria - Luiss G.Carli

European Central Bank, Supervisory assessment of institutions’climate related and environmental risks disclosures (14 March2022)<https://www.bankingsupervision.europa.eu/press/pr/date/20
22/html/ssm.pr220314~37303fd463.en.html>.

62

FranceThis section is to be read in conjunction with the above EU section, andfocuses specifically on rules under French law regarding directors’ duties
and obligations as they pertain to climate change.
There are an increasing number of cases before
the French authorities demonstrating risingawareness of climate change. More and morejudicial actions are being initiated against the
French government or French corporations inthis area. An illustration of this is the so-called‘case of the century’ (Affaire du siècle), where
the Paris Administrative Court found the Frenchgovernment liable for ecological damage due toits inability to comply with its commitments tomeet certain targets for reducing greenhousegas emissions, and ordered the state to takeactions to cut carbon emissions and repair
ecological damage by 31 December 2022. 1
Further, several actions have been initiated,
mainly by associations and NGOs, against
French corporations for alleged breach of their
devoir de vigilance (see below) under French
law; the claimants aim to obtain from French
courts an injunction to compel suchcorporations either to put in place or to enhancetheir vigilance plan (plan de vigilance) in order
to meet the greenhouse gas emissions target
set by the government under the Paris
Agreement.
French law has developed several mechanisms(obligations and incentives) to ensure thatcompanies take environmental issues, including
climate change, into greater consideration
when conducting their business and interactingwith third parties. French companies are
subject to a wide range of international anddomestic legal norms related to climate change.
The following summary focuses on the main
legal provisions applicable to French
companies and/or their board directors.
Directors' Duties and Climate Change

Requirement to take into account social andenvironmental factors: Since the enactment of
the PACTE Law in May 2019,2 the French Civil

1

2

Paris Administrative Court, 3 February 2021, nos. 1904967,
1904968, 1904972, 1904976/4-1; Paris Administrative Court,
14 October 2021, nos. 1904967, 1904968, 1904972,
1904976/4-1.
Law of 22 May 2019 related to the growth and transformationof businesses, i.e., the so-called PACTE Law.

Code specifies
that all French
companies should be managed in the interestof the corporation, taking into consideration thesocial and environmental issues associated with
their activities.3 Failure to comply with thisprovision does not render the company's acts
or deliberations void. However, although we are
not aware of any judicial decisions rendered on
this basis at the time of drafting, failure to takesocial and environmental issues into
consideration may trigger a liability on the partof directors, under the terms of general civil
liability.
In
addition,aninadequate
understanding of social and environmental risk
factors may also constitute a valid reason toremove a director.

Corporate purpose (raison d'être): The PACTE
Law also created the possibility for any
company to specify a corporate purpose, or
raison d’être, in its articles of association.
French law defines the raison d'être as follows:"the principles adopted by the company and forthe respect of which it intends to dedicate
resources in the conduct of its business ".4 In
essence, the raison d'être is characterised by
the expression of a public interest purpose thattranscends the sole pursuit of short-term
profits.
Furthermore, the French Commercial Codespecifically requires the board of directors andthe management board of a limited company(société anonyme) to take into consideration"the company's corporate purpose, if any.”5These provisions define the obligations of
directors in terms of serving the long-term
interests of the company. As such, a corporate
purpose can serve as a framework for strategic
decision-making.

3
4
5

Article 1833 of the French Civil Code, as amended.
Ibid, art. 1835.
Articles L.225-35 §1 and L.225-64 §1 of the French
Commercial Code, as amended.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Franceandvirtuous energy and carbon balance andelectromobility.”11

Non-financial reporting: As laid out in the EU

If the management report does not include this
DPEF, any person having a legitimate interest
may request that the French Courts enjoin theboard of directors or management board (asapplicable) to provide such information, andsubject it to a daily fine, if deemed appropriate.
If the judge grants such a request, the said fineand costs of the proceedings must be borne by
the directors or members of the management
board, individually or jointly as the case may
be.12

Directors' Disclosure
Climate Change

Obligations

section above, the EU Non-Financial Reporting
Directive, in force since 2018, defines a seriesof reporting requirements that have beentranslated into French law. 6 Specific nonfinancial reporting obligations apply to (i)French listed companies with more than 500
employees and more than EUR 40 million of net
turnover or a total balance sheet of EUR 20
million, and (ii) non-listed French companies
with more than 500 employees and more than
EUR 100 million of net turnover or a totalbalance sheet of EUR 100 million. Companies
must include a statement of non-financial
performance (Déclaration de Performance
Extra-Financière or DPEF) in the management
report. This statement must include apresentation of the company's business model,
an analysis of the main risks associated with thecompany's activities, a description of thepolicies and mitigation measures taken in
response to such risks, and the results of thesemeasures, including performance indicators. 7
The DPEF must also describe how the company
takes into consideration the social andenvironmental impacts of its activity. Morespecifically, it must include information related
to the company’s contribution to the causes ofclimate change, through both its operations andthe use of the goods and services it
provides.8 The DPEF must be made available
to the public and easily accessible on thecompany's website within eight months fromthe end of the financial year and for a period offive years.9
In August 2021, the French Climate andResilience Law10 entered into force, whichcontains further details on what the DPEF mustcover in respect of climate change, stating thatthe information which companies must disclose“includes the direct and indirect greenhousegas emissions related to transport activities
upstream and downstream of the activity and isaccompanied by an action plan to reduce theseemissions, in particular through the use of rail
and waterway modes as well as biofuels with a

6
7
8
9
10

Ibid, art. L.225-102-1.
Ibid, art. R.225-105.
Ibid, art. L.225-102-1, III §2.
Ibid, art. R 225-105-1.
Law No. 2021-1104 of August 22, 2021 on combating climatechange and strengthening resilience to its effects.

In May 2021, new disclosure obligations
regarding the governance system of financial
market participants were published13 as the
French implementation of article 3 of the
Sustainable Finance Disclosure Regulation(SFDR). They cover the following: (i)knowledge, skills and experience of the entity’s
governance bodies, including administrative,
supervisory and management bodies (e.g.
board of directors), and oversight of theintegration of ESG criteria within the investment
policy and strategy of the entity and its
controlled entities (e.g. level of oversight andassociated process, reporting of results, skills);(ii) inclusion of sustainability criteria in the
remuneration policy, and disclosure of thecriteria linking remuneration with key
performance indicators; and (iii) integration ofsustainability criteria in the articles ofassociation (a.k.a. bylaws) of the board of
directors or supervisory board.

Corporate duty of vigilance: The French
corporate duty of vigilance (devoir devigilance)14 entails a legally-binding obligation
for French parent companies to identify andprevent
adversehumanrightsandenvironmental impacts resulting from their own
direct activities, including from the activities of
the companies they control, as well as indirectlyfrom the activities of the subcontractors andsuppliers with which they have an establishedcommercial relationship. This duty only applies
to the largest companies in France (i.e. any
company established in France with at least
5,000 employees within the company’s head

11

12
13

14

Article L.225-102-1, III of the French Commercial Code, as
amended by article 138 of the French Climate and Resilience
Law.
Ibid, art. L.225-102-1, VI §2.
Decree no. 2021-663 of 27 May 2021 adopted in application to
article L.533-22-1 of the French Monetary and Financial Code.
Article L.225-105-4 of the French Commercial Code.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Franceoffice and its direct and indirect subsidiaries,
whose head offices are located on French
territory; or that employs at least 10,000 people
within the company and its direct and indirect
subsidiaries, whose head offices are located on
French territory or abroad). Such companies
must assess and address the risks of serious
harm to people and the planet under an annual
plan de vigilance. Such risks should include,
where appropriate, the risks associated withclimate change. The French Climate andResilience Law has introduced an additional
requirement for companies that produce ormarket products resulting from agricultural orforestry activities, requiring them, as of 1
January 2024, to include in their plan devigilance reasonable vigilance measures to
identify the risks and prevent deforestation
associated with the production and transport toFrance of imported goods and services.15
Courts may impose injunctions to compel
compliance with such legal reporting
obligations. In addition, the company's tortious
liability could be sought where its failure toadopt an appropriate plan de vigilance has
caused harm.

Practical Implications for Directors
Despite the absence as of yet of any case law that precisely defines the scope of directors' duties orhelps directors determine the scope and extent of the above-mentioned obligations, the recent changes
in legislation clearly indicate that French directors will have to play an increasingly important role intaking environmental issues into account. This role particularly concerns the company’s contribution toclimate change. In this regard, our practical recommendations are as follows:a) Review and, where required, adapt governance to ensure appropriate leadership at board levelin relation to climate-related risks, including any adverse impacts the company may havethrough its activities and products, and any legal risks the company may face in this respect;b) Designate the department(s) that is/are responsible for monitoring, and providing ongoing
advice in relation to, the ever-expanding body of laws and regulations related to climate risk
management in France and abroad;c) Delegate climate risk identification and evaluation to a clearly-identified management team thatreports directly to the CEO and board, and is responsible for bringing together all key functions,
including the legal and/or compliance function, enterprise risk management, strategic planning,
audit, remuneration, human resources, investor relations, stakeholder relations, etc.;d) Review and, where required, adapt climate-related risk management policies and processes
across the company's supply chain and distribution network, including affiliates, third parties,
and, more generally, stakeholders, on the basis of a solid risk assessment. In this regard,
broaden and deepen the company's due diligence framework for third-party intermediaries toaddress climate-related risk factors;e) Review and, where required, adapt reporting on climate-related risk factors and the measurestaken to address these risks, in line with the French Commercial Code. Introduce internal
assurance processes in relation to reporting; andf)

Hold discussions with a PR advisor, in order to develop an external engagement andcommunications plan.

Contributors:

15

Guillaume Nataf, BakerMcKenzie France
Clotilde Guyot-Rechard, BakerMcKenzie France
Blanche Balian, BakerMcKenzie France

Ibid, art. L. 225-102-4.

65

France (French)
Cette section - qui doit être lue en combinaison avec la section UE cidessus - porte spécifiquement sur les règles de droit français applicables
aux devoirs et obligations d'un administrateur en matière de changement
climatique.
Le nombre croissant de litiges portés devant les
autorités françaises révèle une prise deconscience en matière de changement
climatique. De plus en plus d'actions en justicesont intentées à l'encontre de l'Etat français ou
de sociétés françaises. L'affaire communément
appelée l'Affaire du Siècle en est une desillustrations : le Tribunal administratif de Paris ajugé l'Etat français responsable du préjudiceécologique causé par le non-respect desobjectifs fixés en matière de réduction desémissions de gaz à effet de serre, et ordonné àl'Etat d'adopter des mesures pour réduire lesémissions de carbone et réparer le préjudiceécologique d'ici le 31 décembre 2022.1 En
outre, plusieurs actions ont été intentées,principalement par des associations et ONG, àl'encontre de sociétés françaises au titre d'unmanquement à leur devoir de vigilance (voir ciaprès) ; les demandeurs visent à obtenir devant
les juridictions françaises des injonctions
destinées à contraindre ces sociétés à mettreen place ou renforcer leur plan de vigilance afinde respecter l'objectif en matière d'émissions
de gaz à effet de serre fixé par le Gouvernementfrançais dans le cadre de l'accord de Paris.
La loi française a développé plusieurs
mécanismes (obligations et incitations) afin que
les questions environnementales, en ce
compris le changement climatique, soient
davantage prises en compte par les entreprises
dans la conduite de leurs affaires ou dans leursinteractions avec les tiers. Les sociétésfrançaises sont assujetties à une grande variétédenormesjuridiques
nationalesetinternationales relatives au changement
climatique. La synthèse suivante se concentre
sur les principales dispositions légales
applicables aux sociétés françaises et/ou àleurs conseils d'administration.

1

2

Tribunal administratif de Paris, 3 février 2021, n° 1904967,
1904968, 1904972, 1904976/4-1; Tribunal administratif deParis, 14 octobre 2021, n° 1904967, 1904968, 1904972,
1904976/4-1.
Loi du 22 mai 2019 relative à la croissance et à latransformation des entreprises, appelée loi PACTE.

Responsabilité des administrateurschangement climatiqueetObligation de prendre en compte les facteurssociaux et environnementaux: depuis l'adoption
de la loi PACTE en mai 2019,2 le Code civil
français précise que toutes les sociétés doiventêtre gérées dans l'intérêt de la société, prenant
en considération les questions sociales etenvironnementales associées à leurs activités.3
Le manquement à cette disposition ne rend pas
nuls les actes ou délibérations de la société.
Toutefois, bien que nous n'ayons pasconnaissance de décisions judiciaires rendues
sur ce fondement au jour de la rédaction duprésent document, le fait de ne pas prendre en
considération les questions sociales etenvironnementales
pourrait
engagerlaresponsabilité des administrateurs, sur lefondement de la responsabilité civile. En outre,
une compréhension insuffisante des facteursde risque sociaux et environnementaux peutégalement constituer une raison valable pourrévoquer un administrateur.

Raison d'être: la loi PACTE a également créé lapossibilité pour toute société de stipuler une
raison d'être dans ses statuts. La loi française
définit la raison d'être de la manière suivante :"principes dont la société se dote et pour lerespect desquels elle entend affecter desmoyens dans la réalisation de son activité ".4 En
substance, la raison d'être est caractérisée par
un objectif d'intérêt public transcendant la seule
recherche des profits à court terme.
Par ailleurs, le Code de commerce français
exige plus particulièrement du conseild'administration et du directoire d'une société
anonyme qu'ils prennent en considération "s'il ya lieu, la raison d'être".5 Ces dispositions

3
4
5

Article 1833 du Code civil, tel qu'amendé.
Ibid, art. 1835.
Articles L. 225-35 §1 et L. 225-64 §1 du Code de commerce,tel qu'amendé.

66

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
France (French)

définissent les obligations des administrateurs
pour assurer les intérêts de la société sur lelong terme. Ainsi, la raison d'être peut servir decadre à la prise de décisions stratégiques.

Obligations
d'information
desadministrateurs et Changement climatique

Reporting extra-financier: comme indiqué dansla section relative au droit de l'UE, la directive
européenne sur le reporting extra-financier, envigueur depuis 2018 et transposée en droit
français, définit une série d'exigences dereporting. Des obligations spécifiques dereporting extra-financier s'appliquent aux (i)sociétés françaises cotées employant plus de
500 personnes dès lors que le total de leur bilan
est supérieur à 20 millions d'euros ou lemontant net de leur chiffre d'affaires supérieurà 40 millions d'euros ainsi qu'aux(ii) sociétésfrançaises non cotées, employant plus de 500
personnes et dont le bilan total est supérieur à
100 millions d'euros, ou leur chiffre d'affaires
net supérieur à 100 millions d'euros.
Cette déclaration doit inclure une présentationde son modèle d'affaires, une analyse desprincipaux risques RSE relatifs aux activités dela société, une description des politiques etmesures de prévention et remédiation de ces
risques, et le résultat de ces mesures, incluant
des indicateurs de performance.6 La DPEF doitégalement décrire la manière dont la société
prend en considération les impacts sociaux etenvironnementaux de ses activités. Plus
spécifiquement,
elle
doit
inclurelesinformations relatives à la contribution de lasociété aux causes du changement climatique,tant par ses activités que par l'utilisation desbiens et services qu'elle fournit.7 La DPEF doitêtre mise à la disposition du public et êtrefacilement accessible sur le site internet de lasociété dans les huit mois suivant la clôture del'exercice et pendant une période de cinq ans.8
La loi française Climat et Résilience9 est entrée
en vigueur en août 2021. Elle apporte desprécisions sur les aspects que la DPEF doit

6
7
8
9

Ibid, art. R. 225-105.
Ibid, art. L. 225-102-1, III §2.
Ibid, art. R. 225-105-1.
Loi n° 2021-1104 du 22 août 2021 portant lutte contre ledérèglement climatique et renforcement de la résilience face à
ses effets.

couvrir en matière de changement climatique,stipulant que les informations que les sociétéssont tenues de communiquer "comprennent lespostes d'émissions directes et indirectes de gazà effet de serre liées aux activités de transportamont et aval de l'activité et sontaccompagnées d'un plan d'action visant àréduire ces émissions, notamment par lerecours aux modes ferroviaire et fluvial ainsiqu'aux biocarburants dont le bilan énergétiqueet carbone est vertueux et à l'électromobilité".10
Si le rapport de gestion n'inclut pas ce DPEF,
toute personne ayant un intérêt légitime peutdemander aux tribunaux français d'enjoindre auconseil d'administration ou au directoire (selon
le cas), le cas échéant sous astreinte, de fournir
ces informations.. Si le juge fait droit à cettedemande, ladite astreinte et les frais deprocédure
sont
supportésparlesadministrateurs ou les membres du directoire,individuellement ou conjointement selon lecas.11
En mai 2021, de nouvelles obligations
d'information concernant le système degouvernance des acteurs de marchés
financiers ont été publiées12 pour l'applicationfrançaise de l'article 3 du règlement sur la
publication d’informations en matière dedéveloppement durable dans le secteur desservices financiers (SFDR). Elles couvrent lespoints suivants : (i) les connaissances, lescompétences et l'expérience des organes degouvernance de l'entité, y compris les organes
d'administration, de supervision et de gestion(par exemple, le conseil d'administration), et lasurveillance de l'intégration des critères RSE
dans la politique et la stratégie d'investissement
de l'entité et des entités qu'elle contrôle (par ex.
niveau de surveillance et processus associé,
communication des résultats, compétences) ;(ii) inclusion de critères de développement
durable dans la politique de rémunération, etcommunication sur les critères d'adossement
de la politique de rémunération à desindicateurs de performance ; et (iii) intégrationde critères environnementaux, sociaux et dequalité de gouvernance dans le règlement

10

11
12

Article L. 225-102-1, III du Code de commerce, tel qu'amendé
par l'article 138 de la loi Climat et Résilience.
Ibid, art. L. 225-102-1, VI §2.
Décret n° 2021-663 du 27 mai 2021 adopté en application del'article L. 533-22-1 du Code Monétaire et Financier.

67Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
France (French)interne du conseil d'administration ou duconseil de surveillance.

Devoir de vigilance des entreprises: Le devoir
de vigilance des entreprises françaises13
constitue
une
obligation
juridiquement
contraignante pour les sociétés mèresfrançaises d'identifier et de prévenir les impacts
négatifs sur les droits de l'homme etl'environnement résultant de leurs propres
activités directes, y compris des activités dessociétésqu'ellescontrôlent,
ainsi
qu'indirectement, des activités des soustraitants et fournisseurs avec lesquels elles ont
une relation commerciale établie. Cette
obligation ne s'applique qu'aux plus grandes
entreprises en France (c'est-à-dire touteentreprise établie en France qui emploie aumoins 5 000 salariés au sein de sa société têtede groupe et de ses filiales directes etindirectes, dont le siège social est situé sur leterritoire français ; ou qui emploie au moins 10000 personnes au sein de l'entreprise et de ses
filiales directes et indirectes, dont le siège social

est situé sur le territoire français ou àl'étranger). Ces entreprises doivent évaluer ettraiter les risques d'atteinte grave aux
personnes et à la planète dans le cadre d'unplan de vigilance annuel. Ces risques doivent
inclure, le cas échéant, les risques liés auchangement climatique. La loi Climat et
Résilienceaintroduit
une
exigence
supplémentaire pour les entreprises qui
produisent ou commercialisent des produits
issus d'activités agricoles ou forestières, en leurimposant, à compter du 1er janvier 2024,
d'inclure dans leur plan de vigilance desmesures de vigilance raisonnable pouridentifier les risques et prévenir la déforestation
associée à la production et au transport en
France de biens et services importés.14 Les
tribunaux peuvent imposer des injonctions pourimposer le respect de ces obligations légales dereporting. En outre, la responsabilité délictuellede la société pourrait être recherchée lorsqueson incapacité à adopter un plan de vigilance
approprié a causé un préjudice.

Implications pratiques pour les administrateurs
En dépit de l'absence à ce jour de toute jurisprudence définissant précisément l'étendue des devoirs
des administrateurs ou les aidant à déterminer la portée et l'étendue des obligations susmentionnées,
les récents changements législatifs indiquent clairement que les administrateurs français devront jouer
un rôle de plus en plus important dans la prise en compte des questions environnementales. Ce rôleconcerne notamment la contribution de l'entreprise au changement climatique. A cet égard, nosrecommandations pratiques sont les suivantes:a) Revoir et, le cas échéant, adapter la gouvernance afin d'assurer un leadership approprié auniveau du conseil d'administration ou conseil de surveillance en ce qui concerne les risquesliés au climat, y compris les impacts négatifs que l'entreprise peut avoir par ses activités et ses
produits, et les risques juridiques auxquels l'entreprise peut être confrontée à cet égard;b) Désigner le(s) service(s) chargé(s) de suivre et fournir des avis sur un corpus législatif etréglementaire en matière de gestion des risques climatiques qui ne cesse de s'étoffer en Franceet à l'étranger;c) Déléguer l'identification et l'évaluation des risques climatiques à une équipe de direction
clairement identifiée rendant directement compte au PDG et au conseil d'administration ou
conseil de surveillance, et chargée d'assurer le fonctionnement de toutes les fonctions clés, ycompris la fonction juridique et/ou de conformité, la gestion des risques de l'entreprise, laplanification stratégique, l'audit, la rémunération, les ressources humaines, les relations avec
les investisseurs, les parties prenantes, etc.;

13

Article L. 225-105-4 du Code de commerce.

14

Ibid, art. L. 225-102-4.

68

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
France (French)d) Examiner et, si nécessaire, adapter les politiques et processus de gestion des risques liés au
climat dans l'ensemble de la chaîne d'approvisionnement et du réseau de distribution del'entreprise, y compris les sociétés affiliées, les tiers et, plus généralement, les parties
prenantes, sur la base d'une évaluation des risques solide. À cet égard, élargir et approfondir
le cadre de diligence de l'entreprise pour les intermédiaires tiers afin de tenir compte desfacteurs de risque liés au climat ;e) Examiner et, le cas échéant, adapter les rapports sur les facteurs de risque liés au climat et lesmesures prises pour y faire face, conformément au Code de commerce français. Introduire desprocessus d'assurance interne en relation avec le reporting ; etf)

S'entretenir avec un conseiller en relations publiques, afin d'élaborer un plan d'engagement etde communication externe.

Contributeurs:

Guillaume Nataf, BakerMcKenzie France
Clotilde Guyot-Rechard, BakerMcKenzie France
Blanche Balian, BakerMcKenzie France69Germany
This section is to be read in conjunction with the above EU section, andfocuses specifically on rules under German law regarding directors’
duties and obligations as they pertain to climate change.
The German Federal Financial Supervisory
Authority (BaFin)1 requires regulated entities tomanage climate risks and to integrate them into
their risk management frameworks. With a
guidance notice published in December 2019,
updated in January 2020, BaFin has provided
its supervised companies, in particular banks,
insurance companies, pension funds andcapital management companies, with nonbinding good practice guidelines on how to deal
with sustainability risks and, in particular,
climate risks.2
With an interim report of 5 March 2020, theSustainable Finance Committee (SFB) of theGerman Federal Government has, inter alia,
proposed to expand the application of nonfinancial
disclosures
under
Directive
2014/95/EU (the Non-Financial Reporting
Directive, or NFRD).3 Further, according to the
SFB, listed companies shall be required toapply the TCFD recommendations on climate
reporting from 2022 onwards. The SFB’s final
report was published in March 2022 andpresents 31 recommendations on how theGerman economy can be transformed with asustainable financial system, including on
policy, reporting obligations, knowledge
building and financial products.4

1

2

3

BaFin, ‘BaFin’s Sustainable Finance Conference: Financial
markets
andclimatechange’(June2019)<https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/F
achartikel/2019/fa_bj_1905_Tagung_nachhaltige_Finanzwirts
chaft_en.html>.
BaFin, Guidance Notice on Dealing with Sustainability Risks(January
2020)<https://www.bafin.de/SharedDocs/Downloads/EN/Merkblatt/dl_mb_Nachhaltigkeitsrisiken_en.pdf;jsessionid=CAFA36097D
7125E6241B7D08B04596ED.2_cid500?__blob=publicationFil
e&v=5>.
Sustainable Finance-Committee of the German Federal
Government, Interim Report: The Significance Of Sustainable
Finance
To
The
Great
Transformation(2020)<https://sustainable-finance-beirat.de/wpcontent/uploads/2020/03/200306_SFBZwischenbericht_EN.pdf>.

On 27 June 2022, the new version of theGerman Corporate Governance Code (DCGK)
was published and entered into force.5 The
responsible Commission previously adopted
the new version on 28 April 2022. 6 The DCGK
has, in a previous version, already establishedan explicit expectation that companies and their
management need to be aware of their role inand responsibility vis-à-vis society. In fact,social and environmental factors are
considered to be relevant for businesssuccess.7 This is a clear commitment tosustainability principles.
The new version of the DCGK states that theboard must take into account the social andenvironmental factors which influence theperformance of the company, and thecompany’s impacts on people and theenvironment. Under the new DCGK, a
company’s
management
board
must
systemically identify and assess social andenvironmental risks and opportunities for thecompany, and ensure that the company’s
strategy gives appropriate consideration tosocial and environmental matters. The
supervisory board is required to givesupervision and advice on sustainability issues
in particular, and should comprise memberswith sufficient skills and expertise insustainability matters, which should be
disclosed in a qualification matrix in thecompany’s Corporate Governance Statement.

4

5

6

7

Sustainable Finance Committee, Shifting the Trillions: A
sustainable financial system for the great transformation(March2022)<https://sustainable-finance-beirat.de/wpcontent/uploads/2021/03/210319_SustainableFinanceCommit
eeRecommendations.pdf>.
Regierungskommission Deutscher Corporate Governance
Kodex, German Corporate Governance Code (27 June 2022)<https://dcgk.de/en/press/details/new-code-published-in-thefederal-gazette.html>.
Regierungskommission Deutscher Corporate Governance
Kodex, German Corporate Governance Code (28 April 2022)<https://www.dcgk.de//files/dcgk/usercontent/en/download/code/220627_German_Corporate_Governance_Code_2022.pdf
>.
Ibid.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Germany

The new DCGK also requires one member of
the audit committee to have expertise inauditing, and another to have expertise inaccounting, which should include sustainability
reporting and its auditing and assurance. The
chair of the audit committee is required to haveexpertise in either accounting or auditing (andtherefore, sustainability reporting to therelevant degree).
Moreover, the German Federal Government(Bundesregierung) – in a world first for agovernment – has set out binding national
climate targets in a Climate Protection Act thatentered into force on 18 December 2019. The
Climate Protection Act provides for a gradualreduction in greenhouse gas emissions
compared with 1990 levels, with at least a 55
percent reduction target by the year 2030. In
the long term, the Federal Government ispursuing the goal of greenhouse gas neutrality
by 2050. This goal is also clearly stated in the
Act.8 In August 2021, following a ruling by theGerman Constitutional Court,9 the Climate
Action Law was strengthened, including
introducing a more ambitious greenhouse gas
reduction target of 65 percent by the year 2030,
and 88 percent by the year 2040.10

Directors' Duties and Climate Change
Germany is a civil law jurisdiction. Directors'
duties are codified in the Act on Limited Liability
Companies (GmbHG) and the
Stock
Corporation Act (AktG), and fleshed out further
in case law. The AktG provides for a dual board
system with different duties and responsibilities
for management and supervisory board
members. Whereas the management board is
responsible for the day-to-day business and thecompany's strategic direction, the supervisoryboard is focused on controlling and monitoringthemanagement
board's
decisions.
Notwithstanding these different functions,

8

9

10

Gesetz zur Einführung eines Bundes-Klimaschutzgesetzes undzur Änderung weiterer Vorschriften Vom 12. Dezember 2019
(the
ClimateProtection
Act).
<https://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanz
eiger_BGBl#__bgbl__%2F%2F*%5B%40attr_id%3D%27bgbl
119s2513.pdf%27%5D__1605199445200>.
BVerfG, Beschluss des Ersten Senats vom 24. März 2021 - 1
BvR
2656/18
-,
Rn.
1-270
<http://www.bverfg.de/e/rs20210324_1bvr265618.html>.
Gesetz zur Einführung eines Bundes-Klimaschutzgesetzes undzur Änderung weiterer Vorschriften vom 12. Dezember 2019,
berücksichtigt die Änderung(en) des Gesetzes durch Artikel 1

pursuant to sections 93, 116 AktG, all board
members owe the company a duty of care, dutyof loyalty and duty of confidentiality, and must
exercise their duties “for the benefit of thecompany”.11 The duty of care requires the
directors to “exercise the diligence of a prudent
and conscientious manager”.12 Notwithstanding
the wide scope of directors' duties under
German law, according to the codified businessjudgement rule, a management board member
does not breach his or her duties if, when
making a business decision, the management
board member could reasonably assume, on
the basis of appropriate information, that he/she
was acting in the best interests of thecompany.13 The same rule applies, in principle,
to supervisory board members. Accordingly,
there is no breach of duty if the supervisoryboard member, when making a businessdecision, could reasonably assume that he/she
was acting in the best interests of the company
on the basis of appropriate information. In
addition, it is the supervisory board members
duty to diligently supervise and challenge thedecisions made and proposed by the
management board.
Applying these standards to directors' duties
regarding the risks resulting from climatechange, BaFin has summarised in its guidance
notice for regulated companies that the
management board is responsible for thebusiness and risk strategy, its implementation
within the company, and its communication.
Thus, as a first step, management board
members are expected to understand climate
risks and their potential impact on thecompany's business. Further, management
board members are responsible for fostering aneffective risk culture and institutionalisingprocesses and systems to control and oversee
the impacts and implications of climate risks,
applying a short, medium and long-term
perspective.14 This also applies accordingly tothe supervisory board. In addition, although the
NFRD and its implementation in German law are

11
12
13
14

des Gesetzes vom 17 August 2021 (BGBl. I S. 3905) (theClimate Protection Act) (as amended). <https://www.gesetzeim-internet.de/englisch_ksg/englisch_ksg.html>.
Sections 93 para.1, 116 para.1 AktG.
Ibid.
Ibid, s. 93 para.1.
BaFin, Guidance Notice on Dealing with Sustainability Risks(January
2020)<https://www.bafin.de/SharedDocs/Downloads/EN/Merkblatt/dl_mb_Nachhaltigkeitsrisiken_en.pdf;jsessionid=CAFA36097D
7125E6241B7D08B04596ED.2_cid500?__blob=publicationFil
e&v=5>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Germany

silent on directors' duties, the disclosure
obligations at least implicitly oblige themanagement board members to develop anunderstanding, and assess the impacts, ofclimate change on the business, incorporate theresults in the entity's strategic plans andscrutinise and challenge the company's
resilience to climate-related risks.
In Germany, there is currently a widelyobserved litigation matter before the Higher
Regional Court of Hamm (file No. I-5 U 15/17)
based on a complaint brought by a Peruvian
farmer against German energy provider RWE
alleging damage due to the consequences ofclimate change caused by the defendant. The
farmer is demanding that the defendant pay
0.47 percent of the cost of protective measuresfor his house and village. The farmer accuses
the German company of being co-responsible
for climate change through the greenhouse gas
emissions it produces. The claimant believes
that the consequences will cause a glacier inthe Andes to melt, with meltwater threatening
his house and village. In an oral hearing inNovember 2017, the judges considered a claim
for compensation to be sufficiently pleaded as
to move into the next procedural stage ofevidence taking. This case is currently in theevidentiary phase. If, following trial, the Court
were to determine that the defendant is liable tothe claimant and if such decision was upheld by
the German Federal Court of Justice on further
appeal, the decision could have very farreaching consequences for high-emission
companies in Germany, as it could establish aroute for claimants affected by climate changearound the world to bring claims against
German companies for their contributions toclimate change.

Directors' Disclosure
Climate Change

Obligations

andThe German government has implemented the
NFRD, which provides for disclosure obligations
in a non-financial statement.15 These
disclosures regard, inter alia, the implications ofclimate change for the company, including

15

16

Directive 2014/95/EU of the European Parliament and of theCouncil of 22 October 2014 <https://eur-lex.europa.eu/legalcontent/EN/TXT/HTML/?uri=CELEX:32014L0095&from=EN>.
Gesetz zur Stärkung der nichtfinanziellen Berichterstattung derUnternehmen in ihren Lage- und Konzernlageberichten (CSRRichtlinie-Umsetzungsgesetz) vom 11 April 2017.

potential damage caused by the company tosociety through its emissions, and thoseexperienced by the company due to physicalimpacts, regulatory change, technologicaldisruption etc.; and they require the company todisclose its strategy to address them by meansof the CSR Directive Implementation Act ofMarch 2017.16 Pursuant to the new regulations
in sections 289b subsequent of the Commercial
Code (HGB), companies with more than 500
employees are obliged to include a nonfinancial statement in their management report.
Within this non-financial statement, thecompany must address at least the following
aspects: environmental issues (including
greenhouse gas emissions, water consumption,
air pollution, use of renewable and nonrenewable energy), employee concerns, social
concerns, human rights and its efforts tocombat corruption and bribery.17 Further, withregard to these aspects, the non-financial
statement must provide information necessary
for an understanding of the company's
development and performance, its position andthe effect of its activities on the aspects referred
to above.18 If the company does not adopt any
measures to address one or more of these
aspects, it must explain and justify this clearly inthe non-financial statement.19 Although theimplementation of the NFRD generally involves
a disclosure obligation for directors regarding
climate change risks and impacts, as an explicit
exception, the company may, in the nonfinancial statement, omit any information on
future developments or matters undernegotiation if the directors, in their exercise ofsound business judgment, determine that the
information is likely to cause significant damage
to the company.20
Under the HGB, breaches of the disclosure
obligations concerning the non-financial
statement are sanctioned in different ways.
Misrepresentation or non-disclosure of thecompany’s relations are subject to criminal
punishment,
includingpotential
prisonsentences of up to three years for board
members.21 Moreover, omitting or incompletely
preparing a non-financial statement constitutes
an administrative offence, resulting in possible

17
18
19
20
21

Section 289c para. 2 HGB.
Ibid, s. 289c.
Ibid, s. 289c para. 4.
Ibid, s. 289e para. 1.
Ibid, s. 331.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Germanyfines of up to EUR 10 million. 22 In the event oferrors in the non-financial statement, themanagement board members are also
considered to be in violation of their obligations
under section 93 AktG, which may result in
liability for damages towards the company.
Asanadditionalramification,
theimplementation of the NFRD has led to anamendment in the definition of the supervisoryboard's responsibilities, insofar as it gives
supervisory board members the option of
instructing an external party to conduct acontent review of the non-financial statement.23

In addition to reporting obligations under the
NFRD, German companies may become
subject to additional sustainability-reportingand governance requirements under: theproposed Corporate Sustainability Reporting
Directive (CSRD), which extends the scope ofreporting requirements under the NFRD,
specifies in more detail the information which
companies should report, and requires fullassurance of sustainability information; 24 andthe proposed Directive on Corporate
Sustainability Due Diligence (the Due Diligence
Directive), which introduces a duty for certain
companies to conduct supply chain due
diligence on human rights and environmental
issues.25 Please refer to the EU section for more
information.

Practical Implications for Directors
Given that German regulators have become increasingly emphatic regarding the need for companies
and their directors to adopt climate resilience measures in business practices and disclosure, and inparticular the above-noted BaFin guidance to its supervised companies; the German Federal
Government’s GHG emissions reductions targets, and revisions to the EU’s non-financial reporting
directive, well-counselled boards will:a) Revisit existing and build future business models
Directors and supervisory board members should conduct strategy discussions and manage
the necessary transformation of business models, reflecting also geopolitical risks. On the way
to net-zero, directors should in particular assess the carbon footprint under Scopes 1 to 3 under
the Greenhouse Gas Protocol. Beyond that, it is necessary for the management and supervisoryboards to adequately consider both the risks and opportunities of all relevant ESG aspects.
Further, directors should put on the agenda for the board within 3 or 6 months a process tostart developing a climate transition roadmap to 2050 with transparent carbon neutrality or
reduction targets, with clear interim targets to 2040, 2030, and within the current rolling multiyear strategic plan, and periodically thereafter report back to the board.
In addition, directors should delegate to the appropriate committee(s) of the board, such as risk,
audit,
legal
andgovernance, scenarios/strategy,
nominations/remuneration,orsustainability/corporate responsibility, the task of translating the long-term strategy into a clear
decision-making process for each aspect that is relevant to each committee.
b) Comply with disclosure requirements
Directors and supervisory board members need to gain an understanding of, and directors needto manage legal issues related to relevant (new) non-financial reporting standards. The
supervisory board, in turn, has to monitor the directors’s strategy and decisions as part of its
supervisory function. This requires sufficient knowledge of the underlying regulation and legal
issues and risks.

22
23
24

Ibid, s. 334.
Section 111 para.1 AktG.
Proposal for a Directive of The European Parliament and of theCouncilamending
Directive
2013/34/EU,
Directive
2004/109/EC, Directive 2006/43/EC and Regulation (EU) No

25

537/2014, as regards corporate sustainability reporting,COM/2021/189 final.
Proposal for a Directive of the European Parliament and of theCouncil on Corporate Sustainability Due Diligence andamending Directive (EU) 2019/1937, COM/2022/71 final.

73

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Germany

Further, directors need to discuss with disclosure counsel, to develop an external engagement
and communications plan and to oversee rigorous disclosure and accounting.
c) Review supply chains
Directors should review supply chains to identify potential risks of business disruption due tothe impacts of climate change and other business and geopolitical factors. New due diligenceobligations will need to be fulfilled under recent and incoming regulation in Germany andEurope. Again, the supervisory board has to monitor proper fulfilment of directors’
responsibilities.
d) Implement compliance measures
Directors should implement compliance measures and apply best crisis management practices
in the event of a breach, including communication with regulators and third parties. Directors
must consider legal requirements and recommendations regarding climate risks for all new
projects and activities. Due diligence frameworks and policies and procedures related to
employees, assets, operations and transactions must be developed and reviewed. Directors
need to be trained on legal issues related to climate risks.
Directors should delegate climate risk identification and evaluation to a clearly-identified teamin management which reports directly to the CEO and board.
Supervisory board must supervise proper fulfilment of the directors’ responsibilities.
e) Examine insurance coverage
Directors should review insurance coverage issues in relation to climate-related risks.
f)Monitor the regulatory and legal environment
Directors and the supervisory board should monitor the regulatory and legal environment andrespond to any changes.

g) Avoid reputational damage
Directors must communicate an ESG strategy, take steps to review it and avoid reputation
damage, in particular through greenwashing. Past communication also needs to be scrutinised.

Contributors:

Dr. Henning Schaloske, Clyde & Co Germany
Christoph Pies, Clyde & Co Germany

74

GreeceΤhis section is to be read in conjunction with the above EU section andfocuses specifically on rules under Greek law regarding directors’ duties
and obligations as they pertain to climate change.

At government level, Greece has madesubstantial progress and has establishedspecific policies and targets to foster climate
resilience to climate change.
In December 2019, the Greek Government
adopted the National Energy and Climate Plan
(NECP). The NECP is a strategic plan whichsets out a detailed roadmap regarding theattainment of specific energy and climate
objectives by 2030 and describes specificpriorities and policy measures in respect of awide range economic activities for theachievement of the targets, and therefore it is areference text for the forthcoming decade.
There is a specific goal of reducing greenhousegas (GHG) emissions by 56% by 2030,
compared to 2005 levels. In addition, the shareof renewable energy in gross final energy
consumption is set to stand at 35% by 2030.
In addition, in May 2022, Greece adopted anational climate law which aims at creating a
coherent framework for the improvement of theadaptability and climate-resilience of Greece
and the gradual transition of the country to
climate neutrality by 2050 in the mostenvironmentally sustainable, socially fair andcost-efficient way. For the achievement of thetarget of climate neutrality by 2050, the climate
law sets as intermediary targets for the years
2030 and 2040 the reduction of greenhousegas (GHG) emissions caused by human activity
by at least 55% and 80% respectively,
compared to 1990 levels, taking also into
account the targets of the NECP. For theachievement of the above goals, the national
climate law provides for the adoption of climate
adaptation strategy at a national and regional
level for a period of ten and seven years
respectively, as well as for specific measuresand policies, including the phase-out of lignite’sshare in power generation by 2028, thepromotion of the use of zero carbon and electricvehicles in the public and private sector and the

reduction of CO2 emissions from residential
and public buildings and companies.
The NECP is currently under revision so as tocomply (as the national climate law does) withthe ambitious EU climate targets of reduction of
CO2 emissions by 55% by 2030 (European
Green Deal, European Climate Law, Fit for 55
package) and the phase out of EU’s
dependency on fossil fuels well before 2030 set
out in the Repower EU plan.
Greek regulators, especially in the financial
sector, are also becoming increasingly focusedon the importance and necessity for companies
to apply climate resilience policies andmeasures in the interest of their sustainability
and competitiveness. In 2019 the Athens Stock
Exchange (ATHEX) produced voluntary
guidance on incorporating ESG information,
including climate risks. While voluntary, ATHEX
states that compliance with the guidance islikely to meet regulatory requirements underthe
Non-Financial
ReportingDirective
2014/95/EU and may increase access to capital.
The Hellenic Corporate Governance Code
(HCGC) recommends that listed companies
rely on the ATHEX guidance in relation to their
non-financial disclosures. In addition, in
November 2021, the Bank of Greeceannounced its eight-point plan for climatechange. The Bank committed to following a
climate change action plan, applying
sustainable and responsible investment
principles to its portfolios, assessing climate riskin the financial system, and using therecommendations of the Network for Greening
the Financial System (NGFS).
At the corporate level, Greek law has
introduced the concept of sustainability,
including climate related risks, in thegovernance of listed companies. This has not
yet taken the form of an obligation for the75Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Greecemanagement boards, but rather as an issue left
at the discretion of the boards to decide
whether the adoption of a policy addressing
climate change risks is appropriate for thebusiness activity of the company. However, thefact that Greece has adopted an ambitious
strategy towards the climate neutrality with the
adoption of binding climate targets (see thenational
climatelaw)
presumesanunderstanding by the boards of climate-relatedrisks and assessment of their impact on thebusiness of the company (and vice versa of thecompany’s business to the climate) and is
expected to increasingly affect the governanceculture of directors.

Directors’ Duties and Climate Change
Directors’ duties are set out in the Greek
corporate law 4548/2018 (Corporate Law).1
Pursuant to articles 96 and 97 of the Corporate
Law, all board members have a duty of care,loyalty, diligence and confidentiality towards thecompany and must exercise their duties for the
benefit of the company. Directors are liable tothe company for any damage of the company
due to an act or omission which constitutes
breach of their duties.2 The standard for theassessment of directors’ liability is the diligenceof the “prudent businessman”. Based on thebusiness judgement rule, no liability exists foracts or omissions which are based on a lawful
resolution of the general meeting, or which
concern a reasonable business decision which
was adopted in good faith, based on adequate
information and exclusively for the promotion of
the corporate interest. The court may also rulethat no liability exists for acts of board members
which are based on an opinion of an
independent body or commission which
operates in the company. Although the duty ofcare of directors is towards the company, if thecompany fails to proceed with an action against
the board members, the shareholders could
proceed themselves to seek compensation in1

Law 4548/2018 Reformation of the legal framework of thesocietes anonymes companies (Government Gazette Α
104/13.6.2018).

tort for the indirect damage they have suffered.
Furthermore, shareholders may be entitled tofile an action in tort against the board members
for any direct damage they have suffered. In
addition, the legal representatives of a company
are jointly and severally liable with the company
to compensate any person that suffers damage
because of such action.
Interpreting the duty of care of board members
under the standards and requirements of the
EU and national climate change strategy,
management board directors are expected tobe skilled to understand and assess the impact
of climate risks to the company’s business (andvice versa of the company’s business to theclimate) and to implement policies andmeasures to foster company’s resilienceagainst climate related risks.
Climate change, which falls within the boundsof sustainability issues, is explicitly associatedwith the governance of listed companies in the
Greek corporate governance law 4706/2020(Corporate Governance Law),3 although not in
the form of an obligation. Article 14 of the
Corporate Governance Law provides that listedcompanies shall include in their internal
regulation the sustainable development policy
pursued by the company, where required.
According to the HCGC, sustainability isdetermined by reference to the impact of thecompany's activities on the environment andthe wider community and is measured on thebasis of non-financial factors related, among
others, to the environment, which areeconomically essential for the company and thecollective interests of key stakeholders(employees, customers, suppliers, local
communities
and
other
importantstakeholders). Pursuant to the best practices of
HCGC, board directors must: determine in theannual report the non-financial issues
concerning the long-term sustainability of thecompany that are essential for the company, theshareholders and the stakeholders and how the2
3

Article 102 of Law 4548/2018.
Law 4706/2020 (Government Gazette A' 136/17.07.2020).

76

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Greececompany must apply them; bind and monitor
the executive administration on matters relating
to new technologies and environmental issues;ensure that mechanisms are in place for theknowledge and understanding of the interestsof the stakeholders and monitor theireffectiveness; and disclose to shareholders
information on the management andperformance of the company on sustainable(ESG) issues. HCGC recommends that listedcompanies should use indicators of the ESG
2019 Reporting Guide of the Athens Stock
Exchange or internationally recognizedinitiatives, such as the GRI, the SASB
organization, the CDP or the UNGC.
Another area where climate related risks, aspart of the concept of sustainability, areconsidered is the remuneration policy of theexecutive members of listed companies. HCGC
recommends that the board directors shall
examine and link the remuneration of executive
members with indicators on ESG issues andsustainable development that could give longterm value to the company.
Pursuant to article 150 of the Corporate Law,
non-financial indicators related to thecompany’s
business
activity,
includinginformation about climate related issues, mayalso be included in the management report tothe extent required for the understanding of thedevelopment, the performance or the positionof the company. Again, the use of non-financial
indicators about climate change issues is left at
the discretion of the management board. Verysmall joint-stock companies (other than listedcompanies, insurance companies and banks inrelation to which please see below) are
exempted from the obligation to include nonfinancial information in their management
report.
Pursuant to article 152 of Corporate Law,
companies must also include in their
management report a corporate governancestatement which pursuant to HCGC’s

4

recommendation shall include, among others,
information on the sustainable development
policy (including climate change issues)
followed by the company, such as descriptionof key elements of the policy adopted andimplemented with a view to promoting thecorporate interest and competitiveness of thecompany, reference to the essential nonfinancial issues relating to the long-termsustainability of the company, reference to thestandards used by the company for thedisclosure of such non-financial information.
Breach of the provisions of articles 150 and 152of the Greek Corporate Law may entail
imprisonment of the board member for up to
three years or imposition of fine from €5.000 €50.000.

Directors’ Disclosure
Climate Change

Obligations

andGreece has implemented the Non-Financial
Reporting Directive 2014/95/EU in the
Corporate Law. According to article 151, listedcompanies, banks and insurance companies 4
with over 500 employees includes in their
management report a non-financial statement,in relation at least, to environmental, social andemployment issues, human rights, anticorruption and anti-bribery, to the extent
required for the understanding of thedevelopment, the performance, the status andimpact of their activities. This statement must
include a brief description of the businessmodel, a description of policies, the results of
those policies, the main climate related risks
and the company’s activities, including, whereto the extent appropriate, business relations,products or services that may have negative
results and mitigating actions, as well as nonfinancial performance indicators. If thecompany does not adopt any policies toaddress the above issues, the non-financial
statement must include a clear and justified
explanation for the lack of any such policies

Defined as large public interest corporations in Appendix A of
Law 4308/2014 Greek Accounting Standards (Government
Gazette A’ 251/24.11.2014).

77

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Greece(comply or explain). The non-financial
statement
must
also
include,where
appropriate,referencesandadditional
explanations regarding the amounts stated in
the annual financial statements. As an
exception, the company may omit to include in
the non-financial statement any information
about upcoming developments or issues undernegotiation if, subject to the reasoned opinionof the board members, such information would
cause significant damage to the company andprovided that such omission does not impede
the correct and balanced understanding of the
impacts of the company’s activities. In relation
to the non-financial disclosures, companies
may rely to national or EU or international
standards and, in this case, must clarify thestandards they relied upon. The non-financial

disclosure obligation is subject to external
auditors’ control. In case of incompleteness orerrors in the non-financial statement theHellenic Capital Market Commission (HCMC)
may issue a reprimand or impose a fine up to€3.000.000 to the board members.
Although the Non-Financial Reporting Directive
2014/95/EU makes no reference to directors’
duties, it indirectly obliges the management
board members to develop a governanceculture which takes into account and assesses
the impact of climate related issues to thebusiness of the company and adopts
appropriate measures and policies to address
climate risks in the short-, medium- and longterm interest of the company’s interest andcompetitiveness.

Practical Implications for Directors
Despite the absence of specific commitments and obligations of directors at corporate level in relation
to climate change and environmental issues, the existing EU and national legal framework on climatechange and non – financial disclosures as well as the forthcoming developments proposed by the EU
for a Corporate Sustainability Reporting Directive (revision of EU Directive 2014/95) and for a Directiveon Corporate Sustainability Due Diligence (introducing a duty for certain companies to conduct supply
chain due diligence on human rights and environmental issues) visibly indicate that board directors of
Greek companies must contribute to the company’s resilience to climate change. Our practical
recommendations are as follows:a)Ensure that management board is skilled, and, where required, train the management board tounderstand climate-related risks and how they may affect the business of the company across thecompany's supply chain, including products, clients and in general stakeholders;b)allocate identification of climate risks and opportunities and their evaluation to a specificmanagement team that reports directly to the board;c)designate to a department the monitoring of the legal and policy developments in relation to EU
climate goals, and the potential direction of these developments and put on the agenda for theboard to review, within 3 or 6 months, a process to initiate the development of a climate transition
roadmap to 2050, with transparent carbon neutrality targets, clear interim targets to 2040, 2030
and near-term within the current rolling multi-medium and long-term targets, and at least annually
thereafter report back to the board;d)delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance,
scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, the task oftranslating the long-term climate change strategy into a clear decision-making process for each
aspect that is relevant to each committee;e)Review and, where required, adopt and create a governance policy to ensure appropriate
management and handling of climate-related risks and associated defamation risks;78Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Greecef)

Ensure compliance with the Corporate Law and the Corporate Governance Law on climate related
issues.

g)

Discuss with disclosure counsel, to develop an external engagement and communications plan andto oversee rigorous disclosure and accounting.

Contributors:

Stathis Potamitis, PotamitisVekris
Dimitra Rachouti, PotamitisVekris
Natalia Nicolaidis, Dynamic Counsel Ltd.

79

Hong Kong
In October 2021, the Government of Hong Kong
published its Climate Action Plan 2050. The
plan affirms, inter alia, its target of achievingcarbon neutrality by 2050, states a new targetof reducing carbon emissions by 2035 by half
relative to 2005 levels, and outlines theGovernment’s strategies for decarbonisation
and budgets for mitigation and adaptation. 1 The
proposed policies may have substantial impacts
on the operations of Hong Kong corporations,in particular those which are in, or are closely
connected to, high emission sectors.

In November 2020, the Chief Executive of the
HKMA acknowledged that “[c]limate risk is one

Hong Kong regulators recognise theforeseeability of climate-related financial risks
and are proactively addressing them.2 In
December 2020, the Hong Kong Monetary
Authority (HKMA), a member of the NGFS,
announced that reporting in accordance with
TCFD recommendations will be mandatory forcompanies in the banking, asset management,
insurance and pension fund sectors by 2025. 3
Additionally, the HKMA recently issued acircular regarding best practices by majorinternational banks in managing climate risks,
as well as several other publications regarding
green and sustainable finance and the pricing inof climate transition risks by banks.4 The Hong
Kong Securities and Future Commission (SFC)
and the HKMA also co-chair Hong Kong’s
Green and Sustainable Finance Cross-Agency
Steering Group. The Steering Group includes
several government agencies and aims,
amongst other things, to coordinate themanagement of climate and environmental risks
to the financial sector and to accelerate thegrowth of green and sustainable finance.

of the biggest threats to our planet and future
generations” and that regulators must
determine how the financial sector can “play its
part in tackling this risk”.5 In February 2021,

Hong Kong Special Administrative Region, ‘Hong Kong’s
ClimateActionPlan
2050’(October
2021)<https://www.climateready.gov.hk/files/pdf/CAP2050_booklet_en.pdf> 38, 59-63.
Alexander Stock SC and Jennifer Fan, Legal Opinion on
Directors’ Duties and Disclosure Obligations under Hong Kong
Law in the Context of Climate Change Risks andConsiderations (19 October 2021) <https://ccli.ubc.ca/wpcontent/uploads/2021/10/Hong-Kong-Directors-obligationsand-climate-change.pdf>
HKMA, ‘Cross-Agency Steering Group Launches its Strategic
Plan to Strengthen Hong Kong’s Financial Ecosystem toSupport a Greener and More Sustainable Future’ (17 Dec
2020) <https://www.hkma.gov.hk/eng/news-and-media/pressreleases/2020/12/20201217-4/>.
See HKMA, ‘Range of practices for management of climate
risks’
(7
July
2020)
<https://www.hkma.gov.hk/media/eng/doc/keyinformation/guidelines-and-circular/2020/20200707e1a1.pdf>;
HKMA, ‘White Paper on Green and Sustainable Banking’ (30June 2020) <https://www.hkma.gov.hk/media/eng/doc/keyinformation/guidelines-and-circular/2020/20200630e1.pdf>;
HKMA, ‘Common Assessment Framework on Green andSustainable
Banking’(31
December
2019)<https://www.hkma.gov.hk/media/eng/doc/keyinformation/guidelines-and-circular/2020/20200513e1a1.pdf>;
HKMA, ‘Effect of Climate-related Risk on the Pricing of Bank
Loans: Evidence From Syndicated Loan Markets in Asia Pacific’(13
August2021)<https://www.hkma.gov.hk/media/eng/publication-andresearch/research/research-memorandums/2021/RM062021.pdf>.
Eddie Yue, ‘Managing climate risks in Hong Kong’ (9 November2020) [3] <https://www.bis.org/review/r201109b.htm>.
Ashley Alder, ‘Climate change and finance: What’s next for the
global regulators? Climate Risk and Green Finance Regulatory
Forum 2021’ (11 February 2021) 5 <https://www.sfc.hk//media/EN/files/ER/PDF/CEO_Speech_Climate-Risk-andGreen-Finance-Regulatory-Forum-2021.pdf>.

1

2

3

4

speaking about the international climate financeagenda, the CEO of the Hong Kong Securities
and Future Commission, warned that:

International organisations, national
authorities and the private sector
now have no real option other than toparticipate. If they do not, they risk
being left behind as investments shift
in favour those businesses which canproperly describe how they are
managing the strategic risks resulting
from climate change.6

5

6

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Hong Kong

Directors' Duties and Climate Change
Hong Kong is a common law jurisdiction.
Directors’ duties in Hong Kong are informed by
a combination of statute (principally theCompanies Ordinance (Cap 622)) and common
law. Directors owe fiduciary duties to thecompany including the duty to act bona fide in
the best interests of the company, the duty to
avoid unauthorised conflicts of interest andunauthorised receipt of profits, and the duty to
act for proper purposes. However, these duties
have not been codified; only the common law
duty to exercise reasonable care, skill anddiligence has been. Section 465 of theCompanies Ordinance provides that a directorof a company must “exercise reasonable care,skill and diligence”.
A 2021 legal opinion from Alexander Stock SC
and Jennifer Fan of Temple Chambers foundthat, to the degree that climate risks intersectwith and affect the best interests of a company,
directors are both “entitled” and “obliged” totake these into account when discarding their
obligations.7 With respect to climate change,
the two most salient directors’ duties are theduty to act bona fide in the best interests of thecompany and the duty to exercise reasonablecare, skill and diligence. In Hong Kong, the bestinterests of the company are broadly
understood as being commensurate with thefinancial interests of the members as a whole. 8
As such, under the law of Hong Kong, directors
are entitled to consider climate risks in theirdecision-making processes to the extent thatthey have, or are likely to have, an impact upon
the financial interests of the company’s
members. In fact, directors who fail to consider
climate risks may fall short of their duty to act in
the best interests of the company given theprominence and foreseeability of climaterelated financial risks. Notably, a failure toconsider could encompass situations whereclimate risks were considered but not given
adequate weight or considered on the basis of
inadequateorincorrect
information.

7

Alexander Stock SC and Jennifer Fan, Legal Opinion on
Directors’ Duties and Disclosure Obligations under Hong Kong
Law in the Context of Climate Change Risks andConsiderations (19 October 2021) <https://ccli.ubc.ca/wpcontent/uploads/2021/10/Hong-Kong-Directors-obligationsand-climate-change.pdf>; Ernest Lim, Commonwealth Climate
and Law Initiative, Directors’ Liability and Climate Risk: White
Paper
on
Hong
Kong
(10
December
2021)<https://ccli.ubc.ca/resource/directors-liability-and-climaterisk-white-paper-on-hong-kong/>.

Furthermore, in a jurisdiction such as Hong
Kong where financial regulators haveundertaken concerted and coordinated efforts
to improve climate risk literacy and governance,
the objective standard expected of directors inaddressing climate risks could foreseeably behigher than in other jurisdictions.
Under the law of Hong Kong, the duty of care,skill and diligence comprises an objective andsubjective element. The standard of reasonablecare, skill and diligence expected is based onwhat could reasonably be expected of a person
carrying out the functions of a director,9 as wellas the subjective knowledge, skill andexperience the impugned director actuallyhas.10 Importantly, the subjective characteristicsof the director in question can only raise theexpected standard.11
The duty of care, skill and diligence owed bydirectors under the law of Hong Kong is relevant
to climate risks in several respects. These
include:• the establishment and maintenance ofrisk management processes;• due diligence and informed decision
making;• supervision of management andcommittees;• assessment of financial statements; and• disclosure of material information inaccordance with the Hong Kong Stock
Exchange Listing Rules.
Consequently, directors who dismiss, or unduly
diminish the significance of climate risks,
foreseeably face personal liability on several
fronts under the law of Hong Kong.12

Directors' Disclosure
Climate Change

Obligations

andPart XIVA of the Securities and Futures
Ordinance (Cap 571) provides that listed
corporations, and therefore their directors, havean obligation of continuous disclosure

8

9
10
11

12

Greenhalgh v Arderne Cinemas Ltd [1950] 2 All ER 1120,
1126; Stefan HC Lo and Charles Z Qu, Law of Companies inHong Kong (Sweet & Maxwell, 3rd edn, 2018) [8.030].
Companies Ordinance (Cap 622), s. 465(2)(a).
Ibid, s. 465(2)(b).
Re D’Jan of London Ltd, Copp v D’Jan [1994] 1 BCLC 561,
563.
Ernest Lim, Directors’ Liability and Climate Risk: White Paper
on
Hong
Kong
(CCLI,
10
December
2021)<https://ccli.ubc.ca/resource/directors-liability-and-climaterisk-white-paper-on-hong-kong/>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Hong Kong

regarding information which is likely tomaterially influence the price of their shares incertain circumstances. Similarly, the Hong
Kong Stock Exchange’s (HKEX) Main Board
Listing Rules require disclosure of information
regarding profit forecasts, among othermatters. Relevantly, such disclosure could
foreseeably be precipitated by a climate-related
financial risk being realised.
Under rule 13.24B (1), if an event occurs during
the profit forecast period which makes theassumptions underlying the profit forecast
materially different, the issuer must announce
this information. Furthermore, rule 13.24B (2)provides that if there are activities outside theissuer’s ordinary course of business thatmaterially contributes to or reduces the profit
stated in the profit forecast, the issuer mustannounce this information. In addition, rule13.91 requires companies to furnish an annual
ESG report on a comply or explain basis. In thereport, it is mandatory to disclose, amongst
other matters:• the board’s oversight of ESG issues;• the board’s ESG management approachand strategy, including the process used
to evaluate, prioritise and manage
material ESG-related issues; and• how the board reviews progress madeagainst ESG-related goals and targets
with an explanation of how they relate to
the companies’ operations.
The HKEX is also pressing for greaterawareness and disclosure of climate-related
financial risks as well as increased uptake ofsustainable finance practices. In December
2019, the HKEX introduced new ESG
requirements, requiring that issuers must,
amongst other things, disclose ‘significant’climate-related issues which have, or may have,an impact on the company.13 In December

13

14

HKEX, ‘Amendments to the Main Board Listing Rules: Update
No.128’(2019)<https://enrules.hkex.com.hk/rulebook/update-no-128>;
HKEX,‘Amendments to the GEM Listing Rules: Update No.64’ (2019)<https://en-rules.hkex.com.hk/rulebook/update-no-64>;
HKEX, ‘Guidance on Climate Disclosures: Reporting on TCFD
recommendations’(November
2021)<https://www.hkex.com.hk/-/media/HKEXMarket/Listing/Rules-and-Guidance/Environmental-Socialand-Governance/Exchanges-guidance-materials-onESG/guidance_climate_disclosures.pdf?la=en>.
HKMA, ‘Cross-Agency Steering Group Launches its Strategic
Plan to Strengthen Hong Kong’s Financial Ecosystem toSupport a Greener and More Sustainable Future’ (17December 2020) <https://www.hkma.gov.hk/eng/news-andmedia/press-releases/2020/12/20201217-4/>.

2020, HKEX launched the Sustainable andGreen Exchange (STAGE), the first of its kind in
Asia. The STAGE is an online portal designed toprovide greater information, access, andtransparency on a wide range of sustainablegreen and social investment products.
In addition, financial institutions and funds will
be subject to increased climate disclosure
obligations. As noted above, the HKMA will also
require directors in the banking, asset
management, insurance, and pension fundsectors to ensure that their companies provide
TCFD-aligned disclosures by 2025.14 Morerecently, however, the HKMA has issued
guidance on how authorised financial
institutions are to manage climate-related risks,and has stated that it expects such institutions
to prepare climate-related disclosures no later
than mid-2023.15 Asset managers in particular
are likely to face more onerous disclosure
obligations.
The SFC has issued a circular to managementcompanies of SFC-authorised unit trusts on thedisclosures which ESG funds should make,including a description of the ESG focus of thefund and its investment strategy.16 In addition, in
August 2021, the SFC issued upcoming
amendments to the Fund Manager Code of
Conduct, which require fund managers toconsider climate risks (defined as physical,
transition and liability risks) in their investment
and risk management processes, andmanagers of at least HK$8 billion in assets tomake a reasonable effort to report theirinvestees’ and funds’ Scope 1 and 2
greenhouse gas emissions from November
2022.17 Therefore, both ESG-focused funds andother funds will be required to disclose ESGrelated information (including, where relevant,information relating to climate change).

15

16

17

HKMA, ‘Supervisory Policy Manual: Climate Risk Management’(20 July 2021) <https://www.hkma.gov.hk/media/eng/doc/keyfunctions/banking-stability/supervisory-policy-manual/GS1_for_consultation_20Jul2021.pdf>.
Securities and Futures Commission, ‘Circular to managementcompanies of SFC-authorised unit trusts and mutual funds –ESG
funds’
(29
June
2021)
<https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/pro
ducts/product-authorization/doc?refNo=21EC27>.
SFC, ‘Circular to licensed corporations: Management anddisclosure of climate-related risks by fund managers’ (20August2021)<https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/inte
rmediaries/supervision/doc?refNo=21EC31>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Hong Kong

Practical Implications for Directors
Given that Hong Kong’s regulators have become increasingly emphatic regarding the need forcompanies and their directors to adopt climate resilience measures in business practices anddisclosure, and in particular the above-noted facts that the HKMA will be making TCFD disclosuremandatory for its supervised entities by 2025; the involvement of HFMA and SFC in the Green andSustainable Finance Cross-Agency Steering Group, and new ESG requirements by the HKEX, withspecific attention to climate, well-counselled boards should:a) delegate climate risk identification and evaluation to a clearly-identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear
interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.

Contributors:

CCLI

83

IndiaIn November 2021, Prime Minister Modi statedthat India would achieve net-zero emissions by
2070, and announced a number of interim steps
including increasing the capacity of its nonfossil fuel energy generation, reducing its
carbon emissions and reducing its carbon
intensity, by 2030.1 This may indicate thedirection of government policies in the future,and the context in which Indian corporates
operate.
Indian financial regulators are becoming
increasingly attuned to the magnitude andbreadth of climate-related financial risks. In its
2018-2019 ‘Report on Trend and Progress of
Banking in India’, the Reserve Bank of India(RBI) highlighted that climate change poses
several risks to the financial system and opinedon the opportunities presented by the ‘green
finance ecosystem’.2 Further, RBI has also
published articles on the effect of climatechange on food price inflation and on theopportunities for green finance in India.3 Recent
statements by RBI board members havehighlighted climate change as a financial risk, tobe discussed in a forthcoming RBI Discussion
Paper.4

1

2

3

4

Ministry of External Affairs, National Statement by Prime
Minister Shri Narendra Modi at COP26 Summit in Glasgow (2November
2021)<https://www.mea.gov.in/SpeechesStatements.htm?dtl/34466/National+Statement+by+Prime+Mi
nister+Shri+Narendra+Modi+at+COP26+Summit+in+Glasgow>.
Reserve Bank of India, ‘2018-2019 Report on Trend andProgressof
BankinginIndia’(2019)
17<https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/0RTP2412
19FL760D9F69321B47988DE44D68D9217A7E.PDF>.
Archana Dilip and Sujata Kundu, ‘Climate Change:
Macroeconomic Impact and Policy Options for Mitigating Risks’(RBI
Bulletin2020)<https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/1CLIMATECHANGEF7C6AD14719E43DAA7FA84C1F8F1CFED.PDF>; Shri
M Rajeshwar Rao, ‘Heed to Heal – Climate Change is theEmerging Financial Risk’ (CAFRAL Virtual Conference on
Green and Sustainable Finance, Keynote Address, 16
September
2021)<https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/SUSTAINABLEFINANCE622D9A6802414A49ADEF0301C2E74BB1.PDF>; Saurabh Ghosh et al., ‘Green Finance in India: Progress andChallenges’(RBI
Bulletin2021),<https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/04AR_2101202
185D9B6905ADD465CB7DD280B88266F77.PDF>.
Shri M Rajeshwar Rao, ‘Heed to Heal – Climate Change is theEmerging Financial Risk’ (CAFRAL Virtual Conference on
Green and Sustainable Finance, Keynote Address, 16
September
2021)<https://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/SUSTAINABLEFINANCE622D9A6802414A49ADEF0301C2E74BB1.PDF>; Shaktikanta Das, Governor’s Statement (18 April 2022)<https://rbi.org.in/scripts/BS_ViewBulletin.aspx?Id=20931>.

In April 2021, the RBI joined the Network ofCentral Banks and Supervisors for Greening the
Finance System (NGFS) as a member to learn
from and contribute to the global efforts on
green finance.5
In May 2021, the Securities and Exchange
Board of India (SEBI) amended the corporate
disclosure rules that apply to listed companies
to require the top 1,000 listed companies (bymarket capitalization) to report on business
responsibility
andsustainability
issues,including climate change risks.6 The guidancenote for such reporting draws from India’s
National Guidelines on Responsible BusinessConduct, Global Reporting Initiative (GRI)
Sustainability Reporting Standards and various
Indian laws.7 Following this, in December 2021,
the Chairman of SEBI noted an increased
interest in sustainable investing, and a need toregulate ESG-ratings providers, on which SEBI
has recently sought views from the public.8 The

5

6

7

8

RBI, ‘RBI Joins Network for Greening the Financial System’ (29
April
2021)
<https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51496>.
SEBI (Listing Obligations and Disclosure Requirements)(Second Amendment) Regulations, 2021. See also Securities
and Exchange Board of India, Circular on Business
responsibility and sustainability reporting by listed entities (10
May
2021)
<https://www.sebi.gov.in/sebi_data/meetingfiles/apr2021/1619067265752_1.pdf>.
SEBI, Guidance Note for Business Responsibility andSustainability
ReportingFormat
(10
May
2021)
<https://www.sebi.gov.in/sebi_data/commondocs/may2021/Business%20responsibility%20and%20sustainability%20reporting%20by%20listed%20entitiesAnnexure2_p.PDF>;
Ministry of Corporate Affairs, National Guidelines on
Responsible Business Conduct (10 December 2018)<https://www.mca.gov.in/Ministry/pdf/NationalGuildeline_1503
2019.pdf>.
Shri Ajay Tyagi, ‘Reflections on Evolution of ESG Norms,
Investments and Regulation’ (Speech at the inauguration of
Arun Duggal ESG Centre for Research and Innovation, IIM
Ahmedabad,3
December
2021)<https://www.sebi.gov.in/reports-andstatistics/publications/jan-2022/sebi-bulletin-january2022_55591.html>;
SEBI,
Consultation
Paper
on
Environmental, Social and Governance (ESG) Rating Providers
forSecurities
Markets(24
January2022)<https://www.sebi.gov.in/reports-and-statistics/reports/jan2022/consultation-paper-on-environmental-social-andgovernance-esg-rating-providers-for-securitiesmarkets_55516.html>.

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India

consultation paper makes reference to the workof the International Organisation of Securities
Commissions (IOSCO) in this regard and draws
from global thinking urging for the regulation of
ESG ratings.9
In July 2021, the International Financial
Services Centre Authority (IFSCA), which is theunified regulator for International Financial
Services Centres (IFSCs), issued regulations(IFSCA Regulations) pertaining to the issuanceand listing of securities, including ESG debt
securities in the nature of ‘green’,‘sustainability’ or ‘sustainability-linked’ debt
securities. The IFSCA Regulations also provide
inter alia for external review to ascertain that
ESG debt securities are aligned with specified
international frameworks.10 In March 2022,
IFSCA also sought comments on a draft ‘IFSCA
Guidance Framework on Sustainable andSustainability linked lending by financial
institutions in IFSCs’ which directs registeredIFSC
Banking
Units
andFinanceCompanies/Finance Units (undertaking lending
activities from IFSCs) to develop boardapproved policies on green/ social/ sustainable/
sustainability-linked lending.11
Additionally, in March 2020, the Insurance
Regulatory and Development Authority of India
co-hosted a roundtable with the OECD and
Asian Development Bank that, amongst othermatters, considered the implications of climatechange for insurance business models and therole of pension funds in advancing sustainablefinance.12

9

10

11

12

13

IOSCO, ‘ESG Ratings and Data Product Providers’ (2021)<https://www.iosco.org/library/pubdocs/pdf/IOSCOPD690.pdf>.
IFSCA (Issuance and Listing of Securities) Regulations, 2021,
Chapter X <https://ifsca.gov.in/Viewer/Index/202>.
IFSCA Press Release, ‘Invitation for public comments on draft‘IFSCA
Guidance framework on Sustainable andSustainability linked lending by financial institutions in IFSCs’’ (2March 2022) <https://www.ifsca.gov.in/Document/Legal/draftpress-release-final-lending-framework02032022083249.pdf>.
ADBI Institute, ‘OECD-ADBI-IRDAI Roundtable on Insurance
andRetirement
Savingin
Asia’(2020)<https://www.adb.org/news/events/insurance-and-retirementsaving-asia>.
Companies Act 2013, ss. 166(2), (3) and (4). For a detailed
analysis of climate risk and directors’ liability in India, see

Directors' Duties and Climate Change
Indian directors’ duties are largely codified in
section 166 of the Companies Act. The most
relevant duties in the context of climate change
are, broadly speaking, the duties of trust andloyalty and the duty of competence.13 The
duties of trust and loyalty include the duty to act
in good faith in the best interests of thecompany and its stakeholders, as well as theduty to avoid conflicts of interest. Regarding theduty to act in good faith and best interests,
section 166(2) of the Companies Act provides:

A director of a company shall act ingood faith in order to promote theobjects of the company for the benefitof its members as a whole, and in thebest interests of the company, its
employees, the shareholders, thecommunity and for the protection ofenvironment.
Accordingly, in discharging this duty, directors
must balance various stakeholder interests
under a pluralistic corporate governanceparadigm. Often, the interests of thesestakeholders conflate to some degree when along-term perspective is adopted, thereby
simplifying the balancing act directors must
undertake.
In the context of climate risk, it is notable thatthe provision requires directors to act “ for theprotection of the environment”. Recently, theSupreme Court clarified the broad meaning of
the term ‘environment’ under section 166(2) of
the Companies Act, and demonstrated that
there is no hierarchy between the duties owed
to the company and the other stakeholders
undersection166(2).14
Therefore,
consideration of matters such as climate risk
and environmental protection is not optional for
directors of Indian companies. Rather, it is an
obligation which, if ignored, may create

14

Shyam Divan SC, Ria Singhsawhney and Sugandha Yadav,
Directors’ obligations to consider climate change-related risk inIndia(7
September
2021)<https://ccli.ubc.ca/wpcontent/uploads/2021/09/CCLI_Legal_Opinion_India_Director
s_Duties.pdf>; and Umakanth Varottil, Directors’ Liability andClimate Risk: White Paper on India (4 October 2021)<https://ccli.ubc.ca/wp-content/uploads/2021/10/DirectorsLiability-and-Climate-Risk-White-Paper-on-India.pdf>.
M.K. Ranjitsinh v. Union of India, (2021) SCC Online SC 326,
as discussed in Shyam Divan SC, Ria Singhsawhney andSugandha Yadav, Directors’ obligations to consider climatechange-related risk in India (7 September 2021)<https://ccli.ubc.ca/wpcontent/uploads/2021/09/CCLI_Legal_Opinion_India_Director
s_Duties.pdf> at [19] – [21].

85Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
India

significant liability risk. However, this liability risk
can be reduced if directors undertake a detailed
assessment of climate risk facing theircompany, consider expert advice whereappropriate, determine strategies to address
the risks, implement those strategies, andconsistently review the risks and the efficacy ofsuch strategies.
Regarding the duty of competence, section
166(3) of the Companies Act stipulates that
directors of a company shall exercise their“duties with due and reasonable care, skill anddiligence and shall exercise independentjudgment”. As such, Indian directors must

inform themselves sufficiently about thebusiness of the company and its associatedrisks. They must also employ adequate
monitoring and oversight over the managementof the company. Importantly, the duty ofcompetence is assessed objectively. Hence, anhonest failure on the part of directors to accountfor climate risk cannot be raised as an excuse
against a breach of the duty. Therefore, the dutyof competence will in many cases require Indian
directors to investigate and engage with climate
risks. Prudent engagement will likely involve
integrated risk frameworks, comprehensive
disclosures and considered responses fromboards.
In addition to the duty of competence in section
166(3) of the Companies Act, the SEBI (Listing

Obligations and Disclosure Requirements)
Regulations 2015 (SEBI LODR Regulations)also impose several duties on directors which
include adequately framing, implementing andmonitoring systems of risk management. 15
These regulations require the board of directorsof listed companies to specify a risk
management framework and large listedcompanies to also establish a risk management
committee.16 It is also specified that the risks to
be identified by such a committee include
sustainability risks, especially those pertaining
to ESG.17 These regulations add further content
to the duty of competence and raise the

15
16
17
18
19
20

SEBI LODR Regulations, reg. 4(2)(f).
Ibid, reg. 4(2)(f)(ii) and 21.
Ibid, Schedule II, Part D, C, (1)(a).
SEBI ICDR Regulations, Schedule VI-A, Para. 11(B)(1)(C)(iv).
Ibid, Schedule VI-A, Para. (5)(B).
SEBI (Issuance and Listing of Non-Convertible Securities)
Regulations,
2021,
reg.
2(q),
<https://www.sebi.gov.in/legal/regulations/apr2022/securities-and-exchange-board-of-india-issue-andlisting-of-non-convertible-securities-regulations-2021-last-

expected standard of risk management, and afortiori climate risk management.
Directors' Disclosure
Climate Change

Obligations

andIndian companies may be required to makeclimate risk disclosures both in relation tosecurities issuances and their ongoingdisclosure obligations.
Regarding the issuing of shares, the SEBI (Issue

of Capital and Disclosure Requirements)
Regulations 2018 (SEBI ICDR Regulations)mandate disclosure of several types ofcorporate information which are likely to relate
to climate risk. For example, the SEBI ICDR
Regulations
mandatedisclosureofmanagement’s discussion and analysis of thefinancial condition of the company, alongside a
discussion of various factors (including
infrequent events or known trends or
uncertainties) which may have a material
adverse impact upon the company’s revenue or
profit.18 The SEBI ICDR Regulations also requirethat a company’s prospectus contain thecompany’s material internal and external risk
factors,19 with climate risk likely being aforeseeable factor for many companies. SEBI,
in its framework for issuance and listing of nonconvertible securities, has also specified certain
conditions for the issuance of ‘green debt
securities’ which pertain to debts linked to
specific end-uses, including renewable andsustainable energy, clean transportation, andclimate change adaptation. These include
making disclosures on the proposed
environmental sustainability objectives and theenvironmental impact of the financed project.20
As well as disclosure with respect to shareissuances, disclosure of climate risks is relevant
to annual reports, continuous disclosure
obligations and Business Responsibility andSustainability Reporting (BRSR) requirements.
Notably, the annual reports of Indian companies
must contain a discussion regarding theamended-on-april-11-2022-_58126.html>
andUpdatedOperational Circular for Issue and Listing of Non-convertible
Securities, Securitised Debt Instruments, Security Receipts,
Municipal Debt Securities and Commercial Paper (April 13,2022),
Chapter
IX,<https://www.sebi.gov.in/legal/circulars/apr-2022/updatedoperational-circular-for-issue-and-listing-of-non-convertiblesecurities-securitised-debt-instruments-security-receiptsmunicipal-debt-securities-and-commercial-papermodifications-in-cha-_58060.html>.

86

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
India

company’s risk management policy and themeans by which the company identifies andaddresses risks that pose an existential threat
to the company.21 Furthermore, the report must
address the company’s approach to energy
conservation,22 and more particularly, use ofalternative forms of energy and investments
made in company energy conservation
initiatives.23 The BRSR framework published in
May 2021, which came into effect for reportingfor FY 2022-2023, places great emphasis on
disclosure of sustainability issues. In-scope
listed companies under the BRSR framework
are required to disclose an overview of theirbusiness conduct and sustainability issues,
which includes material climate change-related

21
22
23
24

Companies Act 2013, s. 134(3)(n).
Ibid, s. 134(3)(m).
Companies (Accounts) Rules, 2014, rule 8.
Securities and Exchange Board of India, Circular on Business
responsibility and sustainability reporting by listed entities,
Annexure II: Guidance Note for Business Responsibility &Sustainability
ReportingFormat
(10
May
2021)
<https://www.sebi.gov.in/sebi_data/commondocs/may2021/Business%20responsibility%20and%20sustainability%20reporting%20by%20listed%20entitiesAnnexure2_p.PDF>.

risk, in their BRSR reports.24 Particularly,
companies are required to disclose details ofenergy consumption, scope 1 and scope 2
greenhouse gas emissions, emission reducing
projects, environmental clearances and impact
assessments, renewable energy usage anddetails of any business continuity and disastermanagement plans.25
Indian companies also have continuous
disclosure obligations with respect to material
information to ensure the market is properly
informed.26 The definition of material
information expressly includes information
arising from the impacts of climatic events, suchas flooding and fires.27

25

26
27

Securities and Exchange Board of India, Circular on Business
responsibility and sustainability reporting by listed entities,
Annexure II: Guidance Note for Business Responsibility &Sustainability
ReportingFormat
(10
May
2021)
<https://www.sebi.gov.in/sebi_data/commondocs/may2021/Business%20responsibility%20and%20sustainability%20reporting%20by%20listed%20entitiesAnnexure2_p.PDF>.
SEBI LODR Regulations, Schedule III, Part A.
SEBI LODR Regulations, Schedule III, Part A, para. B(6).

87Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
India

Practical Implications for Directors
Given that regulators in India have become increasingly emphatic regarding the need for companies
and their directors to adopt climate resilience measures in business practices and disclosure, and inparticular the above-noted recognition of climate risk by the Reserve Bank of India, and SEBI’s
consultation on expanded climate disclosure and its current BRSR requirements, well-counselledboards will:a) delegate climate risk identification and evaluation to a clearly-identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board as a matter of priority a process to start developing a climatetransition roadmap to 2070 with transparent carbon neutrality or reduction targets, with clear
interim targets and within the current rolling multi-year strategic plan, and periodically thereafter
report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee;d) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting; ande) Use the BRSR assessment and disclosure process as a climate consciousness check and havegoals mapped to any shortfalls identified and/ or “ leadership indicators” as provided in the
BRSR framework.
Contributors:

Dr. Umakanth Varottil, Associate Professor of Law,
National University of Singapore
Anchal Dhir, Cyril Amarchand Mangaldas
Ganesh Gopalakrishnan, Cyril Amarchand Mangaldas
CCLI

88

IrelandIreland is a member state of the European Union. This section is to beread in conjunction with the above EU section. Ireland is a common law
jurisdiction and directors’ duties derive from both case law and statute.

Summary
There are currently no Irish statutory provisions
which expressly require directors generally totake account of climate-related risks oropportunities in the discharge of their fiduciary
duties. However, to the extent that climaterelated matters affect the company's interests,
directors must consider such matters as they
discharge their duties.
While there is no specific Irish case-law
requiring directors to consider climate mattersin discharging their duties, climate related
litigation has been successfully brought against
the Irish government over failures to comply
with climate legislation.1
Under EU law and relevant Irish implementing
law there are specific climate-related
disclosures required of certain large companies
and corporate financial services firms, which
are made by the directors currently on a comply
or explain basis. Impending EU legislation is set
to materially increase these disclosure
requirements and to require companies toadapt their operations in response to climate
and wider ESG considerations.

1

Accordingly, the nature and extent of theintegration of climate-related considerations bydirectors in the discharge of their duties
depends on the sector and business in which
the company operates. For example, acompany in the financial services sector may
primarily focus on climate-related financial risk
disclosure while a food and beverage
manufacturer may be more concerned with the
implications of policies on carbon emissions
reduction.
Directors of Irish companies should note that:•••companies operating in certain sectors
will be required to comply withparticular climate-related legislation
which is specifically relevant to theiroperations;
relevant incoming and proposed EU
legislation will, once it comes into force
in Ireland, increase the breadth andscope of specific climate-related
considerations for directors;
in discharging their duties, directors
should carefully evaluate the extent towhich climate-related issues should be
integrated into their governance roles.

Friends of the Irish Environment CLG v. Government of Ireland[2020] IESC 49.

89

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Ireland

Irish government policy and legislation on
climateThe Irish government has identified climatechange mitigation and adaptation as major
policy priorities as evidenced in Ireland’s
Climate Action Plan,2 National Development
Plan3 and National Adaptation Framework.4
These developments, while not directly
applicable to directors, are likely to change thecommercial, physical and social context inwhich companies operate, giving rise to risks
and opportunities. Ireland has a track record inenacting legislation supporting transition to a
low carbon economy; for example, enacting theFossil Fuel Divestment Act 2018, making
Ireland one of the first countries in the world towithdraw public money from investment in fossil
fuels.5
Ireland enacted a net-zero emissions target inlaw through the Climate Action and Low Carbon
Development (Amendment) Act 2021, which
includes a goal of net-zero greenhouse gas
emissions by 2050, and a 51% reduction by theend of 2030. The Irish government’s policy
indicates how it intends to meet this target,
including increased investment and sectorspecific targets for agriculture, transport,
electrification and buildings, progressively
increasing carbon taxes under the Finance Act
20206 and implementing a just transition
framework. This may give rise to opportunities
for companies seeking to tap into new markets,
but also risks for companies in high-emission
sectors, or adjacent to such sectors.
The Irish government’s Ireland for Financestrategy includes an action to increase thenumber of Irish firms adopting the voluntary
reporting framework of the Task Force on
Climate-related Financial Disclosures (TCFD).
At the end of 2021, over 30 Irish based firms
had adopted TCFD including leading Irish semi-

2

3

4

5

Government of Ireland, Climate Action Plan 2021 (November
2021)<https://www.gov.ie/en/publication/6223e-climateaction-plan-2021/>.
Government of Ireland, National Development Plan 2021 –2030(4October
2021)<https://www.gov.ie/en/publication/774e2-nationaldevelopment-plan-2021-2030/>.
Government of Ireland, National Adaptation Framework (8February 2021) <https://www.gov.ie/en/publication/fbe331national-adaptation-framework/>.
Department of Finance, ‘Ireland Strategic Investment Fund’ssale of interests in global fossil fuel companies leads the way ingreen thinking – Donohoe and D’Arcy’ (4 January 2019) ,National Adaptation Framework (8 February 2021)<https://www.gov.ie/en/press-release/f07fcb-

state bodies and large Irish financial and nonfinancial companies.
Directors’ Duties and Climate Change
Directors of Irish companies are subject tofiduciary duties as set out in the Companies Act
2014. These include the duties to act in goodfaith in what the directors considers to be theinterests of the company and to exercise thecare, skill and diligence which would be
exercised in the same circumstances by areasonable person (having both the knowledge
and experience which may reasonably be
expected of a person in the director’s position,and the knowledge and experience which that
director actually has). These statutory duties
are interpreted with regard to both common law
and equitable principles.
A breach of a director's fiduciary duties canresult in personal liability for the director toaccount to the company for any gains and/orindemnify the company for losses or damages
arising from the breach.7 In the performance of
their duties (which are owed to the company
alone) directors are to have regard to theinterests of the company’s shareholders andemployees.8 To the extent that climate-related
matters affect the company’s interests,
directors must consider such matters as they
discharge their duties.
Further, companies listed on the Irish stock
exchange, Euronext Dublin, are required tocomply with the U.K. Corporate Governance
Code,9 as well as requirements under the Irish
Corporate Governance Annex of the Euronext
Listing Rules,10 on a ‘comply or explain’ basis.
These state boards should assess the basis onwhich a company generates and preserves
value over the long-term, and how opportunities
and risks to the future success of the company

6

7
8
9

10

foss/#:~:text=The%20Act%20provides%20for%20the,a%20%
E2%80%9Cpracticable''%20timeframe>.
Government of Ireland, Climate Action Plan 2021 (November2021) <Government of Ireland, Climate Action Plan 2021
(November 2021) <https://www.gov.ie/en/publication/6223eclimate-action-plan-2021/>.
Companies Act 2014, s. 228.
Ibid, s. 224.
Financial Reporting Council, The U.K. Corporate Governance
Code (July 2018) <https://www.frc.org.uk/directors/corporategovernance-and-stewardship/uk-corporate-governancecode>.
Euronext Regulated Markets, Euronext Listing Rules Appendix
4:
The
Irish
Corporate
GovernanceAnnex<https://www.euronext.com/en/regulation/euronext-regulatedmarkets>.

90Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Irelandhave been considered and addressed.11
Principle A of the Corporate Governance Codesets out that the role of the board of a
successful company “… is to promote the long-term sustainable success of the company
generating value for shareholders andcontributing to wider society.” Principle C
further states that “[t]he board should alsoestablish a framework of prudent and effective
controls, which enable risk to be assessed andmanaged.”While at the time of writing there is no Irish caselaw on directors’ duties in the context of climatechange, established principles of Irish company
law require directors to demonstrate informed
stewardship as they discharge their duties. Thisrequires them to sufficiently apprise themselvesof key matters in respect of the company and its
operations, including risks and impacts arisingfrom climate change and other sustainability
issues. This requirement will be increasingly
important as forthcoming EU directives
discussed in the EU section above come into
force and require directors to make additionalsustainability disclosures, including in respectof the environment. In the absence of binding
local precedent, Irish courts can consider thecases of other common law jurisdictions inparticular those of the higher courts in Englandand Wales for guidance where relevant, so
directors of Irish companies may wish tofamiliarise
themselveswithmaterialdevelopments in case law in such jurisdictions.
A number of Irish acts and regulations, such as
the Waste Management Act 1996 (asamended), provide for specific requirementsthat apply to companies which operate inclimate-sensitive sectors.

Directors’ Disclosure
Climate Change

Obligations

andIrish companies are required to disclose
information on non-financial issues under theEuropean Directive (EU) 2014/95 (the NonFinancial Reporting Directive or NFRD). The
NFRD
requiresEU-basednon-financial
corporations with over 500 employees andbanks and insurance companies of any size, to11
12

UK Corporate Governance Code, Provision 1.
Regulation (EU) 2020/852 of the European Parliament and of
the Council of 18 June 2020 on the establishment of adisclose the impact of the company onenvironmental matters, including climatechange. The NFRD is dealt with in more detailin the EU section above. The NFRD wastransposed into Irish law by the European Union(Disclosure of Non-Financial and Diversity
Information) Regulations 2017 which requires‘applicable companies’ to make certain climate
related disclosures in a director’s report inrespect of each financial year, on a comply or
explain basis. As discussed in the EU section
above, the NFRD’s reporting requirements will
be broadened by the Corporate Sustainability
Reporting Directive.

Article 8(1) of Regulation (EU)2020/85212 (the Taxonomy Regulation), entities
Under

required to disclose under NFRD must disclose
information to the public on how and to what
extent their activities are associated withenvironmentally
sustainableeconomic
activities. This includes economic activities with
substantial contribution to climate change
mitigation and adaptation. Other companies, forexample SMEs, may decide to disclose thisinformation for the purpose of getting access tosustainable financing or for other businessrelated reasons.
The aim of the disclosure under the EU
Taxonomy is to avoid greenwashing in themarket and increase the potential for green
finance by increasing transparency aboutcompanies’ environmental performance.
There are specific rules published specifying
the content and presentation of the information
to be disclosed under the EU Taxonomy byfinancial and non-financial companies andaccompanying methodology to comply with thedisclosure obligation. There is a staggered
timeline for implementation of the disclosure
requirement: As of 1 January 2022 for thereporting period 2021, qualitative informationand information on taxonomy-eligible activities
in relation to total activities must be disclosed.
Non-financial undertakings must fully comply
with this disclosure requirement from 1 January2023 for the financial year 2022, and financial
undertakings from 1 January 2024 for thefinancial year 2023.
Companies which are listed on Euronext Dublin
are required to disclose information on theframework to facilitate sustainable investment, and amending
Regulation (EU) 2019/2088.

91Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Irelandprincipal risks and uncertainties facing theirbusiness as part of their management report. 13
Therefore, to the extent that climate changerisks are deemed to be a principal risk to thecompany, they should be disclosed.

Financial sector regulation
The Central Bank of Ireland (CBI) has
recognised climate change as a material
financial risk in both its capacity as the central
bank and as the financial regulator, has set out
clear supervisory expectations of regulated
firms regarding climate change in a ‘Dear CEO’letter of 3 November 202114 and has set up a
Climate Risk and Sustainable Finance Forum tobuild capacity and share best practices toadvance the financial sector’s response to
climate change.15 Climate change risks areamong the systemic risks to the financial system
identified by the CBI.16 In a securities regulation
context, the CBI has identified climate change
risk as a threat to the securities market, statingthat firms should pay close attention to suchrisks and ensure that they are clearly
understood and communicated to the market.17
The CBI has also recognised potential risks to a
successful
climatetransition
through

13
14

15

16

Rule 9, Central Bank (Investment Market Conduct) Rules 2019.
Central Bank of Ireland, ‘Central Bank sets out supervisory
expectations of regulated firms regarding climate change, andreaffirms own commitment to take action’ (3 November 2021)<https://www.centralbank.ie/news/article/press-releasecentral-bank-sets-out-supervisory-expectations-of-regulatedfirms-regarding-climate-change-and-reaffirms-owncommitment-to-take-action-03-november-2021>.
Central Bank of Ireland, ‘Central Bank of Ireland hosts inaugural
meeting of the Climate Forum and publishes Sustainable
Investment
Charter’
(30
June
2022)
<https://www.centralbank.ie/news/article/central-bank-ofireland-hosts-inaugural-meeting-of-the-climate-forum-andpublishes-sustainable-investment-charter-30-june-2022>.
See Central Bank of Ireland, Financial Stability Review 2021 I(June 2021) <https://www.centralbank.ie/publication/financialstability-review/financial-stability-review-2021-i>; Central Bankof Ireland, Financial Stability Review 2021 II (November 2021)<https://www.centralbank.ie/publication/financial-stabilityreview/financial-stability-review-2021-ii>; Central Bank of
Ireland, Financial Stability Review 2022 I (June 2022)‘greenwashing’ by issuers of financial products
which are marketed as sustainable.18 The CBI
has also indicated that senior executivefunctions will be prescribed for effectively
managing a regulated financial firm’s approach
to identifying, assessing and managing climaterelated and environmental risks.19
In a disclosure context, Regulation (EU)2019/2088 on sustainability‐related disclosuresin the financial services sector 20 (SFDR) places
significant
andtechnical
disclosure
requirements on financial market participants
such as insurance undertakings, investment
firms, IORPs, AIFMs, UCITS managementcompanies and credit institutions providing
portfolio management at entity and at productlevel.
These
includedisclosuresonenvironmental - including climate-related risks, adverse impacts, objectives andpromotion of environmental characteristics.
There is a staggered implementation timeline
for these requirements which began on 10
March 2021.
Additional specific climate-related provisions
for banks can be read in the EU section above.

17

18
19

20

<https://www.centralbank.ie/publication/financial-stabilityreview/financial-stability-review-2022-i>; Central Bank of
Ireland, Press Release: Climate change a key focus for theCentral
Bank
(13
May
2021)
<https://www.centralbank.ie/news-media/pressreleases/climate-change-a-key-focus-for-the-central-bank-13may-2021>.
Central Bank of Ireland, Securities Markets Risk Outlook Report
2021: Conduct Risks in an Uncertain World (February 2021)<https://www.centralbank.ie/regulation/industry-marketsectors/securities-markets/risk-outlook-reports>.
Ibid.
Central Bank of Ireland, ‘Individual accountability – a maturingof financial regulation - Speech by Gerry Cross, Director of
Financial Regulation: Policy and Risk, at Arthur Cox Client
Seminar’
(24
June
2022)
<https://www.centralbank.ie/news/article/speech-gerry-crossat-arthur-cox-seminar-23-may-2022>.
Regulation (EU) 2019/2088 of the European Parliament and of
the Council of 27 November 2019 on sustainability‐related
disclosures in the financial services sector.

92

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
IrelandPractical Implications for Directors
The focus on climate-related financial risk by the CBI and the evolution of climate risk and opportunity
in Irish government policy, at EU level and in the wider commercial environment will increasingly meanthat directors should consider climate change-related risks and opportunities and consider their effecton their company’s business model to properly fulfil their legal duties to act in the best interests of theircompanies.
In order to ensure high standards of governance, well-counselled boards may wish to:a) develop a strategy for assessing climate-related risks and opportunities relevant to thesector in which their business operates, the nature of the company’s business operations
and the size and scale of the business which may include scenario analysis;b) assess whether there is sufficient skills and knowledge at board level to properly developthat strategy, implement it and challenge during its execution;c) consider delegating climate risk identification and evaluation to a clearly-identified team inmanagement which reports directly to the CEO and board;d) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent and science-based carbon neutrality or
reduction targets, with clear interim targets to 2030 in line with government policy andperiodically thereafter report back to the board;e) consider delegating to the appropriate committee(s) of the board, such as risk, audit, legal
and governance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making
process for each aspect that is relevant to each committee;f)identify any climate-related disclosure requirements for the company and develop a
strategy to comply with those requirements while appropriately managing any potential riskof greenwashing;g) identify any voluntary climate-related initiatives joined or commitments made by thecompany and ensure appropriate strategy, governance, transparency and accountability isin place within the company to measure, monitor and manage targets and deliverables;h) consider whether executive and board remuneration should be linked to the achievementof measurable sustainability targets, which, in the case of environmental targets, should betime-bound and science-based;i)be aware of forthcoming EU legislation which, upon coming into force in Ireland, may impact
upon their duties in respect of climate and broader sustainability issues, most notably the
proposed Corporate Sustainability Reporting Directive and the Corporate Sustainability
Due Diligence Directive which are covered in more detail in the EU section above; andj)for directors of regulated financial entities, identify relevant climate-related supervisory
focus issues for the company and any supervisory, regulatory or disclosure deadlines
applicable to the company.

Contributors:

Ann Shiels, FinLexSus
Eugenée Mulhern, A&L Goodbody LLP
Liam Murphy A&L Goodbody LLP

93

ItalyThis section should be read in conjunction with the previous European
Union section.
In addition to new requirements under EU law,
there have been recent developments in Italianlaw. In 2022, the Constitutional Affairs
Committee approved amendments to Articles 9
and 41 of the Italian Constitution introducing theprinciple of protection of “environment,

biodiversity and of ecosystems, also in theinterest of new generations” and a generalprohibition for entrepreneurial activities to be
carried out in a manner that could hinder“health and environment”.1

There has also been an increasing focus onsustainable finance. In January 2022, Banca
D’Italia set up a Climate Change andSustainability Committee, which will contributeto defining the bank’s sustainable financestrategy, and has also become a member of theSteering Committee of the Network forGreening the Financial System.2
Directors' Duties and Climate Change
Italy is a civil law jurisdiction. Directors’ duties
are codified in the Civil Code (section 2392 ff.)
- dated 1942, later amended in 2003 according to which directors owe a duty to thecompany to manage its affairs with care,evaluated according to a subjective andobjective standard. With the exception of
creditors, consideration of whose interests
arises when the company’s assets are no longer
sufficient to satisfy creditor claims, the Codedoes not explicitly refer to any duties regarding
obligations to stakeholders. Another relevant
provision is article 2381 of the Civil Code,according to which the board of directors is
responsible for ensuring that the company’s
internal organization, administration andaccounting are “adequate”; this responsibility
includes, among others, the duty to ensure thatthe enterprise risk management system
functions effectively.

Directive),3 the Italian Code’s two above-noted
provisions, combined with the Directive’scomprehensive
disclosure
requirements,
create a clear obligation for boards of “ large”4
Italian corporations to adopt a governanceapproach that is focused on the long-term andthus includes climate change. In other words,
by compelling disclosure that is long termfocused, boards are obliged to take appropriate
actions to support these long-term disclosures,
e.g. by identifying and managing climate risks
and opportunities, embedding them in longterm corporate strategy, ensuring alignment
with individual investment decisions, andcorrectly valuing company assets. It follows that
under Italian law, directors’ civil liability fordamages may arise in cases of misstatements,
overvaluation of company assets, and breachesof their duty of care for failing to identify and/or
manage climate-related risks or to consider
climate-related opportunities in setting thestrategy.

Viewed alongside European Directive No.
2014/95/EU (the Non-Financial Reporting

1

2

Legge Costituzionale 11 febbraio 2022, n. 1 Modifiche agli
articoli 9 e 41 della Costituzione in materia di tuteladell'ambiente. (22G00019) (GU Serie Generale n.44 del 22-022022);
Banca D’Italia, ‘The Bank of Italy steps up its action on climate
risks and sustainable finance’ (9 February 2022)

3
4<https://www.bancaditalia.it/media/notizia/the-bank-of-italysteps-up-its-action-on-climate-risks-and-sustainablefinance/?dotcache=refresh>
See EU section above.
Defined as non-financials with over 500 employees and banks
and insurance companies of any size – see EU section above.

94

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Italy

In addition to the Civil Code, the Corporate
Governance Code – which, though not hard law,
defines a set of voluntary ‘comply or explain’
recommendations – was amended in 2020 toinclude an explicit reference to “ sustainablesuccess”. Article 1 of the Corporate
Governance Code provides that “[t]he board of

directors leads the company by pursuing its
sustainable success”, sets corporate strategy inaccordance with this principle, and oversees its
implementation. The concept of “sustainablesuccess” is defined as “the objective thatcreates long-term value for the benefit ofshareholders, taking account of the interests ofother relevant stakeholders”. This echoes
section 172 of the U.K. Companies Act 2006
and is consistent with the concept of‘enlightened shareholder value’. That being
said, the voluntary nature of the Corporate
Governance Code means that breaches of thisprinciple do not give rise to any enforceable
legal liability against company directors.

guides the actions of the board of directors andContributors:

Dr. Sabrina Bruno, Full Professor of Comparative
Corporate Law, University of Calabria - Luiss G.Carli

95

JapanClimate change has been recognised as amaterial issue affecting the sustainability ofalmost all companies. Japan’s Climate Change
Adaptation Act and its Act on Promotion of
Global Warming Countermeasures, read
together, create regulatory expectations that all
sectors of Japanese society must make efforts
to control climate change through mitigation
and adaptation.1
Climate change risks are increasingly being
acknowledged by Japanese regulators. The
Bank of Japan (BoJ), as Japan’s primary
prudential regulator, has acknowledged thatclimate change poses a systemic risk to theJapanese financial system.2 The BoJ hasannounced its Strategy on Climate Change,
which includes the launch of a fundprovisioning measure, which will allow financial
institutions that disclose information on theirefforts to address climate change to receive
support from the BoJ; encouraging financial
institutions to enhance their Task Force on
Climate-related Financial Disclosure (TCFD)aligned disclosures and to promote investments
in climate-related financial products. 3 Japan’s
Ministry of the Environment Climate Change
Policy Division has reported that climate-relatedrisks can result from reassessment of the valueof a large range of assets with a large volume of
GHG emissions during the process ofadjustment towards a lower-carbon economy,
and has advised companies to engage inscenario analysis to assess the resilience of
their business in the face of global warming.4

Directors’ Duties and Climate Change
Japan is a civil law jurisdiction, and the legal
basis for the scope of directors’ and officers’
duties is set out in statute under the Companies
Act of Japan and the Civil Code. Directors inJapan have three primary duties:
●

●

●

1

2

3

4

5
6

Article 2(1), Act on Promotion of Global WarmingCountermeasures (Act No 117 of 1998, as amended, 地球温暖化対策の推進に関する法律平成10年法律第117号).
Bank of Japan, Bank of Japan joins the Network for Greening
the Financial System (NGFS) (28 November 2019),<https://www.boj.or.jp/en/announcements/release_2019/rel19
1128a.htm/>.
Bank of Japan, The Bank of Japan's Strategy on Climate
Change
(16
July
2021)
<https://www.boj.or.jp/en/announcements/release_2021/rel21
0716b.pdf>.
The Ministry of the Environment, Government of Japan Climate
Change Policy Division, Practical Guide for Scenario Analysis
in line with the TCFD recommendations, 2nd edition (March
2020),
1-5,<http://www.env.go.jp/policy/policy/tcfd/TCFDguide_2nd_EN.
pdf>.
Article 355 of the Companies Act of Japan.
Ibid.

7

8

9
10

11

a duty of loyalty,5 including arequirement to act in the company’s
best interests, which a growing numberof lawyers and regulators believe
includes its long-term sustainability;
a duty to comply with all laws,
regulations, ordinances, resolutions ofshareholders’meetingandthecompany articles.6 For directors oflarge companies,7 it includes arequirement to develop systems
related to management of the risk ofloss to the company and any of its
subsidiaries8 and to establish a properinternal control system to ensure thatthe execution of their duties complies
with the relevant laws, regulations andarticles of association. 9 In suchcompanies, a director’s duty of care will
not be effectively performed without aproper internal control system;10 anda duty of care, to the standard of aprudent manager,11 which informs theLarge company is a defined term under Article 2(vi) of theCompanies Act of Japan.
Regulation for Enforcement of the Companies Act, article
100(ii), 会社法施行規則平成 18 年 2 月7 日法務省令第 12 号
Ministry of Justice Order No 12 of February 7, 2006.
Companies Act of Japan, art. 348,362,399-13 and 416.
Regulation for Enforcement of the Companies Act, arts. 98,
100(ii), 110-4 and 112, 会社法施行規則平成 18 年 2 月7 日法務省令第 12 号 Ministry of Justice Order No 12 of February 7,
2006.
Civil Code of Japan (Act No 89 of 1896, as amended,民法明治29年法律第89号) art. 644; Companies Act of Japan (ActNo.2005, as amended, 会社法平成17年法律第86号) arts.
330, 355. For an English translation of Japanese Laws, seeJapanese Law Translation run by the Ministry of Justice, Japan
at <http://www.japaneselawtranslation.go.jp/?re=02>. As has
been suggested by the Japanese Supreme Court, the duty ofcare is judged to be the objective standard of what a reasonably
prudent person would do in comparable circumstances (see96Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Japan

duty of loyalty and the duty to comply
with all applicable laws and regulations.
If a director has met this standard, it
may be a defence to personal liability
for an alleged breach of the duty ofcare.12 Likewise, if there are no“significantly unreasonable aspects”
involved in the decision (known as the‘business judgment rule’), directors will
not have breached their duty of care.13
Directors who neglect their duties are jointly
and severally liable to the company for any
resulting damages; and where directors aregrossly negligent or knowingly fail to performtheir duties, such directors are also liable tothird parties or shareholders for the resulting
damages.14
Directors could breach their duty to ensure thecompany is obeying laws and regulations byfailing to consider the Climate Change
Adaptation Act. This duty requires thatbusinesses endeavour to adapt to climatechange in accordance with the content of theirbusiness activities, and to cooperate withgovernments at all levels. It therefore follows
that directors have a duty to endeavour toensure their companies take robust action toadapt to climate change. In the future, any
strengthening of statutes that would requirecompanies
tosettargets
towards
decarbonization or that require companies todisclosegovernance,
strategy,riskmanagement, and metrics in line with aninternational framework would add those duties
to other duties of directors.
A failure to monitor climate change risks andclimate change-related regulations could giverise to a breach of the directors’ duty of care in
their oversight and management of thecompany if a board were to fail to set up an
appropriate risk management system.15 In order
to comply with their duty of care in relation to
the duty of oversight, directors need to ensure

12

13

14

Dan W Puchniak and Masafumi Nakahigashi, ‘Case No.21:
Corporate Law – Business Judgment Rule – Derivative Action– Supreme Court, 15 July 2010’ in Moritz Bälz et al. (eds.),
Business Law in Japan – Cases and Comments（Kluwer Law
International 2012) at 223).
Companies Act of Japan, examples of where having taken due
care is a defence include article 52 (2)(ii), article 120 (4), andarticle 213 (2)(ii).
Supreme Court 15 July 2010 – Case No 2009 ju 183,
Apamanshop Case, 1332 Hanrei Taimuzu 501.
Katsuyuki Yamaguchi, Kaoru Tatsumi, and Mamiko Komura,‘Corporate governance and directors' duties in Japan:
overview’(1
November2016),

that such a risk management system is properand sufficiently capable of fulfilling the
responsibilities to monitor and manage thecompany’s business, given the likelihood andmagnitude of climate risks to the company.
Since the financial risks of climate change areso broadly acknowledged by governments,
scientists, financial institutions, companies,
investors, and civil society, it is no longer adefence for directors to say that they were
unaware of the risks.
As well as potentially breaching their duty ofcare in respect of the duty of oversight of risks
and compliance, directors could potentiallybreach their general duty to act with due care in
the best interests of the company in failing toaddress
climate-related
risks
and
opportunities.16 Examples of breach of the dutyof care could include failure to make relevant
enquiries to management regarding physicaland transition risks to the business due toclimate change; or failure to seek outside
expertise where the directors do not possess
the knowledge or expertise to devise a strategy
to address climate risk. Other examples might
include failure to robustly assess theassumptions
underlying
revenue/costprojections for climate-related disruption, andfailure to ensure assets and supply chains areresilient to foreseeable physical climate risks.
Additionally, regulators are encouraging thedisclosure of climate-related risks (see below).
The responsibility that corporate directors
therefore have to ensure adequate disclosure,combined with the expectations contained in
the Climate Change Adaptation Act and the Acton
PromotionofGlobalWarming
Countermeasures, put directors in the positionof having to stand by the quality of the practices
that these disclosures reveal, in effect creating
a clear obligation to address climate-relatedrisks and opportunities to an adequate

15

16<https://www.nishimura.com/sites/default/files/tractate_pdf/ja/
43281.pdf>.
For example, under articles 423(1), 348(4), 362(5), 399-13(2),and 416(2) of the Companies Act of Japan and articles 98, 100,
110-2, and 114 of the Regulation for Enforcement of theCompanies Act.
See Yoshihiro Yamada, Janis Sarra and Masafumi Nakahigashi,Commonwealth Climate and Law Initiative, Directors’ Duties
Regarding Climate Change in Japan (February 2021)<https://law-ccli-2019.sites.olt.ubc.ca/files/2021/02/DirectorsDuties-Regarding-Climate-Change-in-Japan.pdf>.

97

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Japan

standard. Heightened disclosure creates a defacto expectation of a higher standard of care.

Directors’ Disclosure
Climate Change

The duty of care for publicly-listed companies isreinforced by the Japanese Corporate
Governance Code. The Corporate GovernanceCoderecommendsthatpublicly-listedcompanies
address
ESG
and
other
sustainability issues proactively to create value
for all stakeholders over the mid- to long-term.
It was revised in June 2021 to include a
recommendation for Japanese companies tofurther promote positive and proactive
responses to sustainability issues in light of theincreasing number of organisations supporting
the TCFD recommendations, and to requireboards to develop a basic policy for thecompany’s sustainability initiatives to increase
corporate value over the mid- to long-term.17
The Code, while non-binding, therefore offers
strong normative guidance for directors toeffectively manage material climate-related
financial risks and opportunities. The impact ofsoft law such as the Corporate Governance
Code has the potential to be instrumental in
shifting climate governance, as the principles
adopted by companies form part of theirfundamental rules of operation. Companies
listed on the Prime Market of the Tokyo Stock
Exchange will be required, on a ‘comply or
explain’ basis, to collect and analyze data on theimpact of climate change-related risks andearning opportunities on their businessactivities and profits, and to enhance the quality
and quantity of disclosure in accordance with
the TCFD recommendations or an equivalentframework.18 The prime market includes 68banks.19

The duty to disclose is contained in the

17

18

Tokyo Stock Exchange, ‘Japan’s Corporate Governance Code
Seeking Sustainable Corporate Growth and Increased
Corporate Value over the Mid- to Long-Term’ (as revised 11
June
2021)
at
9,
19
<https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxjatt/b5b4pj0000046l07.pdf>. For a discussion of early
corporate law, prior to the modernization of company law, see
Janis Sarra and Masafumi Nakahigashi, ‘Balancing Social andCorporate Culture in the Global Economy: The Evolution ofJapanese Corporate Culture and Norms’ (2002) 24 Law &Policy 4 at 299-354.
Joanna Treacy, K&L Gates, ‘ESG Regulatory Developments in
The UK, Japan, and Hong Kong’ (14 January 2022) 12(14)National
Law
Review,<https://www.natlawreview.com/article/esg-regulatorydevelopments-uk-japan-and-hong-kong>.

Obligations

andFinancial Instruments and Exchange Act(FIEA).20 The FIEA requires disclosure (on acontinuous and periodic basis21) of material
business risks. These risks are often reported
as ‘non-financial information’ in annual reports.
Additionally, in January 2019, Japan’s Financial
Services Agency (FSA) issued a Cabinet Office
Ordinance on Disclosure of Corporate Affairs,
which expands the FIEA requirement to include
material ‘forward-looking’ risk. While thisordinance does not refer explicitly to climatechange, the requirements align closely to the
TCFD framework. Therefore, insofar as climatechange is now universally regarded as posing amaterial business risk, it follows that the FIEA
requires disclosure of risks and forward-looking
risks arising from climate change. Thisrequirement is particularly compelling given theguidance and regulatory developments relating
to climate-related disclosures discussed below.
Finally, if directors detect any fact likely to cause
substantial detriment to the stock company,
they must immediately report such fact to theshareholders or to the company auditors. 22
Directors have overall responsibility forensuring that a company’s financial disclosures
are accurate, and so may be primarily liable formisleading disclosures made to the market. 23
Both companies and directors may be subject
to sanctions under financial services legislation
for failure to comply with disclosure
requirements. Unlike general directors’ duties,
disclosure pursuant to financial services law is
not subject to the business judgment rule;
therefore, a court will not consider whether adecision to make or omit a disclosure was

19

20

21

22
23

See Japan Exchange Group, Tokyo Stock Exchange, ‘Listed
Company
Search’,<https://www2.jpx.co.jp/tseHpFront/JJK020030Action.do>.
Financial Instruments and Exchange Act (Act No. 25 of 1948,
金融商品取引法昭和23年法律第25号),<https://www.fsa.go.jp/en/policy/fiel/>.
Planning and Coordination Bureau, Financial Services Agency,‘Points to Note Regarding Article 27-36 of the Financial
Instruments and Exchange Act (Fair Disclosure Rule
Guidelines)’(April2018),
translation
at<https://www.fsa.go.jp/en/laws_regulations/disclosure/201802
06-2.pdf>.
Companies Act of Japan, art. 357(1).
Janis Sarra, Audit Committees and Effective Climate
Governance, A Guide for Boards of Directors (CCLI, December
2020)<https://law-ccli2019.sites.olt.ubc.ca/files/2020/12/CCLI-Guide-for-AuditCommittees-on-Effective-Climate-Governance.pdf>.

98Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)Japan“significantly unreasonable” but will focus onwhether the disclosure was required by law

based on TCFD framework, in line withdomestic regulatory frameworks.

There have also been several recent regulatoryand guidance developments aimed atenhancing the disclosure of climate-relatedrisks, including:●In 2019, a TCFD Consortium waslaunched to encourage effective TCFD
disclosures, supported by the Ministryof the Environment and the Ministry of
Economy, Trade and Industry.24●

In March 2020, the Ministry of theEnvironment issued practical guidanceon scenario analysis in line with TCFD
recommendations.
The
TCFD
Consortium undertakes revision workwith the Ministry. In July 2020, the
TCFD Consortium announced the●

On June 25, 2021, the Minister for
Financial Services, Taro Aso, consulted
the Financial System Council at FSA
with respect to making the disclosuresystem enhance constructive dialogue
between investors and companies.28
The Financial System Council set up
the FSA Disclosure Working Group,
which is considering how listedcompanies and other companies that
submit securities reports should
appropriately
disclosetheirsustainability-related initiatives to makeJapanese capital markets more
attractive in the global context. Japan’s
Ministry of Economy, Trade andIndustry (METI) and FSA reported that
TCFD-aligned disclosures will become
mandatory in the Prime Market of theTokyo Stock Exchange effective April
2022. Companies listed on the Prime
Market segment are to enhance thequality and quantity of disclosure basedon the TCFD or an equivalentframework. In addition, after fiscal
2023, the FSA will expand thedisclosure requirements to cover allcompaniesthatsubmitannualsecurities reports.29●

In its Strategy on Climate Change, theBank of Japan announced that it will
require financial institutions to makedisclosures on results and targets on
green loans and investments alongside
the steps they are taking to meet the
TCFD disclosure requirements.30●

The Ministry of the Environment
announced in October 2021 that the

Guidance on Climate-related Financial
Disclosures 2.0 (TCFD Guidance 2.0).25●

The Japan Exchange Group, Inc andTokyo Stock Exchange Inc have alsostrongly endorsed ESG disclosure,including disclosure of climate-relatedrisks, with the publication of a ‘Practical
Handbook for ESG Disclosure’ inMarch 2020.26●

In 2021, the FSA indicated a movement
towards mandating climate-related
financial disclosures for companies
listed on the Prime Market in its

Strategy on Sustainable Finance.

27

Based on the revision of the Corporate
Governance Code in June 2021, the
FSA encourages listed companies todisclosetheirinitiativesonsustainability. The FSA has agreed tomove toward mandatory disclosure

24
25

26

27

TCFD Consortium, ‘About Us’ <https://tcfd-consortium.jp/en>.
TCFD Consortium, ‘The TCFD Consortium announces therelease of "Guidance on Climate-related Financial Disclosures
2.0 (TCFD Guidance 2.0)"’ (June 2020) <https://tcfdconsortium.jp/en/news_detail/20081201>.
Japan Exchange Group Inc., Practical Handbook for ESG
Disclosure
(31
March
2020)
<https://www.jpx.co.jp/english/corporate/sustainability/esginvestment/handbook/index.html>.
Japanese Financial Services Agency, The JFSA’s Strategy on
Sustainable Finance (July 2021-June 2022) (31 August 2021)<https://www.fsa.go.jp/inter/etc/20211104/01.pdf>. While the
FSA has not yet mandated such disclosures, as its strategy
states, it has issued a consultation on draft ‘Supervisory
Guidance on Climate-related Risk Management and Client
Engagement’ regarding financial institution’s climate risk
management.

28

29

30

Minister for Financial Services, Taro Aso, Consultation paper toFinancial System Council (25 June 2021) (document inJapanese)<https://www.fsa.go.jp/singi/singi_kinyu/soukai/siryou/202106
25/5.pdf>.
Regulation Asia, ‘Japan’s FSA to Mandate Climate Disclosuresfrom April 2022’, ESG Investor (11 October 2021)<https://www.esginvestor.net/japans-fsa-to-mandate-climatedisclosures-from-april-2022/>;
Nihon
KeizaiShimbun(Japanese News Paper), ‘Haisyuturyo Sonshitu Eikyo,4000Sya ni Kaijigimu, Kinyu-Cho Kikohendomeguri’ (morning edn.,
6 October 2021) 2 (article in Japanese; the translated title is‘FSA will introduce mandatory disclosure on climate change
issues, which influence 4000 companies’).
Bank of Japan, The Bank of Japan's Strategy on Climate
Change
(16
July
2021)
<https://www.boj.or.jp/en/announcements/release_2021/rel21
0716b.pdf>.

99

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Japan

Cabinet has approved the Climate
Change Adaptation Plan, based on the
Climate Change Adaptation Act, which
describes measures to be taken forclimate change adaptation, including
science-based goals, target periods,
strategy and the management andevaluation of the progress, including
specific sector-based guidance.31●

management for investors and otherstakeholders.32●

The Japan TCFD Consortium has
issued the Green Investment Guidance
2.0, with amendments that include
transition finance, carbon neutrality,
carbon pricing, and climate risk

Finally, disclosing information beyond
that which is required by law is
encouragedbytheJapanese
Corporate Governance Code.33 In
particular, the Corporate Governance
Code requires companies listed on theJapanese Prime Market to disclose
their initiatives on sustainability, tocollect and analyse necessary data on
climate-related risks, and to enhance
the quality and quantity of theirdisclosures based on the TCFD
recommendations.34

Practical Implications for Directors
Given that Japan’s government and regulators have become increasingly emphatic regarding the needfor companies and their directors to adopt climate resilience measures in business practices anddisclosure, well-counselled boards will:a) delegate climate risk identification and evaluation to a clearly-identified team in managementthat reports directly to the CEO and board;b) put on the agenda for the board, within 3 or 6 months, a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear
interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/ remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel the most effective means of developing an external
engagement and communications plan and how best to engage in effective oversight ofrigorous disclosure and accounting.

Contributors:

31

32

33

Dr. Masafumi Nakahigashi, Professor of Law,
Nagoya University
Dr. Yoshihiro Yamada, Professor of Law,
Ritsumeikan University
Dr. Janis Sarra, Professor of Law, University of
British Columbia, Canada Climate Law Initiative
CCLI

Ministry of the Environment, The Cabinet's Approval of the
Climate Change Adaptation Plan and the Results of the Call for
Public Comments on the Plan (22 October 2021)<https://www.env.go.jp/en/headline/2560.html>.
TCFD Consortium, ‘The TCFD Consortium announces therelease of “Guidance for Utilizing Climate-related Information to
Promote Green Investment 2.0 (Green Investment Guidance2.0)”’(5
October
2021)<https://tcfdconsortium.jp/en/news_detail/21100501>.
Tokyo Stock Exchange, ‘Japan’s Corporate Governance Code
Seeking Sustainable Corporate Growth and Increased

34

Corporate Value over the Mid- to Long-Term’ (as revised 11
June
2021)
at
3,
<https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxjatt/b5b4pj0000046l07.pdf>.
Tokyo Stock Exchange, ‘Japan’s Corporate Governance Code
Seeking Sustainable Corporate Growth and Increased
Corporate Value over the Mid- to Long-Term’ (as revised 11
June
2021)
at
14-15,<https://www.jpx.co.jp/english/news/1020/b5b4pj0000046kxjatt/b5b4pj0000046l07.pdf>.

100Malaysia
Malaysia does not currently have a specific law
requiring a reduction in greenhouse gas
emissions. However, the Ministry of Energy,
Science, Technology, Environment and Climate
Change (MESTECC) has since 16 May 2019
entered into a four (4)-year collaboration with
the U.K. to engage in a scoping review toascertain whether a Climate Change Act isrequired and engage in knowledge-sharing with
the U.K. on the latter’s experiences in adopting
its own Climate Change Act in 2008.1 It has
further been reported that the Ministry ofEnvironment and Water (formerly MESTECC
under the previous administration) completed
the climate change legal framework in
December 2021, which shall form the basis fora Climate Change Bill which is to include theformation of a climate change committee toensure climate change adaptation in the face offloods, climate change mitigation andcompliance mechanisms with existing laws.2
The Malaysian government has launched theTwelfth Malaysia Plan,3 which was approved by
the Senate on 21 October 20214 and sets out
the national development strategy for 20212025, including a reiteration of the goal toreduce GHG emissions by up to 45% to GDP by
2030 relative to 2005 under Malaysia’s
Nationally Defined Contribution5 and afeasibility study on carbon pricing, such ascarbon tax and an emissions trading scheme.6

1

2

See Kenneth Tee, ‘Yeo: At least 24 months for Climate Change
Act to be tabled if necessary’, Malay Mail (16 May 2019)<https://www.malaymail.com/news/malaysia/2019/05/16/yeo-atleast-24-months-for-climate-change-act-to-be-tabled-ifnecessary/1753644>. See also Joseph Kaos Jr., ‘Malaysia hopes
to learn from Britain to come up with Climate Change Act, says
Yeo’,
The
Star
(16
May
2019)
<https://www.thestar.com.my/news/nation/2019/05/16/malaysiahopes-to-learn-from-britain-to-come-up-with-climate-changeact-says-yeo>. Furthermore, it had also been reported that thefour focus areas during the collaboration shall be “institutionalframework in terms of mitigation and adaptations, capacity
building, legal framework scoping studies for a Climate Change
Act and Malaysia’s Carbon Calculator”: Kenneth Tee, ‘Yeo: At
least 24 months for Climate Change Act to be tabled if necessary’,
Malay
Mail
(16
May
2019)
<https://www.malaymail.com/news/malaysia/2019/05/16/yeo-atleast-24-months-for-climate-change-act-to-be-tabled-ifnecessary/1753644>.
Bernama, ‘Climate Change Bill legal framework competed, says
Minister’,
Malay
Mail
(20
January2022)<https://www.malaymail.com/news/malaysia/2022/01/20/climate-change-bill-legal-framework-completed-saysminister/2036533>.

Regulators have become increasingly emphatic
regarding the need for companies and theirdirectors to adopt climate resilience measuresin business practices. Furthermore, a Joint
Committee on Climate Change (JC3) was
formed on 27 September 2019 by both theCentral Bank of Malaysia (Bank Negara
Malaysia or BNM) and the Securities
Commission Malaysia (SC) with the intention of
pursuing collaborative actions for building
climate resilience in Malaysia whilst being
guided by three (3) principal mandates, one ofwhich is to build capacity through sharing of
knowledge, expertise and best practices inassessing and managing climate-related risks.7
In 2020, the JC3 had carried out a review of
disclosure practices of selected financial
institutions against recommendations of the
Task Force on Climate-related Financial
Disclosures (TCFD),8 and its priorities for 2021
included developing guidance documents on
risk management and scenario analysis,
supporting the voluntary implementation ofclimate-related disclosures that are aligned with
TCFD
recommendations,broadening

3

4

5

6

7

8

Malaysian Government, Economic Planning Unit, Twelfth
MalaysiaPlan
2021-2025(September
2021)<https://rmke12.epu.gov.my/en>.
Bernama, ‘Dewan Negara approves 12MP motion’ (22 October2021),
The
Star<https://www.thestar.com.my/news/nation/2021/10/22/dewannegara-approves-12mp-motion>.
These goals include reducing GHG emissions intensity by up to
45% by 2030 relative to 2005. See Malaysian Government,
Malaysia’s Update of its first Nationally Determined Contribution
(July
2021)
<https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/
Malaysia%20First/Malaysia%20NDC%20Updated%20Submissi
on%20to%20UNFCCC%20July%202021%20final.pdf>.
Malaysian Government, Economic Planning Unit, Twelfth
Malaysia Plan 2021-2025 (September 2021), p. 298<https://rmke12.epu.gov.my/en>.
BNM, ‘Inaugural Meeting of Joint Committee on Climate Change’(27 September 2019) <https://www.bnm.gov.my/-/inauguralmeeting-of-joint-committee-on-climate-change>.
TCFD, ‘Final Report: Recommendations of the Task Force on
Climate-related Financial Disclosures’ (June 2017), ii<https://www.fsb-tcfd.org/publications/final-recommendationsreport/>.

101

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Malaysia

engagements with relevant stakeholders to
identify and address enabling conditions for the
structuring of green financial products andsolutions, and deepening technical capacitybuilding programmes with a particular focus on
climate-related disclosures, climate risk
management and climate scenario analysis.9
On 30 April 2021, the BNM issued the Climate
Change and Principle-based Taxonomy
guidance document (BNM Taxonomy GuidanceDocument),1011 prepared in collaboration with
the Risk Management sub-committee12 of theJC3 (defined below), in which it acknowledgedthat climate change has significant impacts on
the society, economy and financial system.13
Specifically, BNM noted that this impact would
manifest in three (3) dimensions of risk, namely
physical risk (damaged property, reduced
productivity and disrupted trade), transition risk(changes in legislative and regulatory
framework, shift in consumer and investor
behaviour) and liability risk (legal risk andclaims on damages and losses).14
The BNM Taxonomy Guidance Document
provides that it is imperative that financial
institutions
integrate
climatechangeconsiderations in all aspects of their business

9

10

11

BNM and SC, ‘Joint Statement by Bank Negara Malaysia andSecurities Commission Malaysia: Towards Greening the Financial
Sector’ (25 February 2021) <https://www.bnm.gov.my/-/jointstatement-bnm-sc-greening-the-financial-sector>.
BNM, Climate Change and Principle-based Taxonomy (30 April
2021)<https://www.bnm.gov.my/documents/20124/938039/Climate+
Change+and+Principle-based+Taxonomy.pdf>. BNM had issued
a discussion paper earlier on the BNM Taxonomy GuidanceDocument on 27 December 2019 for which it received written
feedback from respondents, including financial institutions, asset
management companies, rating agencies and non-governmentalorganisations, during the consultation period. See BNM, ‘Climate
Change and Principle-based Taxonomy’ (30 April 2021)<https://www.bnm.gov.my/-/climate-change-principle-basedtaxonomy>.
Paragraph 4.4 of the BNM Taxonomy Guidance Document
provides that it complements the Value-based Intermediation
Financing and Investment Impact Assessment Framework
Guidance Document (VBIAF Guidance Document) issued by
BNM on 1 November 2019. It further provides that the VBIAF
Guidance Document lays the foundation for ESG considerationsin the provision of financial services to generate a positive andsustainable impact on the economy, community and environment,
and that while the VBIAF is premised on Shariah tenets, theframework has universal application for financial institutions
seeking to reflect ESG considerations in their governance,business strategy and operations, reporting and risk management
systems. See the VBIAF Guidance Document at BNM, ‘Valuebased Intermediation Financing and Investment Impact
Assessment Framework: Guidance Document’ (1 November
2019)<https://www.bnm.gov.my/documents/20124/761679/VBIAF_Fin
al+guidance+1.11.2019.pdf/97938f34-3796-216c-14a054002c377e3b?t=1590725447991>.

strategies,15 and also recognises that financial
institutions play a pivotal role in accelerating
their customers’ transition towards moresustainable practices in their business
operations.16 Furthermore, the BNM Taxonomy
Guidance Document provides that a consistentand systematic classification of economic
activities can facilitate and promote thechannelling of financial flows to activities that
support climate change and environmental
objectives, and further classifies17 economic
activities into three (3) broad categories of“Climate Supporting”, “Transitioning”, and“Watchlist” which are structured around five (5)guiding principles:18 (i) “climate change
mitigation”; (ii) “climate change adaptation”; (iii)“no significant harm to the environment”; (iv)“remedial measures to transition”; and (v)“prohibited activities”.19
On 27 December 2021, BNM published an
exposure draft on climate risk management andscenario analysis for financial institutions (theBNM Climate Risk Exposure Draft), which was
slated to come into effect on 1 June 2022,20 but
is now expected to be finalised in the second
half of 2022.21 The BNM Climate Risk Exposure
Draft includes proposed requirements that: (i)the board and senior management of financial

12

13

14
15
16
17

18

19
20

21

The committee comprises of the following entities: Bank Islam
Malaysia Berhad, Bank Pertanian Malaysia Berhad (Agrobank),
CIMB Bank Berhad, Etiqa Insurance and Takaful, Hong Leong
Bank Berhad, Institutional Investors Council Malaysia, Malayan
Banking Berhad, Nomura Asset Management Malaysia Sdn.
Bhd., the SC, Standard Chartered Bank Malaysia Berhad andZurich Insurance and Takaful. See the Preface &Acknowledgement section on page 2 of the BNM Taxonomy
Guidance Document.
Paragraph 1.1, page 4 of the BNM Taxonomy GuidanceDocument.
Ibid, para. 5.1, p. 7.
Ibid, para.1.5, pp. 4-5.
Ibid, para. 1.6, p. 5.
See Section 9 on pages 23 and 24 of the BNM Taxonomy
Guidance Document for further elaboration on these categories
of classifications.
See Section 7, Part C on pages 12 to 21 of the BNM Taxonomy
Guidance Document for further elaboration on these guiding
principles.
Ibid, para. 9.1, p. 23.
BNM, Climate Risk Management and Scenario Analysis Exposure
Draft
(27
December
2021)<https://www.bnm.gov.my/documents/20124/938039/ED_Clima
te_Risk.pdf>, feedback to which was being received by BNM up
to 31 March 2022. At the time of writing, we note the BNM Climate
Risk Exposure Draft is no longer available on the official website
of BNM, presumably to undergo further revisions following receiptof the aforementioned feedback.
BNM, Joint Statement by BNM and Securities Commission
Malaysia: Accelerating the Financial Sector's Response to
Climate Risk (27 April 2022) <https://www.bnm.gov.my/-/jc37th-meeting>.

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institutions should have overall responsibility
and effective oversight over climate changerelated risks to safeguard the financial
institution’s resilience against climate change,
including appointing a dedicated Chief
Sustainability Officer to oversee the effective
management of climate-related risks or
expanding the current responsibilities of an
existing senior management officer for thispurpose; (ii) the board and management should
ensure that they have a sound understanding ofclimate-related risks to inform the financial
institution’s business and risk management
strategies; (iii) climate-related risks should beincorporated and embedded into, amongst
others, the financial institution’s businessstrategies and risk appetite frameworks; (iv)financial institutions to continuously develop
data capabilities, tools and methodologies toeffectively aggregate and report material
climate-related risks; (v) financial institutions toactively monitor and escalate material andpotential climate-related risks in a timely
manner; (vi) financial institutions to understandthe transmission and impact of climate-relatedrisks on existing risk types such as credit andliquidity risks and ensure their risk
managements systems account for material
climate-related risks; (vii) financial institutions
should conduct scenario analysis to determine
the resilience of their business strategies tomaterial climate-related risks; and (viii) financial
institutions should disclose climate-relatedrisks. The BNM Climate Risk Exposure Draft,when it comes into effect, shall have application
at the entity level (including overseas branch
operations) and consolidated level (including
both financial and non-financial subsidiaries) offinancial institutions.22
In December 2021, the JC3 announced that a
TCFD-aligned application guide for disclosures
on climate-related risks by financial institutions
shall be issued for public consultation in
January 2022 (TCFD Climate Disclosures
Application
Guide).2324
Furthermore,its
members supported a proposal for financial
institutions to make mandatory TCFD-aligned
climate-related financial risk disclosures from2024, and feedback for this proposal will bewelcomed as part of its consultation on the22
23

See paras. 7.1 and 7.2 of the BNM Climate Risk Exposure Draft.
We note at the time of writing that the exposure draft for the TCFD
Climate Disclosures Application Guide has yet to be published.

TCFD Climate Disclosures Application Guide
and BNM Climate Risk Exposure Draft.
Accordingly, the BNM Climate Risk Exposure
Draft proposes for financial institutions to berequired to make annual climate-related
disclosures that are aligned with therecommendations of the TCFD by 31
December 2024, to be published together withthe annual financial reports for financial years
beginning on or after 1 January 2024.
Furthermore, financial institutions are required
to separately address specific areas in theannual disclosures, including governancearound climate-related risks and opportunities
and actual and potential impact of climaterelated risks and opportunities on business,strategy and financial planning. The appendicesto the Climate Risk Exposure Draft provide thedescription of the disclosures aligned to the“Basic” and “Stretch” recommendations
outlined in the TCFD Climate Disclosures
Application Guide.
Directors in the financial industry are therefore
expressly encouraged to consider the impact ofclimate change in their decision-making
processes; this is reflected by the proposed
requirements in the BNM Climate Risk
Exposure Draft. More importantly, the BNM
Taxonomy Guidance Document and the BNM
Climate Risk Exposure Draft will definitely havean effect on the profile of industries that
financial institutions are prepared to lend to, andwill see a trickle-down effect to the wider
economy by encouraging (and later, effectively
compelling) a shift in funding and investments
towards
businesses
withsatisfactory
environmental and sustainability practices andgovernance.
Directorsofnon-financial
companies would therefore also do well toincorporate such practices in their companies’
daily operations.

24

BNM, ‘Joint Statement by Bank Negara Malaysia and Securities
Commission Malaysia Advancing the Financial Sector's Response
to Climate Risk’ (10 December 2021) <https://www.bnm.gov.my//bnm-sc-6th-jc3-meeting-en>.

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Directors' Duties and Climate Change
Malaysia is a common law jurisdiction and theCompanies Act 2016 (CA 2016) codifies thefiduciary duty25 of loyalty of a director,
established under common law. The CA 2016sets out certain general duties of directors.
Section 213 of the CA 2016 provides that a
director has a duty to exercise his26 powers, at
all times, for a proper purpose and in good faith
in the best interest of the company,27 and also
to exercise reasonable care, skill and diligencewith the knowledge, skill and experience that
may reasonably be expected of a director
having the same responsibilities and any
additional knowledge, skill and experience thatthe director in fact has.28
In determining whether a director has acted ingood faith and in the best interest of thecompany, the Malaysian courts adopt both asubjective and objective test29 – the subjective
element is determined based on an assessmentof the state of mind of the director,30 whilst theobjective element is determined by whether anhonest and intelligent man in the position of thedirector could reasonably have believed thetransaction was for the benefit of thecompany.31
Whilst there have yet to be any Malaysian court
decisions expressly linking the exercise of
thesedutieswithclimate-related
considerations, decisions of courts in othercommon law jurisdictions will be persuasive
authority in Malaysia, particularly where claims
have been brought by shareholders andmembers of the public against the directors of

25

26

27
28
29

30

31

Nallini Pathmanathan J explained in paragraph 219 of the High
Court decision of Petra Perdana Bhd v Tengku Dato’ Ibrahim
Petra Bin Tengku Indra Petra & Ors [2014] 11 MLJ 1 that theessence of a fiduciary duty involves acting bona fide in theinterests of the company. See also the High Court decision of Ng
Pak Cheong v Global Insurance Co Sdn Bhd [1995] 1 MLJ 64 at
page 77 in citing the dicta of the Australian decision of Australian
Growth Resources Corp Pty Ltd v Van Reesema (1988) 13 ACLR
261.
In this section, references to “he”, “his”, “him” and “man” areintended as referring to persons of all genders.
Section 213(1) of the CA 2016.
Ibid, s. 213(2).
See paragraph 166 of the Federal Court decision of Tengku Dato’
Ibrahim Petra Bin Tengku Indra Petra v Petra Perdana Bhd andAnother Appeal [2018] 2 MLJ 177 per Azahar Mohamed FCJ.
Ibid, in discussing what constitutes the subjective element of the
test.
This objective element is also known as the “Charterbridge
Principle”, which was elaborated by Azahar Mohamed FCJ in

a company for failing to factor in climate change
considerations in business decisions.
The SC has issued Guidelines on Conduct of
Directors of Listed Corporations and their
Subsidiaries dated 30 July 2020 (revised 12
April 2021) (SC Guidelines), which reiterate theduties under the CA 2016 for a director of acorporation to exercise his powers for a proper
purpose and in good faith in the best interest of
the corporation in which he sits as a board
member.32 The SC Guidelines further provide
under Chapter 5 on group governance (which
took effect on 1 January 202133) that a listed
corporation and its directors must establish andensure that the group-wide framework on
corporate governance include, amongst others,
managing material sustainability risks.34
The Malaysian Code on Corporate Governance(updated as at 28 April 2021) (MCCG) issued
by the SC has long been a tool for promoting
good corporate governance practices inpublicly-listed companies (PLCs).35 Non-listed
entities are also encouraged to adopt the
MCCG in their practices.36 The MCCG provides
that effective board leadership and oversightrequire the integration of sustainability
considerations
incorporate
strategy,
governanceanddecision-making,assustainability and its underlying ESG issues
become increasingly material to the ability ofcompanies to create durable and sustainablevalue and maintain confidence of theirstakeholders.37 Furthermore, boards should, indischarging their responsibilities, ensure thatthe strategic plan of the company supports
long-term value creation and includes
strategies on the economic, environmental andsocialconsiderations
underpinning

32

33
34
35

36
37

paras. 172 and 173 of Tengku Dato’ Ibrahim Petra Bin Tengku
Indra Petra v Petra Perdana Bhd and Another Appeal [2018] 2
MLJ 177 and Zainun Ali JCA in the Court of Appeal decision of
Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anorand Other Appeals [2012] 3 MLJ 616 at paras.239 and 240.
Securities Commission Malaysia, ‘Guidelines on Conduct of
Directors of Listed Corporations and their Subsidiaries’ SC-GL/42020
(12
April
2021),
4<https://www.sc.com.my/api/documentms/download.ashx?id=e5
c77f58-2055-4d1c-82f2-79f552a67682>.
Page 2 of the covering pages to the SC Guidelines.
Paragraph 5.02, Chapter 5 on page 7 of the SC Guidelines.
Securities Commission Malaysia, ‘Malaysian Code on Corporate
Governance’,
(28
April
2021),
2<https://www.sc.com.my/api/documentms/download.ashx?id=23
9e5ea1-a258-4db8-a9e2-41c215bdb776>.
Ibid, para. 2.8, p. 4.
Ibid, Introductory paragraphs, Section I: Board Responsibilities,
Principle A: Board Leadership and Effectiveness, p. 15.

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sustainability.38 The Corporate Governance
Guide 2017 (3rd edition) issued by Bursa
Malaysia Berhad39 (Bursa Malaysia) further
elaborates on this latter point by explaining thatstakeholders are now more aware of the impactthat businesses have on the economy,
environment and society, and therefore
relevant economic, environmental and social
considerations should be embedded in thecompany’s
businessstrategies
andoperations.40
In light of the above, it is imperative that
directors evaluate and incorporate climate risks
and considerations in their board decisions, as
it can be anticipated that the Malaysian courts
would likely step in to align the law with modern
circumstances by expressly endorsing climatechange as a key consideration for determining
if a director was carrying out his duties understatute and common law to act in the bestinterest of the company.

emissionofenvironmentallyhazardous
substances into different areas of theenvironment above prescribed limits. For
example, the Environmental Quality (Prohibitionon the Use of Chlorofluorocarbons and Other
Gases as Propellants and Blowing Agents)
Order 1993 was introduced under the EQA

1974 pursuant to Malaysia’s ratification of theMontreal Protocol43 to prohibit the use ofcontrolled
substancessuchaschlorofluorocarbons, one of the primary
greenhouse gases contributing to climatechange.

If directors do not proactively take into accountand mitigate against climate-related risks andinformation in their board decisions and in theoperations of the companies of which they are
directors, they risk exposing themselves tostatutory liability and common law actions
which can manifest as tangible risks to thecompany.41
Furthermore, directors can be found personallyliable under the Environmental Quality Act 1974
(EQA 1974) for allowing practices by its
companies that are harmful towards theenvironment, unless such director can provethat the offence was committed without his
consent or connivance, and that he had
exercised all such diligence to prevent thecommission of the offence.42 In specific relation
to climate change, the EQA 1974 and certain
regulations made under it generally prohibit the

38

39

40

Ibid, para. G1.1, Section I: Board Responsibilities, Principle A:
Board Leadership and Effectiveness, p. 17.
Bursa Malaysia is a listed exchange holding company with several
subsidiaries, including Bursa Malaysia Securities Berhad, and isunder the purview of the SC and Ministry of Finance.It is theoperator and regulator of Bursa Malaysia, the Malaysian stock
exchange.
Bursa Malaysia, ‘Pull-Out I: Guidance on Board Leadership andEffectiveness of the Corporate Governance Guide 2017 (3 rdedition)’(2017),
16<https://bursamalaysia.s3.amazonaws.com/reports/Consolidated_CG_Guide_
3.PDF>. Given that the MCCG has been revised on 28 April 2021,
we anticipate that the Corporate Governance Guide 2017 (3rd ed.)may be subsequently revised. However, such revised version has
not yet been published at the time of writing.

41

42
43

See Tan Sri Zarinah Anwar and To’ Puan Janet Looi, Legal
Opinion on Directors’ Duties and Disclosure Obligations under
Malaysian Law in the context of Climate Change Risks andConsiderations
(22
July
2022)
<https://commonwealthclimatelaw.org/legal-opinion-ondirectors-duties-and-disclosure-obligations-under-malaysianlaw-in-the-context-of-climate-change-risks-andconsiderations/>.
Section 43 of the EQA 1974.
Department of Environment Malaysia, ‘Malaysia HCFC Phase-Out
Management Plan (HPMP Stage-2)’ (2017-22), 11-12<https://www.doe.gov.my/portalv1/wpcontent/uploads/2017/12/Buku-HPMP-Stage-2_Part1.pdf>.

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Directors' Disclosure
Climate Change

Obligations

andThere are a number of disclosure requirements
and initiatives specific to PLCs that need to beconsidered by the directors of those entities.
Chapter 15 of the Main Market Listing
Requirements44 (updated as at 1 June 2020)
issued by Bursa Malaysia Securities Berhad 45(Bursa Malaysia Securities) imposes arequirement on PLCs to ensure that theirdirectors provide an overview of the applicationof the principles set out under the MCCG in theannual report of the PLCs.46 Furthermore, thePLCs would need to disclose the application ofeach of the “practices” set out under the
MCCG, i.e. action items that PLCs are expectedto adopt to achieve a specific outcome, during
the financial year, to Bursa Malaysia Securities
in the prescribed format and announce thesame together with the announcement of its
annual report.47 As mentioned in the preceding
section, the MCCG provides that directors
should ensure that the strategic plan of thecompany
includeenvironmental
considerations.
Furthermore, Chapter 9 of the Main Market
Listing Requirements (updated as of 1 March
2021) issued by Bursa Malaysia Securities
provides that a PLC needs to include a narrative

44

45

46

To note that in the Federal Court judgment of Bursa Malaysia
Securities Berhad v Mohd Afrizan bin Husain Federal Court of
Malaysia Civil Appeal No.: 02(f)-39-07/2021(W), the question oflaw concerning the interpretation of the Main Market Listing
Requirements had been considered, and it was held that there isboth a statutory and independent contractual relationshipbetween Bursa Malaysia Securities and the PLCs, including its
directors, Please see the summary of the judgment provided by
Skrine Advocates & Solicitors at Nimalan Devaraja and Ann Tiang
Wen En, ‘Federal Court: Bursa Securities has discretion tomaintain listing of Wound-Up Company – Liquidators must ensurecompliance with Listing Requirements while Company remains
listed’ (Skrine Advocates & Solicitors, 13 January 2022)<https://www.skrine.com/insights/alerts/january-2022/federalcourt-bursa-securities-has-discretion-to-m>. Furthermore, it had
also been reported that the High Court had cited theaforementioned decision of the Federal Court in dismissing Serba
Dinamik Holdings Berhad’s (Serba Dinamik’s) application to seek
an injunction on Bursa Malaysia Securities to prohibit the samefrom forcing Serba Dinamik to release the fact-finding update by
Ernst & Young Consulting Sdn. Bhd., given the undertaking that
Serba Dimanik has with regards to contractual obligations with
Bursa Malaysia Securities: see Hafiz Yatim, ‘High Court strikes out
Serba Dinamik’s bid to stop Bursa Malaysia from compellingcompany to release fact-finding update’, The Edge Markets (10February 2022) <https://www.theedgemarkets.com/article/highcourt-dismisses-injunction-application-serba-dinamik-stoprelease-factfinding-update>.
Bursa Malaysia Securities is a wholly-owned subsidiary of Bursa
Malaysia and provides, operates and maintains the securities
exchange.
Paragraph 15.25(1) of the Main Market Listing Requirements.

statement of its management of material
economic, environmental and social risks andopportunities (Sustainability Statement), in themanner as prescribed by Bursa Malaysia
Securities, in its annual report. 48 The
Sustainability Reporting Guide 2018 (2ndedition) issued by Bursa Malaysia Securities
provides further elucidation on the manner ofpreparation and information to be included in
the Sustainability Statement.49
In its 2020 Sustainability Report, Bursa Malaysia
stated that it became an official supporter of therecommendations of the TCFD in 2018.50
Furthermore, it had in 2020 joined the United
Nations Sustainable Stock Exchanges Initiative
Advisory Group on Climate Disclosure, a newworkstream launched in 2020 that aims to
support exchanges in developing best practiceguidance for issuers on climate-related
disclosures,51
and
also
organiseda‘Sustainability Thematic Workshop on Climate
Change: Practical Steps in Measuring andManaging Greenhouse Gas (GHG) Emissions’,
aimed at providing guidance to PLCs on
measuring and managing GHG emissions using
widely-recognised frameworks and standards.52
Bursa Malaysia has also previously launched
the FTSE4Good Bursa Malaysia Index (F4GBM
Index) on 22 December 2014. 53 To be includedin the index, companies need to meet a varietyof ESG inclusion criteria.54 The PLCs included

47
48

49

50

51
52
53

54

Paragraph 15.25(2) of the Main Market Listing Requirements.
Item 29, Part A, Appendix 9C of the Main Market Listing
Requirements, pursuant to Paragraph 9.25 of the Main Market
Listing Requirements. Paragraph 9.25(1) of the Main Market
Listing Requirements provides that a PLC must set out the items
under Part A of Appendix 9C in its annual report unless thefollowing conditions are met: (a) the information has beenpreviously announced or disclosed to shareholders pursuant to
the Main Market Listing Requirements, or remains substantiallyunchanged from year to year; (b) the PLC publishes suchinformation on its website and (c) the PLC discloses in the annual
report, the address of its website and the place on its website
where the information can be accessed.
Bursa Malaysia Securities, ‘Sustainability Reporting Guide 2018’(2nd
edition)(2018)<https://bursamalaysia.s3.amazonaws.com/reports/Bursa%20Malaysia%20Su
stainability%20Reporting%20Guide%20(2nd-Edition).pdf>.
Bursa Malaysia, ‘Bursa Malaysia 2020 Sustainability Report’(2020),
4,7,43<https://www.bursamalaysia.com/sites/5d809dcf39fba22790cad
230/assets/60409d0b39fba231285dd4c8/_Interactive_PDF__B
URSA_SR2020_Final_R1.pdf>.
Ibid, 2 8, 37, 44 and 40.
Ibid 22, 44 and 80.
See Bursa Malaysia, ‘Bursa Malaysia announces launch ofEnvironmental, Social and Governance Index (22 December
2014)<https://www.bursamalaysia.com/about_bursa/media_centre/bu
rsa-malaysia-announces-launch-of-environmental-social-andgovernance-index>.
For further details of the criteria, see Section 6, page 12 of the
FTSE4 Bursa Malaysia Index Ground Rules v2.0 (December106Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Malaysia

in the F4GBM Index are listed publicly on theofficial website of Bursa Malaysia55 and are able
to increase their profile and exposure,56 whilst
attracting investors who want to incorporate
ESG elements into their investment decisions.57
Assessments are based on publicly-available
data sources and therefore PLCs areencouraged to ensure that high quality data andinformation are provided publicly on theirpractices.58
On 23 March 2022, Bursa Malaysia issued aconsultation
paper
on
the
proposed
amendments to the Main Market Listing
Requirements and ACE Market Listing
Requirements to (i) require disclosure ofprescribedsustainability
matters59
andindicators that are deemed material for listed

issuers across all sectors; (ii) introduce climatechange related disclosures in line with therecommendations of the TCFD; (iii) require
disclosure of prescribed sustainability mattersand indicators that are deemed material for
listed issuers in specified sectors; (iv) introduce
enhanced disclosure requirements of thecompanies’ quantitative information on material
sustainability matters; and (iv) require astatement on whether the Sustainability
Statement (as defined above) has beeninternally reviewed and independently assured,and if so, the scope covered by the review orassurance.60 These requirements are proposed
to be effective for Sustainability Statements
issued either for the financial year ending on orafter 31 December 2023 or on or after 31
December 2024.61

2020) issued by the London Stock Exchange Group plc: see
Bursa Malaysia and FTSE Russell, FTSE4Good Bursa Malaysia
Index
GroundRules
v2.3(April2022)<https://research.ftserussell.com/products/downloads/FTSE4Go
od_Bursa_Malaysia_Index_Ground_Rules.pdf?_ga=2.24016838
5.376282776.1604501061-1755973650.1601360556>, to beread together with Section 6, pages 13-16 of the FTSE4 Good
Index Series Ground Rules v4.2 (March 2021) issued by the
London Stock Exchange Group plc: see FTSE Russell,
FTSE4Good Index Series Ground Rules v4.6 (June 2022)<https://research.ftserussell.com/products/downloads/FTSE4Go
od_Index_Series_Ground_Rules.pdf?_ga=2.6678256.37628277
6.1604501061-1755973650.1601360556>.
Bursa Malaysia, ‘ESG Ratings of PLCs Assessed by FTSE
Russell# in Accordance with FTSE Russell ESG Ratings
Methodology’,<https://www.bursamalaysia.com/sites/5d809dcf39fba22790cad
230/assets/5f30cfff5b711a0bfc0d8a01/ESG_Ratings_of_PLCs_
assessed_by_FTSE_Russell_n_Index_Constituents_June2020.p
df>.
Ibid. See also Bursa Malaysia, ‘FTSE4Good Bursa Malaysia ESG
Scores on Malaysian Public Listed Companies Now Available on
Bursa
Malaysia
Website’(14
August2020)<https://www.bursamalaysia.com/about_bursa/media_centre/fts
e4good-esg-scores-on-malaysian-public-listed-companies-now-

available-on-bursa-malaysia-website> and Bursa Malaysia,‘FTSE4Good Bursa Malaysia Index’ (16 March 2018)<https://bursasustain.bursamalaysia.com/dropletdetails/resources/ftse4good-bursa-malaysia-index>.
Ibid.
See Bursa Malaysia, ‘FTSE4Good Bursa Malaysia Index’ (16March 2018) <https://bursasustain.bursamalaysia.com/dropletdetails/resources/ftse4good-bursa-malaysia-index>.
We note that para. 6.2 of Practice Note 9 of the Main Market
Listing Requirements defines “sustainability matters” aseconomic, environmental and social (EES) risks andopportunities.
Bursa Malaysia, Consultation Paper No. 1/2022: Review of the
Sustainability Reporting Requirements under the Main Market andACE Market Listing Requirements (23 March 2022)<https://www.bursamalaysia.com/regulation/public_consultation>, feedback to which is being received up to 18 May 2022.
The proposals under (i) (for sustainability matters on anticorruption, community / society, diversity, energy management,
health and safety, labour practices and standards, supply chain
management, data privacy and security and water), (iv) and (v)shall be effective for financial statements ending on or after 31
December 2023, whilst the proposals under (i) (for sustainability
matters on emission management), (ii) and (iii) shall be effective
for financial statements ending on or after 31 December 2024.

55

56

57
58

59

60

61

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Practical considerations for directors
Given the increasing focus of Malaysian capital market and financial regulators on climate change andsustainability issues, including an increased emphasis on climate-related risk management; the potential
for increased mandatory obligations on climate-related disclosures; and the potential for legislation
requiring nationwide reductions in greenhouse gases, well-counselled directors of Malaysiancompanies should:a) delegate climate risk identification and evaluation to a clearly identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board within 3 to 6 months a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear
interim targets for 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance,
scenarios / strategy, nominations / remuneration, or sustainability / corporate responsibility, thetask of translating the long-term strategy into a clear decision-making process for each aspectthat is relevant to each committee; andd) discuss disclosure obligations and best practice with appropriate counsel and subject experts,
in order to develop an external engagement and communications plan.
Contributors:

To’ Puan Janet Looi, SKRINE Malaysia
Francine Ariel Paul, SKRINE Malaysia
Bar Council Environment & Climate Change Committee

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Mexico“Climate change and environmental degradation constitutes a challenge

at national and global levels and is a source of financial risk.”

Climate-related risks are a source of financial risk. Therefore it is within
the mandate of central banks and supervisory bodies to ensure that thefinancial system is resilient to these risks.
Banco de México considers it is imperative to promote, throughout thefinancial sector, the best assessment of climate, environmental and social
risks and opportunities.”
Alejandro Díaz de León, Governor of Banco de México
Mexico City, 19 November 2021
XLIX IMEF National Convention“The focus of the economic recovery should be on reducing social gaps and climate change.

We need to move towards sustainable finance in order to mobilize resources to address climate changerisks and achieve sustainable development goals.
We would like Mexico to begin to mobilize capital in the medium and long term to move more quickly
towards a green growth path, for banks to disseminate information on risks associated with climatechange but also to evaluate the impact of climate change on their projects and portfolios. ”
Gabriel Yorio, Undersecretary of Treasury and Public Credit of The United Mexican States
Mexico City, 20 November 2020
XLVIII° Convention of the Mexican Institute of Finance Executives
Banco de México (Banxico) is a founding
member of the Network of Central Banks andSupervisors for Greening of the Financial
System.1 In 2020, Banxico proposed thecreation of the Sustainable Finance Committee
within the Financial System Stability Council in
Mexico (the Committee), which is chaired by
the Ministry of Finance.2 The Committee istasked with matters such as improving climate
disclosures and creating a taxonomy forsustainable finance.
Banxico is also leading on an ESG disclosureand risk capacity-building and financial
education programme aimed at financial
institutions and financial market participants
with the Committee, producing a framework forclimate-related macro-financial risks, and has
created the Directorate of Analysis and Policies
of Environmental and Social Risk, which canwork with a range of parties to create
sustainability regulations, alongside various

1

Some of the companies that are supporters of the Task Forceon Climate-Related Financial Disclosure and are active
promoters of disclosure of climate risks are: Afore XXI Banorte,
Cemex, BIVA, Citibanamex, Citibanamex Afore, Fresnillo,
Orbia and Funo. Raquel Rosas and Gabriela Niño, ‘Official
Launch of the TCFD Mexico Consortium’ (17 December 2021)<https://iki-alliance.mx/en/lanzamiento-oficial-del-consorciotcfd-mexico/>.

other mandated activities. The effect of theactivities of the Committee include, among
others: (i) new regulation for financial and nonfinancial entities; (ii) development of asustainable financial taxonomy that favours
sustainable development in the activities andservices carried out in the financial system; (iii)
the integration of climate and ESG risk factors
in supervisory and financial market activities,(iv) improvements in the amount and quality of
disclosures and reporting by non-financial andfinancial institutions, (v) and the enabling ofconditions to increase sustainable capital
mobilization.3

23

Banco de México, 2021: Año de la Independencia (4November2021)<www.banxico.org.mx/financialsystem/d/%7B80FDF3B4-F5C1-E88F-442EEF77C6A7BE59%7D.pdf>.
Banco de México, 2021: Año de la Independencia (4November2021)<www.banxico.org.mx/financialsystem/d/%7B80FDF3B4-F5C1-E88F-442EEF77C6A7BE59%7D.pdf>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
MexicoDirectors’ Duties and Climate Change
Directors’ duties and liabilities are regulated bydifferent legal frameworks depending onwhether a company is private, listed, or
prudentially regulated, such as financial
institutions.

A. Private companies
Companies Law (Ley General deSociedades Mercantiles) regulates corporateThegovernancein
privatenon-regulatedcompanies, setting forth the role, duties,
obligations, authority and liability of theirdirectors.
Directors’ liabilities pursuant to the Companies
Law are threefold. Directors are liable for any
breach of: (i) their obligations under thecompany by-laws; (ii) their obligations underapplicable laws and regulation; and (iii) the
obligations inherently stemming from theirposition as directors of the company.
Directors not only have a responsibility tocomply with objective duties established in the
by-laws of the company and applicable laws
and regulation, but also have a fiduciary duty tocomply with all those obligations inherent totheir responsibility to manage the company.
Pursuant to article 142 of the Companies Law,
directors are “mandatarios” of the company.
Under the concept of mandato, an agency
relationship entailing particular responsibilities
between the directors and the shareholders isestablished.
The legal concept of a mandatario incommercial law is regulated by the Third Title of
the Commercial Code under the concept of“comisión mercantil”. Pursuant to articles 286
and 287 of the Commercial Code, acomisionista must follow the instructions of its
principal; in the event that there are no express
instructions, the comisionista must consult withthe principal, and if that is not possible, thecomisionista “… shall act prudently, taking careof the business as if it were his own.” The duties
of a director entail a personal responsibility anddemand utmost due care.
Pursuant to article 157 of the Companies Law,
directors “have the responsibilities inherent totheir mandate”. Shareholders are the principalsof the directors, who give them the mandate ofmanaging the company. Therefore, the board of
directors is ultimately accountable to theshareholders, and only shareholders and thecompany are entitled to demand compensation
for damages caused by breaches of directors totheir duties.
Mexican Courts have issued persuasive (nonbinding) precedents (tesis aislada) that provide
guidance on what may be interpreted to be theobligations inherently stemming from theposition of directors. The precedents provide atest to confirm if the directors have compliedwith their fiduciary duties. Accordingly, it shallbe deemed that directors are in compliancewith their fiduciary duties: (i) if they are following
and complying with the instructions expressly
given to them; (ii) if they have no express
instructions, then they shall act based on proper
advice and consultations; and (iii) in case there
are no express instructions and it is not possible
for them to act under proper advice andconsultations, then they must act prudently andwith utmost due care, considering the businesspurpose of the company. Considering that thedirectors are the legal representatives of thecompany, and their authority is established in
the bylaws, the directors’ authority is limited by
the business purpose of the company.
The precedents further clarify that if this test is
not met and there is a causal link between the
conduct of the director and a damage to, or lossof profit by, the company, then it shall bedeemed that the director is liable for thedamages caused as a consequence of his/heractions or omissions in breach of his/her
fiduciary duties.
In view of these precedents and thedevelopment of a doctrine on the scope of thefiduciary duties of directors and in particular,
those duties of diligence and care, it follows that
directors are liable for any damage caused tothe company by their actions or inactions;provided, however, that directors are released
from liability if (i) they received express
instructions by the shareholders, and either: (ii)they acted based on proper advice and after
having made the appropriate consultations on
the manner in which they must take actions, or(iii) they acted prudently and with utmost due
care.
Mexican law does not establish objective
parameters with regard to the scope of fiduciary
duties. The scope of the directors’ fiduciary
duties, for example, in terms of having a longterm or medium-term perspective, is relative
and would depend on the industry or businessin question and the specific risks the businessis subject to.
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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
MexicoThere are certain industries and regions in
Mexico that are highly susceptible to thephysical effects of climate change. Thesephysical effects of climate change are notorious
facts, since they are widely known anddocumented, for example, in publications of
Banxico and other authoritative sources;4
therefore, no director could reasonably claimthat he/she was unaware of this risk. Based on
Mexican precedents, notorious facts are thosethat by human knowledge are consideredcertain and indisputable, whether they pertain
to history, science, nature, related to current
public life or circumstances in a certain placethat are well known. It therefore follows that any
such risks shall be deemed material for both
short-term and long-term decisions, and that
directors will be held responsible for giving
them due consideration in their oversight of risk
management and strategic planning.

floods and fires have increased in
Mexico, including:a.

b. The loss of the Ayoloco glacier of
the Iztaccihuatl volcano.
c.

To illustrate the foregoing, we could consider
the following cases of physical risks in Mexico.
1.

4

Hurricanes,
droughts,
landslides,
extreme temperatures, torrential rains,

See, e.g. Bank of Mexico, Climate and Environmental Risks andOpportunities in Mexico’s Financial System: From Diagnosis to
Action (February 2020) <https://www.banxico.org.mx/sistema-

Floods in the State of Mexico,
Jalisco and Chihuahua in 2021.

d. Drought of dams in a large part ofthe country, such as Lake Cuitzeo
in Michoacán.
e.

Fires consumed 617,142 hectares
in 2021, which is almost double theprevious year's figure.

f.

Fires consumed 7,000 hectares offorest in Coahuila and Nuevo
León.

g. The Atlantic tropical cyclone
season broke a record with a totalof 30 hurricanes.

Considering that scientific research andevidence are clear on the irreversible effects ofthese physical risks and the necessity to reducetransition and liability risks on climate-relatedchanges, it is our opinion that directors who do
not explicitly take into account the risks andopportunities resulting from the effects thatclimate change will have on the operations,finances, credit, market, liquidity, profitability
and reputation of their companies are in breachof their fiduciary duties, and may be held liableaccordingly.
The liability of directors is contingent on thebusiness suffering the negative effects ofclimate change and damages or losses caused
therefrom. The fact that these negative effects
have not been materialized might preclude
directors from taking immediate action or being
sensitive to their fiduciary duty in the long-term;
however, directors’ lack of awareness of theurgent need to take immediate and ambitious
action does not exempt them from having suchliability, because such need is now a notorious
fact, inasmuch as information regarding climatechange risks is now ubiquitous.

The overflowing of the Tula River.

These cases, the likelihood and impactof which were increased by climatechange, had an impact on multiple
sectors in Mexico, affecting theiroperations, finances, and profitability.
Directors have had to take actions tocompensate the effects of these
events, even if they did not
acknowledge that such events werecaused by climate change. The lack ofinterest and recognition of these events
as a consequence of global warming
could make the directors liable for theiromissionsin
identifying
andimplementing measures to reducetransition risks.
2.

Rising sea levels are likely to have an
impact on the tourism sector in certain
coastal areas in the Southeast of
Mexico by 2050 at the latest. In thesecases, the directors of, for example,
companies
developing
hotel
infrastructure must take into accountthe effects of global warming and therise in sea levels to make decisions in
the medium and long term. If thedirectors do not consider such animportant risk in their decision-making

financiero/d/%7B3A8C7F15-9FE1-9A2A-DCF76C6D11A0E1DB%7D.pdf>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexicoprocess, the shareholders may holdthem accountable for the damages tothe business caused by the sea level
rises resulting from the omission in
taking actions to prevent any such
effects.
As noted, the liability would not be triggered
until such time as the business suffereddamages or losses and there were a causal link
between the acts or omissions of the directors
and the damages or losses. To the extent thatthe direct and indirect effects of climate change
were to start to manifest in the operations,finance and profitability of business, directors
would be liable if they failed to meet the test
above and there were a causal link between the
conduct (act or omission) of the director anddamages or loss of profit suffered by thecompany.

B. Non-listed companies
The Companies Law does not explain whatmust be understood by “acting prudently andwith utmost due care”; however, inasmuch as
the Stock Market Law (Ley del Mercado deValores) does clarify the meaning of the terms‘duty of diligence’ and ‘duty of care’ for
directors of listed companies, these are impliedduties for directors of private companies, andmay be reasonable to construe such definitions
as setting a valid standard for what shall be theirduties of directors under the Companies Law as
set forth above and in the judicial precedents.

C. Listed companies
Corporate governance of listed companies ismainly regulated by the Stock Market Law.
The Stock Market Law expressly regulates theduties of diligence and loyalty borne bydirectors of publicly-traded companies, and as
explained above, the scope of the duty of
diligence and duty of loyalty may be used toconstrue the scope and extent of the obligationof directors to act prudently and with utmost
due care, as express duties of directors.
Pursuant to the Stock Market Law:(i)the duty of diligence requires
acting in good faith and in the bestinterests of the company; being
duly qualified, prepared andinformed regarding all aspects thatare relevant to the correct

operation of the company; and
using
the
resources
andorganisation of the business toachieve the greatest possible
efficiency in its operation andmanagement of financial risks; and(ii)

the duty of loyalty refers to putting
the interests of the company first at
all times, including but not limited
to the inherent obligation to keepcompany information confidential,
and to make decisions devoid ofconflicts of interest.

D. Regulated companies
Corporate governance of regulated entities,
such as financial institutions, is subject tospecific regulation contained in the law
applicable to the respective entity.
General fiduciary duties are also applicable toregulated companies in relation to their specificregulations.
As at the time of writing, there is no explicit
regulation regarding the obligations of financial
entities or their directors to addressenvironmental risks, with the notable exceptionof private pension funds ( Administradoras deFondos Para el Retiro - AFORES) being subject
to a requirement to assess the ESG factors of
their investments as of January 2022.

E. Extra-Contractual Duties
The fiduciary duties that have been describedabove are in all cases contractual duties, as
they derive from the contractual relationshipbetween the shareholders and the directors,
and therefore, only the shareholders areentitled to demand compensation if directors
breach their duties causing financial damage tothe company.
Mexican law also considers extra-contractual
liability that may be attributed to the directors
for a breach of the law or of good practices(buenas costumbres), based on article 1910 of
the Federal Civil Code. Moreover, the Mexican
Constitution provides the general obligation of
the private sector to act with “social
responsibility”, as it states in article 25 that “Thepublic, social and private sectors shall concur,with social responsibility, to the national
economic development …”

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
MexicoFrom the environmental perspective, Mexico
has legislation that imposes sanctions oncompanies for damaging the environment,
either by action or omission of their board of
directors. Article 24 of the Environmental
Responsibility Federal Law (Ley Federal de
Responsabilidad Ambiental) states thatcompanies are liable for the environmental
damage caused by their managers, officers,
directors and employees, and any staff with
control over the operations of the company ifthey omit or act within their authority inrepresenting the company, or when they order
or agree on actions that damage theenvironment.
Irrespective of their contractual obligations
under the by-laws of the companies in which
they serve as directors, directors shall, in allcases, act in accordance with good practices
and assume their social responsibility.
As of this writing, there are no judicial
precedents or guidance on what shall bedeemed good practices or assuming one’ssocial responsibility.
Directors’ Disclosure
Climate Change

Obligations

andThe Companies Law establishes that directors
must present an annual financial report toshareholders, including financial statements
and information describing the financial state of
the company.5 There is no explicit obligation todisclose information about potential climate
risks; however, such an obligation may be

5

Pursuant to article 172 of the Companies Law, at least thefollowing information must be presented to shareholders every
year: an explanation of the general state of the company main
policies implemented and key projects; an explanation of theaccounting standards used to prepare the financial information;
the updated finances of the company; a report on the changesof the general finances and assets of the company; and any
note or clarification regarding the information provided.

inferred as part of the fiduciary duty of
diligence, and to the extent that the risks ofclimate change are reasonably considered, as
they increasingly are, to be material to thebusiness and purpose of the company.
In the case of listed companies, pursuant to the
Stock Market Law, directors must disclosematerial information or events to the generalpublic. The legislation does not expressly
establish the obligation to disclose climaterelated risks, but they must be disclosed to theextent that they are considered material events.
The omission of any disclosure of material
events,orthemakingofmaterial
misstatements, may give rise to financial
sanctions.
In recent years, the Mexican stock markets anda significant number of listed companies havebeen active in promoting the disclosure of ESG
information
andadherencetorecommendations of the Task Force on
Climate-related Financial Disclosures (TCFD)
and the Sustainability Accounting Standards
Board (SASB) standards.6 In December 2021,
the TCFD Mexico Consortium was launched.7
The Consortium works in support of theintegration and disclosure of climate-related
financial risks, and along with the then Governorof Banco de México Alejandro Díaz de León,
noted the importance of adopting the TCFD
recommendations.
At the time of writing, ESG disclosure andadherence to the TCFD recommendations,
SASB standards, or any other climate or ESG
disclosure standard are voluntary.

67

Some of the companies that are supporters of the Task Forceon Climate-Related Financial Disclosure and are active
promoters of disclosure of climate risks are: Afore XXI Banorte,
Cemex, BIVA, Citibanamex, Citibanamex Afore, Fresnillo,
Orbia and Funo.
Raquel Rosas and Gabriela Niño, ‘Official Launch of the TCFD
Mexico Consortium’ (17 December 2021) <https://ikialliance.mx/en/lanzamiento-oficial-del-consorcio-tcfdmexico/>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
MexicoPractical Implications for Directors
Notwithstanding the slow pace at which Mexican regulators have been issuing and implementing
regulation regarding the adoption of climate resilience measures in business practices and disclosures,companies must act based on their own analysis of risk and scenarios to adopt climate resiliencemeasures and disclosures to prevent potential financial damages. In this sense, well-counselled boards
will:a) expressly acknowledge and define the responsibility of the board to identify climate risk andopportunities and appoint a clearly-identified team in management tasked with reporting
directly to the CEO and board;b) include in the agenda of the board the development of a climate transition roadmap to 2050
with transparent carbon neutrality and reduction targets, with clear interim targets to 2030 and
2040, and a current rolling multi-year strategic plan, with periodic reporting to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, in order to develop an external engagement andcommunications plan.
As a practical consideration, on 3 November 2021 the International Reporting Standards Foundation(IFRS) Trustees, created the International Sustainability Standard Board (ISSB) to help the demand of
an increasing calling of global investment portfolios, for high quality, transparent, reliable andcomparable reporting by companies on climate and other ESG matters. Directors must take into
consideration that these reporting standards will most likely shape international practice onsustainability-related disclosure standards, considering that they will provide investors and other capital
market participants with information about companies’ sustainability-related risks and opportunities.81
The Securities Exchange Commission (SEC) proposed new guidelines in March 2022, to improve andstandardize climate-related disclosures in order to meet investor needs. Many issuers are actively
attempting to address investor demand for this information, but current disclosure methods are
fragmented and uneven. The proposed rules will make it easier for issuers to disclose these risks morehomogeneously, which will benefit both investors and issuers.
As of this date, there is no specific date as to when these rules will enter into force, but it is assumed
that the proposed rules will be adopted with an effective date in December 2022.
Contributors:

8

Yves Hayaux du Tilly L., Nader, Hayaux & Goebel Mexico
Enrique Salcedo R., Nader, Hayaux & Goebel Mexico

IFRS, ‘About the International Sustainability Standards Board’ (accessed 18 May 2022) <https://www.ifrs.org/groups/international-sustainabilitystandards-board/>.

114

Mexico (Spanish)“El cambio climático y la degradación ambiental representan retos
importantes y crecientes a nivel nacional y global y conllevan riesgos,
pero también oportunidades para el sistema financiero.
Los diversos eventos climáticos catastróficos, agudos o crónicos y ladegradación de los ecosistemas afectan la productividad, [por lo que] losbancos centrales y los organismos supervisores deben incentivar y
procurar que el sistema financiero sea cada vez más consciente yresiliente ante estos riesgos.
Los bancos centrales y los organismos supervisores deben incentivar y procurar que el sistema
financiero sea cada vez más consciente y resiliente ante estos riesgos.”
Alejandro Díaz de León, Gobernador del Banco de México
Ciudad de México, 19 de noviembre de 2021
XLIX Convención Nacional del IMEF
“queremos impulsar una agenda donde establezcamos criterios para la movilización de capital con
criterios sustentables, no sólo verdes, sino también, enfocados a cerrar brechas sociales”.
Debemos avanzar hacia las finanzas sostenibles para movilizar recursos que permitan enfrentar losriesgos del cambio climático y alcanzar los objetivos de desarrollo sostenible.
“Quisiéramos que en el mediano y largo plazo México empiece a movilizar capital para movernos más

rápido a una senda de crecimiento verde, que los bancos hagan una divulgación de información sobre
riesgos asociados a cambio climático pero que también evalúen el impacto de cambio climático en sus
proyectos y cartera”

Gabriel Yorio, Subsecretario de Hacienda y Crédito Público de los Estados Unidos Mexicanos
Ciudad de México, 20 de noviembre de 2020
XLVIII° Convención del Instituto Mexicano de Ejecutivos de Finanzas
El Banco de México (Banxico) es miembro
fundador de la Red de Bancos Centrales ySupervisores para Enverdecer el Sistema
Financiero.1 En 2020, Banxico propuso lacreación del Comité de Finanzas Sostenibles
dentro del Consejo de Estabilidad del Sistema
Financiero en México, el cual es presidido por
la Secretaría de Hacienda y Crédito Público.2 El
Comité se encarga de asuntos como la
optimización de las divulgaciones climáticas yla creación de una taxonomía para las finanzas
sostenibles. Banxico también preside unprograma de capacitación y educación
financiera en materia de divulgación y riesgos
ASG dirigido a las instituciones financieras y a
los participantes en los mercados financieros,
elaborando un marco para los riesgos macro-financieros relacionados con el cambio
climático, y ha creado la Dirección de Análisis y
Políticas de Riesgos Ambientales y Sociales,
que trabaja con diversas entidades para crear
normativas de sostenibilidad, además de otras
actividades que le han sido encomendadas. Los
efectos de las actividades del Comité incluyen,
entre otros: (i) desarrollar una nueva regulaciónpara las entidades financieras y no financieras;(ii) el desarrollo de una taxonomía financiera
sostenible que favorezca el desarrollo
sostenible en las actividades y servicios
realizados en el sistema financiero; (iii) la
integración de los factores de riesgo climático yde ASG en las actividades de supervisión y delos mercados financieros, (iv) la mejora de lacantidad y la calidad de las divulgaciones e

Algunas de las empresas que apoyan al Grupo de Trabajo
sobre Divulgación Financiera Relacionada con el Medio
ambiente y son promotoras activas de la divulgación de losriesgos climáticos son: Afore XXI Banorte, Cemex, BIVA,
Citibanamex, Citibanamex Afore, Fresnillo, Orbia y Funo.
CONFIRMAR QUE ESTA ACTUALIZADA ESTA LISTA. Raquel
Rosas y Gabriela Niño, ‘Lanzamiento oficial del Consorcio

TCFD México’ (17 de diciembre de 2021) <https://ikialliance.mx/en/lanzamiento-oficial-del-consorcio-tcfdmexico/>.
Banco de México, 2021: Año de la Independencia (4 denoviembrede2021)<www.banxico.org.mx/financialsystem/d/%7B80FDF3B4-F5C1-E88F-442EEF77C6A7BE59%7D.pdf>.

1

2

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexico (Spanish)

informes de las instituciones financieras y no
financieras, (v) y la habilitación de condiciones
para aumentar la movilización de capital
sostenible.3
Los deberes de los administradores y elcambio climático
Los deberes y responsabilidades de losadministradores están regulados por diferentes
marcos jurídicos, según se trate de empresas
privadas no reguladas, de empresas bursátiles
que cotizan en bolsa o empresas reguladas, asícomo de instituciones financieras.

A.

Sociedades mercantiles

La Ley General de Sociedades Mercantiles
regula el gobierno corporativo en las empresas
privadas no reguladas, estableciendo el rol, losdeberes, las obligaciones, las facultades y la
responsabilidad de sus administradores.
La responsabilidad de los administradores deacuerdo con la Ley General de Sociedades
Mercantiles es tripartita. Los administradores
son responsables por el incumplimiento de: (i)sus obligaciones estatutarias; (ii) sus
obligaciones a las disposiciones legales yregulatorias aplicables; y (iii) las obligaciones
inherentes a su función como administradoresde la sociedad.
Los administradores no sólo tienen la
responsabilidad de cumplir con los deberes
objetivos establecidos en los estatutos de lasociedad y las leyes y reglamentos que le son
aplicables, sino que también tienen el deberfiduciario de cumplir con todas aquellas
obligaciones inherentes a su responsabilidad
de gestionar la sociedad.
De acuerdo con el artículo 142 de la Ley
General de Sociedades Mercantiles, losadministradores son mandatarios de lasociedad. De conformidad con dicho mandato,
se establece una relación de comisión
mercantil que conlleva responsabilidades
particulares entre los administradores y losaccionistas.
El concepto legal de mandatario en derecho
mercantil está regulado en el Título Tercero delCódigo de Comercio bajo el concepto de"comisión mercantil". De acuerdo con los

3

Banco de México, 2021: Año de la Independencia (4noviembre2021)<www.banxico.org.mx/financial-artículos 286 y 287 del Código de Comercio, el
comisionista debe seguir las instrucciones desu comitente; en caso de que no existan
instrucciones expresas, el comisionista debe
consultar con el comitente, y si ello no es
posible, el comisionista "... actuará con

prudencia, cuidando de los negocios como si
fueran propios". Los deberes del administrador

implican una responsabilidad personal y exigen
la máxima diligencia.
De acuerdo con el artículo 157 de la Ley
General de Sociedades Mercantiles, losadministradores "tienen las responsabilidades
inherentes a su cargo". Los accionistas son losmandantes de los administradores, quienes lesotorgan el mandato de gestionar la empresa.
Por lo tanto, el consejo de administración es
responsable ante los accionistas y sólo éstos yla sociedad tienen derecho a exigir a losadministradores una indemnización por los
daños y perjuicios causados por el
incumplimiento de sus deberes.
Los tribunales mexicanos han emitido
precedentes (tesis aisladas) persuasivos (novinculantes) que proporcionan orientación
sobre lo que debe interpretarse como las
obligaciones inherentes a los administradores.
Los precedentes proporcionan un criterio para
confirmar si los administradores han cumplido
con sus deberes fiduciarios. En este sentido, la
regla general es que los administradores deben
de actuar conforme a las instrucciones
expresas que reciban , de no existir éstas o serinsuficientes, deberán atender a asesorías yconsultas adecuadas, y ante la imposibilidad deéstas,eladministrador
debe
obrar
prudentemente y con el cuidado exigible paralos propios negocios. Considerando que losadministradores son los representantes legales
de la sociedad y que su autoridad está
conferida en los estatutos, su facultad está
constreñida al objeto social de la sociedad.
El precedente aclara además que si los
administradores incumplen con dichos criterios
y por lo tanto, a sus deberes de prudencia y
cuidado y existe una relación de causalidad
entre la conducta de los administradores –quepuede ser de acción u omisión- y un daño opérdida de utilidades a la sociedad, entonces
los actos del administrador son ilícitos y elsystem/d/%7B80FDF3B4-F5C1-E88F-442EEF77C6A7BE59%7D.pdf>.

116

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexico (Spanish)administrador es responsable por los daños
que cause.
En virtud de estos precedentes y del desarrollode una doctrina sobre el alcance de los deberes
fiduciarios de los administradores y, enparticular, de los deberes de diligencia y
cuidado, se desprende que los administradores
son responsables de los daños causados a lasociedad por sus acciones u omisiones; no
obstante lo anterior, los administradores están
exentos de responsabilidad si (i) recibieron
instrucciones expresas de los accionistas, (ii) si
actuaron con base en un asesoramiento
adecuado y después de haber realizado las
consultas pertinentes sobre la forma en la quedeben actuar, o (iii) si actuaron con prudencia ycon el máximo cuidado.
La legislación mexicana no estableceparámetros objetivos en cuanto al alcance delos deberes fiduciarios. El alcance de losdeberes fiduciarios de los administradores, por
ejemplo, en lo que respecta a tener una
perspectiva de largo o mediano plazo, es
relativo, y dependería de la industria o negocio
en cuestión y de los riesgos específicos a losque está sujeto el negocio.
Hay ciertas industrias y regiones en México que
son altamente susceptibles a los efectos físicosdel cambio climático. Estos efectos físicos alcambio climático son hechos notorios, ya queson ampliamente conocidos y documentados,
por ejemplo, en publicaciones de Banxico yotras fuentes autorizadas; por lo tanto, ningún
directivo podría alegar razonablemente que
desconocía este riesgo. Con base en losprecedentes mexicanos, los hechos notorios
son aquellos que por el conocimiento humano
se consideran ciertos e indiscutibles, ya seaque pertenezcan a la historia, a la ciencia, a lanaturaleza, que estén relacionados con la vida
pública actual o con circunstancias de un lugar
determinado que sean bien conocidas. Por lotanto, se desprende que tales riesgos seconsiderarán importantes para las decisiones
tanto a corto como a largo plazo, y que losadministradores serán responsables de darles
la debida consideración en su supervisión de lagestión de riesgos y la planificación estratégica.
Teniendo en cuenta que las investigaciones
científicas y evidencia es clara respecto a losefectos irreversibles de estos riesgos físicos y ala necesidad de reducir los riesgos detransición y por la responsabilidad que devienede los cambios relacionados con el medio
ambiente,
consideramosquelosadministradores que no tengan en cuenta losriesgos y las oportunidades resultantes de losefectos que tendrá el cambio climático en las
operaciones, las finanzas, el crédito, elmercado, la liquidez, la rentabilidad y la
reputacióndesus
empresas
están
incumpliendo sus deberes fiduciarios, y pueden
ser considerados responsables de los daños ypérdidas ocasionados.
La responsabilidad de los administradores estácondicionada a que la empresa sufra losefectos negativos del cambio climático y los
daños o pérdidas ocasionados por el mismo. El
hecho de que estos efectos negativos no sehayan materializado podría impedir que losadministradores tomen medidas inmediatas osean conscientes de su deber fiduciario a largo
plazo; sin embargo, la falta de conciencia de losadministradores sobre la necesidad urgente detomar medidas inmediatas y ambiciosas no les
exime de su responsabilidad, al ser un hecho
notorio considerando que la información sobre
el cambio climático es de todos conocida.
Para ilustrar lo anterior, podemos considerar
los siguientes casos:1.

Los huracanes, las sequías, losdeslizamientosdetierra,lastemperaturas extremas, las lluvias
torrenciales, las inundaciones y losincendios que han venido en aumento
en México, incluyendo, por ejemplo:
a. El desbordamiento del río Tula.
b. La pérdida del glaciar Ayolocodel volcán Iztaccíhuatl.
c. Las inundaciones en el EstadodeMéxico,JaliscoyChihuahua en 2021.
d. Sequía de presas en gran partedel país, como el lago deCuitzeo en Michoacán.
e. Incendios que consumieron
617,142 hectáreas en 2021, lo
que representa casi el doble
de la cifra del año anterior.
f. Los incendios consumieron
7,000 hectáreas de bosque en
Coahuila y Nuevo León.
g. La temporada de ciclones
tropicales en el Atlántico
rompió un récord con un total
de 30 huracanes.

117Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexico (Spanish)

Estos casos tuvieron un impacto en múltiples
sectores en México y fueron causados por elcambio climático, lo que afectó operaciones,
finanzas y rentabilidad de múltiples empresas.
Los administradores debieron tomar medidas
para compensar los efectos de estos sucesos,
aunque no reconocieran que dichos sucesos
son causados por el cambio climático. La falta
de interés y reconocimiento de estos eventos
como consecuencia del cambio climático
podríahacer
responsablesalosadministradores de sus omisiones en laidentificación e implementación de medidas
para reducir los riesgos de transición.
2.

El caso del sector turístico en ciertas
zonas costeras del sureste de México,
donde el aumento del nivel del mar
tendrá muy probablemente un impacto
importante en dichas zonas para el año
2050.
En
estos
casos,
losadministradores de, por ejemplo, lasempresasquedesarrollan
infraestructuras hoteleras deben teneren cuenta los efectos del cambio
climático y el aumento del nivel delmar, para tomar decisiones a medianoy largo plazo. Si los administradores notienen en cuenta un riesgo tan
importante en su proceso de toma dedecisiones,
puedenresultar
responsables por la omisión en la
adopción de medidas para prevenir los
daños que cause el aumento del nivel
del mar en la empresa.

Como se ha señalado, la responsabilidad no se
actualiza hasta el momento en que la empresa
sufre daños o pérdidas y exista un vínculo
causal entre los actos u omisiones de losadministradores y los daños o pérdidas sufridos
por la empresa. En la medida en la que losefectos directos e indirectos del cambio
climático se manifiesten en las operaciones, lasfinanzas y la rentabilidad de las empresas, losadministradores serían responsables si
incumplieron con los criterios que les imputan
responsabilidad analizados anteriormente, yexista un vínculo causal entre la conducta(acción u omisión) del administrador y los
daños y perjuicios sufridos por la empresa.

Empresas privadas no reguladas

embargo, en la medida en la que la Ley del
Mercado de Valores aclara el significado deldeber de diligencia y deber de lealtad para losadministradores de las empresas bursátiles,éstos son deberes implícitos para losadministradores de las empresas privadas no
reguladas, y puede ser razonable interpretar
dichas definiciones como el establecimiento deun estándar válido para sus deberes deadministrador bajo la Ley General deSociedades Mercantiles, tal y como se ha
expuesto anteriormente y en los precedentes
judiciales.

Empresas bursátiles
El gobierno corporativo de las sociedades
bursátiles está principalmente regulado por la
Ley del Mercado de Valores.
La Ley del Mercado de Valores regula
expresamente los deberes de diligencia ylealtad de los administradores de las empresas
bursátiles, y como se ha explicado
anteriormente, el alcance de los deberes dediligencia y de lealtad pueden utilizarse parainterpretar el alcance y la extensión de la
obligación de los administradores de actuar con
prudencia y con la máxima diligencia, comodeberes expresos de los administradores.
De acuerdo con la Ley del Mercado de Valores:i.

ii.

El deber de diligencia exige actuar debuena fe y en el mejor interés de laempresa;estar
debidamente
capacitado, preparado e informado en
relación con todos los aspectos quesean relevantes para el correcto
funcionamiento de la empresa; y utilizar
los recursos y la organización delnegocio para lograr la mayor eficiencia
posible en su funcionamiento y en lagestión de los riesgos financieros; yEl deber de lealtad se refiere a
anteponer en todo momento losintereses de la empresa, lo que incluye,
entre otras cosas, la obligación
inherentedemantenerlaconfidencialidad de la información de laempresa y de tomar decisiones
exentas de conflictos de intereses.

La Ley General de Sociedades Mercantiles no
explica qué ha de entenderse por " actuar con
prudencia y con la máxima diligencia"; sin
118

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexico (Spanish)

B.

Empresas reguladas

El gobierno corporativo de las entidades
reguladas, como las instituciones financieras,
está sujeto a una regulación específica prevista
en la ley aplicable a la respectiva entidad.
Los deberes fiduciarios también son aplicables
a las empresas reguladas en relación con su
normativa específica.
A la fecha de redacción de este informe, no
existe una regulación expresa sobre las
obligaciones de las entidades financieras o desus administradores para hacer frente a losriesgos ambientales, con la notable excepciónde que las Administradoras de Fondos Para el
Retiro (AFOREs) están sujetas a la obligaciónde evaluar los factores Ambientales, Sociales yde Gobernanza (ASG) en sus inversiones apartir de enero de 2022.

C.

Deberes extracontractuales

Los deberes fiduciarios descritos anteriormente
son en todos los casos deberes contractuales,
ya que derivan de la relación contractual entre
los accionistas y los administradores, y por lotanto, sólo los accionistas y la sociedad tienen
derecho a exigir una indemnización si los
administradores incumplen sus deberescausando un perjuicio económico a lasociedad.
El derecho mexicano también contempla laresponsabilidad extracontractual que se puede
atribuir a los administradores por el
incumplimiento de la ley o de las buenas
costumbres, con base en el artículo 1910 delCódigo Civil Federal. Adicionalmente, laConstitución Política de los Estados Unidos
Mexicanos establece la obligación general delsector privado de actuar con "responsabilidadsocial", al señalar en su artículo 25 que "Aldesarrollo económico nacional concurrirán, conresponsabilidad social, el sector público, el
sector social y el sector privado ..."

Desde el punto de vista ambiental, México
cuenta con legislación que impone sanciones alas empresas que dañen el medio ambiente, ya
sea por acción u omisión de su consejo deadministración. El artículo 24 de la Ley Federal
de Responsabilidad Ambiental señala que las

4

De acuerdo con el artículo 172 de la Ley General deSociedades Mercantiles, cada año se debe presentar a losaccionistas, como mínimo, la siguiente información: una
explicación de la situación general de la empresa, de lasprincipales políticas aplicadas y de los proyectos más

empresas son responsables del daño ambiental
causado por sus administradores, funcionarios,
y empleados, y cualquier persona que controle
las operaciones de la empresa si omiten oactúan dentro de sus facultades enrepresentación de la empresa, o cuando
ordenan o acuerdan acciones que dañan elmedio ambiente.
Con independencia de las obligaciones
contractuales que les impongan los estatutos
de las sociedades en las que ejercen como
administradores, éstos deben actuar en todo
momento conforme a las buenas prácticas yasumiendo su responsabilidad social.
A la fecha de redacción de este documento, no
existen precedentes judiciales ni criterios sobre
lo que debe considerarse como buenas
prácticas o asunción de la responsabilidadsocial.
Obligaciones de los administradores deproporcionar información y el cambio
climático
La Ley General de Sociedades Mercantiles
establece que los administradores deben
presentar un informe financiero anual a losaccionistas, que incluya los estados financieros
e información que describa el estado financierode la empresa.4 No existe una obligación
expresa de divulgar información sobre losposibles riesgos climáticos; sin embargo, dicha
obligación puede inferirse como parte deldeber fiduciario de cuidado, y en la medida enque los riesgos del cambio climático seconsideren razonablemente importantes parael negocio y el objetivo de la empresa, comoocurre cada vez más.
En el caso de las empresas bursátiles,
conforme a la Ley del Mercado de Valores, losadministradores deben revelar al público en
general la información o hechos relevantes. La
legislación no establece expresamente la
obligación de revelar los riesgos relacionados
con el cambio climático, pero deben serrevelados en la medida en la que éstos seconsideren hechos materiales. La omisión decualquier revelación de hechos materiales, oimportantes; una explicación de las normas contables
utilizadas para elaborar la información financiera; las finanzas
actualizadas de la empresa; un informe sobre la evolución delas finanzas generales y del patrimonio de la empresa; ycualquier nota o aclaración sobre la información facilitada.

119Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexico (Spanish)las declaraciones erróneas de importancia,
puede dar lugar a sanciones financieras.
En los últimos años, el mercado de valores
mexicano y un número importante de empresas
bursátiles han promovido activamente ladivulgación de información ASG y la adhesióna las recomendaciones del Grupo de Trabajo
sobre Divulgaciones Financieras Relacionadas
con el Clima (TCFD) y las pautas del Consejo
de Normas Contables de Sostenibilidad(SASB).5 En diciembre de 2021, se implementó

el Consorcio TCFD México.6 El Consorcio
trabaja en apoyo a la integración y divulgaciónde los riesgos financieros relacionados con elcambio climático, quien, junto con el Banxico,señalaron la importancia de adoptar las
recomendaciones del TCFD.
A la fecha de este documento, la divulgación deinformación ASG, la adhesión a las
recomendaciones de la TCFD, los criterios dela SASB o cualquier otra norma de divulgación
climática o ASG son voluntarias.

Implicaciones prácticas para los administradores
A pesar del retraso con el que los legisladores y reguladores mexicanos han emitido e implementando
la regulación para la adopción de medidas de resiliencia climática en las prácticas y divulgaciones
empresariales, las empresas deben actuar con base en su propio análisis de riesgo y escenarios, para
adoptar medidas de resiliencia climática y divulgaciones, y prevenir potenciales daños financieros. En
este sentido, los consejos de administración que estén bien asesorados:a.

Reconocerán y establecerán expresamente la responsabilidad del consejo de administración
en identificar riesgos y oportunidades relacionadas con el cambio climático, y nombrarán unequipo claramente identificado en la administración de la sociedad, encargado de mantener
informado al respecto al director general y al consejo de administración;b. Incluir en el orden del día del consejo, la propuesta de elaborar una hoja de ruta para latransición climática hasta 2050, con objetivos transparentes de neutralidad y reducción deemisiones de carbono, con objetivos intermedios claros hasta los años 2030 y 2040, y un plan
estratégico plurianual, con informes periódicos al consejo de administración;c. Delegar al comité o a los comités apropiados del consejo, así como al comité de riesgos, deauditoría, jurídico y de gobierno corporativo, de estrategia, de remuneración o al desostenibilidad/responsabilidad corporativa, según corresponda, la tarea de implementar laestrategia a largo plazo en un proceso claro de toma de decisiones en cada aspecto que sea
relevante para cada comité; yd. Analizar con los asesores de divulgación el desarrollo de un plan de compromiso ambiental ycomunicación externa.
Como consideración práctica, el 3 de noviembre de 2021 los fideicomisarios de la Fundación deNormas Internacionales de Información Financiera (NIIF), crearon el Consejo de Normas
Internacionales de Sostenibilidad (ISSB) para ayudar a la demanda creciente de las carteras deinversión mundiales en la presentación de informes de alta calidad, transparentes, confiables ycomparables por parte de las empresas en lo que respecta a su sostenibilidad, impacto del cambio
climático y su adhesión a criterios ASG. Los administradores deben tener en cuenta que estas normas
de información probablemente darán forma a la práctica internacional por lo que respecta a las normas
de divulgación relacionadas con la sostenibilidad, teniendo en cuenta que proporcionarán a losinversionistas y a otros participantes en el mercado de capitales, información sobre los riesgos yoportunidades de las empresas relacionados con su sostenibilidad. 71

5Algunas de las empresas que apoyan al Grupo de Trabajo
sobre Divulgación Financiera Relacionada con el Clima y son
promotoras activas de la divulgación de los riesgos climáticosson: Afore XXI Banorte, Cemex, BIVA, Citibanamex,
Citibanamex Afore, Fresnillo, Orbia y Funo. CONFIRMAR QUE
ESTA ACTUALIZADA ESTA LISTA.

6

7

Raquel Rosas y Gabriela Niño, ‘Lanzamiento oficial delConsorcio TCFD México’ (17 de diciembre de 2021)<https://iki-alliance.mx/en/lanzamiento-oficial-del-consorciotcfd-mexico/>.
IFRS, ‘About the International Sustainability Standards Board’(accessed
18
May
2022)

120

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Mexico (Spanish)

La Comisión de Bolsa y Valores (SEC) propuso nuevas directrices en marzo de 2022, para mejorar yestandarizar la información relacionada con el impacto del cambio climático, con el fin de satisfacer lasnecesidades de los inversionistas. Muchas emisoras intentan proactivamente atender la demanda delos inversionistas para este tipo de información, pero los métodos actuales de divulgación están
fragmentados y son desiguales. Las normas propuestas facilitarán que las emisoras divulguen estos
riesgos de forma más homogénea, lo que beneficiará tanto a los inversionistas como a las emisoras.
Al día de hoy no hay una fecha concreta sobre cuándo entrarán en vigor estas normas, pero se estima
que las normas propuestas se adoptarán y entrarán en vigor en diciembre de 2022.
Colaboradores:

Yves Hayaux du Tilly L., Nader, Hayaux & Goebel Mexico
Enrique Salcedo R., Nader, Hayaux & Goebel Mexico<https://www.ifrs.org/groups/international-sustainability-standards-board/>.

121

New Zealand
Regulators
in
New
Zealandreadilyacknowledge the systemic financial problems
posed by climate change.
The New Zealand Government has pledged tohalve New Zealand’s emissions by 2030 relative
to 2005 levels, and has a legislative target ofreaching net-zero emissions by 2050.1 The
Climate Change Commission was establishedin November 2019, to provide independent,
evidence-based advice to the Government on
climate issues, including the country’s ability tomeet these goals. Advice will be given
progressively over the years2 and forms a key
resource to inform business leaders of some of
the impacts they will need to consider.
From 2023 ‘Climate Reporting Entities’ (CREs)
will, as described below, be required to reportpublicly on climate change impacts, inaccordance with Task Force on ClimateRelated Financial Disclosures (TCFD) aligned
standards issued by the External Reporting
Board (XRB), and supervised by the Financial
Markets Authority (FMA). CREs will include
large listed companies, and specified large
financial institutions. This is expected to provide
greater transparency on climate-related
impacts in relation to part of the New Zealandeconomy and inform stakeholders in CREs as tothe potential exposure they have.

In the meantime, the Reserve Bank of New
Zealand (RBNZ) has stated its intention to
introduce a climate stress test in 2023 forregistered banks and licensed insurers and toincrease “supervisory intensity on entities thatare not positively progressing their climatechange capabilities”.3 Directors of those entities
will be concerned to comply with the RBNZ’s
requirements.
The FMA has also signalled its aim to “ ensure[the] effects of climate change are routinely
considered in financial decision-making” by
CREs.4 The FMA has also set expectations for
issuers of financial products that claim nonfinancial features, such as ‘green’ bonds and‘socially responsible’ managed funds.
Directors’ Duties and Climate Change

New Zealand directors’ statutory duties are set
out in the Companies Act 1993 (the CompaniesAct) (Part 8).5 The core duties of directors
include the duty to act in good faith and in thebest interests of the company (section 131), to
exercise powers for a proper purpose (section133), and to exercise reasonable care, diligenceand skill (section 137).
Currently before the New Zealand Parliament is
the Companies (Directors Duties) Amendment

1

2

3

Climate Change Response (Zero Carbon) Amendment Act
2019, pt 1B; New Zealand Government, Govt increases
contribution to global climate target (31 October 2021)<www.beehive.govt.nz/release/govt-increases-contributionglobal-climate-target>. See also Ministry for the Environment,
Emissions budgets and the emissions reduction plan (2021)<https://environment.govt.nz/what-government-isdoing/areas-of-work/climate-change/emissions-budgets-andthe-emissions-reduction-plan/>.
He Pou a Rangi Climate Change Commission, Ināia tonu nei: alow emissions future for Aotearoa (31 May 2021), Figure 3.1,
<https://ccc-production-media.s3.ap-southeast2.amazonaws.com/public/Inaia-tonu-nei-a-low-emissionsfuture-for-Aotearoa/Figure-3.1-our-responsibilities-under-theAct.pdf>.
Reserve Bank of New Zealand, Climate Change 2021 &Beyond - The Reserve Bank Climate Change Report, (2645October 2021) <www.rbnz.govt.nz/financial-stability/climatechange/climate-change-report>.
Financial Markets Authority, Investor News Wrap: October
2021(1
November2021),<https://www.fma.govt.nz/investors/resources/newswrapoct21/>.
Companies Act 1993: ss. 131, 133, 137. There is support inthe case law that the common law duties continue alongsidedirectors’ statutory duties, i.e. unlike in some other jurisdictions
such as England, New Zealand directors owe duties under both
statute and judge-made law. For the strongest statement of thisapproach see Benton v Priore [2003] 1 NZLR 564 at 573. See
also Sojourner v Robb [2006] 3 NZLR 808 at 829. This does
not have practical implications for the analysis, so the primer
follows the Aotearoa Circle opinion and focuses on the statutory
duties.

122

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
New ZealandBill (the Amendment Bill),6 which aims to clarify
that directors may take into consideration“recognised
environmental, social andgovernance factors” when acting in the bestinterests of the company, whether they havedirect financial implications or not. As at 28 July
2022, the Amendment Bill is awaiting its firstreading in Parliament. While that is Members
Bill (meaning it was introduced by a member ofparliament and not the Government), there
have been multiple calls recently in New
Zealand for a review of directors’ duties
generally including from the Institute of
Directors.7 While the Bill is permissive, if
passed, it would provide additional comfort todirectors as to their ability to take into accountnon-financial factors.

possible resulting harm. The morematerial the risk, the more it would bereasonably
expectedtobeconsidered.10
Directors' Disclosure
Climate Change

•
•

•

6

7

8

9

10

identify that risk;
periodically assess the nature andextent of the risk to the company,
including by seeking and criticallyevaluating advice as necessary; anddecide whether, and if so, how to takeaction in response, taking into accountthe likelihood of the risk occurring and

New Zealand Parliament, Companies (Directors Duties)
Amendment Bill, <https://www.parliament.nz/en/pb/bills-andlaws/bills-proposed-laws/document/BILL_115958/companiesdirectors-duties-amendment-bill>.
Institute of Directors and MinterEllisonRuddWatts, Stakeholder
governance – A call to review directors’ duties (30 July 2021)<https://www.iod.org.nz/resources-and-insights/research-andanalysis/stakeholder-governance/>.
The Aotearoa Circle Sustainable Finance Forum, Chapman
Tripp,
Legal
Opinion2019(October
2019)<https://chapmantripp.com/media/r30jdd05/climate-changerisk-legal-opinion-2019.pdf>.
The Aotearoa Circle Sustainable Finance Forum, Chapman
Tripp, Legal Opinion 2019 (October 2019), 3,<https://chapmantripp.com/media/r30jdd05/climate-changerisk-legal-opinion-2019.pdf>.
Ibid, 4.

andIn October 2021, the Financial Sector (Climate-

related Disclosures and Other Matters)
Amendment Act 2021 (the Climate DisclosureAct) received royal assent.11 The Climate
Disclosure Act amends the Financial Markets
Conduct Act 2013 (the FMCA), the Financial
Reporting Act 2013 and the Public Audit Act
2001 to:•In terms of the current law, in 2019, The
Aotearoa Circle Sustainable Finance Forumpublished a legal opinion on the duties, of New
Zealand company directors and managed
investment scheme providers regarding
climate-related risks (the Aotearoa Circle
opinion).8
The opinion acknowledged that climate change
includes foreseeable financial risks and must
therefore be considered by directors and fundmanagers in the same way as any otherfinancial risk.9 In particular, where companies
are affected by climate-related financial risk,
directors’ duty of care requires that they, at aminimum:

Obligations•

enable the XRB to prepare and issue
climate-related reporting standards
that align with the TCFD framework;andrequire CREs to make climate-related
disclosures in line with the XRB
standards that will be accessible tostakeholders and regulators.

CREs include large listed issuers (entities with amarket capitalisation exceeding NZ$60 million);and large registered banks, licensed insurers,
credit unions, and building societies (with total
assets exceeding NZ$1 billion, or in the case oflicensed insurers where premium income
exceeds NZ$250 million); and large managers
of registered managed investment schemes(with total assets exceeding NZ$1 billion).12
Crown Financial Institutions are not included
but are directed under letters of expectations
from the Minister of Finance to report against
the TCFD framework.13
The Government has stated that the NZ$1
billion threshold for CREs will ensure that 90%
of assets under management in New Zealand

11

12
13

Financial Sector (Climate-related Disclosures and Other
Matters)
Amendment
Act
2021,<www.legislation.govt.nz/act/public/2021/0039/latest/whole.ht
ml#LMS479698>; Ministry for the Environment, Mandatory
climate-related
disclosures(1
December
2021)<https://environment.govt.nz/what-government-isdoing/areas-of-work/climate-change/mandatory-climaterelated-financial-disclosures/>.
Ibid, which will be FMCA, new section 461O.
The Treasury, Enduring Letter of Expectation Information
Release(October
2021)<https://www.treasury.govt.nz/sites/default/files/2021-10/loecfiri-28oct21.pdf>; New Zealand Government, ‘Climate
reporting for Crown financial institutions‘ (12 March 2021)<https://www.beehive.govt.nz/release/climate-reportingcrown-financial-institutions>.

123Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
New Zealandare included within the disclosure system.14 The
New Zealand Government has indicated that it
may publicly consult on possible wider private
sector application after the regime comes into
force.15
At a high-level, CREs will be required to:
•

•
•

•

prepare annual climate statements thatcomply with the XRB’s climate
standards and are signed off bydirectors;
keep proper records that will ensure
climate statements comply with theframework;
obtain an assurance engagement inrelation to the climate statements to theextent those statements are required todisclose greenhouse gas emissions(though this requirement will only comeinto force 2 years after the climate
standards have been issued); andlodge copies of climate statements with
the Registrar of Financial Service
Providers within 4 months after thebalance date of the CRE.16

An exposure draft of the climate standards isdue to be published in July 2022. 17 Assuming
the XRB issues the climate standards inDecember 2022 (as currently projected), thiswill make climate risk disclosure mandatory for
CREs from the 2023 financial year and require
any climate disclosures on GHG emissions tobe assured as part of the 2024 reporting.
tasked under the Climate
with the independent
monitoring, reporting and enforcement of CREs
under this regime. The FMA has released an
implementation approach for the regime andindicated that it hopes to issue more guidanceon its enforcement approach in December 2022
The

FMA

Disclosure

14

15

16

17

is

Act

New Zealand Government, ‘New Zealand first in the world torequire climate risk reporting’ (15 September 2020)<https://www.beehive.govt.nz/release/new-zealand-first-worldrequire-climate-risk-reporting>.
New Zealand Parliament, Financial Sector (Climate-related
Disclosures and Other Matters) Amendment Bill — Second
Reading(23
September
2021)<https://www.parliament.nz/en/pb/hansarddebates/rhr/combined/HansDeb_20210923_20210923_28>.
Ibid, which will be FMCA, new section 461N and new section
461ZH. For registered schemes, climate statements must be
prepared for the separate funds of the scheme.
Ministry for the Environment, Mandatory climate-related
disclosures(1
December
2021)<https://environment.govt.nz/what-government-isdoing/areas-of-work/climate-change/mandatory-climaterelated-financial-disclosures/>. For more information on theExternal Reporting Board’s consultation on the standards, seeExternal Reporting Board, Climate-related Disclosures (2022)(which coincides with the XRB’s proposed
timing around the issuance of the climate
standards).18
The Climate Disclosure Act details a series of
behaviours that will be incorporated into the
FMCA as offences committed by companies
and/or directors personally, including:
•
•
•
•
•

a failure to comply with the newprovisions on climate reporting
disclosure records;19
knowingly failing to comply with anapplicable climate standard;20
for directors or employees, failing toprovide information or an explanation
to the climate assurance practitioner;21
failing to file climate statements withinfour months of the CRE’s balancedate;22 andfor a CRE that is required to prepare
an annual report under the Companies
Act, failing to state and include in its
annual report that the entity is a CRE
and a copy of the statements prepared
under the new legislation or a link oraddress to where these can be foundonline.23

The Aotearoa Circle opinion also considereddirectors’
disclosure
obligations
more
generally, with respect to climate-related risks.
It concluded that where a company has public
disclosure obligations (e.g., in productdisclosure statements, continuous disclosure
obligations, etc), directors must ensure thatthey disclose material financial risks associatedwith climate change beyond the scope of theFMCA.24 Best practice corporate governanceguidance issued by New Zealand’s Exchange(NZX) and the FMA is also explicit on theimportance of reporting on environmental

18

19
20

21
22
23
24

<www.xrb.govt.nz/standards/climate-relateddisclosures/governance-and-risk-management-consultationdocument/>.
Financial Markets Authority, Climate-related Disclosuresregime: Implementation approach (November 2021)<www.fma.govt.nz/assets/Guidance/Climate-relateddisclosures-implementation-approach.pdf>.
FMCA, new section 461W, including fines up to NZ$50,000.
FMCA, new section 461ZG, including fines up to NZ$500,000
and/or imprisonment for up to five years for persons, and fines
up to NZ$2.5 million in any other case.
FMCA, new section 461ZHE, including fines up to NZ$50,000.
FMCA, new section 461ZI, including fines up to NZ$50,000.
FMCA, new section 461ZJ, including fines up to NZ$50,000.
The Aotearoa Circle Sustainable Finance Forum, Chapman
Tripp,
Legal
Opinion2019(October
2019)3<https://chapmantripp.com/media/r30jdd05/climate-changerisk-legal-opinion-2019.pdf>.

124Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
New Zealand(including climate change),governance factors.25

socialandAn emerging issue for directors is also theclaiming of climate or sustainability benefits ingoods or services (including financial services)which have not been substantiated.26 Bothregulators are actively monitoring forgreenwashing.

Practical Implications for Directors
Given that regulators in New Zealand have become increasingly emphatic regarding the need forcompanies and their directors to adopt climate resilience measures in business practices anddisclosure, and particularly given that mandatory climate-related reporting will soon apply to someentities in New Zealand, well-counselled boards will:a) delegate climate risk(s) and opportunity(ies) identification and evaluation, and scenario analysis,
to a clearly-identified team in management (who may have assistance from a task force of
relevant staff and teams around the company) which reports directly to the CEO and board;b) put on the agenda for the board a process to start developing a climate transition roadmap to2050 with transparent carbon neutrality or reduction targets, with clear interim targets to 2040,
2030, and within the current rolling multi-year strategic plan, and periodically thereafter reportback to the board – for CREs, this should occur before the XRB issues the climate standards inDecember 2022;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making processwith targets and metrics for accountability for each aspect that is relevant to each committee;andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.
The boards of CREs will be subject to specific additional scrutiny because of the transparency of theirreporting.
Even if a company is not a CRE for the purposes of the FMCA, some are now voluntarily adopting the
TCFD framework as part of their reporting. Also, businesses interacting with CREs may also be required
to monitor and report to them on their climate policy and climate-related impacts.

25

The NZX is New Zealand’s stock exchange. NZX, GuidanceNote: Environmental, Social and Governance (December2017), 4-6, <https://s3-ap-southeast-2.amazonaws.com/nzxprodc84t3un4/comfy/cms/files/files/000/002/924/original/NZX_ES
G_Guidance_Note__11_December_2017_%28final_for_publication%29.pdf>;
FMA, Corporate Governance Handbook 2018, 16,<https://www.fma.govt.nz/assets/Guidance/180228Corporate-Governance-Handbook-2018.pdf>; New ZealandCorporate Governance Forum, NZ Corporate Governance
Forum
Guidelines,(July2015),
7,26<https://cmpartners.co.nz/wpcontent/uploads/2015/02/NZCGF-Corporate-GovernanceGuidelines-July-2015.pdf>.
FMA, ‘FMA sets expectations for issuers of ‘green’ and‘responsible’ investment products’ (14 December 2020)<https://www.fma.govt.nz/news-and-resources/mediareleases/expectations-green-investment-products/>;
Commerce Commission, ‘Commerce Commission releases
guidelines on environmental claims’ (7 July 2020)<https://comcom.govt.nz/news-and-media/mediareleases/2020/commerce-commission-releases-guidelines-onenvironmental-claims>.

125Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
New Zealand

The recognition of climate risk from regulators (such as the RBNZ, FMA, and Commerce Commission)
also signals that directors and other business leaders should be educating themselves on climate risks
and should, if they have or do not already, educate themselves on climate risks and opportunities.
Further, directors have a responsibility to set the tone from the top to acknowledge the financial andother risks and opportunities arising from climate change for their company. They should require
management and the business to have robust processes and controls to mitigate or take advantage ofsuch climate change impacts, and set accountability measures and report on them.

Contributors:

Lloyd Kavanagh, MinterEllisonRuddWatts
Stephanie de Groot, MinterEllisonRuddWatts
Shaanil Senarath-Dassanayake, MinterEllisonRuddWatts
Dr. Janis Sarra, Professor of Law, University of British
Columbia, Canada Climate and Law Initiative
CCLI

126

Philippines
Climate change has become an increasing
focus for government and regulators in thePhilippines in recent years. The Philippines’
Nationally
DefinedContribution(NDC)
submitted to the United Nations Framework
Convention on Climate Change stipulates that it
will reduce its greenhouse gas emissions by
75% by 2030 (of which 72.29% is conditional on
multilateralsupport
under
the
Paris
Agreement).1
The NDC is based on the Climate Change Actof 2009, and two key policy documents; theNational Framework Strategy on Climate
Change 2010-2022,2 which sets out thePhilippines’ principles of climate change
mitigation and adaptation, the risks arising fromclimate change, and overarching strategies for
mitigation and adaptation, and the National
Climate Change Action Plan 2011-2028,3 which
outlinesthePhilippine
Government’s
comprehensive commitments to respond toclimate risks that involves both the public andthe private sectors.
The Philippine Constitution recognizes thecitizens’ “right to health” and “right to abalanced and healthful ecology,” withcorresponding obligations of the state to“protect and promote the right to health of thepeople,”4 and to “protect and advance the rightof the people to a balance and healthful ecology
in accord with the rhythm and harmony of
nature.”5 The Philippine Supreme Court also
recognized “the right of Filipinos to a balanced
and healthful ecology” that carries with it “thecorrelative duty to refrain from impairing theenvironment.”6 It also held that even without theconstitutional provisions on the rights to healthand to a balanced and healthful ecology, thesame would constitute part of the law of the landbecause the Philippines is a signatory to the
Universal Declaration of Human Rights and

1

2

3

4

Republic of the Philippines, Intended Nationally Determined
Contribution
(15
April
2021)
<https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Philippines%20First/Philippines%20-%20NDC.pdf>.
Climate Change Commission, National Framework Strategy on
ClimateChange2010-2022
(28
April
2010)
<https://climate.gov.ph/files/NFSCC.pdf>.
Climate Change Commission, National Climate Change ActionPlan
2011-2028(2011)<https://policy.asiapacificenergy.org/sites/default/files/National%20Climate%20Change%20Action%20Plan%2020112028.pdf>.
Sec. 15, Art. II (Declaration of Principles and State Policies),
1987 Constitution.

the Alma Conference Declaration of 1978
which recognizes health as a fundamental
human right.7
In May 2022, the Commission on Human Rightsof the Philippines concluded an investigation
into climate change and human rights. Whilenon-binding, the Commission’s findings andrecommendations included: climate change
poses a threat to individual’s human rights;
international treaties and resolutions, including
the Universal Declaration on Human Rights,
form part of Philippine law; and that therefore
entities incorporated or doing business in thePhilippines in the value chain of high-emission
companies could be compelled to undertake
human rights due diligence.8
Regulators have also made their perspective on
climate change risk clear. The Securities andExchange Commission’s (SEC) Code ofCorporate Governance9 encourage publiclyheld companies to be socially responsible intheir dealings with the communities where they
operate by pursuing “sustainable development”
which means that companies not only comply
with existing regulations, but also voluntarily
employ value chain processes that take into
consideration economic, environment, socialand governance issues and concerns, which
includes climate change.10 The Bangko Sentral
ng Pilipinas (Philippine Central Bank) has
approved frameworks requiring financial
institutions to embed sustainability principles intheir corporate governance framework, and toincorporate physical and transition climate

5
6

7

8

9

10

Ibid, sec. 16, Art. II.
Oposa v. Factoran, G.R. No. 101083, 30 July 1993; 224 SCRA
792 (1993).
Laguna Lake Development Authority v. Court of Appeals, G.R.
No. 110120, 16 March 1994; 231 SCRA 292, 307-308.
Commission on Human Rights of the Philippines, National
Inquiry on Climate Change (May 2022) <https://chr.gov.ph/wpcontent/uploads/2022/05/CHRP-NICC-Report-2022.pdf>.
Code of Corporate Governance for Publicly-Listed Companies(SEC Memorandum Circular No. 19-2016), Code of Corporate
Governance for Public Companies and Registered Issuers of
Securities (SEC Memorandum Circular No. 24-2019).
Ibid, Principle 16 (Encouraging Sustainability and Social
Responsibility) and underlying Explanation.

127

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Philippineschange risks into their risk management
frameworks.11
The Philippines may see increasing litigation
against corporations in respect of climatechange. The Philippine Supreme Court
promulgated “Rules of Procedure forEnvironmental Cases,”12 to “govern theprocedure in civil, criminal and special civil
actions before [trial and appellate courts]
involving enforcement or violations ofenvironmental and other related laws, rules andregulations.”13 The Rules formally recognize“citizen suits” that allow any Filipino citizen in

representation of others, including minors or
members of generations yet unborn, to file anaction to enforce rights or obligations underenvironmental laws, with power by the courts toissue an environmental protection order; allows
the issuance of a writ of kalikasan as a remedy
to a natural or juridical person, entity authorizedbylaw,people’sorganization,
nongovernmental organization, or any public
interest group on behalf of persons whose
constitutional right to a balanced and healthfulecology is violated, or threatened with or by an
unlawful act or omission of a public official or
employee, or private individual or entity, any
possible large-scale ecological threats.
In light of these developments, it is apparent
that climate change poses material financial andlitigation risk by government and regulators in
the Philippines.

Directors’ Duties and Climate Change
Under Philippine Corporation Law, the board of
directors is vested directly by law with nearly all
corporate powers to conduct all business and tocontrol all properties of the corporation.14
Consequently, directors are bound by thefiduciary duty of obedience – to pursue
corporate affairs in accordance with the purpose
for which it is constituted and in compliance withthe law; and the duty of diligence – to exercise
corporate powers with the diligence of a prudent
person, in good faith and in the interests of thecorporation and its stockholders. The corporate
governance framework for publicly-heldcompanies extends these fiduciary duties toother stakeholders of the company, which
includes among others, customers, creditors,
employees, suppliers, investors, as well as thegovernment and the community in which they
operate.15
Under the doctrine of centralized management,
Philippine Corporation Law constitutes the
directors as fiduciaries in fulfilling theircompanies’ long-term economic, moral, legal
and social obligations towards the shareholders
and other stakeholders, with a mandate tomaximize the organization’s long-term success,creating sustainable value for its shareholders,
stakeholders and the nation. Under thecommon-law doctrine of the business judgment
rule, the manner of fulfilment of directors’
fiduciary duties to the company, its stockholders
and other stakeholders is addressed to theboard’s business judgment.16 The exercise ofthat business judgment, even when it causes
damage to the corporation, its stockholders orother stakeholders, does not make directors’
personally liable,17 unless it is shown that thedirectors’ have in the process violated the law,
acted with fraud, negligence or bad faith.18

11

12

13

14

15

Bangko ng Sentral Philippines, Circular No. 1085: Sustainable
Finance
Framework(2020)<https://www.bsp.gov.ph/Regulations/Issuances/2020/c1085.p
df>; Bangko ng Sentral Philippines, Circular No. 1128:
Environmental and Social Risk Framework (October 2021)<https://www.bsp.gov.ph/Regulations/Issuances/2021/1128(Corrected%20Copy).pdf>.
Administrative Matter No. 09-6-8-SC, 13 April 2010, hereinafterreferred to as “Rules of Procedure for Environmental Cases.”Sec. 2 (Scope), Rule 1, Part I, Rules of Procedure forEnvironmental Cases.
This embodies the principle of “centralized management” that isprovided for under section 23 of the Revised Corporation Code
(Rep. Act No. 11232).
Principle 14 of the SEC CG Codes: “The rights of stakeholders
established by law, by contractual relations and throughvoluntary commitments must be respected. Where
stakeholders’ rights and/or interests are at stake, stakeholders

16

17

18

should have the opportunity to obtain prompt effective redress
for the violation of their rights.”
Montelibano v. Bacolod-Murcia Milling Co., Inc., G.R. No. L15092, 18 May 1962; 5 SCRA 36, 42 (1962); Gamboa v.
Victoriano, G.R. No. L-40620, 05 May 1979; 90 SCRA 40(1979).
Western Agro Industrial Corp. v. Court of Appeals, G.R. No.
82558, 20 August 1990; 188 SCRA 709 (1990); Rustan Pulp &Paper Mills v. Intermediate Appellate Court, G.R. No. 70789, 19
October 1992; 214 SCRA 665 (1992).
Section 30 of the Revised Corporation Code provides in part:“Directors or trustees who wilfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in directing the affairs of
the corporation or acquire any personal or pecuniary interest in
conflict with their duty as such directors or trustees shall be
liable jointly and severally for all damages resulting therefrom

128Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Philippines

When it comes to climate change, the emerging“role of directors” – which in turn defines thepotential liabilities to which they are exposed toin relation to climate change – is a bit nuanced,
if not bifurcated. Under Philippine corporate
governance framework which adheres to the‘comply or explain’ approach, directors areencouraged (not mandated) to “adopt a clear

and focused policy on the disclosure of nonfinancial information, with emphasis on the
management of economic, environmental,social and governance (EESG) issues of its
business, which underpin sustainability … [and]should adopt a globally recognized standard/framework in reporting sustainability and nonfinancial issues.”19 Other than the disclosure
obligations for publicly-listed companies on ESG
matters (see discussions below), there are no
regulations
specificallyprovidingtherequirements or processes by which directors
are to monitor, manage and take steps tomitigate climate change risks. Therefore, thefulfillment of their fiduciary duties to thecompany,its
stockholders
and
other
stakeholders is addressed to the exercise of
their business judgment. In the absence offraud, gross negligence or bad faith,stockholders and other affected stakeholders
cannot ascribe a breach of fiduciary duties
against directors whose approach on climatechange risks is within their business judgment topursue; much less can they be held personallyliable for exercising their business judgment
when there is no showing of fraud, grossnegligence or bad faith.
The deference to the board’s business judgment
also means that boards are able to take actions
to mitigate the impacts of climate change on
their company without exposing themselves tothe risk of liability for breaching their duties. For
instance, directors that implement a strategy toaddress climate impacts, in order to ensure thelong-term viability of the company during theenergy transition – even where this may risk
incurring greater costs in the short term – will beprotected from fiduciary liability unless they
have violated the law, or acted with fraud,
negligence or bad faith.
On the other hand, the emerging “role ofdirectors in climate change” under the Climate
Change Act and related environmental laws

suffered by the corporation, its stockholders or members andother persons.”

imposes a duty on directors to refrain fromharming the environment and to refrain fromcommitting any of the “prohibited acts” laid
down by the state in various environmental laws;
otherwise directors could be held both
criminallyandcivilly
liable.
Unlessenvironmental laws relating to climate change
make directors liable for a corporation’s
violation of prohibited act, the prevailing rule isthat when such prohibited acts are committed
by the corporation, directors as such do not
become criminally punishable, but only those
directors, officers and employees of thecorporation who are directly responsible for thecommission of the prohibited acts shall be
penalized.
While the enumeration of “prohibited acts”
under the various environmental laws provide
for the specified areas when directors may beheld criminally liable for corporate offenses, thesame may be the legal basis – especially when
the commission by the corporation of suchprohibited acts is egregious – under Section 30of the Revised Corporation Code forstockholders and other affected stakeholders to
pursue legal action to make the directors
personally liable (civil) for “wilfully andknowingly assenting to patently unlawful acts ofthe corporation,” or at least for “grossnegligence or bad faith in directing the affairs of
the corporation.”

While the failure of directors to pro-actively
pursue climate change activism may notnecessarily expose them to personal, criminalor administrative liabilities, the pursuit by nongovernment organizations and public-interest
groups through citizen suits constitutes thegraver risk to directors that constitute a threat
to their professional reputation as the stewardsof the private corporate sector’s mandate topursuesustainable
development.
The
Philippines is now experiencing climate change
activism, coupled with the very accommodating
litigation rules on environmental cases, and thecurrent demand of local and international
investors in companies that have a clear andfocused policy on ESG matters.
Private corporations, especially publicly-heldcompanies which control much of the
productive resources in the country, must

19

Recommendation 10.1, Code of Corporate Governance for
Publicly-Listed Companies (SEC Memorandum Circular No.
2016-19, 22 November 2016).

129

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Philippines

pursue sustainable development in theircorporate strategies. This means not only
complying with existing environmental rules
and regulations and disclosing material climaterelated risks, but also collaborating closely withthe government and civil society in contributing
solutions to the challenges of climate change
facing the country.20
Directors’ Disclosure
Climate Change

Obligations

andWhen it comes to sustainability reporting in
general, under the ‘comply or explain’ approachof the Code of Corporate Governance issued by
the SEC, publicly-held companies aremandated to ensure that material andreportable non-financial and sustainability
issuesaredisclosed,21
under
the
recommendation to the board to have a clear
and focused policy on the disclosure of nonfinancial information with emphasis on the
management of economic, environmental,social and governance (EESG) issues of its
business, which underpin sustainability, and toadopt
aglobally
recognized
standard/framework in reporting sustainability
and non-financial issues.22
The SEC’s Sustainability Reporting Guidelines
for Publicly Listed Companies are based on,
and refer to, the Task Force on Climate-related
Financial
Disclosures(TCFD)
recommendations, as well as other global
reporting standards. These guidelines include
reporting on environmental risks and impacts,
including the board’s governance, strategy, risk
management and metrics and targets in respect
to climate-related risks and opportunities.
Philippine publicly-listed companies must
report in accordance with these guidelines on a‘comply or explain’ basis and submit thesustainability report as part of its annual
reportorial requirements with the SEC. 23 The
SEC is reportedly planning to make

20

21

22
23

For further discussion, please see Dean Cesar L. Villanueva,
Dean Lily K. Gruba, Angelo Patrick F. Advincula and Joyce
Anne C. Wong, Legal Opinion on Directors’ Responsibilities andDisclosure Obligations under Philippine Law on Climate
Change Risks and Related Considerations (forthcoming).
Principle 10, Code of Corporate Governance for Publicly-Listed
Companies (SEC Memorandum Circular No. 19, 20 November2016).
Ibid, Recommendation 10.1.
Securities
andExchange
Commission
Philippines,

sustainability reporting mandatory for publicly
listed companies by 2023.24
Disclosures in the sustainability report shouldreflect the publicly-listed companies’ significant
economic, environmental, and social impacts,
includingclimate-related
risks
and
opportunities and UN sustainability goals, andshould consider the reasonable expectations
and interests of key shareholders. Further, suchdisclosures should be quantifiable andmeasurable,
adequately
providingacomprehensive record of the company’s nonfinancial performance for the relevant reporting
period.
It is interesting to note that the specificdisclosures for climate-related risks andopportunities fall under the category of
economic
disclosuresforsustainability
reporting, which may emphasise therecognition by the SEC of climate change as amaterial financial risk for publicly-listedcompanies. Philippine companies have leeway
in determining what may constitute material
climate-related risks that arise in the pursuit of
the companies’ business operations, plans andstrategies. This is consistent with the policy of
the Philippine government and its regulators
allowing company discretion in determining anddisclosing its corporate climate policy,
particularly for publicly-listed companies which
are subject to the materiality threshold under
the PSE disclosure rules.
Further, the broad materiality thresholdprovided under the PSE disclosure rules which
require publicly-listed companies to disclose“any material fact or event that occurs which

would reasonably be expected to affectinvestors’ decisions in relation to trading thesecurities”25 and “such information [which] may
reasonably be expected to materially affectmarket activity and the price of its securities,”26
would generally include the disclosure ofclimate-related risks particularly when suchimpacts trading and price of company shares.

24

25
26

Memorandum Circular No.4 of 2019 – Sustainability Reporting
Guidelines for Publicly-Listed Companies (15 February 2019)<https://www.sec.gov.ph/wpcontent/uploads/2019/10/2019MCNo04.pdf>.
Anne Ruth Dela Cruz, ‘SEC to make sustainability reporting
mandatory by 2023’, Business Mirror (30 August 2021)<https://businessmirror.com.ph/2021/08/30/sec-to-makesustainability-reporting-mandatory-by-2023/>.
Sec. 4, Art. VII, PSE Disclosure Rules.
Ibid, sec. 4.3(c), Art VII.

130

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Philippines

Based on a review of current disclosure rules
for publicly-listed companies in the Philippines,
the obligation to disclose and submit thesustainability report, including material climatechange disclosures, is primarily a corporate
responsibility, as it is the publicly-listed
corporation itself which faces the administrative
penalties of reprimand, fine, delisting or
revocation of license for failure to do so. Under

Philippine law, directors are not directly andpersonally liable for corporate disclosures,
unless they make false or misleadingstatements of material fact in required SEC
filings which are tantamount to “market
manipulation,”27 or “fraudulent transactions,” asdefined under the Securities and Regulation
Code.28

Practical Implications for Directors
With the increased climate change activism and continued public interest litigation on the environment
prevailing in the Philippines, directors of private corporations are potentially exposed to the following
actions: (a) criminal and civil prosecution by the Philippine government for engaging their companies toviolate prohibited acts under various environmental laws; (b) citizen suits for violating the right of thepeople to a healthful environment or violation of environmental laws; and (c) administrative penalties for
failure to properly quantify and disclose climate change risks.
In order to ensure that they are fulfilling their fiduciary duties to their companies, and to reduce
litigation exposure (e.g., by citizen suits), directors of Philippine companies, especially those of
publicly-held companies, must ensure that they act on a fully informed basis, with due diligence andcare in addressing the physical, transition and reputational risks facing their company by:a)putting in place and overseeing a sound enterprise risk management frameworkthat identifies key risks exposures relating to economic, environmental, social andgovernance (EESG) factors consonant with achieving the company’s strategic
objectives;b)devoting time and attention in board meetings necessary to developing climate risk
mitigation plan, including monitoring and evaluating the effectiveness of thecompany’s climate change risk management processes; andc)communicating to the various stakeholders climate change risks and opportunities
facing their company and the status of implementation of risk management
strategies.

For large publicly-held companies, it is additionally recommended for their boards to constitute a
Sustainability Committee with a clear charter to mandate and oversee sustainability principles andclimate action.
Contributors:

27
28

Cesar L. Villanueva, Villanueva Gabionza & Dy Law
Lily K. Gruba, Zambrano Gruba Caganda & Advincula Law
Angelo Patrick F. Advincula, Zambrano Gruba Caganda & Advincula Law
Joyce Anne C. Wong, Romulo Mabanta Buenaventura Sayoc & de los Angeles Law

Sec. 24 (d), Securities Regulation Code.
Ibid, sec. 27.

131

Romania
This section is to be read in conjunction with t above EU section, andfocuses specifically on rules under Romanian law regarding directors’
duties and obligations as they pertain to climate change.
Regulators and government bodies in Romania
have recognised that climate change is a global
challenge that requires a responsible approachand concrete action at global, regional, national
and local levels.
Romania has signed and ratified into national
legislation both treaties: the United Nations
Framework Convention on Climate Change(UNFCCC) by Law No. 24/1994, as well as the
Kyoto Protocol by Law No. 3/2001. Moreover,
Romania ratified the Paris Agreement by Law
No. 57/2017 and entered into force on 1 June
2017. The Paris Agreement was adopted by
196 Parties, including the EU and its Member
States at COP 21 in Paris, on 12 December
2015 and entered into force on 4 November
2016 (Paris Agreement) and includes a goal of
limiting global warming to well below 2°C,
preferably to 1.5°C, compared to pre-industrial
levels.
Romania remains firmly committed to theinternational legal framework developed by theUnited Nations – the 2030 Agenda for
Sustainable
Development,
the
Paris
Agreement, Kyoto Protocol and the UNFCCC.

National Bank of Romania
There is a concern at the level of National Bankof Romania (NBR) about green financing andthesustainabilityofclimatechange,respectively how well the Romanian economy
and the banking sector would withstand in thecontext of climate change. A study has beenlaunched in this regard and its result, which was
also presented in the 2019 Financial Stability
Report,1 shows that the stakes are important,both for the authorities and for the private
environment.
In this regard, NBR pays special attention in
identifying the financial risks related to theclimate change and is developing a framework
for monitoring economic sectors that may beaffected by climate risk and their importance tothe banking sector.

1

National Bank of Romania, Financial Stability Report Year IV(XIV), No. 7 (June 2019) <https://www.bnr.ro/FinancialStability-Report-no.-1,-2019-19835.aspx>.

In September 2020, NBR became a member ofthe group of central banks and financial
supervisors called the Network for Greening the
Financial System (NGFS). In order to stimulate
green financing, NBR has decided to set up at
the level of the National Committee for
Macroprudential Oversight (NCMO) a working
group which has over 90 members both fromthe state (NBR, ministries, regulators), as well
as from the private environment. The NCMO
report put forward recommendations for
authorities with short implementation deadlines,
covering three areas: sustainably increasing
access to finance for climate change projects,
supporting structural change in the economy
towards higher value-added and improving
transparency, reporting and the availability of
information on climate change, as well as
raising awareness of the impact of climatechange on society and the financial system.2
On April 2022, NBR Regulation No. 5/2022
partially went into force, amending andsupplementing NBR Regulation No. 5/2013 on
capital requirements for credit institutions andrepealing certain pieces of legislation, inter alia,
incorporating into the national legislation the
Guidelines issued by the European Banking
Authority (EBA) on loan origination andmonitoring.
One of the topics addressed by NBR Regulation
No. 5/2022 is incorporating into national
legislation the EBA recommendations for credit
institutions to consider environmental, socialand governance (ESG) in the lending process.
Starting on 1 April 2022, credit institutions are
required to:••2

put in place an adequate strategy forcredit-risk analysis to include ESG
factors;
include in their policies and procedures
ESG factors and related risks (e.g. theNCMO, Analysis of the NCMO Working Group on supporting
green
finance(2021)<https://www.cnsmro.ro/res/ups/Summary-Report-NCMOgreen-finance.pdf>.

132Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Romania

physical risk of climate change over thefinancial performance of the borrower,
the transition risk that a transition to a
low carbon economy might have overthe borrower, market changes, etc.).

Financial Supervisory Authority
The strategy of the Financial Supervisory
Authority (FSA) for the period 2021-2023
contains both the Strategic Objectives of the
FSA and the program of activities, which areadapted to new realities and unprecedented
challenges brought by the Covid-19 pandemic,
as well as ESG, aiming to fulfil the strategic roleof the institution.3
Under these circumstances, the FSA’s risk
analysis activities will focus on integrating thenew perspectives generated by financial
innovation and environmental, social andgovernance (ESG) factors. In order to ensure
cross-sectoral convergence and harmonizationof rules and practices at the level of the threefinancial sectors, the FSA envisages to issue,
inter alia, an integrated regulation on content,
methodologies and presentation information onsustainability indicators in the financial services
sector (ESG risks) with a view to establishingharmonized and transparent rules on informing
investors in non-banking financial products onenvironmental and social risks and governanceassociated with investments.
The FSA has published the ‘Recommendations
for a prudent approach to climate risk’.4 The
purpose of these recommendations is tosupport entities supervised by the FSA by
providing a first set of information onsustainable financing, in particular on thegrowing importance of sustainability risks, in a
global, European and local context, by making
every effort to support the financing ofenvironmentally sustainable activities with aview to transform real savings into long-termsustainable ones.

Bucharest Stock Exchange
The Bucharest Stock Exchange (BSE) is apartner exchange to the United Nations
Sustainable Stock Exchanges (SSE) initiative. In
April 2022, the BSE published ESG Reporting
Guidelines in which it sets out its form ofrecommended disclosures on ESG issues,
including, inter alia:•

Integrating sustainability
o If the company integrates risks andopportunities
regardingsustainability(including
those
related to climate change) in its
economic strategy and in its risk
management process;o A textual presentation that explains
the resilience of the business modeland the company's strategy on therisks associated with the issues
concerning sustainability;o The company's plans to ensure thatits business model and strategy arecompatible with the transition to a
low-carbon economy and the goalsof the Paris Agreement to limit
global warming by 1.5°C.
• Sustainability governanceo Description
of
the
role
of
management
andsupervisory
bodies in terms of sustainability
issues.
In Romania, companies covered by the NFRD
now have the opportunity to present therequired information on ESG either:••in a management report; orin a separate report, which is not part ofthemanagement
reportonsustainability (provided that thedeadline for the publication of such areport does not exceed six months
from the date of submission of thebalance sheet).

However, after the entry into force of the CSRD,
this option will no longer be available and therequested ESG information will have to be
published in the management report.

3

Financial Supervisory Authority, The Strategy of the Financial
Supervisory Authority for 2021-2023 (31 July 2020)<https://asfromania.ro/en/a/6/the-strategy-of-the-financialsupervisory-authority-for-the-period-2021---2023>; Financial
Supervisory Authority, Recomandări privind abordarea

prudentă
arisculuiclimatic,<https://asfromania.ro/uploads/articole/attachments/619627df
e59a1282090234.pdf>.

133Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Romania

Directors’ duties and climate change
Generally, directors are authorised to perform
all acts necessary and useful for the conduct of
the company’s business, other than those acts
requiring the approval of shareholders at a
general meeting. These acts are found in thearticles of association of the company and/or
are expressly provided for by Romanian law.
The Romanian law imposes certain general
duties on directors of companies. In this regard,
it is provided that the directors must fulfil theirduties acting diligently, with loyalty, in theinterest of the company, as well as within thelimit of their powers.
The directors are liable to the company forlosses caused to it by their wilful misconduct orinaction.
Considering that the Company Law No.
31/1990, as modified, does not explicitly
provide for directors’ duties to address the riskof the adverse impacts of climate change on thecompany, it could be however interpreted that
their obligation to cover this risk is included intheir overall responsibility and failure to do so
may lead to damage suffered by the company
and personal liability. Indeed, in light of the
focus by Romanian regulators and thegovernment on climate change risks andfinance, as discussed above, directors should
consider the risks and opportunities posed byclimate change in order to ensure that they are
fulfilling their duties to the company.
Directors’ disclosure obligations and climatechangeAs a rule, the directors are responsible for
ensuring that their companies comply with all
relevant statutory obligations, including
environment-related disclosure.

Public and private entities
According to the Romanian accounting
regulations on financial statements, both public
and private entities that, at the balance sheet
date, exceed the criterion of having an average
number of 500 employees (FTEs) during thefinancial year should include in the directors’
report a non-financial statement containing,
insofar as it is necessary to understand thedevelopment, performance and position of theentity and the impact of its work, information on
environmental issues. If such an entity does not

implement policies regarding one or more of
the aspects previously mentioned, the nonfinancial statement should provide a clear andreasoned explanation of this option (the comply
or explain principle).
The non-financial statement should contain, in
relation to the environmental aspects, details of
the current and foreseeable impact of theentity’s operations on the environment and,
where applicable, on health and safety, use ofrenewable
andnon-renewableenergy,greenhouse gas emissions, water use and air
pollution. Furthermore, the non-financial
statement must also include the consequences
for the entity’s climate change activity and theuse of the goods and services it produces, aswell as for its commitments to sustainable
development.
Specifically, the report must cover:•

The company’s business model;•

The policies pursued to addressthese ESG risks, including due
diligence applied;•

The outcome of these policies;•

The main ESG risks resulting fromthe company’s own operations
and,
where
relevant
andproportionate,itsbusinessrelationships, products or services;•

Non-financial key performanceindicators related to the company’s
response to ESG risks.

Securities anddisclosuresstock

exchange-related

The BSE regulates under its code that a listedcompany must continuously provide to the BSE,
inter alia, the information related to theoccurrence of any environmental factor that
could significantly affect the functioning or
activity of a listed company.
Therefore, Romanian companies listed on thestock exchange are obliged to insert within thereports submitted to the BSE a description of
any climate risk-related information which cansignificantly affect the listed company in its
business activities.
Further, as set out above, the ESG Reporting
Guidelines issued by the BSE, while voluntary,
set out a best practice approach for Romanian134Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Romania

listed companies to fulfil their reporting
obligations under relevant EU law.
In Romania, environmental monitoring by thestate is conducted, through the National
Authority for Environment Protection, by meansof collecting and processing data on
environmental matters as reported bycompanies. Such state statistical reporting is
mandatory and covers, among others, air andwater. The following discusses reporting
obligations most relevant to climate change:

Greenhouse gas emissions
On January 14, 2019 the Romanian Law No.
14/2019 entered into force, establishing thelegal, institutional and procedural frameworknecessary for the application of Decision No.
406/2009/EC on the effort of Member States toreduce their greenhouse gas emissions to meet
the Community’s greenhouse gas emission

reduction commitments up to 2020. This law
establishes the legal, institutional andprocedural framework for the application of thisDecision in order to ensure Romania'scontribution to the European Union's
commitment by limiting the increase ingreenhouse gas emissions by 2020 to a level of
19% compared to the level of emissions in2005. Moreover, we expect in the near futurethat the Romanian regulators will set out binding
national climate targets in accordance with theagreement between EU leaders and European
Parliament negotiators in which it is envisageda gradual reduction in greenhouse gas
emissions compared with 1990 levels, with atleast a 55 percent reduction target by the year
2030, and a long term goal to reach agreenhouse gas neutrality by 2050. Under such
scenario, there may be regulated further
obligations related to this topic for certain
industrial companies.

Practical implications for Directors
Considering that regulators in Romania, including, but not limited to, the Romanian Government, NBR,
FSA and BSE, have become increasingly emphatic regarding the need for companies and their directors
to adopt climate resilience measures in business practices and disclosure, and the likely coming into
effect of expanded climate and ESG disclosure, a well-counselled board will:a) delegate climate risk identification and evaluation to a clearly identified team in managementthat reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to initiate the development of aclimate transition roadmap to 2050 with transparent carbon neutrality or reduction targets, withclear interim targets to 2040, 2030 and the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance,
scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, thetask of translating the long-term strategy into a clear decision-making process for each aspectthat is relevant to each committee; andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.
Contributors:

Cristina Reichmann, CMS Cameron McKenna
Nabarro Olswang LLP SCP
Mircea Ciută, CMS Cameron McKenna Nabarro
Olswang LLP SCP

135

RussiaThis section has not been updated since the first edition of thePrimer published in June 2021.
Russian laws expressly regulate only following
the issues connected with climate change,
including:●prohibitions and restrictions on theactivity
causingharm
totheenvironment: in particular, by means ofrate-setting and regulation;●

liability measures for violations of suchprohibitions and restrictions: inparticular, measures of public liability of
directors for violations committed bytheircompanies,
i.e.
fines,
disqualification, etc.; measures ofprivate liability, i.e. compensation ofdamages, subsidiary liability for thecompany's obligations in case ofbankruptcy, disciplinary liability for the
improper performance of their duties
as directors, per their legal andcontractual obligations.

The Russian Civil Code provides for the
obligation of directors to act reasonably and ingood faith for the benefit of the company. 1
However, the Code does not make explicit
reference to directors’ fiduciary duty in respectof climate change. To the extent that directors
are held to such duties, they arise from thecompany itself voluntarily committing to goodpractice, placing responsibility for climate
governance with the board and disclosing thesecommitments via publicly available statements
and documents.

In 2014, the Bank of Russia approved the
Corporate
Governance
Code,
the
implementation of which is recommended to
public companies.2 The Corporate Governance
Code is not mandatory. However, publiccompanies are encouraged to adhere to it, andmay adopt model language contained in the
Code as their own, and include it in their public
documents.
Directors' Duties and Climate Change
The Corporate Governance Code sets out thefollowing duties of company directors:

Examples of such internal documents
determining corporate governance standards
are as follows:1●

corporate ethics (culture) codes;●

corporate governance codes;●

ESG and disclosure policies etc.

Financial Supervisory Authority, The Strategy of the
Financial Supervisory Authority for 2021-2023 (31 July
2020)
<https://asfromania.ro/uploads/articole/attachments/616
3e0731e00b316200043.pdf?TSPD_101_R0=08cc9ed8f
dab20005998b78a75acdc0614f2fbf83102a950d27bd4f
08d1a5f0e7c05cdbd2866d25908a2f1c4ef14300095bba●

to assess and take into account nonfinancial environmental risks;●

to disclose additional information in theareas of social and environmental
responsibility,inparticular,thecompany's policies and management
systems related to the environment);and●to include in annual reports informationon the company's policy in the field ofenvironmental
protection
andenvironmental policy.

In addition, most public companies haveadopted their own definitions of director duties,
which they incorporate into their by-laws orother documentation that are made public.
These definitions often include the following
duties:2e225c204de35d27ffca3881addcabfc7f0dbb8eec2c49bd
78a61f6b4e2819b3e>; Russian Civil Code, art. 53.1,
clause 3.
Financial Supervisory Authority, The Strategy of the
Financial Supervisory Authority for 2021-2023 (31 July2020); Letter of the Bank of Russia, ‘On the Corporate
Governance Code’, No. 06-52/2463 dated 10 April 2014.

136

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Russia●to be guided by the principle ofpreventing rather than remediating
environmental damage;●to improve competencies and raiseawareness amongst employees in thefield of environmental best practice;
and

●

to
take
measurestogreenhouse gas emissions.

sustainable
development
environmental reports.

reportsandPublic disclosure generally includes:●

data on certification (inter alia
voluntary) of products, equipment andbuildings;

reduce●corporate environmental goals andperformance against them;Russian legislation continues to develop. At
present, there are several draft laws underconsideration that address the regulation ofcompanies’ carbon footprints. If they are
adopted, they may also affect directors' duties
in the sphere of climate change.

●

environmental management systems;●

Information concerning the issuance ofGreen Finance instruments, such as
bonds, project finance and bank loans
used to finance renewable energy
projects;●

resource efficiency processes andpolicies; and●efforts to improve energy efficiency etc.

Directors' Disclosure
Climate Change

Obligations

andInformation regarding climate change isnormally disclosed within annual reports,

Practical implications for Directors
Given that issues connected with climate change are on the agenda of Russian public companies andtheir boards, it is highly recommended to adopt climate resilience measures in business practices, which
may include:a) adopting internal documents determining corporate governance standards (ESG policies, etc.);b) delegating climate risk identification and evaluation to a clearly-identified management teamwhich reports directly to the CEO and board;c) initiating the development of a climate transition roadmap to 2050 with transparent carbon
neutrality or reduction targets, with clear interim targets for 2040 and 2030, a current rolling
multi-year strategic plan, and periodical reports back to the board;d) delegating to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of implementing the long-term strategy into a clear decision-making
process for each aspect relevant to each committee; ande) discussing with the disclosure counsel, in order to develop an external engagement andcommunications plan.
Contributors:

Nikita Shabalin, DLA Piper Russia

137Singapore
In Singapore, regulators are increasingly
scrutinisingfinancial
institutions’andcompanies’ responses (or lack thereof) to
climate
risks
and,
more
generally,
environmental risks. In June 2020, theMonetary Authority of Singapore (MAS), a
founding member of the NGFS, urged financial
institutions to report the impact of material
climate-related risks on their business andoperations in accordance with internationalguidelines
such
as
the
TCFD
recommendations.1 In October 2020, theManaging Director of the MAS opined that“Singapore has much at stake in global efforts
to mitigate climate risk” and that “[f]inancial
institutions cannot afford to ignore these risks”.2
In December 2020 the MAS, in its capacity as
central bank and financial regulator, issued its
Guidelines on Environmental Risk Management
for the banking, insurance, and asset
management sectors.3 These guidelines
establish the expectation that financial
institutions will assess, monitor, mitigate anddisclose environmental risks, including physicaland transition risks, and financial institutions
must implement these expectations from June
2022.
In addition, since 2016 the Singapore Exchange(SGX) has required listed companies to furnish
annual sustainability reports containing theiridentification and evaluation of material
environmental, social and governance issues
on a comply or explain basis.4 In 2021, the SGX
issued amendments to the listing rules
regarding sustainability issues, in particularclimate change.5 These include a requirement
for the annual sustainability report to include
climate-related disclosures, and for first-time

1

2

3

MAS, ‘Consultation Paper on Proposed Guidelines on
Environmental Risk Management for Banks’ (25 June 2020)<https://www.mas.gov.sg/publications/consultations/2020/con
sultation-paper-on-proposed-guidelines-on-environmentalrisk-management-for-banks>; MAS, Consultation Paper on
Proposed Guidelines on Environmental Risk Management for
Insurers
(25
June
2020)
<https://www.mas.gov.sg/publications/consultations/2020/con
sultation-paper-on-proposed-guidelines-on-environmentalrisk-management-for-insurers>.
MAS, ‘Harnessing the Power of Finance for a Sustainable
Future’(October
2020)<https://www.mas.gov.sg/news/speeches/2020/harnessingthe-power-of-finance-for-a-sustainable-future>.
MAS, ‘Guidelines on Environmental Risk Management for AssetManagers’(8
December
2020)<https://www.mas.gov.sg/regulation/guidelines/guidelines-onenvironmental-risk-management-for-asset-managers>; MAS,
‘Guidelines on Environmental Risk Management for Insurers’ (8directors to undertake mandatory sustainability
training.
Singapore has had a carbon tax in place since2019, which has to date been set at S$5/tCO2.
In the 2022 Budget, the Ministry of Financeannounced that it would raise the carbon tax
significantly from 2024 onwards (to S$25/tCO 2
and to S$45/tCO2), with a view to reaching
S$50-80/tCO2 by 2030. Companies will bepermitted to use high-quality international
carbon credits to offset up to 5% of their taxable
emissions from 2024.6 Directors, particularly ofcompanies with high emissions, should be alert
to the potential increased costs this may entail.
Directors' Duties and Climate Change
Singapore is a common law jurisdiction where
both statute (principally the Companies Act(Cap 50)) and common law inform directors’
duties. The Companies Act imposes several
specific obligations on company directors.
Section 157(1) of the Companies Act provides
that directors shall “… at all times act honestly

and use reasonable diligence in the dischargeof the duties of his office”. The assessment of

reasonable diligence is an objective one,requiring investigation as to whether the
director exercised the same degree of care anddiligence as a reasonable director would havein the relevant circumstances.7 This duty exists

4
5

6

7

December
2020)<https://www.mas.gov.sg/regulation/guidelines/guidelines-onenvironmental-risk-management-for-insurers>;
MAS,‘Guidelines on Environmental Risk Management for Banks’ (8December
2020)<https://www.mas.gov.sg/regulation/guidelines/guidelines-onenvironmental-risk-management>.
Singapore Exchange Listing Rules, rr 711A and 711B.
SGX, Climate and Diversity: The Way Forward (15 December
2021)<https://api2.sgx.com/sites/default/files/202112/Response%20Paper%20on%20Climate%20and%20Diver
sity%20-%20The%20Way%20Forward_0.pdf>.
Ministry of Finance, Budget Statement 2022: D. Advance Our
GreenTransition(February2022)<https://www.mof.gov.sg/singaporebudget/budget2022/budget-statement/d-advance-our-green-transition>.
Lim Weng Kee v Public Prosecutor [2002] 2 SLR(R) 848 at
[28].

138

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Singaporein addition to the similar duty at common law to
exercise care, skill, and diligence in relation to
the company.8 Section 157(2) requires that a
director not make improper use of his office or
any information in that capacity to gain, directly
or indirectly, an advantage for himself or
another, or to cause detriment to the company.
As fiduciaries, directors also have a duty to act
bona fide in the best interests of the company,9and to avoid any action that may result in them
being in a position of conflict of interests withthe company.10 Furthermore, there are
numerous offence-creating provisions in
Singapore’s environmental legislation thatspecifically provide for the directors ofcompanies to be criminally liable for theircompanies’ breaches of these laws.11
In 2021, Singaporean barrister and former
Deputy Solicitor General Jeffrey Chan Wah
Teck SC released a legal opinion on directors’
responsibilities and climate change under
Singaporean law (the Chan Opinion).Chan SC
concluded that:[A]t this time, directors in Singapore are
obliged, when carrying out their
responsibilities as directors, to take into
account climate change and its
associated risks, particularly insofar as
those risks are or may be material tothe interests of the company.12of the relevant facts and circumstances before
undertaking a course of action.14 Furthermore,
Chan SC posited that Singaporean law requires“at the very least” that directors consider theircompanies’ exposure to the physical,
transitional, and liability risks associated withclimate change, with directors who fail to do sopotentially facing criminal prosecution as wellas personal liability.15 Accordingly, the Chan
Opinion urges directors to institute governanceand management processes for identifying,monitoring, managing, and reporting on climate
risks.16
Directors' Disclosure
Climate Change

Obligations

andCompanies listed in Singapore have an
obligation of continuous disclosure with respect
to information that is likely to have a material
effect on the price or value of their securities.17
The Chan Opinion highlighted that there are
numerous ways in which climate risks may havea material effect on the price or value of
securities, including through:a) Legislative changes rendering certain
company assets or activities unusable
or untenable at cost (such as thephase-out of petrol and diesel
vehicles);b) Damage caused by extreme weather
events in particular geographicallocales which might be especiallysusceptible (such as flood-prone orcoastal areas);

The Chan Opinion identified that suchobligations arise from the directors’ duties ofcare and diligence and to act in good faith, aswell as statutes addressing environmental
sustainability and climate change. Notably, theChan Opinion observed that directors may beheld criminally liable under Singaporean
environmental sustainability and climatechange statutes for failing to ensure that theircompanies have in place principles andsystems for compliance.13c) The commencement of climate change
litigation against the company or one ofits subsidiaries;d) Rising financing or insurance costs forcertain company activities or assets(such as coal-fired power plants); andMoreover, the Chan Opinion highlighted that
the Singaporean business judgement defence
will not protect a director who fails to make aconscious decision, does not exercise their
judgment, or fails to properly inform themselves

8
9
10
11

12

Bristol and West Building Society v Mothew [1998] Ch 1 at 16.
Re Smith and Fawcett Ltd [1942] Ch 304 at 306.
Bray v Ford [1896] AC 44 at 51
For example, see Environmental Protection and Management
Act (Cap 94A, 2002 Rev Ed.) s. 71(1).
Jeffrey Chan SC et al, ‘Legal Opinion on Directors’
Responsibilities and Climate Change Under Singaporean Law’
(April
2021)
at
[79],
<https://ccli.ubc.ca/wp-

13
14
15
16
17

content/uploads/2021/04/Legal-Opinion-on-DirectorsResponsibilities-and-Climate-Change-under-SingaporeLaw.pdf>.
Ibid at [45].
Ibid at [76].
Ibid at [79].
Ibid at [80].
Singapore Exchange Listing Rules, r 703.

139

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Singaporee) The exposure of its counter-parties tothe above risks.18
Accordingly, the Chan Opinion opines that
where these circumstances are present,
directors ultimately hold responsibility forensuring that their company discloses incompliance with the Singapore Exchange
Listing Rules.19 Singaporean companies arealso required to furnish an annual sustainability
reportwhich
must
includematerial
environmental, social and governance factors;
policies, practices and performance; targets;sustainability reporting frameworks; and board
statements.20
Regarding disclosure obligations and climatechange under Singaporean law, the Chan
Opinion concluded that:[…] directors who fail to disclose
physical and transition risks to thevaluation of the assets and liabilities
under their stewardship may facevarious civil liabilities, even within thecontext of existing financial reporting
standards.21
Further, the SGX has now amended theSingapore Listing Rules to require listedcompanies to disclose climate change risks inalignment with the recommendations of theTaskforceon
Climate-related
Financial

18

19
20
21

Jeffrey Chan SC et al, ‘Legal Opinion on Directors’
Responsibilities and Climate Change Under Singaporean Law’
(April 2021) at [64].
Ibid at [65].
Singapore Exchange Listing Rules, rr 711A and 711B.
Jeffrey Chan SC et al, ‘Legal Opinion on Directors’
Responsibilities and Climate Change Under Singaporean Law’
(April 2021) at [69].

Disclosures.22 These requirements apply on a‘comply or explain’ basis from January 2022;
from 2023, climate-related disclosures will bemade mandatory for issuers in the financial,energy, and agriculture, food and forest
products industries; and from 2024, suchdisclosures will be made mandatory for issuersin the materials, buildings and transportationindustries.23 The SGX amendments explicitly
extend the requirement for the sustainability
report to include a statement of the board on its
consideration of sustainability risks to include: adescription of the board’s oversight of climaterelated risks and opportunities, and a
description of management’s role in assessing
and managing such risks. Issuers are also
required to describe their process for
identifying, assessing and managing climaterelated risks, their metrics and targets used toassess and manage climate-related risks, anddisclose their Scope 1, 2 and, if appropriate,
Scope 3 emissions.
Additionally, under the Banking Act (Cap 19)
the MAS may also require banks to publicly
disclose information relating to their risk profile
andrisk
management
processes.24
Foreseeably, the MAS could seek information
pursuant to its recently released Guidelines on
Environmental Risk Management to examine
banks governance of climate risks.

22

23

24

Singapore Exchange Listing Rules, r 711B(aa); Singapore
Exchange Listing Rules Practice Note 7.6, at [4.7]-[4.17].
SGX, SGX mandates climate and board diversity disclosures(15
December
2021)<https://www.sgx.com/mediacentre/20211215-sgx-mandates-climate-and-board-diversitydisclosures>.
Sections 10B(1) and (2), Banking Act (Cap 19) (see also s.
26(1)).

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Singapore

Practical Implications for Directors
Given that regulators in Singapore have become increasingly emphatic regarding the need forcompanies and their directors to adopt climate resilience measures in business practices anddisclosure, and in particular the above-noted recognition of climate risk by the MAS, its guidelines forEnvironmental Risk Management and disclosure for banking, insurance, and asset management, theSingapore Exchange regulations regarding sustainability reporting and training, and the Chan legal
opinion, well-counselled boards should:a) ensure that board members have adequate training on sustainability management, including
risk and opportunity identifications and oversight (including climate risks), and delegate
sustainability risk identification and evaluation to a clearly-identified team in management which
reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent net-zero-aligned reduction targets, with clear
interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.

Contributors:

CCLI

141

South Africa
The Climate Change Bill, which among otherthings will require government entities to aligntheir policies to take into account climatechange risks and require the government to set
legally binding greenhouse gas emissions
targets, will come before the country’s
parliament this year.1 The National Adaptation
Strategy, which was adopted by South Africa’s
cabinet in October 2017, will serve as binding
guidance for sectors on preparing for the
impact of climate change.2 South Africa has hada tax on greenhouse gas emissions since 2019
under the Carbon Tax Act, 2019. In the 2022
budget, the National Treasury announced that
this levy would increase to reach US$20 per
tonne by 2025, in line with the government's
commitments made at the 26th Conference ofParties to the UNFCCC (COP 26), and that from2026 onwards, the rate of increase would
increase rapidly and allowances would fallaway.3The South African Reserve Bank, Prudential
Authority (PA) and Financial Sector Conduct
Authority each recognize that climate change
poses systemic risks to the financial system. In
2019, the Prudential Authority surveyed theSouth African banking and insurance sector’s
implementation of the Task Force on Climaterelated
Financial
Disclosures’(TCFD)
recommendations. As a result, the PA intends
to enhance its supervision of climate-related
financial risks and to publish guidelines“outlining proposals to insurers and banks toconsider climate risks”.4

examine their
responses tospecific climate
risks which are
the subject ofsupervisory
focus.5
In May 2020,
South Africa’s financial regulators worked with
the National Treasury to produce a technicalpaper entitled ‘Financing a Sustainable
Economy’.6 A 2021 technical paper has since
been produced.7 Moreover, in June 2020 theSouth African Reserve Bank, a member of the
Network of Central Banks and Supervisors forGreening the Financial System, published aworking paper entitled ‘Climate Change and its
Implications for Central Banks in Emerging andDeveloping Economies’.8 The Reserve Bank
has since released a report on climate risk andfinancial institutions, which found that 90% of
the institutions surveyed said they were taking
steps to understand the risks posed by climatechange, and has announced that it is integratingclimate risk into its analyses.9
This regulatory focus upon addressing climaterelated financial risks also led to theestablishment of the Prudential Authority
Climate Think Tank (PACTT) in September
2020.10 The PACTT’s mandate is to promote,develop and coordinate the Prudential
Authority’s
regulatory
andsupervisory
response to climate risks.

As part of this, the PA
carried out a survey of financial institutions to

1

2

3

4

5

6

ClimateChangeBill(B9-2022)<https://www.parliament.gov.za/bill/2300773>.
Department of Environment, Forestry and Fisheries, National
Climate Change Adaptation Strategy (October 2017)<https://www.dffe.gov.za/sites/default/files/legislations/session
2_draftnational_adaptationstrategy.pdf>.
National Treasury, 2022/23 Budget Speech by Minister ofFinance Enoch Godongwana (23 February 2022)<http://www.treasury.gov.za/documents/national%20budget/2
022/speech/speech.pdf>.
Prudential Authority, ‘Prudential Authority Annual Report
2019/2020’(2020),
13,<https://www.resbank.co.za/en/home/publications/publicationdetail-pages/reports/pa-annual-reports/2020/10227>.
Prudential Authority, Climate Risk Survey Report (October
2021)<https://www.resbank.co.za/en/home/publications/publicationdetail-pages/prudential-authority/pa-publicawareness/Financial-Sector-Awareness/Prudential-AuthorityClimate-Survey-Report-2021%5d>.
South African National Treasury, ‘Financing a Sustainable
Economy:Technical
Paper
2020’
(2020)<http://sustainablefinanceinitiative.org.za/wpcontent/downloads/Sustainability_technical_paper_2020.pdf>.

7

8

9

10

National Treasury, Financing a Sustainable Economy:
Technical
Paper
2021
(15
October
2021)<http://www.treasury.gov.za/comm_media/press/2021/20211
01501%20Financing%20a%20Sustainable%20Economy.pdf>
South African Reserve Bank, ‘Climate Change and its
Implications for Central Banks in Emerging and Developing
Economies’, Working Paper Series WP/20/04 (2020)<https://www.resbank.co.za/en/home/publications/publicationdetail-pages/working-papers/2020/10001>.
Lameez Omarjee, ‘Can central banks do more to fight climatechange?’(23
August2021)<https://www.news24.com/fin24/companies/can-centralbanks-do-more-to-fight-climate-change-20210823>;
South
African Reserve Bank, Prudential Authority Climate Risk Survey
Report2021(October
2021)<https://www.resbank.co.za/content/dam/sarb/publications/pr
udential-authority/pa-public-awareness/financial-sectorawareness/2021/PA%20Climate%20Survey%20Report%202
021.pdf>.
Sustainable Insurance Forum, ‘Jurisdiction: South Africa:
Prudential
Authority(PA)’(2020)<https://www.sustainableinsuranceforum.org/view_pdf.php?pdf_file=wp-content/uploads/2020/11/South-Africa-PrudentialAuthority-PA-1.pdf>.

142Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
South Africa

Directors’ Duties and Climate Change
The fiduciary duties of South African directorsthat have been partially codified in the
Companies Act 71 of 2008 (Companies Act),are mandatory, and apply to all companies. The
general duties of directors fall into two
categories: fiduciary duties of good faith,honesty and loyalty; and the duty to exercise
reasonable care, skill and diligence, which is nota fiduciary duty and instead centres on the issueof competence.
A 2018 report by the Commonwealth Climate
and Law Initiative concluded that “fiduciary andother company law duties requiring company
directors to act in the best interests of thecompany are likely to apply in the climate-risk
context, given the material financial risks thatclimate change poses, which are foreseeable,
requiring company directors to develop
strategies to manage these risks”.11 Theseduties evolve with the values of society andwhat is considered to be the industry norm, or‘best practice’, at any given time. In the South
African context, the King Report, and theConstitution and Bill of Rights, are of particular
relevance to the framing of climate issues within
directors' duties. A forthcoming legal opinion by
the Centre for Environmental Rights finds that inlight of South African company law in relation tofiduciary
duties,corporate
governancerequirements, and policy and regulatory
developments, directors of South Africancompanies and financial institutions are
required to consider climate-related financial
risks when fulfilling their legal duties.12
On the issue of investor fiduciary duties andclimate change, a leading South African
pension lawyer, Rosemary Hunter of law firm
Fasken, published an opinion in April 2019 thatfound that the boards of South African pension
and provident funds are required, per theirfiduciary duties, to fully consider climate risk

11

12

13

14

Christine Reddell, Commonwealth Climate and Law Initiative,
Directors’ Liability and Climate Risk: South Africa - Country
Paper(April2018)<https://ccli.ouce.ox.ac.uk/wpcontent/uploads/2018/04/CCLI-South-Africa-Paper-Final.pdf>.
Centre for Environmental Rights, Legal opinion on Directors’
Duties and Climate Change under South African Law(forthcoming).
Fasken, ‘Pension Funds and Climate Risk’ (April 2019) 2-3, 1516,<https://justshare.org.za/wpcontent/uploads/2019/04/2019_Pension-fund-legal-opinionby-Fasken.pdf>
Institute of Directors in South Africa and King Committee on
Corporate Governance, ‘King Report on Corporate
Governance
for
South
Africa2016’(2016)<https://cdn.ymaws.com/www.iodsa.co.za/resource/collection

when making investment decisions (the Fasken
opinion).13 Failure to do so exposes trustees tothe threat of legal liability for losses incurred by
the fund as a result.
Directors' Disclosure Obligations andClimate Change
According to the 2016 King IV Report on
Corporate Governance (King IV),14 boards areadvised that, in preparing their integrated
report, they must address “matters that could

significantly affect the organisation’s ability tocreate value”. King IV explicitly links value

creation to the six capitals, one of which isnatural capital. Entities listed on the
Johannesburg Stock Exchange must report on
their compliance with King IV’s disclosure andapplication regime as part of their annual
report.15
Non-listed
entitiesarealso
encouraged to comply.
Disclosure in accordance with the TCFD’s
recommendations is also becoming a norm inSouth Africa. In a survey conducted by the
Prudential Authority, 67% of banks and 100% of
non-life insurers stated they intended to makeTCFD-aligned disclosures in financial year
2019-2020.16 Furthermore, in November 2020
the Code for Responsible Investing in South
Africa (CRISA) Committee released their draft
revised Code.17 The Code calls upon
institutional investors to integrate sustainablefinance practices (including climate resilience
activities) into their operations and to disclose
how such practices are being integrated, which
standards, guidelines or models are being used
and the outcomes of such implementation.
South Africa is considering developing climate
disclosure
requirements
forfinancial
institutions, and the Prudential Authority has
noted that the TCFD framework may be a useful
disclosure
tool.18
Furthermore,
the

15
16

17

18

/684B68A7-B768-465C-8214E3A007F15A5A/IoDSA_King_IV_Report_-_WebVersion.pdf>
See JSE Listings Requirements Service Issue 27, [8.63(a)].
South African Prudential Authority, ‘Survey Results: Task Forceon
Climate-related
Financial
Disclosures’(2020)<https://www.resbank.co.za/en/home/publications/publicationdetail-pages/prudential-authority/pa-public-awareness/Covid19-Response/9855>.
CRISA Committee, ‘CRISA Code for Responsible Investment inSouth Africa: 2020 Revision Consultation Draft’ (2020)<https://collaborate.unpri.org/group/5346/stream>.
Financial Stability Board, Report on Promoting Climate-Relating
Disclosures(7July2021),
14andn8,<https://www.fsb.org/wp-content/uploads/P070721-4.pdf>.

143Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
South Africa

Johannesburg Stock Exchange has launchedguidance on sustainability and climate change
disclosure for issuers.19 The guidance proposesthat issuers follow a three-stage process:disclosure diagnosis and context, integratingclimate risks, and disclosing climate-related
information.20 Therefore, while TCFD-aligned
disclosures are not required of South Africancompanies, boards may wish to prepare forsuch disclosures becoming mandatory.

Practical Implications for Directors
Given that regulators in South Africa have become increasingly emphatic regarding the need forcompanies and their directors to adopt climate resilience measures in business practices anddisclosure, and in particular the above-noted recognition of climate risk by the Reserve Bank Prudential
Authority and Financial Sector Conduct Authority, the Government’s coordination of sustainable financeanalysis, the Faskin opinion on pension funds’ climate change obligations, and King IV Report on
Corporate Governance, well-counselled boards will:a) delegate climate risk identification and evaluation to a clearly-identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear
interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.
Contributors:

19

CCLI

Johannesburg Stock Exchange, Leading the way for a better
tomorrow: JSE Sustainability Disclosure Guidance (15December
2021)<https://www.jse.co.za/sites/default/files/media/documents//JS
E%20Sustainability%20Disclosure%20Guidance%202021_S
PS.pdf>; Johannesburg Stock Exchange, Leading the way fora better tomorrow: JSE Climate Change Disclosure Guidance(15
December
2021)<https://www.jse.co.za/sites/default/files/media/documents//JS
E%20Climate%20Disclosure%20Guidance%202021_SPS.pdf>; Sustainable Stock Exchanges Initiative, ‘Exchange in Focus:

20

JSE launches new Sustainability and Climate Change
Disclosure
Guidance’(15
December
2021)<https://sseinitiative.org/all-news/exchange-in-focus-jselaunches-new-sustainability-and-climate-change-disclosureguidance/>.
Clyde & Co, ‘Development of Environmental, Social andGovernance risk reporting: How is this being handled in theSouth
Africanmarket’(2
February2022)<https://www.clydeco.com/en/insights/2022/01/developmentof-environmental-social-and-governance>.

144

Switzerland
Sustainability, and environmental aspects inparticular, are becoming increasingly
important in Switzerland's legislation. In thepast few years, there have been numerous
legislative efforts aimed at reducing negative
impacts on the climate and obliging companies
to comply with certain due diligence andreporting obligations. On 27 January 2021, theSwiss Federal Council published Switzerland’s
Long-Term Climate Strategy, which sets out atarget of attaining net-zero greenhouse gas
emissions by 2050.1
While the revision of the current Federal Act on
the Reduction of CO2 Emissions (CO2 Act) was
narrowly rejected by the Swiss electorate inJune 2021 and the new proposal for the revisionof this Act is only expected in autumn 2022,
developments in climate reporting haveadvanced.
In May 2021, the Swiss Financial Market
Supervisory Authority (FINMA) introduced
reporting obligations for large banks andinsurance companies (supervisory categories 1
and 2) in line with the Task Force on Climaterelated Financial Disclosures (TCFD), by
amending its Circulars ‘Disclosure – banks’(Circular 2016/1) and ‘Disclosure – insurers’(Circular 2016/2).2 The revised disclosure rules
require relevant financial institutions to:describe the main features of the entity’s
governance structure to enable it to identify,
evaluate, manage, monitor and report on
climate-related financial risks; describe themajor climate-related financial risks identified
and their impact on the business model andstrategy; describe risk-management structuresin respect of such risks; and disclosequantitative information on their climate-related
financial risks.3

1

2

3

Federal Council, Switzerland's Long-Term Climate Strategy (27January2021)<https://www.newsd.admin.ch/newsd/message/attachments/6
5879.pdf>.
FINMA, FINMA specifies transparency obligations for climate
risks
(31
May
2021)
<https://www.finma.ch/en/news/2021/05/20210531-mmtransparenzpflichten-zu-klimarisiken/>.
FINMA, Circ. 16/1, ‘Disclosure – banks’ at [14.1], Annexure 5;
FINMA Circ. 16/2, ‘Disclosure – insurers’ at [13]-[13.7]

In November 2021, the Swiss government
tasked the Finance Department to propose, in
consultation with the Department of theEnvironment,
Transport,
EnergyandCommunication, amendments to financial
market legislation to prevent greenwashing.
Such legislative proposals are expected by theend of 2022. 4
In January 2022, a revision of the Swiss Codeof Obligations came into force, implementing
new due diligence and reporting obligations for
Swiss companies. This new law was introduced
as a counter-proposal to the Responsible
Business Initiative, which would have opened
up Swiss companies to litigation in Swiss courts
for alleged violations of human rights orenvironmental laws around the world. The new
ESG reporting requirements are modelled after
the EU Non-Financial Reporting Directive(Directive 2014/95) (cf. below section on
directors' disclosure obligations).
Lastly, in March 2022, the Swiss government
published a draft ordinance, which specifies theclimate-related reporting obligations for large
Swiss companies, being part of the ESG
reporting requirements introduced with theaforementioned revision of the Swiss Code ofObligations.5 The draft ordinance provides forthe implementation of the recommendations of
the TCFD by large Swiss companies. The
ordinance is expected to come into force on 1
January 2023.

4

5

Federal Council, Federal Council strives to be international
leader in sustainable finance with climate transparency (17November
2021)<https://www.admin.ch/gov/en/start/documentation/mediareleases.msg-id-85925.html>
Federal Council, Federal Council initiates consultation on
ordinance on climate reporting by large companies (30 March2022)<https://www.admin.ch/gov/en/start/documentation/mediareleases.msg-id-87790.html>

145

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland

Directors' Duties and Climate Change
The duties of the directors of Swiss companies
are primarily governed by the Swiss Code ofObligations (CO). The legal provisions aresupplemented by soft law, such as the Swiss
Code of Best Practice.6
According to article 716a CO, the board of
directors is inter alia responsible for the overallmanagementofthecompany,thedetermination of the company's organisation,
the organisation of the accounting, financial
control and financial planning systems and theoverall supervision of the persons entrustedwith managing the company. In particular, theboard of directors must define the company's
strategy and ensure that the strategy is in thecompany's best interests and can be
implemented with the resources available. The
board of directors also needs to ensure that thecompany's risks are sufficiently identified,assessed and managed.
The members of the board of directors and third
parties engaged in managing the company's
business must perform their duties with all due
diligence and safeguard the interests of thecompany in good faith (article 717 CO). If thedirectors intentionally or negligently breach
their duties, they are liable both to the company
and to the individual shareholders and creditors
for any losses or damage arising from thebreach of their duties (article 754 CO).
The law does not explicitly stipulate that
directors must also take climate-related risks
into account when determining the company's
strategy and overseeing its risk management
systems. However, in light of the developments
mentioned above, in particular the widespreadrecognition by financial regulators that climatechange poses material financial risks tobusiness and the new ESG reporting
requirements, it logically follows that directors
must integrate climate risks and opportunities
into their governance roles.

6

economieswisse, ‘Swiss code of best practice for corporate
governance’(2016)<https://www.economiesuisse.ch/sites/default/files/publications/economiesuisse_swisscode_e_web_2.pdf>.

Directors' Disclosure
Climate Change

Obligations

andAs explained at the outset, the revision of the
Swiss Code of Obligations introduced as acounter-proposal to the Responsible BusinessInitiative came into force on 1 January 2022.
The new provisions of the Swiss Code ofObligations provide for two new obligations.
Firstly, large Swiss companies will be obliged toissue a general ESG report showing the risk of
their business activities on environmental,social, labour, human rights and anti-corruption
issues, as well as the measures taken against
them. Secondly, companies with risks in thesensitive areas of child labour and so-called
conflict minerals must comply with special andfar-reaching due diligence and reporting
obligations. The Federal Council has
determined the details of these specific due
diligence and reporting requirements in a new

ordinance on due diligence and transparency inrelation to minerals and conflict-affected areasand child labour (DDTrO).7 The newrequirements will apply for the first time for thefinancial year beginning in 2023. This meansthat the first reports based on the new statutory
ESG reporting and due diligence framework
must be issued in 2024 with respect to the 2023
financial year.
The general ESG reporting obligation (Article
964a-964c CO) applies to companies of public
interest domiciled in Switzerland that, together
with controlled companies in Switzerland andabroad, (i) have at least 500 FTEs on averageannually, and (ii) have assets of at least CHF 20
million or revenues of CHF 40 million in two
consecutive years. Other than FINMA regulated
financial institutions, companies of public
interest include companies incorporated in
Switzerland that are listed in Switzerland or
abroad, have bonds outstanding, or contributeat least 20% of the assets or of the turnover tothe consolidated accounts of such companies.
However, companies that are controlled by acompany to which the new reporting
requirements apply, or that are subject toequivalent reporting under foreign laws, are notrequired to prepare an additional report.

7

Ordinance of 3 December 2021 on Due Diligence andTransparency in relation to Minerals and Metals from ConflictAffected
Areas
and
Child
Labour(DDTrO)<https://www.fedlex.admin.ch/eli/cc/2021/847/en>

146

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland

While Swiss subsidiaries of foreign companies
would usually not be listed on any stock
exchange, the ESG reporting obligations may
apply to such subsidiaries, if they have bonds
outstanding, unless a direct or indirect parent
company is subject to equivalent reporting
obligations under foreign law, such as the EU
Non-Financial Reporting Directive.
The ESG report must include informationnecessary to understand the company's
business and the impact of its activities on theenvironment (including CO2 targets), as well associetal concerns related to employees, respectfor human rights and the fight against
corruption across their value chains.8
As indicated at the outset, the ESG reporting
requirement is modelled after the EU NonFinancial Reporting Directive, and the nonexhaustive list of topics that the report mustcover tracks its model closely. Specifically, thereport has to cover the following topics:
●
●

●

●
●

the company's business model(Business Model);the main ESG risks resulting from thecompany's own operations and, where
relevant and proportionate, its
business relationships, products orservices (Risk Assessment);
the policies pursued to address these
ESG risks, including due diligence
applied (Policies and Due Diligence);
the outcome of these policies(Outcome); andnon-financial key performanceindicators related to the company's
response to ESG risks (KPIs).

If a company does not have policies addressing
certain ESG risk areas, the report must include
an explanation of the reasons for such a gap(comply or explain). The only defensible
explanation that one could expect to see is anassessment that a company's activities do notraise concerns in a certain area.

8

9

10

In addition to the generic ESG reporting obligation, the new
ESG legislation provides for further specific due diligence andreporting obligations related to so-called Conflict Minerals andrelated to child labour.
OECD, OECD Guidelines for Multinational Enterprises (2011)<http://www.oecd.org/daf/inv/mne/48004323.pdf>.
GRI,
GRI
Standards
(May
2020)
<https://www.globalreporting.org/how-to-use-the-gristandards/gri-standards-english-language/>.

The report may be based on national, European
or international reporting standards, such as forexample the OECD Guidelines for Multinational
Enterprises9 or the standards of the Global
Reporting Initiative (GRI).10 Further, companies
may want to draw from guidelines the EU has
issued on the methodology for reporting nonfinancial information.11 Under the above
headings, these guidelines list out in detail the
aspects that the ESG report should cover.
In addition, as stated above, the Federal Council
has in the meantime specified the requirements
for climate-based reporting in a draft
ordinance.12 According to this draft ordinance,
it is assumed that companies comply with theirclimate-based reporting obligations if they
follow the recommendations of the TCFD as
specified in Article 3 of the draft ordinance. This
assumption does not prevent companies from
reporting on the impact of the climate on its
business and the impact of its business'
activities on the climate in other ways, inparticular by relying on other guidelines orstandards. However, in such a case, thecompany must specifically demonstrate that itmeets the obligation to report on climate issues
or explain why it has no policies addressing
climate-related issues (comply or explain).
The report may be established in one of the
Swiss national languages (i.e., German, Frenchor Italian), or in English. It must be approved by
the board of directors and the shareholders'meeting and made electronically accessible tothe public for a period of 10 years. However,unlike the company's financial statements, there
is no requirement for the ESG report to beaudited.
Non-compliance with the new ESG reporting
regime is subject to criminal liability. Noncompliance includes the inclusion of false
statements in any of the newly-required reports,
the generic ESG Report and the report oncompliance with due diligence measures in theareas of conflict minerals and child labour, or
the failure to issue any of these reports, or the11

12

European Commission Communication, ‘Guidelines on Nonfinancial Reporting: Supplement on Reporting Climate-relatedInformation’,
2019/C
209/1,
(20
June
2019)
<https://ec.europa.eu/finance/docs/policy/190618-climaterelated-information-reporting-guidelines_en.pdf>.
Verordnung über die Berichterstattung über Klimabelange<https://www.newsd.admin.ch/newsd/message/attachments/7
0878.pdf>

147

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland

failure to keep records of, or publish, thesereports. If any of these acts are committed
intentionally, the fine is up to CHF 100,000; if
committed negligently, the fine is up to CHF
50,000.

In addition, deficient ESG due diligence orreporting may trigger civil liability under existing
law, namely the liability of board members andmanagement under article 754 of the Swiss
Code of Obligations.

Practical Implications for Directors
In addition to our standing recommendation to develop and maintain a well-documented and effective
general Compliance Program, we suggest that in response to the developments laid out in this note,board directors lend particular attention to the following points as a matter of priority:a) Review and where required adjust governance to ensure appropriate leadership at the board
level in relation to climate-related risks, including adverse impacts the company's activities may
cause and legal risks the company may face;b) Designate responsible function(s) to monitor and provide ongoing advice in relation to theincreasing body of laws and regulations in the area of climate risk management requirements
both in Switzerland and in their companies' markets abroad;c) Delegate climate risk identification and evaluation to a clearly identified team in managementthat reports directly to the CEO and board, and is charged with bringing together all key
functions, including the Legal and/or Compliance function, Enterprise Risk Management,
Strategic Planning, Audit, Remuneration, Human Resources, Investor Relations, Stakeholder
Relations, etc.;d) Review and where required adjust climate-related risk management policies and processes
across the company's supply chain and distribution network, including affiliates and third
parties, on the basis of a solid risk assessment. In this regard, broaden and deepen thecompany's third party intermediary due diligence framework to address climate-related risk
factors and do so into tiers 2 and 3 of their companies’ supply chains; ande) Review and where required adjust their reporting on climate-related risk factors and themeasures they take to address these risks. Introduce internal assurance processes in relation
to reporting.

Contributors:

Philippe Reich, Baker McKenzie Switzerland
Corinne Nacht, Baker McKenzie Switzerland

148

Switzerland (French)
La durabilité, et en particulier les aspects
environnementaux, occupent une place de plus
en plus importante dans la législation suisse.
Ces dernières années, de nombreux efforts
législatifs ont été déployés pour réduire les
impacts négatifs sur le climat et obliger lesentreprises à se conformer à certaines
obligations de diligence raisonnable et derapport. Le 27 janvier 2021, le Conseil fédéralsuisse a publié la Stratégie climatique à longterme de la Suisse, qui fixe l'objectif d'atteindredes émissions nettes de gaz à effet de serre
nulles d'ici 2050.1
Même si la révision de l'actuelle loi fédérale surla réduction des émissions de CO2 (loi sur leCO2) a été rejetée de justesse par le peuplesuisse en juin 2021 et que la nouvelle
proposition de révision de cette loi n'est
attendue
qu'enautomne2022,
lesdéveloppements en matière de rapport
climatique ont continué de progresser.
En mai 2021, l'Autorité fédérale de surveillancedes marchés financiers (FINMA) a introduit desobligations de rapport destinées aux grandes
banques et aux compagnies d'assurance(catégories de surveillance 1 et 2),
conformément à la Task Force on Climaterelated Financial Disclosures (TCFD). Pour ce
faire, la FINMA a modifié ses circulaires‘Publication – banques’ (Circulaire 2016/1) et‘Publication – assureurs’ (Circulaire 2016/2).2
Les règles de publication révisées exigent que
les institutions financières concernées :décrivent les caractéristiques centrales de lastructure de gouvernance de l'entité pour lui
permettre d'identifier, d'évaluer, de gérer, desurveiller et de rendre compte des risques
financiers liés au climat ; décrivent les
principaux risques financiers liés au climat
identifiés et leur impact sur la stratégie
commerciale, le modèle d'entreprise et lastratégie ; décrivent les structures de gestion
des risques en ce qui concerne ces risques ; et

1

2

3

Conseil fédéral, Stratégie climatique à long terme de la Suisse(27
janvier
2021)<https://www.bafu.admin.ch/dam/bafu/fr/dokumente/klima/fac
hinfo-daten/langfristige-klimastrategie-derschweiz.pdf.download.pdf/Strat%C3%A9gie%20climatique%
20%C3%A0%20long%20terme%20de%20la%20Suisse.pdf>.
FINMA, La FINMA concrétise les obligations de transparenceen matière de risques climatiques (31 mai 2021)<https://www.finma.ch/fr/news/2021/05/20210531-mmtransparenzpflichten-zu-klimarisiken/>.
FINMA, Circ. 16/1, ‘Publication – banques’, [14.1], Annexe 5 ;Circ. 16/2, ‘Publication – assureurs’, [13]-[13.7].

publient
desinformations
quantitatives surleursrisquesfinanciers liés au
climat. 3
Ennovembre2021,
legouvernement suisse a chargé le Département
des finances de proposer, en concertation avec
le Département de l'environnement, destransports, de l'énergie et de la communication,des modifications de la législation sur lesmarchés
financiers
afind'empêcher
l'écoblanchiment (le greenwashing). De telles
propositions législatives sont attendues d'ici lafin de l'année 2022.. 4
En janvier 2022, une révision du Code desobligations suisse est entrée en vigueur,
mettant en œuvre de nouvelles obligations dediligence raisonnable et de rapport pour lesentreprises suisses. Cette nouvelle loi a été
introduite en tant que contre-proposition à
l'Initiative pour des entreprises responsables,qui aurait permis de poursuivre les entreprises
suisses devant les tribunaux suisses en cas deviolations présumées commises dans le mondeentier à l'encontre des droits de l'homme ou deslois
environnementales.
Lesnouvelles
exigences en matière de rapport ESG
s'inspirent de la directive européenne sur leReporting Non Financier (directive 2014/95) (cf.
ci-dessous la section sur les obligations dedivulgation des administrateurs).
Finalement, en mars 2022, le gouvernement
suisse a publié un projet d'ordonnance, faisantpartie des exigences de rapport ESG
introduites avec la révision du Code desobligations susmentionnées, qui précise les
obligations de rapport climatique destinées aux
grandes entreprises suisses.5 Le projet
d'ordonnance prévoit la mise en œuvre desrecommandations du TCFD par les grandes

45

Conseil fédéral, Le Conseil fédéral entend faire de la Suisse un
leader mondial en matière de placements durables grâce à latransparence
climatique(17
novembre2021)<https://www.admin.ch/gov/fr/accueil/documentation/commun
iques.msg-id-85925.html>
Conseil fédéral, Le Conseil fédéral ouvre la procédure deconsultation concernant l'ordonnance relative au rapport desgrandes entreprises sur les questions climatiques (30 mars
2022)
<https://www.admin.ch/gov/fr/accueil/documentation/commun
iques.msg-id87790.html#:~:text=Berne%2C%2030.03.2022%20%2D%20
Lors,suisses%20sur%20les%20questions%20climatiques>.

149Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland (French)

entreprises suisses. L'entrée en vigueur del'ordonnance est prévue pour le 1er janvier
2023.

Devoirs des administrateurs et changement
climatique
Les obligations des administrateurs de sociétéssuisses sont principalement régies par le Codedes obligations (CO). Les dispositions légales
sont complétées par des lois noncontraignantes, comme le Code suisse debonnes pratiques.6
Selon l'article 716a CO, le conseild'administration est inter alia chargé d'exercer
la haute direction de la société, de fixerl’organisation de la société, de fixer lesprincipes de la comptabilité et du contrôle
financier ainsi que le plan financier et d'exercer
la haute surveillance sur les personnes
chargées de la gestion pour s’assurer. En
particulier, le conseil d'administration doit
définir la stratégie de la société et s'assurer quecette stratégie est dans l'intérêt de la société etqu'elle puisse être mise en œuvre par les
ressources
disponibles.
Le
conseild'administration doit également veiller à ce que
les risques de la société soient suffisamment
identifiés, évalués et gérés.
Les membres du conseil d’administration, demême que les tiers qui s’occupent de la gestion,
exercent leurs attributions avec toute ladiligence nécessaire et veillent fidèlement aux
intérêts de la société (article 717 CO). Si les
administrateurs manquent à leurs devoirs, que
ce soit intentionnellement ou par négligence, ils
sont responsables, tant envers la société
qu'envers les actionnaires et les créanciers
individuellement, des pertes ou dommages
résultant de la violation de leurs devoirs (article
754 CO).
La loi ne prévoit pas explicitement que lesadministrateurs doivent également prendre encompte les risques liés au climat lorsqu'ils
déterminent la stratégie de l'entreprise etsupervisent ses systèmes de gestion desrisques. Toutefois, à la lumière desdéveloppements mentionnés ci-dessus, en

6

Economiesuisse, ‘Code suisse de bonnes pratiques pour legouvernementd'entreprise’(2016)<https://www.economiesuisse.ch/sites/default/files/publications/economiesuisse_swisscode_f_web.pdf>.

particulier de la prise de conscience répanduechez les régulateurs financiers que lechangement climatique présente des risques
financiers considérables pour les entreprises,
ainsi que des nouvelles exigences en matièrede rapport ESG, il s'ensuit en toute logique que
les administrateurs doivent intégrer les risqueset opportunités climatiques dans leurs rôles degouvernement d'entreprise.
Obligations
dedivulgation
desadministrateurs et changement climatiqueComme expliqué précédemment, la révision du
Code des obligations suisse, introduite commecontre-projet à l'initiative pour des entreprises
responsables, est entrée en vigueur le 1er
janvier 2022. Les nouvelles dispositions duCode des obligations suisse prévoient deux
nouvelles obligations. D'une part, les grandes
entreprises suisses seront tenues de publier un
rapport ESG général présentant les risques deleurs activités commerciales en matière
environnementale, sociale, personnel, lerespect des droits de l’homme et la lutte contre
la corruption, ainsi que les mesures prises à cetégard. D'autre part, les entreprises présentant
des risques dans les domaines sensibles dutravail des enfants et des minerais dits de conflit
doivent se conformer à des obligations
spéciales et étendues de diligence raisonnable
et de rapport. Le Conseil fédéral a fixé lesdétails de ces obligations spécifiques dediligence et de rapport dans une nouvelleordonnance sur les devoirs de diligence et detransparence en matière de minerais et demétaux provenant de zones de conflit et enmatière de travail des enfants (ODiTr).7 Les

nouvelles exigences s'appliqueront à partir del'année financière de 2023. Cela signifie que lespremiers rapports basés sur le nouveau cadre
légal de rapport et de diligence raisonnable
ESG doivent être publiés en 2024 pour l'année
financière de 2023.
L'obligation générale de rapport ESG (articles
964a à 964c CO) s'applique aux sociétésd'intérêt public siégeant en Suisse qui, avec lessociétés contrôlées en Suisse et à l'étranger, (i)comptent au moins 500 emplois à plein temps

7

Ordonnance du 3 décembre 2021 sur les devoirs de diligenceet de transparence en matière de minerais et de métaux
provenant de zones de conflit et en matière de travail desenfants(ODiTr)<https://www.fedlex.admin.ch/eli/cc/2021/847/fr>.

150

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland (French)en moyenne annuelle, et (ii) ont un total du biland'au moins 20 millions de francs ou un chiffred'affaires de 40 millions de francs pendant deuxannées consécutives. Outre les établissements
financiers réglementés par la FINMA, lessociétés d'intérêt public comprennent lessociétés constituées en Suisse qui sont cotéesen Suisse ou à l'étranger, qui ont desobligations en circulation ou qui contribuent à
hauteur d'au moins 20% des actifs ou du chiffred'affaires consolidé de ces sociétés. Toutefois,
les sociétés qui sont contrôlées par une société
à laquelle les nouvelles obligations de rapport
s'appliquent, ou qui sont soumises à un rapportéquivalent en vertu de lois étrangères, ne sont
pas tenues d'établir un rapport supplémentaire.
Bien que les filiales suisses de sociétésétrangères ne soient généralement pas cotées
en bourse, les obligations de rapport ESG
peuvent s'appliquer à ces filiales, si elles ont desobligations en circulation, à moins qu'unesociété mère directe ou indirecte ne soit
soumise à des obligations de rapportéquivalentes en vertu du droit étranger, commel'impose la directive européenne sur leReporting Non Financier.
Le rapport ESG doit inclure les informations
nécessaires à la compréhension de l'activité del'entreprise et de l'impact de ses activités sur
l'environnement (y compris les objectifs enmatière de CO2), ainsi que les préoccupations
sociétales liées aux employés, au respect desdroits de l'homme et à la lutte contre lacorruption à travers leurs chaînes de valeur.8
Comme mentionné précédemment, l'exigencede rapport ESG est calquée sur la directive
européenne sur le Reporting Non Financier. La
liste non exhaustive des sujets que le rapport
ESG doit couvrir suit de près le modèle
européen. Plus précisément, le rapport doit
couvrir les sujets suivants :
●

8

9

10

le modèle commercial de l’entreprise(Modèle commercial) ;En plus de l'obligation générique de rapport ESG, la nouvelle
législation ESG prévoit d'autres obligations spécifiques dediligence raisonnable et de rapport concernant les ‘minerais
provenant de zones de conflit’ et le travail des enfants.
OCDE, Principes directeurs de l'OCDE à l'intention desentreprises
multinationales(2011)<https://www.oecd.org/fr/daf/inv/mne/2011102-fr.pdf>.
GRI,
Normes
GRI
(mai
2020)
<https://www.globalreporting.org/how-to-use-the-gristandards/gri-standards-french-translations/>.

●

les principaux risques ESG résultant
des activités propres de l'entreprise et,lorsque cela est pertinent etproportionné, de ses relationscommerciales, produits ou services(Principaux risques et gestion de cesderniers) ;●les politiques suivies pour traiter ces
risques ESG, y compris la diligence
raisonnable appliquée (Politiquesmenées et procédures de diligence
raisonnable) ;●les résultats de ces politiques(Résultats) ; et●les indicateurs clés de performancenon financiers liés à la réponse del'entreprise aux risques ESG(Indicateurs clés de performance).

Si une entreprise n'a pas de politiqueconcernant certains domaines de risque ESG,le rapport doit inclure une explication lesraisons de cette lacune (se conformer ou
expliquer). La seule explication défendable àlaquelle on pourrait s'attendre est uneévaluation selon laquelle les activités del'entreprise ne suscitent pas de préoccupations
dans un certain domaine.
Le rapport peut se fonder sur des normes derapportnationales,
européennes
ouinternationales, comme par exemple Les
principes directeurs de l'OCDE à l'intention desentreprises multinationales9 ou encore lesnormes du Global Reporting Initiative (GRI).10
En outre, les entreprises peuvent vouloirs'inspirer des lignes directrices que l'Union
européenne a publiées sur la méthodologie decommunication
desinformations
non
financières.11
Sous
lesrubriques
susmentionnées,ceslignesdirectricesénumèrent en détail les aspects que le rapport
ESG doit couvrir.
Par ailleurs, comme indiqué ci-dessus, leConseil fédéral a entre-temps précisé lesexigences relatives au rapport basé sur le11

Communication de la Commission européenne, ‘Lignes
directrices concernant l'information non financière: Supplément
relatif à la communication d'informations en rapport avec leclimat’, 2019/C 209/1, (20 juin 2019) <https://eurlex.europa.eu/legalcontent/FR/TXT/PDF/?uri=CELEX:52019XC0620(01)&from=IT>.

151

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland (French)climat dans un projet d'ordonnance.12 Selon ce
projet, il est supposé que les entreprises se
conforment à leurs obligations de rapport basé
sur le climat si elles suivent les
recommandations du TCFD comme spécifié àl'article 3 du projet d'ordonnance. Cette
hypothèse n'empêche pas les entreprises derapporter l'impact du climat sur son activité etde l'impact des activités de son entreprise surle climat d'une autre manière, notamment ens'appuyant sur d'autres lignes directrices ou
normes. Toutefois, dans un tel cas, l'entreprise
doit démontrer spécifiquement qu'elle satisfait à
l'obligation de faire rapport sur les questions
climatiques ou expliquer, dans le cas contraire,
pourquoi elle n'a pas de politiques traitant desquestions climatiques (se conformer ou
expliquer).
Le rapport peut être établi dans l'une deslangues nationales suisses (c'est-à-dire en
allemand, français ou italien), ou en anglais. Il
doit
être
approuvéparleconseild'administration et l'assemblée des actionnaires
et rendu accessible au public par voieélectronique pendant une période de 10 ans.
Cependant, contrairement aux bilans financiersde l'entreprise, il n'est pas obligatoire que lerapport ESG soit audité.
La non-conformité au nouveau régime derapport ESG est sujette à une responsabilité
pénale. La non-conformité comprend l'inclusionde fausses déclarations dans l'un des rapports
nouvellement exigés, le rapport ESG génériqueet le rapport sur le respect des mesures dediligence raisonnable dans le domaine desminerais de conflit et du travail des enfants, ou
l'omission d'éditer, conserver ou publier l'un deces rapports. Si l'un de ces actes est commis
intentionnellement, l'amende peut atteindre
100'000 CHF ; s'il est commis par négligence,l'amende peut atteindre 50'000 CHF.
En outre, une diligence raisonnable ou un
rapport ESG déficient peut engager laresponsabilité civile en vertu du droit existant, àsavoir la responsabilité des membres du conseild'administration et de la direction en vertu del'article 754 CO.

Implications pratiques pour les administrateurs
En plus de notre recommandation constante de développer et de maintenir un programme général deconformité efficace et bien documenté, nous suggérons qu'en réponse aux développements exposés
dans cette communication, les administrateurs accordent une attention particulière aux points suivants:a) Examiner et, le cas échéant, ajuster le gouvernement d'entreprise pour assurer un leadershipapproprié au niveau du conseil d'administration en ce qui concerne les risques liés au climat, ycompris les impacts négatifs que les activités de l'entreprise peuvent provoquer et les risques
juridiques auxquels l'entreprise peut être confrontée;b) Désigner une ou plusieurs responsables chargés de suivre et de fournir des conseils
permanents concernant le nombre croissant de lois et de réglementations dans le domaine desexigences de gestion des risques climatiques, tant en Suisse que sur les marchés étrangers deleurs entreprises;c) Déléguer l'identification et l'évaluation des risques climatiques à une équipe de direction
clairement identifiée qui rend directement compte au PDG et au conseil d'administration, et qui
est chargée de réunir toutes les fonctions clés, notamment la fonction juridique et/ou deconformité, la gestion des risques d'entreprise, la planification stratégique, l'audit, larémunération, les ressources humaines, les relations avec les investisseurs, les relations avec
les parties prenantes, etc;d) Examiner et, le cas échéant, ajuster les politiques et les processus de gestion des risques liésau climat dans l'ensemble de la chaîne d'approvisionnement et du réseau de distribution de

12

Ordonnance relative au rapport sur les questions climatiques<https://www.newsd.admin.ch/newsd/message/attachments/7
0882.pdf>

152

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Switzerland (French)

l'entreprise, y compris les filiales et les tiers, sur la base d'une solide évaluation des risques. À
cet égard, élargir et approfondir le cadre de diligence raisonnable des intermédiaires tiers del'entreprise pour prendre en compte les facteurs de risque liés au climat et le faire dans les
niveaux 2 et 3 des chaînes d'approvisionnement de l'entreprise; ete) Revoir et, le cas échéant, adapter leurs rapports sur les facteurs de risque liés au climat et lesmesures qu'ils prennent pour faire face à ces risques. Introduire des processus de contrôleinterne en relation avec les rapports.

Contributeurs:

Philippe Reich, Baker McKenzie Switzerland
Corinne Nacht, Baker McKenzie Switzerland

153

Switzerland (German)
Nachhaltigkeit
undinsbesondere
Umweltaspekte
gewinneninderschweizerischen Gesetzgebung zunehmend an
Bedeutung. In den letzten Jahren gab es
zahlreiche gesetzgeberische Bestrebungen, diedarauf abzielten, negative Auswirkungen auf
das Klima zu reduzieren und Unternehmen zur
Einhaltung
bestimmter
Sorgfaltsund
Berichterstattungspflichten zu verpflichten. Am
27. Januar 2021 veröffentlichte der Bundesrat
die langfristige Klimastrategie der Schweiz,
welche das Ziel verfolgt, bis 2050 Netto-Null
Treibhausgasemissionen zu erreichen.1
Währenddie

Revisiondesgeltenden

Bundesgesetzes über die Verminderung vonTreibhausgasemissionen (CO2-Gesetz) im Juni
2021 vom Schweizer Stimmvolk knapp
abgelehnt wurde und die neue Vorlage zur
Revision dieses Gesetzes erst im Herbst 2022
erwartet wird, sind die Entwicklungen in der
Klimaberichterstattung vorangeschritten.
Im Mai 2021 führte die Eidgenössische
Finanzmarktaufsicht (FINMA) mit der Änderung
ihrer Rundschreiben ‘Offenlegung – Banken’(Rundschreiben 2016/1) und ‘Offenlegung –Versicherer’ (Rundschreiben 2016/2) im
Einklang mit der Task Force on Climate-related
Financial
Disclosures(TCFD)
Berichterstattungspflichten für grosse Banken
und Versicherungen (Aufsichtskategorien 1
und
2)
ein.2
Die
überarbeiteten
Offenlegungsvorschriften verlangen von den
betroffenen Finanzinstituten insbesondere: Die
Beschreibung der zentralen Merkmale derGovernance-Struktur des Unternehmens, dieesihm
ermöglichen,klimabezogene
Finanzrisiken zu identifizieren, zu beurteilen, zu
bewirtschaften, zu überwachen und darüber zu
berichten;
dieBeschreibung
derwichtigsten identifizierten klimabezogenen
Finanzrisiken und ihrer Auswirkungen auf dieGeschäftsstrategie und das Geschäftsmodell;dieBeschreibung
derRisikomanagementstrukturen in Bezug auf
solcheRisiken;und die
Offenlegung

1

2

3

Bundesrat, Langfristige Klimastrategie der Schweiz (27. Januar
2021)<https://www.newsd.admin.ch/newsd/message/attachments/6
5874.pdf>.
FINMA, FINMA präzisiert Transparenzpflichten zu Klimarisiken
(31.
Mai
2021)
<https://www.finma.ch/de/news/2021/05/20210531-mmtransparenzpflichten-zu-klimarisiken/>.
FINMA, Rundschreiben 16/1, ‘Offenlegung – Banken’ in [14.1],
Anhang 5; FINMA Rundschreiben 16/2, ‘Offenlegung –Versicherer’ in [13]-[13.7]

quantitativer
Informationen
über
ihre
klimabezogenen
Finanzrisiken.3
Im
November
2021
beauftragte die
Schweizer Regierung das Finanzdepartement,
in Zusammenarbeit mit dem Departement für
Umwelt, Verkehr, Energie und KommunikationÄnderungen an der Finanzmarktgesetzgebung
vorzuschlagen,umGreenwashingzuvermeiden.
SolcheGesetzesvorschläge
werden bis Ende 2022 erwartet.4
Im Januar 2022 trat eine Revision desSchweizerischen Obligationenrechts in Kraft,welcheneue
Sorgfaltsund
Berichterstattungspflichten
fürSchweizer
Unternehmen
einführte.
Diese
Gesetzesrevision wurde als Gegenvorschlag
zur Volksinitiative für verantwortungsvolle
Unternehmen
eingeführt,welchedie
Möglichkeit
eröffnet
hätte,
Schweizer
Unternehmen wegen mutmasslicher Verstösse
gegen Menschenrechte oder Umweltgesetze inder ganzen Welt vor Schweizer Gerichten
einzuklagen. Die neuen ESG-Berichtspflichtenorientieren sich an der EU-Richtlinie über die
nichtfinanzielle Berichterstattung (Richtlinie
2014/95) (siehe untenstehenden AbschnittüberdieOffenlegungspflichtenderVerwaltungsräte).
Schliesslich hat die Schweizer Regierung im
März
2022
einen
Verordnungsentwurf
veröffentlicht,derdieklimabezogenen
BerichterstattungspflichtenfürgrosseSchweizer Unternehmen spezifiziert, welche
Teil der ESG-Berichtspflichten sind, die mit deroben erwähnten Revision des Schweizerischen
Obligationenrechts eingeführt wurden.5 Der
Verordnungsentwurf sieht die Umsetzung derEmpfehlungen des TCFD durch grosse
Schweizer Unternehmen vor. Die Verordnung

45

Der Bundesrat will mit Klimatransparenz einen internationalen
Spitzenplatz bei nachhaltigen Finanzanlagen (17. November
2021)<https://www.admin.ch/gov/de/start/dokumentation/medienmit
teilungen.msg-id-85925.html>
Bundesrat, Bundesrat eröffnet Vernehmlassung überVerordnung zur Klimaberichterstattung von grossen
Unternehmen
(30.
März
2022)
<https://www.admin.ch/gov/de/start/dokumentation/medienmit
teilungen.msg-id-87790.html>

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Switzerland (German)

wird voraussichtlich am 1. Januar 2023 in Kraft
treten.

Pflichten
derKlimawandel

Verwaltungsräte

undDie Pflichten der Verwaltungsräte vonSchweizer Unternehmen sind in erster Linie im
Schweizerischen
Obligationenrecht(OR)
geregelt. Die gesetzlichen Bestimmungenwerden durch Soft Law, wie den Swiss Code ofBest Practice, ergänzt.6
Gemäss Artikel 716a OR ist der Verwaltungsrat
unter anderem verantwortlich für die
Oberleitung der Gesellschaft, die Festlegung
der Organisation des Unternehmens, die
Ausgestaltung des Rechnungswesens, derFinanzkontrolle sowie der Finanzplanung und
der Oberaufsicht überdie mit derGeschäftsführung
betrauten
Personen.
Insbesondere muss der Verwaltungsrat die
Strategie des Unternehmens festlegen undsicherstellen, dass die Strategie im besten
Interesse des Unternehmens liegt und mit den
verfügbaren Mitteln umgesetzt werden kann.
Der Verwaltungsrat muss auch sicherstellen,dassdie
RisikendesUnternehmens
hinreichend erkannt, bewertet und bewältigt
werden.
Die Mitglieder des Verwaltungsrats sowie Dritte,
die mit der Geschäftsführung der Gesellschaft
befasst sind, müssen ihre Pflichten mit aller
Sorgfalt erfüllen und die Interessen derGesellschaft in guten Treuen wahren (Art. 717
OR).
Verletzen
die
Mitglieder
desVerwaltungsrats ihre Pflichten absichtlich oderfahrlässig, so haften sie sowohl gegenüber derGesellschaft als auch gegenüber den einzelnen
Aktionären und Gläubigern für den aus der
Pflichtverletzung entstandenen Schaden (Art.
754 OR).
Das Gesetz schreibt nicht ausdrücklich vor,
dass Verwaltungsräte auch klimabezogene
Risiken berücksichtigen müssen, wenn sie die
Strategie des Unternehmens festlegen unddessenRisikomanagementsystemeüberwachen. In Anbetracht der oben
erwähnten Entwicklungen, insbesondere derweitverbreiteten
Erkenntnis
der6

economiesuisse, ‘Swiss Code of Best Practice for Corporate
Governance’(2016)<https://www.economiesuisse.ch/sites/default/files/publications/economiesuisse_swisscode_d_web.pdf>.

Finanzaufsichtsbehörden,dassderKlimawandel wesentliche finanzielle Risiken fürdie Wirtschaft birgt, und der neuen ESGBerichterstattungspflichten, ist es jedoch
unabdingbar,
dass
Verwaltungsräte
Klimarisikenund-chancenin
ihre
Führungsaufgaben integrieren müssen.
Offenlegungspflichten der Verwaltungsräte
und Klimawandel
Wie eingangs erläutert, trat die Revision desObligationenrechts, die als Gegenvorschlag zur
Initiative für verantwortungsvolle Unternehmen
eingeführt wurde, am 1. Januar 2022 in Kraft.
Die neuen Bestimmungen des Schweizerischen
Obligationenrechts
sehen
zwei
neue
Verpflichtungen vor: Einerseits werden grosse
Schweizer Unternehmen verpflichtet, einenallgemeinen ESG-Bericht zu erstellen, der die
Risiken ihrer Geschäftstätigkeit in Bezug auf
Umwelt-, Sozial- und Arbeitnehmerbelange, die
Achtung der Menschenrechte und die
Bekämpfung der Korruption sowie die dagegenergriffenen
Massnahmen
aufzeigt.
Unternehmen mit Risiken in den sensiblen
BereichenderKinderarbeit
unddersogenannten Konfliktmineralien müssen zudem
besondere und weitreichendere Sorgfalts- undBerichtspflichten erfüllen. Der Bundesrat hat
die Einzelheiten dieser besonderen Sorgfaltsund Meldepflichten in einer neuen Verordnungüber Sorgfaltspflichten und Transparenz
bezüglich Mineralien und Metallen aus
Konfliktgebieten und Kinderarbeit (VSoTr)
festgelegt.7 Die neuen Anforderungen gelten
erstmals für das im Jahr 2023 beginnendeGeschäftsjahr. Die ersten Berichte auf derGrundlage des neuen gesetzlichen Rahmens
fürESG-Berichterstattung
undSorgfaltspflichten müssen im Jahr 2024 für das
Geschäftsjahr 2023 veröffentlicht werden.
Die allgemeine ESG-Berichtspflicht (Art. 964a964c OR) gilt für Unternehmen des öffentlichen
Interesses mit Sitz in der Schweiz, diezusammen mit den von ihnen kontrollierten inund ausländischen Unternehmen (i) im
Jahresdurchschnitt
mindestens
500
Vollzeitstellen haben und (ii) in zwei
aufeinanderfolgenden Geschäftsjahren eine

7

Verordnung vom 3. Dezember 2021 über Sorgfaltspflichten
und Transparenz bezüglich Mineralien und Metallen aus
Konfliktgebieten
undKinderarbeit(VSoTr)<https://www.fedlex.admin.ch/eli/cc/2021/847/de>155Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Switzerland (German)

Bilanzsumme von mindestens 20 Millionen
Franken oder einen Umsatz von 40 Millionen
Franken aufweisen. Zu den Unternehmen desöffentlichen Interesses gehören neben den vonder FINMA beaufsichtigten Finanzinstituten
auch Unternehmen mit Sitz in der Schweiz, diein der Schweiz oder im Ausland börsenkotiertsind, Anleihen ausstehend haben odermindestens 20% der Aktiven oder desUmsatzes
zur
Konzernrechnung
dieser
Unternehmen beitragen. Unternehmen, die voneinem Unternehmen kontrolliert werden, fürwelches die neuen Meldepflichten gelten oderdie nach ausländischem Recht einer
gleichwertigen Meldepflicht unterliegen, sindjedoch nicht verpflichtet, einen zusätzlichen
Bericht zu erstellen.
ObwohlSchweizer
Tochtergesellschaften
ausländischer Unternehmen in der Regel nichtbörsenkotiert sind, können die ESGBerichtspflichten
für
solch
eine
Tochtergesellschaft gelten, wenn sie Anleihen
ausstehen hat, es sei denn, eine direkte oderindirekte
Muttergesellschaft
unterliegt
gleichwertigen
Berichterstattungspflichten
nach ausländischem Recht, wie beispielsweiseder EU-Richtlinie über die nichtfinanzielle
Berichterstattung (Richtlinie 2014/95).
Der ESG-Bericht muss Informationen enthalten,
die notwendig sind, um die Geschäftstätigkeit
des Unternehmens und die Auswirkungenseiner Aktivitäten auf die Umwelt zu verstehen(einschliesslich der CO2-Ziele). Zudem mussderBericht
Informationen
übergesellschaftliche Belange in Bezug auf die
Mitarbeiter, die Achtung der Menschenrechte
und die Bekämpfung der Korruption in dergesamten Wertschöpfungskette aufweisen.8
Wie eingangs erwähnt, orientiert sich die ESGBerichtspflicht an der EU-Richtlinie über die
nichtfinanzielle Berichterstattung (Richtlinie
2014/95), und die nicht abschliessende Liste
der Themen, die der Bericht abdecken muss,
lehnt sich eng an dieses Modell an. Im
Einzelnen muss der Bericht die folgenden
Themen abdecken:

89Neben der allgemeinen ESG-Berichtspflicht sieht die neue
ESG-Gesetzgebung weitere spezifische Sorgfalts- undBerichtspflichten in Bezug auf sogenannte Konfliktmineralien
und Kinderarbeit vor.
OECD, OECD-Leitsätze für multinationale Unternehmen(2011) <http://www.oecd.org/corporate/mne/48808708.pdf>.

●

das Geschäftsmodell desUnternehmens (Geschäftsmodell);●die wichtigsten ESG-Risiken, die sichaus der eigenen Geschäftstätigkeit
und, sofern relevant und angemessen,
aus den Geschäftsbeziehungen,Produkten oder Dienstleistungen desUnternehmens ergeben (wesentliche
Risiken und Handhabung dieser
Risiken);●die Massnahmen, die zur Bewältigung
dieser ESG-Risiken verfolgt werden,
einschliesslich der angewandten Due
Diligence (Konzepte und Due
Diligence Prozesse);●das Ergebnis dieser Massnahmen(Ergebnisse); und●die nichtfinanziellen
Leistungsindikatoren im
Zusammenhang mit der Reaktion desUnternehmens auf ESG-Risiken(wichtigste Leistungsindikatoren).

Wenn ein Unternehmen keine Richtlinien fürbestimmte ESG-Risikobereiche hat, muss derBericht eine Erklärung über die Gründe fürdiese Lücken enthalten (comply or explain). Die
einzige vertretbare Erklärung, die man erwarten
könnte, ist die Einschätzung, dass die
Aktivitäten eines Unternehmens in einem
bestimmten Bereich keinen Anlass zu
Bedenken geben.
Der Bericht kann auf nationalen, europäischenoderinternationalen
Berichtsstandards
beruhen, wie zum Beispiel den OECDLeitsätzen für multinationale Unternehmen 9oder den Standards der Global Reporting
Initiative (GRI).10 Darüber hinaus können die
Unternehmen auch die von der EU
herausgegebenen Leitlinien zur Methodik derBerichterstattungübernichtfinanzielle
Informationen
heranziehen.11
In
diesen
Leitlinien werden unter den oben genanntenÜberschriften die Aspekte, die der ESG-Bericht
abdecken sollte, im Detail aufgeführt.

10

11

GRI,
GRI
Standards
(Mai
2020)
<https://www.globalreporting.org/how-to-use-the-gristandards/gri-standards-german-translations/>.
Mitteilung der Europäischen Kommission, ‘Leitlinien für die
Berichterstattung über nichtfinanzielle Informationen: Nachtrag
zur klimabezogenen Berichterstattung’, 2019/C 209/1, (20.
Juni
2019)
<https://eur-lex.europa.eu/legalcontent/de/TXT/PDF/?uri=CELEX:52019XC0620(01)>.

156

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Switzerland (German)

Darüber hinaus hat der Bundesrat, wie oben
erwähnt,
dieAnforderungenandieklimabasierte Berichterstattung inzwischen in
einem Verordnungsentwurf konkretisiert.12
Gemäss diesem Verordnungsentwurf wird
davon ausgegangen, dass Unternehmen ihre
klimabasierten Berichtspflichten erfüllen, wenn
sie den Empfehlungen des TCFD gemäss
Artikel 3 des Verordnungsentwurfs folgen.
Diese Annahme hindert die Unternehmen nicht
daran, über die Auswirkungen des Klimas auf
ihre Geschäftstätigkeit und die Auswirkungenihrer Geschäftstätigkeit auf das Klima auf
andere Art und Weise zu berichten,
insbesondere indem sie sich auf andere
Leitlinien oder Standards stützen. In einem
solchen Fall muss das Unternehmen jedoch
ausdrücklich nachweisen, dass es der
Verpflichtung zur Berichterstattung überKlimafragen nachkommt oder erklären, warum
es keine Richtlinien hat, die sich mit
klimabezogenen Fragen befassen (comply or
explain).
Der Bericht kann in einer der Schweizer
Landessprachen (d.h. Deutsch, Französischoder Italienisch) oder in Englisch verfasst
werden. Er muss vom Verwaltungsrat und derGeneralversammlung genehmigt und derÖffentlichkeit während eines Zeitraums vonzehn Jahren elektronisch zugänglich gemacht
werden. Jedoch muss der ESG-Bericht, anders
als der Jahresabschluss des Unternehmens,
nicht geprüft werden.
Die Nichteinhaltung der neuen ESGBerichterstattungspflichten kann strafrechtlich
verfolgt werden. Die Nichteinhaltung umfasst
die Aufnahme falscher Angaben in einen der
neu geforderten Berichte, den allgemeinen
ESG-Bericht und den Bericht über die
Einhaltung der Sorgfaltspflichten im Bereich
der Konfliktmineralien und Kinderarbeit, oderdas Versäumnis, einen dieser Berichte
herauszugeben, aufzubewahren oder zu
veröffentlichen. Wird eine dieser Handlungenvorsätzlich begangen, beträgt die Geldstrafe bis
zu 100'000 CHF, bei fahrlässiger Begehung bis
zu 50'000 CHF.
Darüber hinaus könnte eine mangelhafte ESG
Due-Diligence oder eine mangelhafte ESG
Berichterstattung eine zivilrechtliche Haftungnach geltendem Recht auslösen, nämlich die
Haftung von Verwaltungsratsmitgliedern undGeschäftsleitung nach Artikel 754 desSchweizerischen Obligationenrechts.

Praktische Auswirkungen für Verwaltungsräte
Zusätzlich zu unserer ständigen Empfehlung, ein ausführlich dokumentiertes und wirksames
allgemeines Compliance-Programm zu entwickeln und aufrechtzuerhalten, schlagen wir vor, dass die
Verwaltungsratsmitglieder als Reaktion auf die in dieser Mitteilung dargelegten Entwicklungen den
folgenden Punkten besondere Aufmerksamkeit schenken:a) Überprüfung und nötigenfalls Anpassung der Unternehmensführung, um eine angemessene
Führung auf Verwaltungsratsebene in Bezug auf klimabezogene Risiken sicherzustellen,
einschliesslich der negativen Auswirkungen, welche die Aktivitäten des Unternehmens
verursachen können, und der rechtlichen Risiken, denen das Unternehmen ausgesetzt seinkann;b) Benennung einer oder mehrerer verantwortlichen Funktion(en), welche die zunehmende Zahl
von Gesetzen und Vorschriften im Bereich des Klimarisikomanagements sowohl in der Schweizals auch in den Auslandsmärkten ihrer Unternehmen überwachen und kontinuierlich dazu
beraten;c) Delegierung der Ermittlung und Bewertung von Klimarisiken an ein klar definiertes Team in derGeschäftsleitung, welches direkt dem CEO und dem Verwaltungsrat unterstellt ist und die
Aufgabe hat, alle wichtigen Funktionen zusammenzubringen, einschliesslich der rechtlichen
und/oder Compliance-Funktion, des Risikomanagements, der strategischen Planung, der12

Verordnung über die Berichterstattung über Klimabelange<https://www.newsd.admin.ch/newsd/message/attachments/7
0878.pdf>

157

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Switzerland (German)

Rechnungsprüfung, der Vergütung, der Personalabteilung, der Beziehungen zu Investoren, derBeziehungen zu den Interessengruppen usw.;d) Überprüfung und nötigenfalls Anpassung der Richtlinien und Verfahren für das klimabezogene
Risikomanagement in der gesamten Lieferkette und im Vertriebsnetz des Unternehmens,
einschliesslich verbundener Unternehmen und Dritter, auf der Grundlage einer soliden
Risikobewertung. Erweiterung und Vertiefung des Rahmens für die Sorgfältigkeitsprüfung von
Zwischenhändlern, um klimabezogene Risikofaktoren zu berücksichtigen, und zwar auf den
Ebenen 2 und 3 der Lieferketten ihrer Unternehmen; unde) Berichterstattung über klimabezogene Risikofaktoren und die Massnahmen, die die
Verwaltungsratsmitglieder zur Bewältigung dieser Risiken ergreifen, überprüfen undgegebenenfalls anpassen. Einführung interner Sicherungsprozesse in Bezug auf die
Berichterstattung.
Mitwirkende:

Philippe Reich, Baker McKenzie Switzerland
Corinne Nacht, Baker McKenzie Switzerland

158

Turkey

In light of international and national
developments in the perception of climatechange as a financial risk to companies and thewider economy, directors of Turkish companies
should, as part of their duty of care, be alert toclimate risks, act in accordance with any
legislative obligations on the company, and takesteps to reorient the company's activities in linewith the sustainability principles. Directors
should also ensure that ESG risks andopportunities are disclosed in line with theCapitalMarkets
Board’s
Sustainability
Principles Compliance Framework, and takesteps towards measuring and disclosing
greenhouse gas emissions in order to ensure asmooth integration of the company’s businessmodel with the forthcoming emissions trading
scheme, as well as EU laws which may affect
Turkish businesses.
With an increased awareness of the risks
caused by climate change that the world isfacing, Turkey is expanding its range of work in
the fight against climate change day by day. It
carries out legislative studies in order to comply
with international agreements and fulfil its
commitments, and takes steps to prepare thenecessary social and financial infrastructure forthe struggle. Boards of Turkish companies
should be alert to these developments, which
may signal increased focus from the Turkish
government and regulators, and lead to new orincreased risks and opportunities forcompanies as a result of new policies andlegislation.
On 16 July 2021, the Turkish Government
approved the ‘Green Deal Action Plan’, aroadmap aimed at promoting a green economy
in multiple policy areas.1 With this plan, Turkey
aims to align with the ‘European Green Deal’ of
the European Union (EU). The plan includes
actions such as limiting carbon emissions,increasing green finance and working towards
a green and circular economy.

1

2

See Ministry of Trade, Turkey’s Green Deal Action Plan (2021)<https://ticaret.gov.tr/data/60f1200013b876eb28421b23/MUTABAKAT%20YE%C5%9E%C4%B0L.pdf>.
See Republic Of Turkey, Intended Nationally Determined
Contribution(30
November
2015)<https://www4.unfccc.int/sites/submissions/INDC/Published%
20Documents/Turkey/1/The_INDC_of_TURKEY_v.15.19.30.p
df>.

On
27
September2021,
thePresidency
announcedatarget of netzero emissions by 2053, noting that this would
require far-reaching changes, including toinvestment and production. Turkey’s ‘Intended
National Determined Contribution’ (INDC),
submitted on 30 September 2015 and laying
out Turkey’s plans for the targets of the Paris
Agreement, states that by 2030 Turkey will
reduce greenhouse gas emissions by 21%
against the ‘business as usual’ level.2 Murat
Kurum, Minister of Environment, Urbanization
and Climate Change, has stated that the workon preparing a ‘climate law’, which will set out alegal framework for Turkey’s climate goals,
continues.
Turkey signed the Paris Agreement with therepresentatives of 175 countries at the signingceremony held in New York on 22 April 2016.

The Law Regarding the Approval of the Paris
Agreement by the Turkish Grand National
Assembly was published in the Official Gazettedated 7 October 2021, numbered 31621, andentered into force on 10 November 2021.3
The name of the ‘Ministry of Environment and
Urbanization’ was changed to the ‘Ministry ofEnvironment, Urbanization and Climate
Change’ with the presidential decree publishedin the Official Gazette dated 29 October 2021
and numbered 31643.4 This may suggest an
increased focus on climate policy by the
Ministry.
The ‘Green Borrowing Instrument, Sustainable
Borrowing Instrument, Green Lease Certificate,
Sustainable Lease Certificate Guide’, which
was published on the Capital Markets Board(CMB) website on 24 February 2022, aims toincrease transparency, honesty, consistency
and comparability in the financing ofsustainability projects and green projects.5

3

4

5

See The Law on Approval of the Paris Agreement,<https://www.resmigazete.gov.tr/eskiler/2021/10/202110077.pdf>.
See
Presidential
DecreeNo.
31621,<https://www.resmigazete.gov.tr/eskiler/2021/10/2021102935.pdf>
See Capital Markets Board, Green Debt Instrument,
Sustainable Debt Instrument, Green Lease Certificate,159

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
TurkeyThe economic and financial effects of risks
stemming from climate change also affect pricestability and financial stability in the markets. As
a result, central banks are following
developments regarding climate change andfactoring climate risks into their monetary
policy. The Governor of the Central Bank of the
Republic of Turkey (CBRT) Şahap Kavcıoğlu
has stated that the CBRT sees the potential
impact of climate change on the general pricelevel and that the CBRT will adopt sustainablefinance initiatives to reduce climate-relatedrisks. The CBRT has established a ‘Green
Economy and Climate Change Department’ toidentify and evaluate the risks and opportunities
arising from climate change for the country's
financial system.
The Banking Regulation and Supervision
Agency (BRSA) published its 2022-2025
Sustainable Banking Strategic Plan in July
2021. The plan includes actions aimed atbuilding capacity in the assessment andmanagement of climate-related risks andstrengthening oversight of the management
and identification of climate-related financial
risks.6
Directors’ Duties and Climate Change
Article 369 of the Turkish Commercial Code(TCC) No. 6102, titled ‘Duty of care and loyalty’,regulates the responsibility of the members of
the board of directors of companies based ontrust. The article reads as follows: “Members of

the board of directors and third parties incharge of the management are responsible forfulfilling their duties with the care of a prudent
manager, and following the company's interests
with honesty.”7
Violations of the board of directors’
responsibilities of care are regulated by Article
553 of the TCC, which provides that “In casethe founders, members of the board of
directors, managers and liquidators violate their
obligations arising from the law and the articles
of association, they are liable to both thecompany, the shareholders and the creditors of

6

Sustainable Lease Certificate Guide (24 February 2022)<https://spk.gov.tr/Sayfa/Dosya/1362>.
See Banking Regulation and Supervision Agency, Sustainable
Banking
Strategic
Plan
(July
2021)
<https://www.alomaliye.com/wpcontent/uploads/2021/12/2022-2025-stratejik-bankacilik.pdf>.

the company for the damage they havecaused.”In order to determine a road map in the fightagainst climate change, it is undoubtedly
necessary for directors of Turkish companies todetermine the current and possible risks ofclimate change and the steps that can be taken
against these risks, to prepare action plans, andto start the necessary infrastructure works inline with these plans.
Climate change risks for Turkey are classified
as ‘Physical Risks’ (including acute risks suchas extreme weather events and chronic risks
such as sea level rise and changes inprecipitation patterns), ‘Transition Risks’(including changes in climate policies,
technology, consumer preferences andfinancial market expectations) and ‘Nominal
Risks’ in the 2022-2025 Sustainable Banking
Strategy Plan of the BRSA. These risks are
considered to have potentially serious financial
consequences for organisations.
A related report of the BRSA finds that the
Turkish banking sector is exposed to significant
transition risks through the fossil fuel-basedenergyproduction,
cement,iron-steel,aluminium,
fertilizer,
transportation,
construction, and related sectors. The EU‘Carbon Border Adjustment Mechanism’, which
will be implemented as of 2026, is also
considered as an important risk in this sense.
Companies are increasingly discussing climatechange at the board level. According to the‘Turkey Climate Change and Water Report’published by the Carbon Disclosure Project(CDP) in 2021, 33% of surveyed companies (atotal number of 18) stated that they put climaterelated issues on the agenda at every board
meeting in 2020, with this rate increasing to
54% (34 companies) in 2021.8 In the report, it isstated that 97% of the companies reporting inTurkey define risks related to climate change. In
this sense, it can be said that the climate change
awareness of companies in Turkey is increasing
day by day.

7

8

See
the
TurkishCommercial
Code,<https://www.mevzuat.gov.tr/MevzuatMetin/1.5.610220130328.pdf>.
CDP, CDP Climate Change and Water Report 2021 (April
2022)<https://cdpturkey.sabanciuniv.edu/sites/cdpturkey.sabanciun
iv.edu/files/cdp_climate_change_and_water_report_2021turkey_edition.pdf>.

160

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
TurkeyPutting climate change risks on the agenda of
the board of directors, following the legislative
work on this subject, acting in accordance withthe obligations required by the legislation andreorienting the company's activities in line withthe sustainability principles, should beconsidered within the scope of the
responsibility of care of each director, even if
there is no legal obligation to do so. This isbecause companies’ ability to adapt tochanging conditions and continue their
existence depends upon the foresight of theirdirectors and the measures they take against
risks.
Directors’ Disclosure
Climate Change

Obligations

andThe Regulation on Monitoring of Greenhouse
Gas Emissions in Turkey, number 29003, waspublished in the Official Gazette dated 17 May
2014, and took its final form with theamendment made on 31 May 2017. 9 This
Regulation sets out principles regarding theregular reporting and verification of annual
greenhousegasemissionsbythemanufacturing sector representatives ofenergy-intensive sectors such as electricity,
steam
generation,oilrefineries,
petrochemicals, cement, iron-steel, aluminium,
brick, ceramics, lime, paper and glass
production.
The CMB, which is the regulatory andsupervisory authority for the capital markets in
Turkey, aims to ensure that the capital markets
operate safely, fairly and effectively byprotecting the rights and interests of investors.
The CMB is of the opinion that good corporate
governancepractices
constitutetheinfrastructure of fair and orderly functioning
capital markets. For this reason, the Corporate
Governance Principles were announced to the
public for the first time in 2003 and theseprinciples were updated with the communiquéspublished in the following periods.
Compulsory and non-mandatory corporate
governance principles, which apply tocompanies whose shares are traded on Borsa

9

10

See Regulation on Monitoring of Greenhouse Gas Emissions,<https://www.mevzuat.gov.tr/mevzuat?MevzuatNo=19678&M
evzuatTur=7&MevzuatTertip=5>.
See
CommuniquéNo.
II-17.1,<https://www.mevzuat.gov.tr/File/GeneratePdf?mevzuatNo=1
9225&mevzuatTur=Teblig&mevzuatTertip=5>.

Istanbul, are defined in the ‘Corporate
Governance Communiqué No. II-17.1’.10 The
CMB, which aims to develop corporate
governance practices and public disclosure
practices, closely monitors whether companies
comply with the mandatory principles and the
explanations given by companies on thematters where they depart from the nonmandatory principles.
In October 2020, the Corporate GovernanceCommunique was amended to include the‘Sustainability
Principles
Compliance
Framework’ published by the CMB, which
includes the basic Environmental, Social andCorporate Governance (ESG) principles thatpublic companies are expected to adhere toand disclose upon, including the identificationof ESG risks and opportunities, and related
policies, how the company’s corporate strategy
is in compliance with ESG policies, risks andopportunities, and the company’s sustainability
performance, goals and actions. Although theimplementation of these principles is voluntary,
it is obligatory to report whether they are
implemented or not, on the basis of the ‘Comply
or Explain’ principle.11 In other words; theapplication of these principles is not a legal
obligation. However, companies must explain
which of these principles are complied with,which are not followed, and the reasons for noncompliance.
Greenhouse gas emissions reporting may also
be required for certain companies as a result of
EU climate goals and regulations, and a
proposed Turkish Emissions Trading System.
As part of the ‘Fit For 55’ package of policies
and legislation, the ‘Carbon Border Adjustment
Mechanism’ published by the European
Commission in July 2021 will oblige EU member
countries to ensure that imported goods will be
subject to an equivalent carbon price to goods
originating in EU member countries in the
cement, electricity, aluminium, iron, steel andfertilizer sectors following a transition period
ending in 2026.12 Since this obligation indirectly
covers countries exporting to EU member
countries, it is envisaged that companies
importing goods from Turkey in these sectors

11

12

Capital Markets Board, Sustainability Principles Compliance
Framework(October
2020)<https://www.spk.gov.tr/Sayfa/Dosya/1332>.
European Commission, 'Fit for 55': delivering the EU's 2030
Climate Target on the way to climate neutrality (14 July 2021)<https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:52021DC0550&from=EN>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Turkeywill report the emissions occurring in the
production process of the imported goods
quarterly, starting from 2023, and detail any
carbon price paid abroad, as well as direct andindirect emissions.
In addition, the Minister of Environment,
Urbanization and Climate Change Murat Kurum
has stated that the Nationally Determined
Contribution will be updated before the 27th
Conference of the Parties with increased
ambition on greenhouse gas emissions
reduction targets. In this context, he stated thatthe commitments as part of the goal of attaining
net-zero emissions by 2053 will be fulfilled, andan ‘Emissions Trading System’ will be
implemented to contribute towards greenhousegas reduction.13 The ‘Emissions Trading
System’ involves determining an upper limit
value based on the sector and the greenhousegas emissions capacity of the facilities in therelevant system, and producing a permit for thisupper limit; therefore, Turkish companies may
be required to report on their emissions as partof the ‘Emissions Trading System’.

Practical Implications for Directors
Considering the approach of the Ministry of Environment, Urbanization and Climate Change, CMB,BRSA and other regulatory and supervisory institutions to climate change and its risks in Turkey, it isrecommended that companies and their directors pay attention to the following issues in theircommercial practices and public disclosures:a)

Establishing teams to work on the fight against climate change and sustainability at management
and/or board level, determining the risks and opportunities in this regard, making reports within thecompany, and acknowledging that climate change risks and opportunities are within the
responsibility of care and commitment in line with the principle of transparency;b)

Making a transition to green production disclosures within the scope of sustainable economy
principles, using renewable energy sources actively in the production sector, accelerating
infrastructure works in this direction, increasing the use of alternative raw materials and fuel andtaking measures to reduce emissions, and in order to achieve these goals, preparing short, medium
and long-term goals within long-term action plans;c)Calculating and verifying the greenhouse gas emissions released as a result of company activities
according to the ‘ISO 14064 Greenhouse Gas Reporting and Verification Standard’ published by
the Turkish Standards Institute (TSI), and reporting to relevant authorities in accordance with thelegislation on monitoring and reporting of greenhouse gas emissions and reductions with utmost
care;

d)

Following the legislative preparations of the legislator regarding climate change, analysing theobligations brought by the regulations that come into force for companies, complying with theseobligations, and benefiting from expert opinions on these issues if needed.

Contributors:

13

Emre Durgun, Nazali Tax & Legal
Süreyya Korkmaz, Nazali Tax & Legal

Ministry of Environment, Urbanisation and Climate Change,
High Level Climate Dialogue with the European Union (21 April

2022) <https://ab.csb.gov.tr/avrupa-birligi-ile-yuksek-duzeyliiklim-diyalogu-haber-268075>.

162

Turkey (Turkish)İklim değişikliğinin şirketler ve ekonominin
geneli için finansal bir risk olarak
algılanmasındaki uluslararası ve ulusalgelişmeler ışığında, Türk şirketlerinin
yöneticileri, özen yükümlülüklerinin bir parçası
olarak iklim risklerine karşı tetikte olmalı, her
türlü mevzuata uygun hareket etmeli ve şirket
faaliyetlerini sürdürülebilirlik ilkeleridoğrultusunda yeniden yönlendirmek içinadımlar atmalıdır. Yöneticiler ayrıca, Sermaye
Piyasası Kurulu'nun Sürdürülebilirlik İlkeleri
Uyum Çerçevesi doğrultusunda Çevresel,
Sosyal, Yönetimsel (ÇSY) risklerinin ve
fırsatlarının açıklanmasını sağlamalı ve şirketiniş modelinin AB yasaları ile düzenlenen ve
gelecekte Türk işletmelerini de etkileyebilecek
emisyon ticareti ile sorunsuz bir şekilde
entegrasyonunu sağlamak için sera gazı
emisyonlarının ölçülmesine ve açıklanmasınayönelik adımlar atmalıdır.
Dünyanınkarşıkarşıyaolduğuiklimdeğişikliğinin neden olduğu risklerin artan
farkındalığı ile Türkiye, iklim değişikliği ile
mücadelede her geçen gün çalışma alanlarınıgenişletmektedir. Uluslararası anlaşmalara
uymak ve taahhütlerini yerine getirmek içinmevzuat çalışmaları yapmakta, mücadele için
gerekli sosyal ve mali altyapıyı hazırlamaktadır.
Türk şirketlerinin yönetim kurulları, Türk
hükümetinin ve düzenleyici kurumların bugelişmelere daha fazla odaklandığının sinyaliolan yeni politikalar ve mevzuatın bir sonucu
olarak kendileri için yeni risk ve fırsatlara yol
açabilecek bu gelişmelere karşı hazırlıklı
olmalıdır.
16 Temmuz 2021'de Türk Hükümeti, yeşil bir
ekonomiyi birden fazla politika alanında
desteklemeyi amaçlayan bir yol haritası olan‘Yeşil Anlaşma Eylem Planını’ onaylamıştır.1 Bu
plan ile Türkiye, Avrupa Birliği'nin (AB) ‘AvrupaYeşil Anlaşması’ ile uyum sağlanmayı
amaçlamakta ve plan, karbon emisyonlarını
sınırlama, yeşil finansmanı artırma ve yeşil vedöngüsel bir ekonomi için çalışma gibi eylemleri
içermektedir.

1

2

3

Ticaret Bakanlığı’nın Yeşil Mutabakat Eylem Planı için bkz,
<https://ticaret.gov.tr/data/60f1200013b876eb28421b23/MUTABAKAT%20YE%C5%9E%C4%B0L.pdf>.
Türkiye Niyet Edilen Ulusal Katkı Beyanı için bkz,
<https://yesilekonomi.com/files/The_INDC_of_TURKEY_v_15_
19_30-TR.pdf>.
Paris Anlaşmasının Onaylanmasının Uygun Bulunduğuna Dair
Kanun
için
bkz,

27 Eylül 2021'deCumhurbaşkanlığı, 2053 yılına kadar net sıfır
emisyon hedefini açıklamış ve bunun yatırım veüretim de dahil olmak üzere geniş kapsamlıdeğişiklikler gerektireceğini kaydetmiştir. 30
Eylül 2015’de sunulan ve Paris Anlaşması'nın
hedeflerine yönelik planlarını ortaya koyan‘Türkiye Niyet Edilen Ulusal Katkı Beyanı’(INDC), 2030 yılına kadar sera gazı
emisyonlarını ‘olağan iş’ düzeyine kıyasla %21
oranında azaltacağını belirtmektedir.2 Çevre,Şehircilik ve İklim Değişikliği Bakanı Murat
Kurum, Türkiye'nin iklim hedeflerine yasalçerçeve oluşturacak bir 'iklim yasası' hazırlamaçalışmalarının sürdüğünü belirtmiştir.
Türkiye, 22 Nisan 2016 tarihinde New York’ta
düzenlenen imza töreninde 175 ülke temsilcisi
ile birlikte Paris anlaşmasını imzalamıştır.
Türkiye Büyük Millet Meclisi tarafından ‘ParisAnlaşmasının
Onaylanmasının
Uygun
Bulunduğuna Dair Kanu’ 7 Ekim 2021 tarihli ve
31621 sayılı Resmi Gazete’de yayımlanarak 10
Kasım 2021’de yürürlüğe girmiştir.3
29 Ekim 2021 tarihli 31643 sayılı resmi gazetede
yayınlanan cumhurbaşkanlığı kararnamesi ile‘Çevre ve Şehircilik Bakanlığı’ nın adı ‘Çevre,Şehircilik ve İlkim Değişikliği Bakanlığı’ olarakdeğiştirilmiştir.4 Bu durum Bakanlığın iklimdeğişikliği politikasına daha çok odaklanacağı
izlenimi vermektedir.
24 şubat 2022 tarihinde Sermaye Piyasası
Kurulu’nun (SPK) internet sitesinde yayınlanan“YeşilBorçlanma
Aracı,
Sürdürülebilir
Borçlanma Aracı, Yeşil Kira Sertifikası,
Sürdürülebilir Kira Sertifikası Rehberi” ilesürdürülebilirlik projeleri ve yeşil projelerin
finansmanında, şeffaflık, dürüstlük, tutarlılık vekarşılaştırılabilirliğin artırılması amaçlanmıştır. 545<https://www.resmigazete.gov.tr/eskiler/2021/10/202110077.pdf>
Cumhurbaşkanlığı
kararnamesi
için
bkz,
<https://www.resmigazete.gov.tr/eskiler/2021/10/2021102935.pdf>.
Sermaye Piyasası Kurulu, Yeşil Borçlanma Aracı, Sürdürülebilir
Borçlanma Aracı, Yeşil Kira Sertifikası, Sürdürülebilir Kira
Sertifikası
Rehberiiçinbkz,<https://spk.gov.tr/Sayfa/Dosya/1362>.

163

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Turkey (Turkish)İklim değişikliği kaynaklı risklerin ekonomik ve
finansal etkileri, piyasalardaki fiyat istikrarını vefinansal istikrarı da etkilemektedir. Bu durum
iklim değişikliğine ilişkin gelişmelerin merkez
bankaları tarafından takip edilmesini ve bu
risklerin para politikası stratejilerine dahil
edilmesini gerektirmektedir. Bu nedenle
Türkiye Cumhuriyet Merkez Bankası (TCMB)Başkanı Şahap Kavcıoğlu, TCMB'nin iklimdeğişikliğinin genel fiyat düzeyi üzerindeki
potansiyel etkisini gördüğünü ve İklimle ilgili
riskleri azaltmak için TCMB'nin sürdürülebilirfinansmangirişimlerini
desteklediğini
belirtmiştir.
Bankacılık Düzenleme ve Denetleme Kurumu(BDDK), 2022-2025 Sürdürülebilir Bankacılık
Stratejik Planını Temmuz 2021'de yayınlamıştır.
Plan, iklimle ilgili risklerin değerlendirilmesi veyönetilmesi
konusundaki
kapasitenin
artırılmasını ve iklimle ilgili finansal risklerin
yönetiminin ve tanımlanmasının denetimini
güçlendirmeyi
amaçlayan
eylemleriiçermektedir.6
Yöneticilerin Görevleri Ve İklim Değişikliği
6102 sayılı Türk Ticaret Kanunu’nun (TTK)‘Özen ve bağlılık yükümlülüğü’ başlıklı 369.
maddesi, şirketlerin yönetim kurulu üyelerinin
güvene dayalı sorumluluklarını “Yönetim kuruluüyeleri ve yönetimle görevli üçüncü kişiler,
görevlerini tedbirli bir yöneticinin özeniyle
yerine getirmek ve şirketin menfaatlerini
dürüstlük
kurallarınauyarakgözetmekyükümlülüğü altındadırlar.” ifadelerine yervermek sureti ile düzenlemektedir.7
Yönetim kurulu üyelerinin özen sorumluluklarını
ihlal etmeleri hali ise TTK’nın 553. maddesinde
düzenlenmiş olup madde metni “Kurucular,

yönetim kurulu üyeleri, yöneticiler ve tasfiye
memurları, kanundan ve esas sözleşmedendoğan yükümlülüklerini kusurlarıyla ihlal ettikleri
takdirde hem şirkete hem pay sahiplerine hemde şirket alacaklılarına karşı verdikleri zarardan
sorumludurlar.” ifadelerine yer vermektedir.
İklim değişikliği ile mücadelede bir yol haritası
belirlemek için kuşkusuz iklim değişikliğinin
mevcut ve muhtemel risklerinin belirlenmesi, bu

67

Sürdürülebilir
Bankacılık
Stratejik
Planı
için
bkz,
<https://www.alomaliye.com/wpcontent/uploads/2021/12/2022-2025-stratejik-bankacilik.pdf>.
6102
sayılı
Türk
TicaretKanunuiçinbkz,<https://www.mevzuat.gov.tr/MevzuatMetin/1.5.610220130328.pdf>.

riskler karşısında atılabilecek adımların tespit
edilmesi, eylem planları hazırlanması ve bu
planlar doğrultusunda gerekli alt yapıçalışmalarına başlanması gerekmektedir.
Türkiye için iklim değişikliği riskleri, 'Fiziksel
Riskler' (aşırı hava olayları gibi akut riskler ve
deniz seviyesinin yükselmesi ve yağış
düzenindeki değişiklikler gibi kronik riskler
dahil), 'Geçiş Riskleri' (iklim politikaları, teknoloji,
tüketici tercihleri ve finansal piyasa beklentileri
dahil) ve BDDK'nın 2022-2025 Sürdürülebilir
Bankacılık Strateji Planında yer alan 'Nominal
Riskler olarak sınıflandırılmaktadır. Bu risklerin
kuruluşlar için potansiyel olarak ciddi finansal
sonuçları olduğu düşünülmektedir.
BDDK'nın ilgili raporunda, Türk bankacılık
sektörünün fosil yakıta dayalı enerji üretimi,çimento, demir-çelik, alüminyum, gübre,ulaştırma ve inşaat sektörleri ve ilgili sektörlerdeönemli geçiş risklerine maruz kaldığı tespit
edilmiştir. 2026 yılından itibaren hayata
geçecek olan AB 'Karbon Sınır Ayarlama
Mekanizması' da bu anlamda önemli bir risk
olarak değerlendiriliyor.
Şirketler iklim değişikliğini yönetim kurulu
düzeyinde giderek daha fazla tartışmaktadır.
Karbon Saydamlık Projesi (CDP) tarafından
2021 yılında yayınlanan 'Türkiye İklim Değişikliği
ve Su Raporu'na göre, ankete katılan şirketlerin
her yönetim kurulu toplantısında iklimle ilgili
konuları gündeme aldıkları belirtilmiştir. 2020'debu oran %33 ile toplam 18 iken 2021'de %54'e(34 şirket) çıkmıştır. Raporda, Türkiye'deraporlama yapan şirketlerin %97'sinin iklimdeğişikliği ile ilgili risk tanımladığı belirtiliyor.8 Bu
anlamda Türkiye'deki şirketlerin iklim değişikliği
bilincinin
her
geçen
gün
arttığı
söylenebilecektir.
Yönetim kurulunun iklim değişikliği risklerini
gündemine alması, bu konudaki mevzuatçalışmalarını
takip
etmesi,mevzuatın
gerektirdiği yükümlülüklere uygun hareket
etmesi ve şirket faaliyetlerinin sürdürülebilirlik
ilkeleri doğrultusunda yeniden yönlendirilmesi,
yasal bir zorunluluk olmasa bile her yöneticininözen yükümlülüğü kapsamındadır. Çünkü
şirketlerindeğişenkoşullara
uyumsağlayabilmeleri ve varlıklarını sürdürebilmeleri,

8

CDP’nin Türkiye 2021 İklim Değişikliği ve Su Raporu için bkz,
<https://cdpturkey.sabanciuniv.edu/sites/cdpturkey.sabanciun
iv.edu/files/cdp_climate_change_and_water_report_2021turkey_edition.pdf>.

164Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Turkey (Turkish)yöneticilerinin öngörülerine ve risklere karşı
alacakları önlemlere bağlıdır.
Yöneticilerin Açıklama Yükümlülükleri
Türkiye’de ‘Sera Gazı Emisyonlarının Takibi
Hakkında Yönetmelik’ 17 Mayıs 2014 tarihli ve
29003 sayılı Resmi Gazete’de yayınlanmış,31.05.2017’de yapılan değişiklik ile son halinialmıştır.9 Yönetmelik uyarınca elektrik, buharüretimi, petrol rafinerileri, petrokimya, çimento,
demir-çelik, alüminyum, tuğla, seramik, kireç,kağıt ve cam üretimi gibi enerji yoğun
sektörlerin imalat sektörü temsilcilerinin yıllık
sera gazı emisyonlarını düzenli olarak
raporlaması ve doğrulamasına ilişkin ilke veesaslar belirlenmiştir.
Türkiye’deki sermaye piyasasında düzenleyici
ve denetleyici otorite olan SPK, yatırımcıların
hak ve çıkarlarını koruyarak sermayepiyasalarının güvenli, adil ve etkili bir şekildeçalışmasını sağlamayı amaçlamaktadır. SPK, iyi
kurumsal yönetim uygulamalarının adil vedüzenli işleyen sermaye piyasalarının altyapısını
teşkil ettiği görüşündedir. Bu nedenle, 2003
yılında Kurumsal Yönetim İlkeleri ilk kez kamuya
duyurulmuş ve sonraki dönemlerde yayımlanan
tebliğler ile bu ilkeler güncellenmiştir.
Payları Borsa İstanbul’da işlem gören şirketler
tarafından benimsenmesi beklenen zorunlu vezorunlu olmayan kurumsal yönetim ilkeleri ‘II17.1 Sayılı Kurumsal Yönetim Tebliği’ndetanımlanmaktadır.10
Kurumsalyönetimuygulamalarıvekamuyuaydınlatma
uygulamalarının geliştirilmesini amaçlayan SPK,şirketlerin zorunlu ilkelere uyup uymadıklarını
ve zorunlu olmayan ilkelerden ayrıldıkları
hususlarailişkinaçıklamaları
yakındanizlemektedir.
Ekim 2020'de SPK tarafından yayınlanan‘Kurumsal Yönetim Tebliği’, halka açıkşirketlerin uymaları ve açıklamaları beklenen
temel Çevresel, Sosyal ve Kurumsal Yönetim(ÇSY)
ilkelerini
içeren'Sürdürülebilirlikİlkelerine Uyum Çerçevesi'ni içermektedir.
Kurumsal Yönetim İlkeleri, ÇSY risklerinin,

9

10

11

Sera Gazı Emisyonlarının Takibi Hakkında Yönetmelik için bkz,
<https://www.mevzuat.gov.tr/mevzuat?MevzuatNo=19678&M
evzuatTur=7&MevzuatTertip=5>.
II-17.1 Sayılı Kurumsal Yönetim Tebliği için bkz,
<https://www.mevzuat.gov.tr/File/GeneratePdf?mevzuatNo=1
9225&mevzuatTur=Teblig&mevzuatTertip=5>.
Sermaye Piyasası Kurulu, Sürdürülebilirlik İlkeleri UyumÇerçevesi
içinbkz,<https://www.spk.gov.tr/Sayfa/Dosya/1332>.

fırsatlarının ve ilgili politikaların belirlenmesi,şirketin kurumsal stratejisinin ÇSY politikaları,
riskleri ve fırsatları ile nasıl uyumlu olduğu veşirketin sürdürülebilirlik performansı, hedefleriveeylemleridahil
birçokkonuyukapsamaktadır. Bu ilkelerin uygulanması isteğe
bağlı
olmaklabirlikte,
uygulanıpuygulanmadığının ‘Uy ya da Açıkla’ ilkesi
temelinde raporlanması zorunludur. 11 Diğer birdeyişle; bu ilkelerin uygulanması yasal bir
zorunluluk değildir. Ancak şirketler bu
ilkelerden hangilerine uyulduğunu, hangilerine
uyulmadığını ve uymama nedenlerini açıklamak
zorundadır.
AB iklim hedefleri ve düzenlemelerinin bir
sonucu olarak bazı şirketler için sera gazı
emisyonlarının raporlanması ve bir Türk
Emisyon Ticareti Sistemine geçiş gerekli
olabilecektir. ‘55'e Uyum’ paketinin bir parçası
olarak, Avrupa Komisyonu tarafından Temmuz
2021'de yayınlanan ‘Sınırda Karbon Düzenleme
Mekanizması’, 2026 yılında sona erecek olangeçiş dönemi sonrasında AB üye ülkelerinde
ithal edilen malların, mallara eşdeğer bir karbon
fiyatına tabi olmasını zorunlu kılacaktır.12 Bu
yükümlülük, dolaylı olarak AB üyesi ülkelere
ihracat yapan ülkeleri kapsadığından çimento,
elektrik, alüminyum, demir, çelik, gübre ve
sektörlerinde Türkiye'de mal ihraç edenşirketlerin, ihraç edilen malın üretim sürecindeoluşan doğrudan ve dolaylı emisyonları
2023'ten itibaren üçer aylık dönemler itibarıyla
raporlayacakları ve yurt dışında ödenen karbon
bedellerini
detaylandıracaklarıöngörülmektedir.
Ayrıca Çevre, Şehircilik ve İklim Değişikliği
Bakanı Murat Kurum, sera gazı emisyonlarını
azaltma hedeflerine yönelik iddiaların artmasıyla
Niyet Edilen Ulusal Katkı Beyanı’nın 27. Taraflar
Konferansıöncesinde
güncelleneceğini
belirtmiştir. Bu kapsamda, 2053 yılına kadar net
sıfır emisyon hedefi kapsamında verilen
taahhütlerin yerine getirileceğini ve sera gazı
azaltımına katkı sağlamak için ‘Emisyon Ticareti
Sistemi’nin uygulanacağını belirtti.13 Emisyon
Ticareti Sistemi, ilgili sistemdeki tesislerin
sektör ve sera gazı emisyon kapasitesi bazında

12

13

European Commission, 'Fit for 55': delivering the EU's 2030
Climate Target on the way to climate neutrality (14 July 2021)
metni
için
bkz,
<https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:52021DC0550&from=EN>.
Avrupa Birliği İle Yüksek Düzeyli İklim Diyaloğu için bkz,
<https://ab.csb.gov.tr/avrupa-birligi-ile-yuksek-duzeyli-iklimdiyalogu-haber-268075>.

165

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
Turkey (Turkish)bir üst sınır değerinin belirlenmesini ve bu üstsınır için izin belgesi hazırlanmasını ifade
etmektedir. Bu nedenle, Türk şirketlerinin

emisyonlarını 'Emisyon Ticareti Sistemi'nin bir
getirisi olarak raporlamaları gerekebilir

Yöneticiler için Uygulanabilir Öneriler
Türkiye’de Çevre, Şehircilik ve İklim Değişikliği Bakanlığı, SPK, BDDK ve sair düzenleyici ve denetleyici
kurumların iklim değişikliği ve risklerine yaklaşımı göz önüne alındığında şirketlerin ve yöneticilerinin
ticari uygulamalarında ve kamuoyuna bildirimlerinde şu hususlara dikkat etmesi önerilmektedir:a) Yönetim ve/veya yönetim kurulu düzeyinde iklim değişikliği ve sürdürülebilirlik ile mücadele
konusunda çalışacak ekipler oluşturmak, bu konudaki risk ve fırsatları belirlemek, şirket içinde
raporlama yapmak, iklim değişikliği risk ve fırsatlarının öngörülmesinin şeffaflık ilkesidoğrultusunda Yönetim Kurulunun özen yükümlülüğü kapsamında olduğunu kabul etmek;b) Sürdürülebilir ekonomi ilkeleri kapsamında yeşil üretime geçiş çalışmaları yapılması,
yenilenebilir enerji kaynaklarının üretim sektöründe aktif olarak kullanılması, bu yöndeki alt yapıçalışmalarının hızlandırılması, alternatif hammadde ve yakıt kullanımının artırılması ve emisyon
azaltımını sağlayacak tedbirlerin alınması, bu amaçlara ulaşabilmek adına kısa, orta ve uzun
vadeli eylem planları hazırlanması;c) Şirket faaliyetleri sonucunda açığa çıkan sera gazı emisyonlarının Türk Standartları Enstitüsü(TSE) tarafından yayınlanan ISO 14064 Sera Gazı Raporlama ve Doğrulama Standardı’na göre
hesaplanması, doğrulanması, sera gazı emisyonlarının izlenmesi ve raporlanması hakkındaki
mevzuat uyarınca ilgili makamlara raporlanması ve azaltımı konularında azami özengösterilmesi;d) Kanun koyucunun iklim değişikliği ile ilgili yapılması planlanan mevzuat hazırlıklarının takibi,
yürürlüğe giren düzenlemelerin şirketler açısından getirdiği yükümlülüklerin analiz edilmesi, bu
yükümlülüklere uygun davranılması ve ihtiyaç duyulması halinde bu hususlarda uzmangörüşlerinden faydalanılması.
Katkıda Bulunanlar:

Emre Durgun, Nazali Tax & Legal
Süreyya Korkmaz, Nazali Tax & Legal

166

United Kingdom
The Bank of England Prudential Regulation
Authority (PRA), the Financial Conduct
Authority (FCA), the Financial Reporting
Council (FRC), and the Pensions Regulator(TPR) released a joint statement in 2019 settingout their position on climate change:

Climate change is one of the defining
issues of our time. We recognise it
presents far-reaching financial risks
relevant to our mandates from both
physical factors, such as extreme
weather events, and transition risks that
can arise from the process ofadjustment to a carbon-neutral
economy. Companies should consider
the likely consequence of climatechange on their business decisions, inaddition to meeting their responsibility
to consider the company’s impact on
the environment.1
In October 2021, the FCA, PRA, TPR and FRC
released a further joint statement on the
publication of the Climate Change Adaptation
Reports by the FRA, PRA and TPR under the
Climate Change Act 2008.2 In these reports, theorganisations each emphasised the risks posedby climate change to their regulatory objectives,and how they will integrate climate change
considerations into their guidance andsupervisory roles.3

1

2

3

Joint statement on climate change by the Bank of England,
Financial Conduct Authority, Financial Reporting Council andthePensions
Regulator
(2
July
2019)
<https://www.bankofengland.co.uk//media/boe/files/prudential-regulation/publication/2019/jointstatement-on-climate-change.pdf>.
Joint statement by the FCA, PRA, TPR and FRC on the
publication of Climate Change Adaptation Reports (28 October
2021)<https://www.fca.org.uk/news/statements/jointstatement-fca-pra-tpr-frc-climate-change-adaptation-reports>.
PRA, Climate-related financial risk management and the role ofcapital requirements: Climate Change Adaptation Report 2021
(28
October
2021)<https://www.bankofengland.co.uk/prudentialregulation/publication/2021/october/climate-changeadaptation-report-2021>; FCA, FCA Climate Change
Adaptation
Report(28
October
2021)<https://www.fca.org.uk/publications/corporatedocuments/fca-climate-change-adaptation-report>;
TPR,
Climate Change Adaptation Report (28 October 2021)

In June 2021,
the Bank ofEnglandannounced its
Climate Biennial
Exploratory
Scenario(CBES), a stress test to assess the resilience of
the U.K. financial system and individual
institutions.4 The results of the first CBES were
published in May 2022; the Bank of Englandfound that banks and insurers had taken somesteps to integrate climate risk management into
their processes, but that more remained to bedone, and that if no changes were made tobusiness models, climate impacts could cause
an equivalent to a 10-15% drag on profits eachyear.5 A second round of the CBES waslaunched in February 2022.6
It is clear that U.K. regulators view climatechange as a financially material risk. Welladvised boards should seek to incorporate
climate risk into their decision-making.
Directors' Duties and Climate Change
Historically, company directors owed duties totheir company under common law. However, in
2006, directors' duties were codified in the
Companies Act 2006.7 Two relevant duties are
the duty to promote the success of thecompany for the benefit of its members as awhole (section 172), and the duty to exercise
reasonable care, skill, and diligence (section174), the latter of which is not fiduciary innature.8 The duty to promote the success of thecompany has been described as the ‘principal

4

5

6

7
8

<https://www.thepensionsregulator.gov.uk/en/documentlibrary/corporate-information/climate-change-andenvironment/climate-adaptation-report>;
Bank of England, Key elements of the 2021 Biennial Exploratory
Scenario: Financial risks from climate change (8 June 2021)<https://www.bankofengland.co.uk/stress-testing/2021/keyelements-2021-biennial-exploratory-scenario-financial-risksclimate-change>.
Bank of England, Results of the 2021 Climate Biennial
Exploratory
Scenario(CBES)
(24
May
2022)
<https://www.bankofengland.co.uk/stresstesting/2022/results-of-the-2021-climate-biennial-exploratoryscenario>.
Bank of England, Bank of England launches a second round of
the Biennial Exploratory Scenario (BES) exercise on financial
risks
from
climatechange(9February2022)<https://www.bankofengland.co.uk/news/2022/february/boelaunches-second-round-of-biennial-exploratory-scenario>.
See generally Companies Act 2006 (UK) sections 171-177.
Maidment v Attwood & Ors [2012] EWCA Civ 998, [22].

167Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United Kingdom

duty’,9 consistent with the primacy of the duty ofloyalty at common law.10 Section 174 further
informs the exercise of section 172 by directors
by setting standards for the manner in which
directors are expected to act and theknowledge, skill and experience they should
hold.
Given the breadth and potential materiality ofclimate change-related risks, it seems
increasingly likely that directors should
consider these when fulfilling their duty under
section 172.11 Discussing this in August 2019,
Lord Sales, Justice of the U.K. Supreme Court,
delivered a speech on directors’ duties inrespect of climate change.12 Lord Sales
recognised the links between directors’ duties
and climate change, noting that general
fiduciary and duty of care obligations may
require directors to have regard to climaterelated risks and to take action to reduce theircontribution to climate change.
Additionally, in promoting the success of thecompany under section 172, directors are
required to "have regard" to a non-exhaustive
list of factors. This includes "the impact of thecompany's operations on the community andenvironment" (section 172(1)(d)) which
captures consideration of climate change
issues.
Therefore, when fulfilling their duty to promote
the success of their company, directors should
consider climate change risks both in light of thegeneral duty under section 172 and therequirement to have regard to climate change
issues. A well-counselled director should
ensure that they consider climate-related issues
in good faith as they carry out their role, using
their own skill and judgment, and having regard
to the likely long-term consequences of thedecision being considered.

ClientEarth announced that it had issued a preaction letter to the board of Shell plc, indicating
its intention to bring a derivative claim against
the board alleging that the directors hadbreached their duties to act in the best interestsof the company and with due skill, care anddiligence in failing to develop and implement a
climate strategy that aligns with the Paris
Agreement goals, increasing its risk of stranded
assets and having to make write-downs.13
Directors' Disclosure
Climate Change

Obligations

andClimate-related disclosures are also required to
be integrated into disclosures on which
directors are required to sign off, including
Strategic Reports, the section 172 statement,
and the financial statements.
The Strategic Report must include information
about environmental matters, including theimpact of the company's business on theenvironment, with additional disclosures in thisregard being required following implementationof the EU Non-Financial Reporting Directive in
the U.K. The Strategic Report must also include
a section 172 statement on how the board hascomplied with its duty to promote the successof the company, including by having regard to
the impacts of the company on theenvironment. The FRC published guidance inJuly 2018 on companies’ annual Strategic
Reports, advising companies to report on
climate-related risk where “material”.14
The U.K. government's July 2019 Green
Finance Strategy set out its expectation thatlarge asset owners and listed companies should
disclose in line with the Taskforce on Climaterelated
Financial
Disclosures(TCFD)

The application of these duties with respect toclimate change is the subject of ongoing
litigation. In March 2022, the UK NGO

9

10

11

See Rosemary Teele Langford, ‘The Duty of Directors to Act
Bona Fide in the Interests of the Company: A Positive Fiduciary
Duty? Australia and the UK Compared’ 11(1) Journal of
Corporate Law Studies’ (2011) 215, 234.
Bristol and West Building Society v Mothew [1998] Ch 1, 16(Millet LJ): the ‘obligation of loyalty’ is the distinguishing, ‘core’obligation of a fiduciary.
See Alexia Staker and Alice Garton, Commonwealth Climate
and Law Initiative, Directors’ Liability and Climate Risk: United
Kingdom
Country
Paper(April2018)<https://ccli.ouce.ox.ac.uk/wpcontent/uploads/2018/04/CCLI-UK-Paper-Final.pdf>.

12

13

14

Lord Sales, Directors’ duties and climate change: keeping pacewith environmental challenges,’ (27 August 2019)<https://www.supremecourt.uk/docs/speech-190827.pdf>
See
ClientEarth,Redirecting
Shell<https://www.clientearth.org/redirecting-shell/#theclaim>.
Financial Reporting Council Guidance on the Strategic Report(July2018):
44-45<https://www.frc.org.uk/getattachment/fb05dd7b-c76c-424e9daf-4293c9fa2d6a/Guidance-on-the-Strategic-Report-31-718.pdf>. See also Janis Sarra, “Following the Footpath to
Mandatory TCFD Disclosure in the United Kingdom: Lessons
for Canadian and Other Regulators”, (forthcoming June 2021,
Canada Climate Law Initiative (ubc.ca)).

168

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United Kingdom

recommendations by 2022,15 and rules
enacting this have now been put in place (seebelow). In November 2020, the U.K.
government announced its intention that TCFDaligned disclosure would be mandatory acrossthe economy by 2025, going beyond the‘comply or explain’ approach.16
Certain listed companies have been required to
produce disclosures aligned with the TCFD
recommendations since January 2021. In
December 2020, the FCA implemented
amendments to the listing rules to implement
TCFD disclosure reporting for premium-listedcompanies on the London Stock Exchange(other than investment companies) on a comply
or explain basis for financial years starting on orafter 1 January 2021.17
In December 2021, the FCA published rules
expanding the scope of these requirements toinclude standard-listed companies and asset
managers, life insurers and FCA-regulated
pension providers.18 These rules apply from 1
January 2022 (although asset managers andasset
ownerswill
haveaphasedimplementation, with the rules initially applying
to the largest firms and coming into effect forsmaller firms one year later).

require listed companies and those with aturnover greater than £500 million to provide a
non-financial and sustainability information
statement in their Strategic Report, and applies
to disclosures made in financial years beginningon or after 6 April 2022.19 This statement must
include climate-related information including:the actual and potential climate-related risks
and opportunities arising in connection with
their operations, and the time periods overwhich these are assessed; the impacts ofclimate-related risks and opportunities on theirbusinessmodel;
theirgovernancearrangements in assessing and managing
climate-related risks and opportunities; theirprocess for identifying these risks andopportunities; and an analysis of the resilienceof the company’s business model under
different climate scenarios. The Department for
Business, Energy and Industrial Strategy (BEIS)
has produced guidance on complying withthese requirements.20

Regulations) amends sections 414C, 414CA
and 414 CB of the Companies Act 2006 to

The disclosures required under the Climate
Disclosure Regulations are less extensive thanthose introduced under the FCA rules (seeabove),21 but the FCA rules are on a comply or
explain basis rather than being fully mandatory.
BEIS’ guidance on the Climate Disclosure
Regulations also explains the overlap between
the FCA rules and the Climate Disclosure
Regulations, noting that UK-registered listedcompanies are likely to be subject to both setsof requirements. In such a case, BEIS notes that
disclosure in a manner consistent with the
TCFD recommendations and recommended
disclosures in line with the FCA rules are likely

HM Treasury and Department for Business, Energy & Industrial
Strategy,
Green
Finance
Strategy
(July
2019)
<https://www.gov.uk/government/publications/green-financestrategy>. The UK government has recently concluded aconsultation on an update to the Green Finance Strategy,
including questions on disclosures including the importance of
scope 3 emissions data for investors and the role of the UK
government in supporting disclosures. See UK government,
Update to Green Finance Strategy: Call for Evidence (11 May
2022)<https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1074650/green-financestrategy-cfe.pdf>.
UK Government, Chancellor sets out ambition for future of UK
financial services (9 November 2020)<https://www.gov.uk/government/news/chancellor-sets-outambition-for-future-of-uk-financial-services>.
FCA, PS20/17: Proposals to enhance climate-related
disclosures by listed issuers and clarification of existing
disclosure
obligations(December
2020)<https://www.fca.org.uk/publication/policy/ps20-17.pdf>.
FCA, PS21/23: Enhancing climate-related disclosures bystandard
listedcompanies(December
2021)<https://www.fca.org.uk/publication/policy/ps21-23.pdf>; FCA,
PS21/24: Enhancing climate-related disclosures by asset

managers, life insurers and FCA-regulated pension providers(December
2021)<https://www.fca.org.uk/publication/policy/ps21-24.pdf>.
The companies which are within the scope of the regulations
are traded companies, AIM-listed companies, banking
companies, insurance companies, and companies with anannual turnover higher than £500 million. Similar regulations
have been made in respect of limited liability partnerships under
the Limited Liability Partnerships (Climate-related Financial
Disclosure) Regulations 2022.
Department for Business, Energy & Industrial Strategy, Green
Finance Strategy, Mandatory climate-related financial
disclosures by publicly quoted companies, large privatecompanies and LLPs - Non-binding guidance (February 2022)<https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1056085/mandatoryclimate-related-financial-disclosures-publicly-quoted-privatecos-llps.pdf>.
The Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022 disclosures require reporting inline with the four ‘pillars’ of the TCFD recommendations(Governance, Strategy, Risk Management and Metrics andTargets), rather than requiring disclosures in line with the 11
specific TCFD recommendations within these categories,
which are required by the listing rules.

In January 2022, the U.K. government
published regulations requiring large U.K.
incorporated companies to disclose climaterelated information. The Companies (Strategic

Report) (Climate-related Financial Disclosure)
Regulations 2022 (the Climate Disclosure

15

16

17

18

19

20

21

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United Kingdom

to fulfil the requirements of the Climate
Disclosure Regulations.22
From 1 October 2021, occupational pension
schemes have been required by new
regulations to make TCFD-aligned disclosures,
as well as put governance and management
structures in place governance, strategy andrisk management measures in respect ofclimate change-related risks.23 BEIS has notedthat the Climate Disclosure Regulations arelikely to inform the disclosures of pension
schemes under these regulations. 24
The FCA is also sharing views and expertiseinternationally through its co-chairing aworkstream on disclosure as part of IOSCO’s
Sustainable Finance Task Force.25

Climate-related issues may be required to be
included in companies’ financial statements, on
which the board is required to sign-off. The FRC
has published a thematic review on climatechange reporting in November 2020 which
identified that improvements were required. 26 It
supported the introduction of global standards
on non-financial reporting, but, as an interim
step, encouraged public interest entities toreport against the TCFD’s recommended
disclosures and the Sustainability AccountingStandards Board metrics for their sector. In
November 2021, the FRC published a factsheet
explaining how climate change-related matters
may impact financial statements prepared
under U.K. Generally Accepted Accounting
Principles.27

Practical Implications for Directors
The focus on climate risk by U.K. regulators and the new disclosure requirements is likely to mean that
directors of companies which are subject to these requirements will be required to consider climatechange-related risks in order to properly fulfil their legal duties. In order to ensure high-standards ofgovernance, well-counselled boards will:a) delegate climate risk identification and evaluation to a clearly-identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear
interim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.

Contributors:

22

23

24

Alex Cooper, CCLI

Department for Business, Energy & Industrial Strategy, Green
Finance Strategy, Mandatory climate-related financial
disclosures by publicly quoted companies, large privatecompanies and LLPs - Non-binding guidance (February 2022)<https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1056085/mandatoryclimate-related-financial-disclosures-publicly-quoted-privatecos-llps.pdf>.
Occupational Pension Schemes (Climate Change Governanceand Reporting) Regulations 2021.
Department for Business, Energy & Industrial Strategy, Green
Finance Strategy, Mandatory climate-related financial
disclosures by publicly quoted companies, large privatecompanies and LLPs - Non-binding guidance (February 2022)<https://assets.publishing.service.gov.uk/government/uploads

25

26

27

/system/uploads/attachment_data/file/1056085/mandatoryclimate-related-financial-disclosures-publicly-quoted-privatecos-llps.pdf>.
FCA, Climate change and sustainable finance (21 April 2021)<https://www.fca.org.uk/firms/climate-change-sustainablefinance>.
FRC,
ClimateThematic(November
2020)<https://www.frc.org.uk/getattachment/ab63c220-6e2b-47e6924e-8f369512e0a6/Summary-FINAL.pdf>.
FRC, FRS 102 Factsheet 8: Climate-related Matters(November
2021)<https://www.frc.org.uk/getattachment/63c18c7a-6f3d-42a89f6c-ce181c8f287a/Fact-Sheet-8-FRS-102-ClimateFINAL.pdf>.

170

United States

Climate change has become a part of both U.S.
foreign and domestic policy under the Biden
administration. On his first day of office, 20
January 2021, President Biden declared
support for the Paris Climate Agreement and its
threefold goals of “a safe global temperature,

increased climate resilience, and financial flowsaligned with a pathway toward low greenhousegasemissionsandclimate-resilient1
development.” His climate change Executive
Order on 27 January 2021 established aprocess to embed climate risk mitigation in
every executive agency of the federal
government, including establishing an interagency coordinating process and appointing
both a foreign and domestic policy lead in
newly-established positions within the WhiteHouse.2

financial systemrelated
risk
posed by climatechange, and tax
policy incentives
toeffectchange.5 In a speech on 21 April 2021, shevowed to build on President Biden’s ‘whole ofgovernment’ approach with a “whole ofeconomy” approach6 and released a Climate
Action Plan in July.7 On 20 May 2021, President
Biden issued an Executive Order on Climate
Change Financial Risk, with responsibilities for
Treasury, the Office of Management andBudget (OMB), and the Financial Stability
Oversight Council (FSOC) and its constituent
agencies.8 Among its significant aspects are
initiatives to:

In October 2021, the White House issued aroadmap to Build a Climate Resilient Economy,
where it acknowledged that “Climate change(1) require the development of agovernment-wide strategy to assess,measure, mitigate, and disclose climatechange financial risk across the Federal
Government;

poses serious and systemic risks to the U.S.
economy and financial system”.3 The reportpresents a climate risk accountability
framework that identifies core principles foraddressing climate-related financial risk,
following with a roadmap and implementation
strategy for action. In December 2021,
President Biden signed an Executive Order for
federal sustainability, pledging to reduce
emissions across all federal operations, invest
in local clean energy industries andmanufacturing, and create clean, healthy andresilient communities.4(2) request a financial analysis of thecapital needed to move the American
economy to net-zero by 2050;(3) require the Treasury to work with
FSOC and its constituent agencies to
identify actions within each agency toidentify, measure, mitigate, anddisclose climate change financial risk;(4) identify financial risk from climate within
the insurance industry;

Secretary of the Treasury Janet Yellen has
stated that climate change will be a priority,
creating a hub within Treasury that will focus on

1

2

3

4

The White House, ‘Paris Climate Agreement: Acceptance on
Behalf of the United States of America’ (20 January 2021)<https://www.whitehouse.gov/briefing-room/statementsreleases/2021/01/20/paris-climate-agreement/>.
The White House, Executive Order on Tackling the Climate
Crisis at Home and Abroad (27 January 2021),<https://www.whitehouse.gov/briefing-room/presidentialactions/2021/01/27/executive-order-on-tackling-the-climatecrisis-at-home-and-abroad>.
The White House, ‘U.S. Climate-Related Financial Risk
Executive Order 14030: A roadmap to build a climate-resilient
economy’(14
October
2021)<https://www.whitehouse.gov/wpcontent/uploads/2021/10/Climate-Finance-Report.pdf>
The White House, ‘Fact Sheet: President Biden signs executive
order catalyzing America’s clean energy economy throughfederalsustainability’(8
December
2021)<https://www.whitehouse.gov/briefing-room/statementsreleases/2021/12/08/fact-sheet-president-biden-signs-

5

6

7

8

executive-order-catalyzing-americas-clean-energy-economythrough-federal-sustainability/>.
Reuters, ‘Yellen says would appoint senior climate official at
Treasury’(19
January2021),<https://www.reuters.com/article/us-usa-biden-yellen-climateidUSKBN29O2B3>.
U.S. Department of the Treasury, ‘Secretary of the Treasury
Janet L. Yellen’s Remarks to the Institute of International
Finance’
(21
April
2021)
<https://home.treasury.gov/news/press-releases/jy0139>.
U.S. Department of the Treasury, ‘Climate Action Plan’ (July2021) <https://home.treasury.gov/system/files/136/TreasuryClimate-Ation-Plan-July-2021-Final.pdf>
The White House, Executive Order on Climate Related
Financial
Risk
(20
May
2021)
<https://www.whitehouse.gov/briefing-room/presidentialactions/2021/05/20/executive-order-on-climate-relatedfinancial-risk/>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United States(5) identify actions that can be taken by the
Department of Labor to protect pension
savings and Federal pension insurance
from climate change financial risk; and(6) identify how the Federal Government
can incorporate climate change
financial risk into its lending, risk
underwriting,procurement,
andbudgeting.9
On 21 October 2021, the FSOC issued a reporton climate-related financial risk, noting that“[t]he increasing economic effects of climatechange imply that climate-related financial risks
are an emerging threat to the financial stabilityof the United States”, and recommending that
regulators of financial institutions to require
increased climate change-related disclosuresand the use of scenario analysis to identify
climate-related risks.10
These actions are consistent with theconclusions of and actions by the Federal
Reserve Bank Board of Governors, which forthe first time identified climate change as a risk
to the American financial system in its Financial
Stability Report (Report) of November 2020.11
As part of its Report, the Federal Reserve statedthat “Federal Reserve supervisors expect banks

to have systems in place that appropriately
identify, measure, control, and monitor all of
their material risks, which for many banks arelikely to extend to climate risks.”12 In October

2021, the Federal Reserve Board issued its
annual financial stability report, assessing theresilience of the U.S. financial system. It notedthat climate change “poses significant

challenges for the global economy and thefinancial system”.13

9
10

11

12
13

14

Ibid.
Financial Stability Oversight Committee, ‘Report on ClimateRelated
Financial
Risk‘(21
October
2021)<https://home.treasury.gov/system/files/261/FSOC-ClimateReport.pdf>
United States Federal Reserve Bank Board of Governors,
Financial Stability Report (November 2020), 59-60,<https://www.federalreserve.gov/publications/2020november-financial-stability-report-purpose.htm>.
Ibid.
Board of Governors of the Federal Reserve System, ‘Financial
Stability
Report’(November
2021)<https://www.federalreserve.gov/publications/files/financialstability-report-20211108.pdf>.
Climate-Related Market Risk Subcommittee, Market Risk
Advisory Committee of the U.S. Commodity Futures Trading
Commission, ‘Managing Climate Risk in the U.S. Financial

A subcommittee of the U.S. Commodity Futures
Trading Commission has likewise recognised
the “serious emerging risks” to the U.S.
financial system posed by climate change andhas urged U.S. financial regulators to “moveurgently
and decisively
to measure,understand, and address these risks”.14

Additionally, the Federal Deposit Insurance
Corporation (FDIC), which insures consumer
deposits and supervises financial institutions forfinancial stability and consumer protection, hasstated that addressing the financial risks posedby climate change is a top priority for 2022,15
and has produced draft principles for climaterelated financial risk management for large
financial institutions, which provide a framework
for the management of exposures to climaterelated financial risks consistent with existing
FDIC rules and guidance.16
Directors' Duties and Climate Change
Directors’ fiduciary duties are sourced in state
corporate legislation and the common law, as
developed by the courts. A majority of U.S.
public companies are incorporated in the stateof Delaware. Directors’ core fiduciary duties are
the duty of loyalty, which includes a duty to act
in good faith without conflicts of interests, andin the best interest of the company; and the dutyof care, which means making decisions on an
informed basis after reasonable inquiry anddeliberation. The duty of loyalty also includes a
duty to provide adequate oversight of legal
compliance, including by ensuring thatreasonable information and reporting systems
are implemented and maintained to provide theboard and senior management with timely,
accurate information to support informed
decision-making. This ancillary duty is often

15

16

System: Report of the Climate-Related Market Risk
Subcommittee, Market Rise Advisory Committee of the U.S.
Commodity Futures Trading Commission’ (September 2020),
ii,<https://www.cftc.gov/sites/default/files/2020-09/9-920%20Report%20of%20the%20Subcommittee%20on%20Cli
mate-Related%20Market%20Risk%20%20Managing%20Climate%20Risk%20in%20the%20U.S.%2
0Financial%20System%20for%20posting.pdf>
FDIC, Acting Chairman Martin J. Gruenberg Announces FDIC
Priorities
for
2022
(7
February2022)<https://www.fdic.gov/news/pressreleases/2022/pr22015.html>.
FDIC, Request for Comment on Statement of Principles for
Climate-Related Financial Risk Management for Large Financial
Institutions
(30
March
2022)
<https://www.fdic.gov/news/financial-institutionletters/2022/fil22013.html>.

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Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United Statescalled the board’s Caremark duty based on thecase that established it.17
There has been an increasing focus on
Caremark duties since the 2019 decision of in
Marchand v. Barnhill,18 allowing a duty ofoversight claim to go forward, giving guidanceon directors’ responsibilities for oversight of“mission critical” operations and compliancerisk. In Marchand, a case involving the Blue Bellice cream manufacturer, the Court allowed thecase to go forward because the plaintiff had
provided enough facts to potentially prove a“dearth of any board-level effort at monitoring”
to ensure board oversight of health, safety, andsanitation controls.19 Marchand may signal a
doctrinal development in oversight liability thatboth expands the scope of the doctrine tooperational oversight over “mission critical”
aspects of the business, and expresses higher
expectations of board vigilance regarding suchcore operations. This conclusion is consistent
with four other recent oversight decisions
applying Marchand to allow cases to proceed.20
These cases might provide scope for fiduciary
liability if a board has not ever turned its
collective attention to analysing the relevance ofclimate change risks to the company, its
operations, long-term strategy, or disclosure.
Directors and officers may be liable for a breachof their duty of oversight where they haveutterly failed to implement any reporting or
information system or controls or where they
have consciously failed to monitor such asystem or controls. In the context of climaterelated risks, oversight liability related to climatechange may arise where directors and officers:

17

18

19
20

In re: Caremark Int’l Derivative Litigation, 698 A.2d 959 (Ch. Ct.
Del. 1996). Caremark construed the duty of oversight as partof the board’s duty of care, but a later Delaware Supreme Court
opinion reconceptualized it as an aspect of the duty of loyalty,
not care. See Stone v. Ritter, 911 A.2d 362 (Del. 2006).
Marchand v Barnhill, 212 A.3d 805 (Del. 2019). The board had
exercised no oversight of operations or food safety in thecompany’s ice cream plants, leading to a listeria outbreak inwhich three people died, and the company’s entire inventory
had to be recalled and destroyed. These facts were sufficient
to allege a breach of the board’s duty of loyalty under
Caremark. The parties agreed to a $60 million settlement lessthan a week prior to the scheduled commencement of the trial:
Jennifer F Longhurst and Joseph DiPonio, 'Canada: Canadian
Directors Should Heed Recent US Caremark Litigation',
Mondaq
(18
June
2020)
<https://www.mondaq.com/canada/directors-andofficers/954780/canadian-directors-should-heed-recent-uscaremark-litigation->.
Marchand v Barnhill, 212 A.3d 805 (Del. 2019).
In re Clovis Oncology Inc. Derivative Litigation, C.A. No. 20170222-JRS (2019) (failure of oversight of pharmaceuticalcompany’s research protocols); Hughes v. Xiaoming Hu,

fail to consider or oversee the implementationof climate-related legal risk controls; fail tomonitor mission-critical regulatory compliance(either
specificclimatechange-related
regulations or existing regulations which
require consideration or disclosure of climatechange risks, such as securities law); or fail tomonitorclimate-related
mission-criticalbusiness risks (although liability for a failure tomonitor business risks has not yet been
imposed in a Delaware case).21
In exercising their fiduciary duties, directors arecharged with maintaining a long-term focus. In
a 2017 case involving a conflict between shortterm and longer-term shareholder interests, theDelaware Chancery Court confirmed the “thefiduciary relationship requires that the directors
act prudently, loyally, and in good faith tomaximize the value of the corporation over the
long-term …”22 It added, “The fact that some
holders of shares might be market participants
who are eager to sell and would prefer a higher
near-term market price likewise does not alter
the presumptively long-term fiduciary focus.”

Directors' Disclosure Obligations andClimate Change
Public companies’ disclosure obligations aregoverned by federal securities laws 23 andregulations.24 In 2010, the U.S. Securities andExchange Commission (SEC) issued specificguidance to public companies to clarify theirclimate change-related disclosure obligations
pursuanttorisk
factors
disclosure

21

22

23

24

C.A.No.2019-0112-JTL (Apr. 27, 2020) (failure of oversightover audited financial statements and internal accounting
function); Teamsters Local 443 Health Servs. v. Chou, C.A. No.
2019-0816-SG (Del. Ch. Aug. 24, 2020) (failure of oversightover indirect subsidiary’s criminal activities regarding handlingof pharmaceutical injections); In re The Boeing Co. Derivative
Litig. No. 2019-0907-MTZ, 2021 WL 4059931 (Del. Ch. Sept.
7, 2021) (failure to establish a monitoring system regarding
aircraft safety).
See Commonwealth Climate and Law Initiative, Fiduciary
Duties and Climate Change in the United States (October
2021)<https://ccli.ubc.ca/wpcontent/uploads/2021/12/Fiduciary-duties-and-climatechange-in-the-United-States.pdf>.
Frederick Hsu Living Trust v. ODN Holding Corp., No. 12108VCL, 2017 WL 1437308 (Del. Ch. Apr. 24, 2017).
See generally Securities Act of 1933 and Securities Exchange
Act 1934 (for public disclosures).
See generally Regulation S-K, Standard Instructions for Filing
Forms under Securities Act of 1933, Securities Exchange Actof 1934, and Energy Policy and Conservation Act of 1975, 17
C.F.R.§§ 229.10-229.1016 (2020).

173

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United Statesrequirements, management discussion andanalysis (MD&A) requirements, and generalmateriality
principles.
The
guidanceemphasised that every company should
consider how climate change impacts theiroperations and financial statements, including
both direct and indirect impacts, such as
impacts on suppliers and customers. It statedthat:

Legal, technological, political, andscientific developments regarding
climate change may create newopportunities or risks for registrants.
These developments may create
demand for new products or services,or decrease demand for existingproducts or services… These businesstrends or risks may be required to bedisclosed as risk factors or in MD&A. 25
The SEC identified regulatory and legislative
developments at a state, federal, andtransnational level that could increase or
decrease prices as issues to be evaluated fordisclosure,suchascap-and-tradearrangements among various states andcountries, or new fuel standards. It also
discussed physical changes from climatechange as similarly requiring analysis, such asincreased frequency and intensity of storms
having financial implications for insurancecompanies, property firms, and mortgage
lenders, for instance.26
In early March 2021, the SEC announced an
enforcement task force that will focus onproblems with companies’ climate and ESG
disclosure.27 In mid-March of 2021, the SEC
published a request for public input on climate
and ESG disclosure.28 On 21 March 2022,
following this public consultation process, theSEC issued proposed rules requiring in-scopecompanies to report climate change-related
information,
includingoversightandmanagement of climate-related risks andimpacts and the process for identifying these,
the impact of climate-related events on the line
items of financial statements, attested
greenhouse gas emissions data for scope 1 and2 emissions (and if material, scope 3 emissions,which would not be subject to attestation), andclimate-related targets, metrics and transition
plans, if any. The proposed rules would require
climate-related disclosures in an issuer’s
registration statements and annual reports. The
proposed rules would be phased in, the earliest
application being for certain large companies
for FY 2023.29

Practical Implications for Directors
Given that regulators in the U.S. have become increasingly emphatic regarding the need for companies
and their directors to adopt climate resilience measures in business practices and disclosure, and inparticular the above-noted recognition of climate risk by the President, the Federal Reserve Bank Boardof Governors, the U.S. Treasury, the FDIC and the SEC; obligations for the Office of Management andBudget and the Financial Stability Oversight Council to incorporate climate risk into their work acrossthe Federal Government; and the likely coming into effect of expanded climate and ESG disclosure
across the economy, particularly for financial institutions, including insurance companies, wellcounselled boards will:a) delegate climate risk identification and evaluation to a clearly identified team in management
which reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to start developing a climatetransition roadmap to 2050 with transparent carbon neutrality or reduction targets, with clear

25

26
27

Securities and Exchange Commission, Commission Guidance
Regarding Disclosure Related to Climate Change, ReleaseNo.33-9106; 34-61469; FR-82 (8 February 2010)<https://www.sec.gov/rules/interp/2010/33-9106.pdf>.
Ibid.
SEC, SEC Announces Enforcement Task Force Focussed on
Climateand
ESG
Issues
(4
March
2021)
<https://www.sec.gov/news/press-release/2021-42>.

28

29

SEC, Public Input Welcome on Climate Change Disclosures (15
March
2021)
<https://www.sec.gov/news/publicstatement/lee-climate-change-disclosures>.
SEC, ‘The Enhancement and Standardization of ClimateRelated Disclosures for Investors’ (21 March 2022)<https://www.sec.gov/rules/proposed/2022/33-11042.pdf>.

174Primer on Climate Change: Directors’ Duties and Disclosure obligations (2 nd Edition, July 2022)
United Statesinterim targets to 2040, 2030, and within the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) discuss with disclosure counsel, to develop an external engagement and communications planand to oversee rigorous disclosure and accounting.

For Directors of Banks, Insurance Companies and Asset Managers
Given the special attention paid by the Treasury to the implications of climate risk for systemic financial
stability, and the focus of FSOC on the insurance sector, well-counselled boards of companies in thebanking, insurance, and fund management sectors will:a) Monitor closely the evolution of the Network of Central Banks and Supervisors for Greening the
Financial System (NGFS), of which the U.S. Federal Reserve became a member in December
2020, as it develops specialized guidance for prudential regulators aimed at addressing climaterelated systemic financial risk;b) Engage with their Chief Risk Officers to ensure the robustness of internal control systems toassess, mitigate, and monitor exposure to climate risk embedded in their portfolios of loans,insurance customers and investments, insofar as the exposure of these companies to climate
risk may affect their credit quality, insurance risk profile, and market valuations;c) Incorporate climate climate-related scenario-modelling and stress-testing within their regularrisk oversight responsibilities;d) Oversee innovation and product development opportunities related to expansion of the lowcarbon economy; ande) Monitor the emergence of new disclosure criteria affecting the finance sector.

Contributors:

Professor Cynthia Williams, Osgoode Hall
Law School, York University, Canada
Climate Law Initiative

175

Ukraine
This section has not been updated since the first edition of thePrimer published in June 2021.
In 2018, Ukraine adopted the Low Emission
Development Strategy 2050, which defines apotential pathway for economic developmentthat takes due account of the goals set by statepolicy on emissions reduction and greenhousegases emissions absorption. Implementation ofthis strategy will inevitably have a significant
impact on the private sector. Therefore,
substantial
legislative
andinstitutional
developments envisaged by the strategy should
be taken into account by company directors.
Directors' Duties and Climate Change
Ukrainian law1 imposes certain general duties
on directors of companies. The fundamental
duties of directors include, inter alia, the duty to
act in the best interests of their company, to act
diligently and in good faith, to act within theirpowers. A more detailed and comprehensive
list of directors’ duties and authorities is set out
in each company's charter.
Directors are liable for losses to theircompanies caused by their wilful misconduct orinaction. In such cases, the companies’
founders (shareholders) may submit aderivative claim on behalf of the company.
Although the law does not explicitly provide fordirectors’ duties to address the risk of theadverse impacts of climate change on thecompany, their failure to do so may lead todamage suffered by the company. In suchcases, the court would decide if the damage has
been caused to the company by the directors’
wilful misconduct, and if the loss was therefore
the directors’ fault as a matter of law.

Directors' Disclosure
Climate Change

Obligations

i. Greenhouse gas emissions
On 1 January 2021, the Law of Ukraine On

Principles of Monitoring, Reporting andVerification of Greenhouse Gas Emissions

entered into force. The law is deemed to be a
step towards Ukrainian integration with the EU
in terms of compliance with the EU acquis onenvironmental protection.
Companies operating equipment or facilities
that produce greenhouse gases are obliged toprepare plans for monitoring their GHG
emissions and submit them to the Ministry ofEnvironment and Natural Resources of Ukraine
for approval. They have to prepare annual
reports on GHG emissions for verification by
independent experts. The verified reports mustthen be further approved by the Ministry ofEnvironment and Natural Resources of Ukraine.
According to the Ukrainian Law On Commercial

Activities with Ozone-Depleting Substancesand Fluorinated Greenhouse Gases, dated 12
December 2019, separate accounting andreporting must be made on imports, exports
and use of the aforementioned substances andfluorinated greenhouse gases.

andA. Climate change and environment
Directors are responsible for ensuring that theircompanies comply with all relevant statutory

1

obligations,
includingenvironmentrelated
disclosure.
In
Ukraine, environmental monitoring by the stateis conducted by means of collecting andprocessing data on environmental matters asreported by companies. Such state statisticalreporting is mandatory and covers, among
others, air and water. The following discusses
reporting obligations most relevant to climatechange:Law of Ukraine ‘On Limited Liability and Additional Liability
Companies’ dated 6 February 2018, No. 2275-VIII; Law of
Ukraine ‘On Joint-Stock Companies’ dated 17 September

ii. Atmospheric air pollution
All companies operating stationary sources of air
emissions must annually submit to the statestatistical authorities a report on emissions of

2008, No. 514-VI; Civil Code of Ukraine dated 16 January
2003, No. 435-IV.

176

Primer on Climate Change: Directors’ Duties and Disclosure obligations (2nd Edition, July 2022)
Ukrainepollutants and greenhouse gases into theatmospheric air (according to form No.2-tp (air)).
The data on emissions of pollutants from mobile
sources (industrial, agricultural and othermachinery, automobile etc.) must be submitted
separately.

B. Securities and stock exchange-related
disclosures
Ukrainian companies issuing securities listed on
the stock exchange are obliged to submit

annual management reports containing bothfinancialandnon-financial
information
characterizing the company’s status and theprospects of its development. The report must
include, inter alia, a description of the risks anduncertainties faced by the company in its
business activities. In that context, we assume
that any climate risk-related information may beconsidered by the company's management as
relevant and should be disclosed in the annual
management report.

Practical implications for Directors
Despite climate change attracting more attention from the Government, Ukrainian legislation does not
explicitly include any regulations on specific climate resilience measures that companies must take toadapt to climate change and minimize related risks. However, as the risks related to climate change
become more obvious each year, and damage resulting from climate change can be better anticipatedand measured, the following best practices should be considered by companies and their boards:a) delegate climate risk identification and evaluation to a clearly-identified team in managementthat reports directly to the CEO and board;b) put on the agenda for the board within 3 or 6 months a process to initiate the development of aclimate transition roadmap to 2050 with transparent carbon neutrality or reduction targets, withclear interim targets to 2040, 2030 and the current rolling multi-year strategic plan, andperiodically thereafter report back to the board;c) delegate to the appropriate committee(s) of the board, such as risk, audit, legal andgovernance, scenarios/strategy, nominations/remuneration, or sustainability/corporate
responsibility, the task of translating the long-term strategy into a clear decision-making process
for each aspect that is relevant to each committee; andd) initiate discussions with relevant sector associations and NGOs about the risks anticipated forthe business and possible mitigation opportunities.

Contributors:

Oleksandr Kurdydyk, DLA Piper Ukraine
Kateryna Soroka, DLA Piper Ukraine177178