Ashurst partner James Clarke said that several proceedings have already commenced in Australia with regard to climate change disclosures and company management. This trend, he said, is expected to continue.
“While there is an increasing understanding about associated obligations and liabilities, there remains a lack of detailed guidance for companies and directors in how to appropriately respond,” he said.
“Australian courts will most likely consider that climate change risks are foreseeable, and that directors who fail to consider those risks may be liable for breaching their duties of care and diligence. At the same time, key regulators have increasingly strengthened their statements in relation to climate change risks.”
One wave of climate change litigation focuses on corporate decision making and disclosures, and the role of directors in those contexts, Mr Clarke continued.
“A separate wave presents a different risk and that is the litigation directed at challenging, on climate change-related grounds, government approvals associated with development of a project, typically relating to fossil fuel projects or projects with high carbon emissions.”
His fellow partners, John Briggs and Jeff Lynn, added that even though the re-election of the Morrison Government means that “significant new legal transitional risks” may not yet emerge at a federal level, it is still expected that individual states and territories may play an increased role in renewable energy and emissions reduction requirements.
“Companies and their directors must monitor these developments and ensure that their practices meet the increasingly well understood obligations,” the pair said.
Climate change can have significant implications for the obligations of companies and their directors, they added, “even when it does not pose any direct physical risk to business activities”.
“Companies and their directors are expected to consider and understand climate change risks, and ensure they are disclosed and, where appropriate, mitigated.”
“Australian regulators including ASIC and APRA are increasingly attuned to these obligations, and have been vocal in their focus and awareness of climate change and associated liability. However, regulators are not the only ones seeking to ensure that companies and their directors consider and respond to climate risks – climate change litigation is a growing global trend,” they concluded.
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