14
Climate Change and Directors' Duties: Closing the Gap Between Legal Obligation and Enforcement Practice

Ellie Mulholland

Director of the Commonwealth Climate and Law Initiative and Senior Associate at MinterEllison

Sarah Barker

Global Head of Climate Risk Governance at MinterEllison

Cynthia Williams

Osler Chair in Business Law, Osgoode Hall Law School, York University

Robert G. Eccles

Visiting Professor of Management Practice at Saïd Business School, the University of Oxford; Founding Chairman of the Sustainability Accounting Standards Board (SASB); and Cofounder of the International Integrated Reporting Council (IIRC)

Introduction

Until relatively recently, climate change was the purview of corporate social responsibility departments, to the extent it was considered at all. Siloed from finance teams, senior management, and the board, it was seen as a nonfinancial, ethical, and purely environmental matter. A public position on climate was beneficial for reputational purposes only, with conventional wisdom that climate change could not affect the financial bottom line, let alone lead to circumstances sufficient to impose personal liabilities on directors or senior management.

Yet this is no longer the case. Having reached global consensus in the Paris Agreement to keep the increase in global average temperature to “well below” 2°C and to pursue efforts to limit it to 1.5°C, the world's governments and private sector leaders are taking steps to deliver the required mitigation and adaptation measures. Advances in our understanding of the potential catastrophic impacts of climate change were brought to the fore in 2018 with the special report on the impacts of global warming of 1.5°C by the Intergovernmental Panel on Climate Change.1

In light of these and other developments, it is now widely understood that the impacts of climate change pose foreseeable, and often material, risks to the financial performance and prospects of companies. Some of the most devastating of these impacts will be felt beyond mainstream investment and business time horizons. The extent of these impacts on future generations is dependent on the near-term actions of our current generation, which we have little incentive to fix, making climate change a “tragedy of the horizon.”2 Yet many of the risks will arise within mainstream planning and investment horizons and are already materializing today: 2017 had the highest ever costs from global weather disasters, with almost two-thirds of the US$320 billion loss uninsured.3 Climate change is beginning to visibly disrupt business models across a range of sectors and geographies.4

This chapter outlines why climate change is now a core corporate governance issue. Directors now need to add a base level of climate competency to their governance skillset, as is necessary to guide their companies through the physical impacts of climate change and the transition to the net-zero emissions economy set out in the goals of the Paris Agreement. And for most, if not all, directors, climate competence is not optional; governance failures and misleading disclosures relating to climate change may be actionable against individuals and companies. Focusing on key common law jurisdictions, this chapter shows that existing corporate and securities laws are conceptually capable of being applied to failures to govern and disclose climate risk. While there is generally a gap between the law on the books and its enforcement against directors, this chapter argues that the climate change litigation gap is likely to close in the relatively near future. This has led to the development of a number of tools to assist boards and their committees to navigate the new governance and disclosure expectations and to take up the opportunities created by climate disruption on business.

Why Climate Change Is a Core Corporate Governance Issue

Climate Change as a Foreseeable—and Often Material—Financial Risk

According to Lloyd's City Risk Index 2018, US$123 billion of the world's GDP is at risk every year in cities affected by climate change.5 Investment firm Schroders has warned of US$23 trillion of losses due to climate change by 2100, a figure it regularly updates to track the progress of governments and the private sector toward meeting the Paris Agreement goals of a net-zero emissions and climate-resilient economy.6

Climate-related risks to the financial performance and prospects of a company arise through three pathways:

  • Physical risk exposures arise from the direct and indirect impacts of both acute and incremental changes to the climate. Acute changes include the increased frequency and intensity of extreme weather events such as storms, droughts, floods, and fires, which arise over all time horizons, including the short term. Gradual onset changes include increases in global average temperatures, changes in precipitation patterns, and sea-level rise, and although they compound over the medium to long-term, are already occurring today: human activities are estimated to have already caused approximately 1°C of global average temperature rise above preindustrial levels, with warming currently increasing at 0.2°C per decade due to past and ongoing emissions.7 The economic impacts could include losses from physical damage to assets or impacts on employees, supply chain disruption, disruption to production capacity, increased operating costs, and increased insurance premiums.
  • Economic transition risks such as write-offs and costs in adaptation arise from societal responses to climate change. These include policy and regulatory reform, developments in technology in areas such as renewable energy and electric vehicles, and shifting market stakeholder expectations, from investors and insurers to financiers and consumers.
  • Litigation risk exposures arise from the attribution of climate change to a company's activities, or a failure to manage either or both the physical and economic transition risks.8

These risks are far-reaching in their breadth and magnitude across the economy. However, sectors such as fossil fuel extraction and combustion, chemicals and manufacturing, transport, real estate and infrastructure, agriculture and financial services are particularly vulnerable.9

Climate Change as a Financial Stability and Efficient Markets Issue

Since the seminal speech in 2015 by Mark Carney, Governor of the Bank of England and then Chairman of the G20 Financial Stability Board,10 there has been an emerging recognition by regulators around the world that climate change is a financial stability issue and therefore within their supervisory mandates.11 Crystallization of climate risks through any of the physical, transition, or liability risk pathways could rapidly cause first-, second-, and third-order economic impacts. In turn, this could result in a rapid repricing of financial assets by banks and the insurance sector and affect credit supply and capital adequacy requirements, with the flow-on effects spreading back through to the real economy. These financial stability risks from climate change will be minimized if there is an orderly market transition to a net-zero emissions economy. Reflecting the acknowledgment that the window for an orderly transition is “finite and closing,”12 regulators' supervisory attention is turning to climate change.

The initial focus has been on banks and insurers. In 2018, the Bank of England Prudential Regulatory Authority (PRA) assessed and categorized the response of UK banks to climate change: 30% were responsible, a CSR perspective focusing on reputational risks; 60% were responsive, viewing climate change as a financial risk, but from a relatively narrow and short-term perspective; and 10% were strategic, taking a more comprehensive and long-term view of the financial risks of climate change and engaging at board level on the current and future risks.13 In 2019, the PRA released a supervisory statement on its expectations that financial firms embed the consideration of the financial risks of climate change into governance, financial risk management, and disclosure.14 Both national treasuries and central banks are increasingly making plans to incorporate climate change into their stress tests for banks.15 The Californian Insurance Commissioner Dave Jones ran a “climate” stress test on the state's largest insurers in 2018, analyzing their climate-related financial risk and exposure to fossil fuel investments.16 This regulatory focus on the banking and insurance sector has direct flow-on effects for nonfinancial firms (and their boards and senior management) as regulators, banks, and insurers in turn demand increased governance and disclosure of climate risks.

Legislatures and securities regulators are increasingly turning their attention to the disclosure of material climate risks across the corporate and investment chain. France has introduced detailed rules for disclosure by institutional investors and asset managers of climate-related financial risks under Article 173 of the Energy Transition for Green Growth Law. While this new legal regime is the exception, regulators in key jurisdictions have confirmed that existing corporate reporting requirements—which broadly require disclosure of material risks and other material information in the context of the prospects and performance of the business—apply to material climate-related financial risks.17 The international body for securities regulators, IOSCO, published a statement in 2019 on the disclosure of ESG matters, “emphasiz[ing] that ESG matters, though sometimes characterized as non-financial, may have a material short-term and long-term impact on the business operations of the issuers as well as on risks and returns for investors and their investment and voting decisions.”18 In 2018, the Australian Securities and Investment Commission published a report on climate risk disclosure by Australia's listed companies, urging them to “comply with the law” by disclosing climate risk in a way that is “relevant and useful to the market.”19 In 2019, the EU will revise the guidelines on disclosure of climate-related information20 and it is likely that further legislative initiatives for climate disclosures are on the horizon.

Task Force on Climate-Related Financial Disclosures

On the sidelines of the meeting of world leaders that led to the landmark Paris Agreement on climate change, the G20 Financial Stability Board launched the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD—a global panel of experts drawn from large banks, insurers, asset managers, pension funds, nonfinancial companies, accounting firms, and credit rating agencies—released its final recommendations in June 2017 following substantial consultation with stakeholders in the business and investor community.

The TCFD recommendations can be adopted by all organizations across all jurisdictions for disclosure of climate-related risks and opportunities within mainstream financial filings, covering information across four themes: climate governance, strategy, risk management, and metrics and targets. Recognizing that many of the potential future impacts of climate change are “without historical precedent,” there is a particular focus on forward-looking scenario analysis for risk management and corporate strategy. Importantly for directors, the TCFD categories of disclosure are well within the ambit of board oversight.21 These disclosures should already be part of mainstream financial filings where they meet the materiality threshold of securities laws,22 which means the TCFD climate disclosures should go through the same assurance process as disclosures relating to other material financial risks.

This is not to say that climate-related disclosures should be confined to the narrative portions of an entity's statutory reports. Material climate-related financial issues may also impact on financial statement accounting estimates. This was sharply emphasized in late 2018 when Australia's accounting and audit standard-setters released joint guidance that climate-related risks are relevant to accounting estimate materiality assessments: from asset fair values and impairments to changes in useful life assumptions and provisions for onerous contracts.23 Australian accounting standards are based on IFRS, and the guidance also purports to align with the IASB's best practice interpretation of materiality.

Shareholder Resolutions, Voting, and Engagement on Climate Change

Despite the growing attention by regulators, the real drive on climate governance and disclosure has come from the investor community. Investor concern has gone beyond the fossil fuel divestiture debate. Many major investors are demanding nuanced and robust climate risk governance and disclosure, and increasingly, that business take active steps to help meet the goals of the Paris Agreement.

The increasing ownership of equity by institutional investors has seen the “managerial capitalism” of the early to mid-twentieth century, characterized by a separation of ownership and control, be supplanted by “fiduciary capitalism.”24 As large asset owners, asset managers, and insurers effectively became universal owners, monitoring is now as important—or even more so—than trading.25 The world's largest asset manager, BlackRock, encourages companies to use the TCFD recommendations for their disclosure, and has warned that if boards are not dealing with material climate risks appropriately, it will vote against the reelection of directors most responsible for board process and risk oversight.26

Institutional investors are increasingly using shareholder rights to bring resolutions to change companies' investments, disclosure, and advocacy practices relating to climate change, particularly in the United States.27 These proposals often come about through collaborations with civil society, uniting stakeholders who once may have been perceived to have had competing financial and environmental aims. Starting in the 2014–15 AGM season, the “Aiming for A” shareholder coalition, based in the UK, filed resolutions mandating that the target oil and gas, mining, and utilities companies produce enhanced disclosures of climate-related risks and opportunities.28 Since then, shareholder resolutions on climate have moved beyond increased transparency. Global investor initiative the Climate Action 100+ filed resolutions with ExxonMobil Corp for its 2019 annual meeting requesting that the board set short-, medium-, and long-term emissions reductions targets in line with the temperature goals of the Paris Agreement, albeit the SEC subsequently acceded to ExxonMobil's request to exclude the resolution.29 Shareholder engagement on climate change issues in Europe tends to focus on engagement rather than proxy voting.30 Responding to shareholder engagement by the Climate Action 100+, Royal Dutch Shell adopted a similar proposal in December 2018, agreeing to link executive remuneration to the achievement of the three- and five-year emissions reductions targets, subject to shareholder approval.31 Despite these high profile examples, the targets of shareholder resolutions are not just energy and mining companies, with climate change–related shareholder resolutions having already been filed at listed companies in sectors as diverse as financial services and pharmaceuticals.

Investor action is moving beyond company engagement and directly into the domain of public policy. In December 2018, over 400 institutional investors with $32 trillion in assets under ownership or management signed the Global Investor Statement calling on governments to implement the TCFD recommendations and request that international standard-setters incorporate them into accounting standards. The statement also calls for governments to put a meaningful price on carbon and a worldwide phaseout of fossil fuel subsidies and thermal coal.32

The Sustainable Development Goals Are Driving the Value-Creation Story of Climate Change

The recognition of climate change as a foreseeable financial risk and financial stability issue bypasses a longstanding tension between a corporation's pursuit of shareholder profits and its ability to achieve environmental and social goals. Yet sustainability issues beyond climate change are still an important part of the story. These provide a value-creation opportunity and are a key component of a corporation's social license to operate. The UN 2030 Agenda for Sustainable Development drives the overarching international policy context for sustainability in business.33 Adopted in 2015 by all UN member states, it sets out 17 Sustainable Development Goals (SDGs) and 169 targets to stimulate global action toward a healthy planet, fair, inclusive, and resilient societies and prosperous economies. The SDGs include: to end poverty (goal 1); ensure clean water and sanitation (goal 6); affordable and clean energy (goal 7); sustainable cities and communities (goal 11); responsible consumption and production (goal 12); climate action (goal 13); and to conserve and sustainably use the oceans (goal 14). As governments take action to meet these goals, the private sector will have an important role to play. Boards that understand the positive and negative impacts of their business on the attainment of the SDGs can take advantage of the greatest opportunities to contribute to the fulfilment of the goals.

Incorporating Climate Change into The Board's Role on Governance, Strategy, Risk Management Oversight, and Disclosure

Against this backdrop of increasing recognition of the linkages between climate change and business, this chapter turns to the role of the board. It focuses on the single-tier structure of Anglo-American boards, but many of the general observations will be relevant for dual structure boards.

Corporations are managed by or under the direction of the board of directors.34 Despite the collective responsibility to manage the business of the company, in practice, boards delegate operational matters to executive management and boards are responsible for oversight of the management of the business. They also retain direct responsibility for the selection, monitoring, and supervision of the CEO and senior management, the approval of significant transactions, and external reporting.35 In recent years, the conception of the oversight role of the board has expanded; indeed, this Handbook is evidence of the increasing breadth of topics within the purview and mandate of the board. The board's role remains governance, not management, and so too in the context of climate change, the board's role remains one of climate strategy and oversight, not climate management at an operational level.

Boards are now expected to take a more active role in planning and approving strategy and monitoring (or oversight) of the execution of strategic plans.36 In the climate context, the board has a key role in selecting the metrics and targets used to assess and manage climate-related risks and opportunities relevant to the business.

Expectations of the board in relation to oversight of risk management have also increased, particularly overseeing enterprise risk management and difficult-to-assess financial risk. Climate risks are dynamic, far-reaching in breadth and magnitude, and involve uncertain and extended time horizons.37 In short, climate risks are just the kind of risks that the board's risk management oversight role must cover.

Risk is the effect of uncertainty on objectives,38 so risk management is inherently interrelated with strategy. Board oversight of both strategy and risk management is critical to value creation.39 Business disruption from the impacts of climate change will create winners and losers. In recognition of this, the TCFD recommendations focus on governance and disclosure of the opportunities arising from the impacts of climate change, not just the risks.

The exact role of the board will depend on the nature of the company, industry, and whether there are special circumstances affecting the business, such as a crisis.40 Crisis management requires enhanced efforts from the board. Nadler characterizes crises into four categories:

  • Gradual emergence, external origin: These might involve economic downturns, the emergence of new competitive threats such as breakthrough technologies, new go-to-market strategies, alliances of major competitors, or regulatory changes that limit business practices or expand competition.
  • Gradual emergence, internal origin: Examples range from strategic mistakes (such as a poorly conceived or executed merger or acquisition) to failed product launches, the loss of key talent to competitors, and employee discrimination suits.
  • Abrupt emergence, external origin: Some of the most obvious examples are natural disasters, terrorist attacks, and product tampering.
  • Abrupt emergence, internal origin: This can include the sudden death or resignation of one or more key executives, failure of critical technology, production, or delivery systems, or workplace violence.41

The highlighted examples of crises map onto examples of climate risks in the taxonomy set out above. That is, the impacts of climate change could result in the gradual or abrupt emergence of a crisis of external origin while the failure to govern for climate risks could result in the gradual emergence of a crisis of internal origin. Californian utility PG&E provides an example of how the materialization of a climate risk can abruptly create a crisis. When PG&E filed for bankruptcy in early 2019 after wildfires involving a tragic loss of life and property led to potential liabilities of US$30 billion, commentators were quick to label it the first “climate-driven bankruptcy.”42 The CEO has attributed the increased intensity of the wildfires on worsening droughts linked to climate change43 and many experts agree.44

In addition to this oversight role, boards retain a direct role in external reporting, with statutory obligations for the attestation of financial reporting and specific disclosure requirements, such as directors' reports. This brings disclosure of the material climate-related financial risks squarely within the responsibility of the board.

As such, climate governance is now an inherent part of good corporate governance.45 Boards must incorporate the risks and opportunities of the impacts of climate change on their business into their governance, strategy, risk management oversight, and disclosure roles. This incorporation of climate change risks and opportunities is not an optional extra. To meet the expectations of regulators and investors, all directors should have a minimum level of climate competence and the standard of competence will only increase for companies in highly exposed sectors. As the next section shows, it's a matter of directors' duties.

Climate Change and Directors' Duties in Key Common Law Jurisdictions

This chapter undertakes a high-level analysis of directors' duties and climate change in four common law jurisdictions—the UK, Australia, Canada, and South Africa. They each operate a common law legal system and have corporate governance frameworks based on common fiduciary principles. This analysis also provides insights for countries such as the United States which apply similar common law and fiduciary precepts.46

The geographies, economies, and financial systems of the four focus jurisdictions are particularly vulnerable to certain physical and economic transition risks of climate change.47 The particulars of conduct demanded by directors' duties in these jurisdictions are flexible in response to changing norms. The application of directors' duties to climate change is heavily influenced by the Paris Agreement and by recent “soft law” developments discussed above, including the TCFD recommendations, the UN's Fiduciary Duty in the 21st Century program, and express statements by prudential, securities, and corporate regulators on climate-related financial risk and governance obligations. Accordingly, the existing directors' duties regimes in these key common law jurisdictions are conceptually capable of being applied to find directorial liability based on a failure to take into account climate-related financial risks in financial planning, strategy, asset valuation, risk assessment, and disclosure.

From Ethical “Corporate Social Responsibility” to Financial Risk and Return

Directors' duties are expressed in statute, regulatory instruments, and case law and differ across jurisdictions in the precise expectations of conduct and the discretion accorded to directors. While not all duties are “fiduciary” in the strict legal sense, corporate governance laws generally reflect core fiduciary principles that directors have obligations of trust and loyalty, and must act with care, skill, and diligence.

A fiduciary describes a legal relationship where one party (the fiduciary) exercises power or holds property on behalf of or for the benefit of another party (the principal) and so owes duties of trust and loyalty. Common law courts have since the eighteenth century recognized that directors are “fiduciaries” to their corporation.48 Initially, debates around the extent to which directors are required, or indeed permitted, to have regard to issues associated with climate change was centered on fiduciary duties. This analysis largely took place within broader discussions of “corporate social responsibility” (CSR),49 in essence asking: What is the scope of directors' fiduciary duties and to whom are they owed?50

Drawing on Milton Friedman's work,51 shareholder primacy theory contends that in serving the fiduciary duty to act in the “best interests of the corporation,” directors are limited to consideration of profits and shareholder value maximization, sidelining any consideration of social or environmental concerns.52

Subsequently, the work of economists Jensen, Meckling, and Fama led to a shift in legal perspective from viewing shareholders as “owners” to “investors,”53 and concomitantly led to a concern with “agency issues” between managers and investors in the firm. Advocates for the longstanding recognition of stakeholder interests, such as Freeman, subsequently developed a coherent stakeholder theory.54 This theory contends that directors' duties are owed to all stakeholders whose interests are impacted by the corporation, such as employees, the community, and the natural environment as well as shareholders.55 The theory in Anglo-American law that there is a legal duty to maximize shareholder interests is merely “ideology.”56 A review of fiduciary duties across more than 30 jurisdictions, conducted for the UN Fiduciary Duty in the 21st Century program,57 confirmed that directors' duties are near universally owed to the corporation and not directly to shareholders (except in very limited circumstances).58 Even in the United States, where the obligations to shareholders are at their highest, there is a “primacy duality” between the duty owed to the corporation and the duty owed to shareholders.59

Between shareholder primacy theory, on one end of the spectrum, and stakeholder theory at the other, Jensen purported to resolve the conflict by combining enlightened value maximization and enlightened stakeholder theory.60 He proposed that the proper objective of the company, and therefore the proper standard for directors' fiduciary duty, is to maximize the long-term market value of the firm. But to do so, directors must have concern for all their stakeholders as firms “cannot create value without good relations with customers, employees, financial backers, suppliers, regulators, communities, and so on.”61 The UK has adopted an enlightened shareholder value approach in the statutory codification of the fiduciary duty to promote the success of the company, “for the benefit of its members as a whole,” having regard to “the likely consequences of any decision in the long term” and “the impact of the company's operations on the community and the environment.”62 The German Corporate Governance Code also follows this approach, providing that the management board must consider the needs of “employees and other stakeholders, with the objective of sustainable value creation.”63 On one view, firm value will not be maximized by disregarding natural resources and the impacts of the firm on the environment and the environment on the firm.

Within this debate, the corporate social responsibility literature framed climate change as an environmental or ethical matter with immaterial impact on financial risk and return.64 In contrast, this chapter—consistent with the developments set out above—approaches climate change through a financial lens. Accordingly, one need not adopt stakeholder theory or enlightened value maximization theory for directors to be required or permitted to take into account climate change in accordance with their legal duties. As a foreseeable financial issue within mainstream investment and planning horizons, climate change now enlivens directors' governance duties as any other issue presenting financial risks and opportunities—under any theory of corporate social responsibility.65 Directors are at a minimum duty bound to have regard to foreseeable financial risk issues in their pursuit of the best interests or success of the company and to exercise due care and diligence in relation to those risks.66 The relative significance of a given issue will be determinative of the degree of examination required; the greater the materiality, the more time and resources required to discharge duties in relation to that risk.67 Whether a particular foreseeable risk has a material impact on a corporation will be a matter that can only be determined under robust due diligence. Materiality in a disclosure context is subtly different and is discussed further below.

Duties of Trust and Loyalty

It is conceivable that a director may breach their fiduciary duties to exercise powers and discharge duties in good faith in the best interests of the corporation (in the UK, to promote the success of the company as a whole) and for a proper purpose, where:

  • The director consciously disregards, or willfully neglects, material financial risks associated with climate change in their governance role relating to risk management oversight and business strategy;
  • The director approves a course of action which, regardless of the director's subjective belief, no reasonable director could have rationally concluded was in the best interests of the company. An example could be where the board of a carbon major acts to increase the company's already high exposure to climate risk by purchasing additional carbon-intensive energy reserves, without ensuring that the risk of asset stranding has been diligently and appropriately integrated into the commercial assessment process, and the company suffers loss as a result of the inability to monetize those assets; or
  • The director's ability to make an independent judgment in the best interests or success of the corporation is compromised by a material conflict of interest, such as perverse remuneration incentives linked to assets at risk of stranding, or an allegiance to an external position or affiliation.68

Laws in the UK and South Africa expressly oblige, and in Canada permit, directors to have regard to the “environment” in its own right in their pursuit of the best interests or success of the company.69 In the UK, a breach of duty may arise where a director fails to have regard to the environment or other climate-relevant mandatory factors, where those factors impact on the interests of the company. Relevant mandatory factors include the likely consequences of the decision on long-term profitability, the impact of the company's operations on the community and the environment, and the need to act fairly between members, such as younger and older members who may have different time horizons for their investments.70

Duties of Competence and Attentiveness

In addition to the duty to act in the best interests of the corporation, directors are subject to minimum standards of competence. This commonly manifests as duties to act with due care, skill, and diligence. Generally, the requisite standard of conduct is that of a reasonable director (objective element) taking into account the characteristics of the corporation and, where it would increase the objective element, the actual knowledge, skills, and experience of the director (subjective element). Fulfillment of the duty does not require the achievement of an optimal or even commercially advantageous financial outcome, but rather robust decision-making processes.71

In the four subject jurisdictions, a director may risk breaching their duty of due care and diligence in circumstances where:

  • The director fails to turn his or her mind to the issue of climate change in strategic planning and risk management in general or in relation to specific projects or acquisitions that require board oversight or approval, whether due to willful or honest ignorance;
  • The director, especially a director of a company operating in a high-risk sector, fails to adequately inform himself or herself of the risks to the corporation arising from climate change, including the information that the director ought to have known in relation to the material physical and economic transition risks. This could include a failure to make proactive reasonable inquiries, or to seek appropriately qualified and independent advice where warranted. Given the influence of the TCFD recommendations, the standard of conduct may increasingly extend to scenario analysis of business plans and transactional outcomes against a range of potential climate futures, such as the “well below” 2°C global average warming ceiling agreed to by the parties to the Paris Agreement;
  • The director fails to consider, or accepts without critical reflection, the conclusions of relevant delegates or experts on the impacts of climate change on the business without independent review or consideration;
  • The director fails to monitor and oversee a robust corporate risk and reporting system on climate change that identifies and manages climate risks, has mechanisms in place to respond rapidly to changes in the risk profile, and involves board supervision of delegates tasked with assessing and managing climate risk; or
  • The director causes, permits, or fails to take reasonable steps to prevent, the company from making a misleading disclosure in relation to the impacts of climate change on the company.72

Courts are reluctant to second-guess directors' commercial judgment with the benefit of hindsight. An express “business judgment rule” operates for the benefit of directors in Australia, Canada, and South Africa. This rule provides that a director will not be held liable for a breach of the duty of due care and diligence where they have actively exercised their judgment (rather than having omitted to consider the relevant issue), otherwise acted honestly and free from material conflict of interest (or, in South Africa, complied with the rules on conflicts of interest), were reasonably informed, and can demonstrate they held a rational belief that their conduct was in the best interests of the company (or in Canada, within a range of reasonable available options).73 The business judgment rule is unlikely to assist directors alleged to have breached their duty of due care and diligence where they are unable to discharge the threshold issue that they made a conscious judgment, such as where the impugned course of action arises from a total failure to consider foreseeable and financially material climate risks.74 Although there is no express business judgment rule in the UK, in practice courts are reluctant to intervene where a director has acted in good faith.75 However, the objective aspects of certain duties arguably require courts to review directors' decisions, and recent case law indicates that many judges no longer decline to assess commercial decisions, particularly in relation to the duty of care, skill, and diligence.76

Enforcement of Directors' Duties

As directors' duties are owed to the company, it is unsurprising that boards are typically reluctant to exercise their powers to commence proceedings by the company against themselves or former colleagues for a breach of duty. A derivative action allows a shareholder to stand in the shoes of the company and commence enforcement proceedings on its behalf. Such claims can only proceed with leave of the court and the permission process is restrictive, generally requiring the shareholder applicant to establish that the company has suffered loss caused by the alleged breach, that the applicant is acting in good faith, and that the proceeding is in the best interests of the company. This suggests substantial loss to the company is generally required to justify the business disruption and cost of the proceedings. Accordingly, a derivative claim brought by activist shareholders for public interest or symbolic reasons only would be unlikely to pass this procedural hurdle.77

There are also significant evidential barriers for shareholder plaintiffs to prove breach, causation, and loss.78 However, certain claims do not require proof of loss. Australia and South Africa allow claims for declaratory or injunctive relief restraining a breach,79 and the UK allows claims to prevent proposed acts or omissions that would result in potential loss to the company, such as the purchase of additional carbon-intensive assets.80

Derivative claims in Canada and South Africa are also open to non-shareholder stakeholders in certain circumstances, which could arguably be used to give standing to a local NGO that can show a legitimate interest in the company's future sustainability, such as an NGO that represents a one-company or one-industry community.81

In certain circumstances shareholders may bring an action for “unfair prejudice” against a director on the basis of breach of the director's duties to the company. This “oppression remedy” avoids the strict permission process of a derivative action. While it is normally seen in relation to private companies, it is possible to make a claim in respect to a public company, although it is extremely rare where the company is solvent. Further, the claim for unfair prejudice would be difficult to establish in relation to a breach of the duty of due care and diligence and it normally applies to cases of misconduct rather than mismanagement.82

Director Liability for Misleading or Inadequate Disclosures Relating to Climate Change

Directors may be primarily liable for breaches of annual reporting and ongoing disclosure obligations for misleading disclosures in all four subject jurisdictions. In Australia and South Africa, directors may also be accessorily liable for their involvement in the company's misleading disclosure in breach of securities laws.83 Misleading disclosure by a corporation may also be a “steppingstone” to a breach of directors' duties in Australia and the UK.84

Disclosures can also reveal whether or not directors have complied with their statutory and common law duties. While disclosures are an imperfect proxy of board deliberations and risk management processes, nondisclosure of climate risks, particularly where peers make climate-related financial disclosures, may draw the attention of shareholders and other stakeholders concerned with climate change.

Focusing on annual reporting obligations in relation to financial statements and accompanying narrative reports, securities laws in each of the four subject jurisdictions essentially require disclosure of material information which presents a true and fair view the corporation's financial performance, position and, prospects.85 Materiality in the disclosure context (as opposed to a governance context discussed above) is a qualitative concept determined by the information that is likely to be decision-useful to a reasonable investor in their assessment of whether to purchase, sell, or continue to hold the company's securities.86 As set out above, there has been an extraordinary increase in interest by regulators and investors alike in the financial risks and opportunities associated with climate change in general, and TCFD-compliant disclosures in particular. It is increasingly plausible that in the absence of meaningful discussion on climate-related risks and opportunities, the financial statements and accompanying narrative reports do not provide a true and fair view of corporate performance, position, and prospects.87

The circumstances which are most likely to present a risk of misleading disclosure in practice, particularly for companies in those sectors highly exposed to physical or economic transition risks, include:

  • A failure to disclose material economic transition risks or physical risks to a company's financial prospects, especially in the narrative portions of the annual report;
  • The denial or material understatement of risk exposure, or material overstatement of strategic preparedness or risk management of relevant climate-related financial risks;
  • The material misstatement of balance sheet values, from the overestimation of assets to underprovisioning of liabilities, particularly where assets are vulnerable to stranding;88
  • The selective application of optimistic demand forecasts or assumptions in support of statements or omissions that represent the company's asset valuations or prospects are unlikely to be materially impacted by climate-related financial risks;
  • An inconsistency between internal assessments on climate risk and external disclosures, such as where internal reports from management and experts indicate the impact on the business of a proposed regulation to implement the goals of the Paris Agreement would be severe, but disclosures deny that the company is able to assess those impacts; and
  • A high-level boilerplate forward-looking risk statement about the predicted impacts or lack of impacts of climate change on the company's operations and assets, such as a statement of opinion or belief that is not supported on reasonable grounds or not accompanied by specific disclosures on its limitations or uncertainties.89

Enforcement of Disclosure Obligations

The barriers to claims for breach of directors' duties by way of derivative action mean that shareholders of larger companies often see securities class actions for misleading disclosures as a more accessible means of seeking redress.90 Where a company remains solvent, securities class actions are ordinarily filed against the company itself. However, there is a potential for “activist shareholder” claims against directors, where litigation is employed as a strategic tool to influence climate-related behavior of directors and their providers of Directors' & Officers' (D&O) insurance.91 The United States has already seen the first event-driven stock drop claims against directors and officers relating to extreme weather events made more likely due to climate change,92 as well as the first securities class actions for misleading disclosures of the economic transition risks relating to climate change.93

D&O Insurance

Whether a company may indemnify a director for liability to the corporation (e.g., a breach of duty claim) or liability to third parties (e.g., a securities class action) varies by jurisdiction. Even where broad indemnities are permitted, companies typically acquire D&O insurance on behalf of the board, which may shield directors from the monetary costs of litigation and compensation orders. However, a number of typical exclusions in “standard” policies may operate to significantly limit the protections afforded by D&O insurance in relation to the governance and disclosure of climate risk. In particular, coverage is generally unavailable for dishonest or intentional misconduct, misleading statements made in prospectuses (subject to specific policy extensions), “prior known matters,” and where there is a failure to take all reasonable precautionary measures to avoid or lessen the chance of a claim.94 For example, a claim for a total failure to govern for a foreseeable material climate risk may fall within the exclusion that the director did not take reasonable precautionary measures to avoid or lessen the chance of a claim. Even where claims are ultimately settled prior to trial with the proceeds of D&O insurance, directors face the burden and reputational damage of “ostensibly unsuccessful”95 litigation.

A more fundamental issue is whether D&O insurers will be able to provide coverage if climate change risks materialize on a significant scale.96 Just as houses in increasingly flood prone areas may become uninsurable,97 directors too may find themselves exposed if claims relating to climate change become uninsurable.

Materiality of the Risk of Personal Liability

The governance and disclosure that will satisfy or contravene directors' duties or disclosure obligations with regard to the impacts of climate change on their business will depend on the unique circumstances of the company and the decision-making context. As a high-level proxy, relative liability exposure can be assessed as a function of: (1) the materiality of the climate-related financial risk on the company according to the industry, geography. and peer-relative exposures; (2) directors' obligations and defenses under law; (3) the elements of the legal framework that indicate litigation is more or less likely in practice; and (4) the quality of the directors' governance and disclosure.98

Whether and how climate change presents a material financial risk over the short, medium, and long term will depend on the circumstances of the company. While certain sectors and geographies are particularly vulnerable, such as the high-risk sectors identified by the TCFD,99 research by the Sustainability Accounting Standards Board identified material financial impacts from climate change to U.S. companies operating in 72 out of 77 industries.100 Extreme weather events, natural disasters, a failure of climate change mitigation and adaption, and water crises were identified as three of the top five risks by likelihood and four of the top five by impact in the World Economic Forum's Global Risk Report 2019.101 Given these indicators, a prudent starting assumption is that climate change presents a risk of harm to many if not all businesses within mainstream planning and investment horizons, unless established otherwise under a robust process of due care and diligence.102

Elements of directors' duties regimes which increase liability exposure include: legal requirements to take into account the environment and other stakeholders in considering the best interests of the company; where the law provides for breaches of fiduciary duties in the absence of subjective bad faith; where the law requires high standards of professionalism to fulfill the duty of care and diligence and which evolve to reflect industry norms and best practice; limitations on the safe harbor afforded by the business judgment rule; and statutory obligations which can be breached by honest but unreasonable disclosures in the absence of knowledge or intention.103

Procedural and evidentiary considerations can increase or decrease the practical likelihood of litigation. High thresholds for court permission for shareholder derivative actions, the potential for adverse costs orders, and difficulties in obtaining evidence of breach and loss (particularly within the statutory limitation periods) all decrease potential liability exposure. On the other hand, a well-established securities class actions landscape, active litigation funders, and enforceability of duties by an independent regulator all increase potential liability exposure.104

On balance, it may be that the practical likelihood of litigation is not high. There are many procedural, evidentiary and cost-related barriers to a claim, particularly in the absence of evidence of bad faith. However, it would be ill-advised for directors to dismiss the risk of personal liability as remote or theoretical. This is particularly the case for directors of companies in high risk sectors or those with special expertise or responsibilities relating to risk management, such as the chair of the board or a member of risk or audit committees.

The Enforcement Gap: Could Climate Change Be the Exception?

There is a significant gap between the corporate law on the books and the practical enforcement in successful actions for damages against directors of publicly listed companies. Authors of one (albeit early) study concluded that the “chances of a director of a publicly traded U.K. company being sued under corporate law are virtually nil.”105 Even in the more litigious U.S. environment, the literature has generally considered that the chances of directors of publicly traded U.S. companies being sued for damages under corporate law in a case serious enough to generate a reported judgment are “small” and “less than is commonly imagined.”106 Another study on litigation against directors in Germany, Australia, Canada, France, and Japan found outside directors were unlikely to pay damages under corporate law for oversight failures.107 However, we argue that, given developments in both the law of corporate governance and the unique nature of climate change, the enforcement gap in this area is swiftly closing. This is for a number of reasons.

First, from a corporate governance law perspective, courts in each of the four subject jurisdictions have shown an increased propensity to hold directors to higher standards of professionalism and proactivity in the discharge of their strategy, oversight, and disclosure obligations.108 Even in the United States, where failures of oversight are litigated as a matter of best interests (rather than due care and diligence) under the high thresholds for breach set under Caremark,109 there is an overt trend toward shareholder filings against directors for their failure to oversee a robust process of organizational risk management on issues such as cyberattack and sexual harassment.110 These developments are likely to sharpen the potential application of directors' duties laws to governance failures on climate-related financial risk issues.

Second, there are activists in this area like no other. Environmental activists across the globe have long sought to use strategic litigation to drive climate action.111 For over a decade, activists have used novel legal arguments under existing public and private legal doctrines to fulfill what they perceive as inadequacies in legislative or policy action. In this way, corporate law and securities laws are merely the next avenue for activists to seek to achieve environmental goals. The first cases are already underway. In the United States, ExxonMobil Corp, its Chairman/CEO, and other directors have been sued in a securities fraud class action by shareholder plaintiffs alleging material misrepresentations relating to asset stranding.112 In Australia, a pension fund member has commenced proceedings against the fund trustee alleging breach of its fiduciary duties to govern and disclose climate risks to the prospects and performance of the fund.113 In Poland, an environmental nonprofit has brought shareholder proceedings against utility Enea SA, alleging the board's consent to build a €1.2 billion coal-fired power plant was a breach of directors' duties to govern for the material economic transition risks of the project.114

Third, government authorities are accessing the courts too. In the United States, a lawsuit brought by the New York Attorney General in 2018 alleges ExxonMobil Corp engaged in securities fraud with its false and misleading assurances to investors that it was managing the transition risks that climate change regulation poses to its business.115 The attorney general's complaint carefully scrutinizes the actions of the board and senior executives, although unlike the securities fraud class action mentioned above, this litigation is against the company only.116

Fourth, climate change involves the prospect of losses of immense magnitude. Large losses generally encourage litigation by incentivizing shareholders to recoup loss and attracting litigation funders. More fundamentally for directors, large losses which result in bankruptcy increase the risk of personal liability as shareholders, creditors, and third parties look for targets beyond the corporate entity from which to recover compensation. Bankrupt companies also may not be in a position to make good any indemnity that exists. As the first “climate-driven bankruptcy,” PG&E is evidence of the scale of the loss when climate risk materializes. PG&E shareholders lost more than $20 billion as the stock plunged 85 percent after the impact of the 2017 and 2018 wildfires became clear. Of course, the losses are not internalized to shareholders, but extend to creditors, insurers (who face huge payouts under all forms of insurance, including life, health, and property), and customers (who face high annual increases to replace infrastructure lost in the fires).117 Although instituted before PG&E filed for bankruptcy, the directors and officers of PG&E have been sued for breach of fiduciary duty for alleged mismanagement and misleading disclosures relating to the wildfires.118

Practical Tools for Climate Governance and Disclosure

Directors and fiduciaries must now approach their governance of climate change in the same way as they would any other foreseeable financial risk matter. Directors who fail to do so may find themselves exposed.119 While this chapter has focused on liability risk, the story is not all negative. There are significant investment opportunities in climate change mitigation and adaptation, and in attaining the SDGs. Boards must be ready to embrace these opportunities if their businesses are to survive and thrive in the net-zero emissions and climate-resilient global economy contemplated under the Paris Agreement.

However, many directors and the executives on which they rely are ill-prepared to navigate this step-change in governance and disclosure expectations. This has led to the development of a number of tools to assist boards and their committees. The authors have collaborated with leading governance advisors to develop the Commonwealth Climate and Law Initiative's Climate Risk Reporting Journey: A Corporate Governance Primer,120 which serves as an actionable framework on how to incorporate climate change risks and opportunities into corporate governance practice. Similarly, the World Economic Forum's How to Set Up Effective Climate Governance on Corporate Boards: Guiding Principles and Questions, launched at Davos 2019, proposes a set of tools for boards to steer their companies through climate risks and opportunities.121

As the field of climate governance and disclosure emerges, the public and private sectors and academia are developing and sharing expertise, best practice, and resources. For example, the UNEP Finance Initiative is working with 16 global banks on a program to implement the TCFD recommendations in banks, and has launched a similar initiatives for insurers.122 The bank project reports Extending Our Horizons: Accessing Credit Risk and Opportunity in a Changing Climate (on transition risks) and Navigating a New Climate (on physical risks) set out useful scenarios, models, and metrics.123 Other helpful resources from the nonprofit sector include B Team and Ceres' Getting Climate Smart: A Primer for Corporate Directors in a Changing Environment.124 Boards may find that publishing an annual Statement of Purpose,125 such as that published by Swedish telecommunications company Telia Company AB, provides focus and clarity for their activities.126 The Statement of Purpose enables the board to identify which stakeholders are significant and the time frames in which the company will evaluate the impact of its decisions on those stakeholders. Based on this, management can determine the material issues and how they will report on them. In the climate context, boards that believe that their company's interests are aligned with the transition towards a net-zero emissions and climate-resilient economy may benefit from communicating their support for long-term value creation and identify that their significant audiences include long-term investors and broader society.

Conclusion

This chapter is not intended to be an alarmist warning. Indeed, in the context of climate change, there are enough—and far more important—alarmist warnings. The conceivable risk of potential personal liability may not even be the biggest issue for directors. The risk is greater to some directors than others. The actions required to discharge a director's obligations to govern and disclose climate-related risks and opportunities will be unique in each case. In particular, additional interrogation and assurance may be warranted in sectors with significant climate-related exposures. The only safeguard against liability exposure will be a proactive, dynamic, and considered approach to the impact of climate change on strategy, risk management, oversight, and reporting in the unique context of their company.127

Rather, the most pressing concern to emerge from this chapter, one that affects all directors of all companies, is how directors should go about the task of climate governance and disclosure to fulfill their duties relating to these far-reaching and nonstationary risks—that are without historical analog.

As boards and senior management begin to incorporate climate risks and opportunities into their governance and disclosure, and investors develop the expertise to accurately price climate risks and opportunities, this “learning by doing” will create a “virtuous circle.”128 In the words of Mark Carney, “More and better information creates the imperatives … for everyone to up their game.”129 The governance and disclosures of climate risks and opportunities will become more consistent, comparable, and decision-useful over time. To stay abreast of market standards and changing norms, boards would be well-advised to devote appropriate attention to climate change governance and disclosure without delay.

About the Authors

Photo of Ellie Mulholland.

Ellie Mulholland is the London-based director of the Commonwealth Climate and Law Initiative, a nonprofit legal research and stakeholder outreach project focused on the intersection of climate change and existing companies and securities laws. Ellie is an Australian-qualified lawyer and in 2017 was named in Australia's Lawyers' Weekly “30 Under 30” while working at Allens Linklaters. As senior associate, she advises private and public sector clients on climate risk governance and disclosure for commercial law firm MinterEllison.

Ellie sits on the Technical Working Group for the Climate Disclosure Standards Board and the steering committee of The Chancery Lane Project. Ellie assisted the World Economic Forum with its effective climate governance initiative, authoring the legal chapter of the whitepaper that was launched at Davos in January 2019. She holds a Masters in law and finance from the University of Oxford and graduated top of her class with degrees in law and philosophy from Monash University, Australia. Ellie was editor of volume 36 of Monash University Law Review, including a special issue on climate change.

Photo of Sarah Barker.

Sarah Barker, B.Com (ACC & FIN), LLB (Hons), M.Env (Hons), is head of Climate Risk Governance, MinterEllison.

Sarah leads the climate and sustainability risk governance team at MinterEllison and is a director of one of Australia's largest superannuation funds, the Victorian state government's $30 billion Emergency Services & State Super. She has more than two decades' experience as a corporate lawyer, and is regarded as one of the world's foremost experts on climate change liability risks.

Sarah's leadership in the field of climate change-related risk and liability is internationally recognized, and has been called upon by governments and institutions from the Bank of England to the OECD and United Nations PRI.

She sits on the Technical Working Group of the London-based Climate Disclosure Standards Board, teaches as part of the Cambridge University's Institute for Sustainability Leadership (convened by EY), and is an academic visitor at the Smith School of Enterprise and the Environment at Oxford University. She is a member of the Steering Committee of the Australian Sustainable Finance Initiative, the only lawyer among a committee comprising senior executives from the Australian banking, finance, and insurance sector.

Sarah was the instructing solicitor on a brief to Mr. Noel Hutley SC that is widely cited as the authoritative exposition on directors' duties with regard to climate change risk in Australia (including by the Australian Prudential Regulation Authority, Australian Securities & Investments Commission and the Reserve Bank of Australia).

She brings an overtly practical, governance-focused perspective to her advice from her own experience as a director on the board of government- and private-sector boards. In addition to her role as a nonexecutive director of Emergency Services & State Super, she sits on the board of the Responsible Investment Association Australasia, and has been actively involved as an examiner, lecturer, and course materials author for the Australian Institute of Company Directors for more than 15 years.

Photo of Cynthia Williams.

Cynthia Williams joined Osgoode Hall Law School on July 1, 2013, as the Osler Chair in Business Law, York University, a position she also held from 2007 to 2009; and was appointed to a part-time position as professor of U.S. Corporate Law and Securities at the Vrije Universiteit (VU), Amsterdam in April 2017. Before coming to Osgoode, she was a member of the faculty at the University of Illinois College of Law and, prior to that, she practiced law at Cravath, Swaine & Moore in New York City.

She writes in the areas of securities law, corporate law, corporate responsibility, comparative corporate governance, and regulatory theory, often in interdisciplinary collaborations with professors in anthropology, economic sociology, and organizational psychology. Her work has been published in the Georgetown Law Journal, the Harvard Law Review, the Journal of Corporation Law, Theoretical Inquiries in Law, the University of New South Wales Law Journal, the Virginia Law Review, the Academy of Management Review, the Corporate Governance International Review, and the Journal of Organizational Behavior, among others.

Professor Williams also engages in policy work through her board membership in the Climate Bonds Initiative, a London-based NGO creating a new asset class, Climate Bonds, to finance the transition to a low-carbon economy; the Commonwealth Climate and Law Initiative, part of the Oxford Sustainable Finance Programme, which is evaluating directors' and trustees' legal obligations to consider climate change risk in companies' strategies and securities disclosure; and was the principal author of a petition submitted to the U.S. Securities and Exchange Commission in October 2018, asking the SEC to engage in rulemaking to require greater sustainability (environmental, social, and governance) disclosure.

Photo of Robert G. Eccles.

Robert G. Eccles is a leading authority on the integration of environmental, social, and governance (ESG) factors in resource allocation decisions by companies and investors. He is also the world's foremost academic expert on integrated reporting.

Currently Eccles is a visiting professor of Management Practice at the Said Business School, University of Oxford, where he is engaged in a number of research projects. Eccles has been a Visiting Lecturer at the Massachusetts Institute of Technology, Sloan School of Management, and was a Berkeley Social Impact Fellow at the Haas School of Business, University of California Berkeley. He was a professor at Harvard Business School and received tenure in 1989.

Eccles is a senior advisor to the Boston Consulting Group. He is on the board of the Mistra Center for Sustainable Markets at the Stockholm School of Economics, was the founding chairman of the Sustainability Accounting Standards Board, and was one of the founders of the International Integrated Reporting Council. In 2011, Dr. Eccles was selected as one of the Top 100 Thought Leaders in Trustworthy Business Behavior—2012 for his extensive, positive contribution to building trust in business. In 2013, he was named the first non-accountant Honorary Fellow of the Association of Chartered Certified Accountants (ACCA), one of only nine since 1999. In 2018 he was named by Barron's as one of the top 20 influencers in ESG investing and cited for being an “ESG research trailblazer.” Also in 2018 he received “The CSR Lifetime Achievement Award” at “The 8th International Conference on Sustainability & Responsibility” in Cologne, Germany.

Dr. Eccles received an S.B. in mathematics and an S.B. in humanities and science from the Massachusetts Institute of Technology and an A.M. and PhD in sociology from Harvard University.

Notes

  1. 1.   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).
  2. 2.   Mark Carney, Breaking the Tragedy of the Horizon—climate change and financial stability (Bank of England, 29 September 2015), https://www.bankofengland.co.uk/-/media/boe/files/speech/2015/breaking-the-tragedy-of-the-horizon-climate-change-and-financial-stability.pdf?la=en&hash=7C67E785651862457D99511147C7424FF5EA0C1A.
  3. 3.   Munich RE, Hurricanes cause record losses in 2017: The year in figures (4 January 2018), https://www.munichre.com/topics-online/en/climate-change-and-natural-disasters/natural-disasters/2017-year-in-figures.html.
  4. 4.   World Economic Forum, How to Set Up Effective Climate Governance on Corporate Boards: Guiding principles and questions (January 2019).
  5. 5.   Lloyd's, Lloyd's City Risk Index 2018, https://cityriskindex.lloyds.com/.
  6. 6.   Schroders, Climate dashboard points to 4°C rise despite healthy increase in carbon prices (17 October 2018), https://www.schroders.com/en/insights/economics/climate_dashboard_points_to_4_degree_rise_despite_healthy_increase_in_carbon_prices/ https://www.schroders.com/en/about-us/corporate-responsibility/sustainability/climate-progress-dashboard/
  7. 7.   IPCC, above n 1, Summary for Policymakers, [A.1], [A.1.1].
  8. 8.   This taxonomy was outlined by the Bank of England Prudential Regulatory Authority (BOE PRA) in 2015 and has been widely adopted. Some versions of the taxonomy set out only two risk pathways, physical and transition risks, with liability risks subsumed as a subset of these. See BOE PRA, The Impact of Climate Change on the UK Insurance Sector (September 2015); TCFD, Final Recommendations, report to the G20 Financial Stability Board (29 June 2017); TCFD, Recommendations Report Annex: Implementing the Recommendations of the TCFD (29 June 2017); United Nations Environment Programme (UNEP) and Columbia Law School Sabin Center for Climate Change Law, The Status of Climate Change Litigation—A Global Review (May 2017).
  9. 9.   TCFD, Final Recommendations, n 8.
  10. 10. Carney, n 2; G. Debelle, Climate Change and the Economy (Reserve Bank of Australia, 12 March 2019).
  11. 11. Central Banks and Supervisors Network for Greening the Financial System (NGFS), A call for action: Climate change as a source of financial risk (April 2019); F. Villeroy de Galhau, Climate Change: The Financial Sector and Pathways to 2°C (Banque de France, 2015); L.F. Signorini, The Financial System: Environment and Climate: A Regulator's Perspective (Bank of Italy, 2017); T. Lane, Thermometer Rising—Climate Change and Canada's Economic Future (Bank of Canada, 2017); A. Dombret, Greener Finance-Better Finance? How Green Should the Financial World Be? (Deutsche Bundesbank, 2018); G. Summerhayes, Australia's new horizon: Climate change challenges and prudential risk (Australian Prudential Regulatory Authority, 2017); G. Summerhayes, The weight of money: A business case for climate risk resilience (Australian Prudential Regulatory Authority, 2017).
  12. 12. BOE PRA, Consultation Paper 23/18: Enhancing banks' and insurers' approaches to managing the financial risks from climate change (October 2018) [2.13].
  13. 13. BOE PRA, Transition in Thinking: The impact of climate change on the UK banking sector (September 2018).
  14. 14. BOE PRA, Enhancing banks' and insurers' approaches to managing the financial risks from climate change—Policy Statement 11/19; Supervisory Statement 3/19 (April 2019).
  15. 15. NGFS, A call for action, n 11. The Coalition of Finance Ministers for Climate Action was launched in April 2019, and has endorsed the Helsinki Principles for stronger collective action on climate change: Climate Action Peer Exchange, The Coalition of Finance Ministers for Climate Action (April 2019), https://www.cape4financeministry.org/coalition_of_finance:ministers. See also Leslie Hook, “Central bank chiefs sound warning on climate change,” Financial Times (9 April 2018), https://www.ft.com/content/888616d6-3b07-11e8-b7e0-52972418fec4; Caroline Binham and David Crow, “Carney plans to test UK banks' resilience to climate change,” Financial Times (17 December 2018), https://www.ft.com/content/0ba2390a-ffd4-11e8-ac00-57a2a826423e.
  16. 16. Don Jergler, “California Commissioner Ran a Climate Change ‘Stress Test’ on Insurers,” Insurance Journal (8 May 2018), https://www.insurancejournal.com/news/west/2018/05/08/488649.htm.
  17. 17. International Organization of Securities Commissions (IOSCO), Statement on Disclosure of ESG Matters by Issuers (18 January 2019) 3; see also United States Securities & Exchange Commission (SEC) (2010), “17 CFR Parts 211, 231 and 241 Commission Guidance Regarding Disclosure Related to Climate Change; Final Rule,” Interpretive Guidance, Federal Register Vol. 75, No. 25 (8 February 2010); Canadian Securities Administrators, CSA Staff Notice 51-533, Environmental Reporting Guidance, 27 October 2010; Canadian Securities Administrators, CSA Staff Notice 51-354, Report on Climate Change-related Disclosure Project, 5 April 2018; Australian Securities and Investment Commission (ASIC), Regulatory Guide 247: Effective disclosure in an operating financial review (March 2013); BOE PRA, Consultation Paper 23/18, n 12.
  18. 18. IOSCO, n 17, 1. The U.S. Securities and Exchange Commission abstained from signing that statement.
  19. 19. ASIC, Report 593: Climate risk disclosure by Australia's listed companies (September 2018) 3–4. Australian corporation's legislation requires disclosure of material business risks affecting future prospects, which may include climate change, in the annual directors' report.
  20. 20. EU Action Plan on Sustainable Finance, Action 9, https://ec.europa.eu/info/publications/180308-action-plan-sustainable-growth_en; EU Technical Expert Group on Sustainable Finance, Report on Climate-related Disclosures (January 2019), https://ec.europa.eu/info/publications/190110-sustainable-finance-teg-report-climate-related-disclosures_en; EU, Consultation Document on the Update of the Non-Binding Guidelines on Non-Financial Reporting (February 2019), https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/2019-non-financial-reporting-guidelines-consultation-document_en.pdf.
  21. 21. Cynthia Williams and Ellie Mulholland, “Climate-Related Disclosures and TCFD Recommendations,” Harvard Law School Forum on Corporate Governance and Financial Regulation (2 September 2018), https://corpgov.law.harvard.edu/2018/09/02/climate-related-disclosures-and-tcfd-recommendations/.
  22. 22. IOSCO, n 17, 3.
  23. 23. Australian Accounting Standards Board and Auditing and Assurance Standards Board, Climate-related and other emerging risk disclosures: assessing financial statement materiality using AASB Practice Statement 2 (December 2018).
  24. 24. James P. Hawley and Andrew T. Williams, The Rise of Fiduciary Capitalism: How Institutional Investors Can Make Corporate America More Democratic (University of Pennsylvania Press, Philadelphia, 2000).
  25. 25. Ibid.
  26. 26. BlackRock, 2018 Engagement Priorities, https://www.blackrock.com/corporate/literature/publication/blk-stewardship-2018-priorities-final.pdf.
  27. 27. Maximilian Horster and Kosmas Papadopoulos, “Climate Change and Proxy Voting in the U.S. and Europe,” Harvard Law School Forum on Corporate Governance and Financial Regulation (7 January 2019), https://corpgov.law.harvard.edu/2019/01/07/climate-change-and-proxy-voting-in-the-u-s-and-europe/.
  28. 28. ShareAction, Investor Report: Two Years After “Aiming for A”: Where Are We Now? (October 2017), https://shareaction.org/wp-content/uploads/2017/10/InvestorReport-AimingForA-Shell.pdf.
  29. 29. Shareholder resolution for ExxonMobil Corp (December 2018), https://osc.state.ny.us/press/docs/xom-resolved.pdf.
  30. 30. Horster and Papadopoulos, n 27.
  31. 31. Royal Dutch Shell, Leading investors back Shell's climate targets (3 December 2018), https://www.shell.com/media/news-and-media-releases/2018/leading-investors-back-shells-climate-targets.html
  32. 32. AIGCC, CDP, Ceres, IGCC, IIGCC, UN PRI, and UNEP FI, 2018 Global Investor Statement to Governments on Climate Change (December 2018), https://theinvestoragenda.org/wp-content/uploads/2018/12/GISGCC-FINAL-for-COP24-with-signatories_6-Dec-CORRECTION.pdf.
  33. 33. United Nations, Transforming our world: The 2030 Agenda for Sustainable Development, A/Res/70/1 (2015), https://sustainabledevelopment.un.org/post2015/transformingourworld.
  34. 34. See, e.g., in the U.S., Delaware General Corporations Law §141(a); in the UK, item 3 of the model articles of association for public companies in the Companies (Model Articles) Regulations 2008, Regulation 4, Schedule 3.
  35. 35. Jean-Christophe Amado and Peter Adams, Value Chain Climate Resilience: A Guide to Managing Climate Impacts on Companies and Communities, Report prepared for Partnership for Resilience and Environmental Preparedness (PREP), Montreal (July 2012) 11; Stephen M. Bainbridge, Corporate Governance After the Financial Crisis (Oxford University Press, New York, 2012) 43; Business Roundtable, Principles of Corporate Governance 2016 (August 2016) 7.
  36. 36. David A. Nadler, “What's the board's role in strategy development?: Engaging the board in corporate strategy” (2004) 32(5) Strategy & Leadership 25; Business Roundtable, n 32, 7.
  37. 37. BOE PRA, Consultation Paper 23/18, n 10, [2.5].
  38. 38. ISO 31000: Risk Management (2018).
  39. 39. Australian Stock Exchange Corporate Governance Council, Corporate Governance Principles and Recommendations (4th ed., February 2019), 26–28.
  40. 40. Cornelius de Kluyver, Corporate Governance (Saylor Foundation, 2012), 56.
  41. 41. David A. Nadler, “The Board's Role in Corporate Crises,” in David A. Nadler, Beverly A. Behan, and Mark B. Nadler (eds.), Building Better Boards: A Blueprint for Effective Governance (Wiley, 2006), 198–199 (emphasis supplied).
  42. 42. Brian Eckhouse and Eric Roston, “California utility PG&E may be the business world's biggest climate change casualty yet,” Financial Post (16 January 2019), https://business.financialpost.com/commodities/energy/california-utility-pge-may-be-the-business-worlds-biggest-climate-change-casualty-yet; Chunka Mui, “PG&E is just the first of man climate change bankruptcies,” Forbes (24 January 2019), https://www.forbes.com/sites/chunkamui/2019/01/24/pge-is-just-the-first-of-many-climate-change-bankruptcies/#3ebd21c37e5f.
  43. 43. Mark Cediak, “Facing $17B in Fire Damages, PG&E CEO Blames Climate Change,” Insurance Journal (13 August 2018), https://www.insurancejournal.com/news/west/2018/08/13/497820.htm.
  44. 44. Kendra Pierre-Louis and Nadja Popovich, “Climate change is furling wildfires nationwide, new report warns,” New York Times (27 November 2018), https://www.nytimes.com/interactive/2018/11/27/climate/wildfire-global-warming.html; Arthur Nelson, “Climate change could make insurance too expensive for most people—report,” The Guardian (21 March 2019), https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report.
  45. 45. World Economic Forum, n 4, 6.
  46. 46. For an analysis of directors' duties in the United States in the context of asset stranding due to climate change, see Sarah Barker, “An Introduction to directors' duties in relation to stranded asset risks,” in B. Caldecott (ed.), Stranded Assets and the Environment: Risk, Resilience and Opportunity (Routledge, Abingdon, Oxon, New York, 2018), 199–249.
  47. 47. Sarah Barker, Commonwealth Climate and Law Initiative (CCLI), Directors' Liability and Climate Risk: Australia—Country Paper (April 2018), 7, https://ccli.ouce.ox.ac.uk/wp-content/uploads/2018/04/CCLI-Australia-Paper-Final.pdf; Cynthia Williams and Janis Sarra, CCLI, Directors' Liability and Climate Risk: Canada—Country Paper (April 2018), 5, https://ccli.ouce.ox.ac.uk/wp-content/uploads/2018/04/CCLI-Canada-Paper-Final.pdf; Christine Reddell, CCLI, Directors' Liability and Climate Risk: South Africa—Country Paper (April 2018), 5, https://ccli.ouce.ox.ac.uk/wp-content/uploads/2018/04/CCLI-South-Africa-Paper-Final.pdf; Alexia Staker and Alice Garton, CCLI, Directors' Liability and Climate Risk: United Kingdom—Country Paper (April 2018), 8, https://ccli.ouce.ox.ac.uk/wp-content/uploads/2018/04/CCLI-UK-Paper-Final.pdf; S&P Dow Jones Indices, The Carbon Scorecard (May 2018), 8, 17, https://www.spglobal.com/en/research-insights/articles/the-carbon-scorecard.
  48. 48. Justice Jack B. Jacobs, “Fifty Years of Corporate Law Evolution: A Delaware Judge's Retrospective” (2015), 5 Harvard Business Law Review 141, 145.
  49. 49. Sarah Barker, Mark Baker-Jones, Emma Fagan, and Emilie Barton, “Climate Change and the Fiduciary Duties of Pension Fund Trustees—Lessons from the Australian Law” (2016), 6(3) Journal of Sustainable Finance & Investment 211; Veronique Magnier, Comparative Corporate Governance (Edward Elgar Publishing, Cheltenham, 2017).
  50. 50. Barker, “An Introduction to Directors' Duties,” n 46, 204.
  51. 51. Milton Friedman, Capitalism and Freedom (University of Chicago Press, Chicago, 1962); Milton Friedman, “The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine (13 September 1970).
  52. 52. James M. McTaggart, Michael C. Mankins, and Peter Kontes, Value Imperative: Managing for Superior Shareholder Returns (Free Press, New York, 1994); Dodge v Ford Motor Corporation 204 Mich. 459, 170 N.W. 668 (1919).
  53. 53. Michael C. Jensen and William H. Meckling, “Theory of the firm: Managerial behavior, agency costs and ownership structure” (1976), 3(4) Journal of Financial Economics 305; Eugene F. Fama, “Agency Problems and the Theory of the Firm” (1980), 88(2) Journal of Political Economy 288, 291–293; Eugene Fama and Michael Jensen, “Separation of Ownership and Control” (1983), 26(2) Journal of Law and Economics 301.
  54. 54. de Kluyver, n 40, 56.
  55. 55. R. Edward Freeman, Strategic Management: A Stakeholder Approach (Cambridge University Press, New York, 1984), 17.
  56. 56. Robert G. Eccles and Tim Youmans, “Materiality in Corporate Governance: The Statement of Significant Audiences and Materiality” (Spring 2016), 28(2) Journal of Applied Corporate Finance 39.
  57. 57. UNPRI/UNEP, Fiduciary Duty in the 21st Century: Final Report (September 2015).
  58. 58. United Nations Global Compact, Sustainability & Fiduciary Duty of Boards of Directors (2015), https://www.unglobalcompact.org/library/3791.
  59. 59. Ibid.; Eccles and Youmans, n 56.
  60. 60. Michael C. Jensen, “Value Maximization, Stakeholder Theory, and the Corporate Objective Function” (2002), 12(2) Business Ethics Quarterly 235.
  61. 61. Ibid., 246.
  62. 62. UK Companies Act 2006, s 172(1)(a) and (d).
  63. 63. German Corporate Governance Code (7 February 2017), s 4.1.1.
  64. 64. Barker, “An Introduction to Directors' Duties,” n 46, 204.
  65. 65. Barker, Australia—Country Report, n 47, 56.
  66. 66. Barker, Australia—Country Report, n 47, 10–11, 17; Williams and Sarra, n 47, 10, 14; Reddell, n 47, 10, 14; Staker and Garton, n 47, 14–15, 21.
  67. 67. Barker, Australia—Country Report, n 47, 30; Williams and Sarra, n 47, 30; Staker and Garton, n 47, 35.
  68. 68. Barker, Australia—Country Report, n 47, 11; Williams and Sarra, n 47, 7; Reddell, n 47, p. 11; Staker and Garton, n 47, 15.
  69. 69. In the UK, see Companies Act 2006 s 172(1)(d); in South Africa, see M. Ramnath, “Interpreting Directors' Fiduciary Duty to Act in the Company's Best Interests Through the Prism of the Bill of Rights: Taking Other Stakeholders into Consideration” (2013), 27(2) Speculum Juris 113; in Canada, see Peoples Department Stores Inc. (Trustee of) v Wise, 2004 SCC 68, [2004] 3 SCR 461 [34], [42].
  70. 70. Staker and Garton, n 47, 17 discussing UK Companies Act 2006 s 172(1).
  71. 71. See, e.g., Re Continental Assurance Company of London plc [2007] 2 BCLC 287, [399] (Park J) and the discussion in R. Thornton, “Ethical investments: A case of disjointed thinking” [2008], Cambridge Law Journal 396, 410.
  72. 72. Barker, Australia—Country Report, n 47, 12–14; Williams and Sarra, n 47, 14–15, 25; Reddell, n 47, 27; Staker and Garton, n 47, 21. Courts in the United States rely upon a particularly strong version of the business judgement rule, with deference to directors' decisions so long as a decision is lawful, not tainted by conflicts of interest, made in good faith and based on a decision-making process that is not grossly negligent. See Smith v. Van Gorkam, 488 A.2d.858 (Del. 1985) (en banc).
  73. 73. In Australia, see Corporations Act 2001 (Cth) s 180(2); in Canada, see BCE Inc. v 1976 Debentureholders, 2008 SCC 69, [39], [2008] 3 SCR 560; in South Africa, see Companies Act 71 of 2008, s 76(4).
  74. 74. Sarah Barker, Ellie Mulholland, and Ben Caldecott, “Directors' liability and climate risk: Navigating the step change in disclosure and governance expectations,” in Frits-Joost Beekhoven van den Boezem, Corjo Jansen, and Ben Schuijling (eds.), Sustainability and Financial Markets (Wolters Kluwer), 231.
  75. 75. Joan Loughrey, Andrew Keay, and Luca Cerioni, “Legal Practitioners, Enlightened Shareholder Value and the Shaping of Corporate Governance” (2008), 8(1) Journal of Corporate Law Studies 79, 108, fn. 137; see also Howard Smith Ltd. v Ampol Petroleum Ltd. [1974] AC 82 (PC).
  76. 76. Staker and Garton, n 47, 38–39 citing Andrew Keay, “The Ultimate Objective of the Company and the Enforcement of the Entity Maximisation and Sustainability Model” (2010), 10(1) Journal of Corporate Law Studies 35, 66; Re AG (Manchester) Ltd. [2008] EWHC 64 (Ch), [2008] 1 BCLC 321; Lexi Holdings Ltd. (in administration) v Luqman [2008] EWHC 1639 (Ch).
  77. 77. Barker, Australia—Country Report, n 47, 48; Williams and Sarra, n 47, 27; Reddell, n 47, 28; Staker and Garton, n 47, 44–46.
  78. 78. Staker and Garton, n 47, 35–36.
  79. 79. Barker, Australia—Country Report, n 47, 45–46 discussing Australian Corporations Act 2001 (Cth) s 1324; Reddell, n 47, 30 discussing South African Companies Act 71 of 2008, s20(4).
  80. 80. Staker and Garton, n 47, 45 discussing UK Companies Act 2006, s 260(3) and (4).
  81. 81. Williams and Sarra, n 47, 27 discussing Canada Business Corporations Act, RSC 1985 c44, s 239; Reddell, n 47, 14, 29 discussing South African Companies Act 71 of 2008, s 218(2).
  82. 82. Barker, Australia—Country Report, n 47, 48; Williams and Sarra, n 47, 28-29; Reddell, n 47, 30; Staker and Garton, n 47, 46–48.
  83. 83. Australian Corporations Act 2001 (Cth) s 79; South African Companies Act 71 of 2008, s 29(6).
  84. 84. Barker, Australia—Country Report, n 47, 37; Staker and Garton, n 47, 28.
  85. 85. See n 17 and accompanying text.
  86. 86. See, e.g., the definition of “material” under the IFRS Standards: International Accounting Standards Board (IASB), IAS 1 Presentation of Financial Statements; IASB, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; IASB, Conceptual Framework for Financial Reporting, March 2018; IASB, IFRS Practice Statement: Making Materiality Judgments, September 2017. For an example under domestic law, see in the Australian continuous disclosure context: Corporations Act 2001 (Cth) ss 674-77; ASX Council, Listing Rule 3.1; ASX Council, Listing Rules—Guidance Note 8, 11 May 2018; Australian Accounting Standards Board, AASB 1031: Materiality.
  87. 87. Barker, Mulholland, and Caldecott, n 72; Williams and Mulholland, n 21.
  88. 88. Australian Accounting Standards Board and Auditing and Assurance Standards Board, n 23.
  89. 89. Barker, Australia—Country Report, n 47, 46–48; Williams and Sarra, n 47, 25–26; Reddell, n 47, 18; Staker and Garton, n 47, 26–29.
  90. 90. Barker, Mulholland, and Caldecott, n 72.
  91. 91. Barker, Australia—Country Report, n 47, 52–53; Barker, Mulholland, and Caldecott, n 72.
  92. 92. Williams derivatively on behalf of PG&E v Earley (2018) 3:18-cv-07128-EDL (Federal District Court for the Northern District of California), https://www.courthousenews.com/wp-content/uploads/2018/11/PGE.pdf.
  93. 93. Ramirez v ExxonMobil Corp (2016) 16-cv-3111 (Federal District Court for the Northern District of Texas), http://climatecasechart.com/case/ramirez-v-exxon-mobil-corp/?cn-reloaded=1.
  94. 94. Barker, Australia—Country Report, n 47; Williams and Sarra, n 47, 25; Reddell, n 47, 25–27; Staker and Garton, n 47, 40–41.
  95. 95. Brian J. Preston, “The Influence of Climate Change Litigation on Governments and the Private Sector” (2011), 2 Climate Law 485.
  96. 96. Staker and Garton, n 47, 40–41 citing William T.J. de la Mare, “Locality of Harm: Insurance and Climate Change in the 21st Century” (2013), 20(1) Connecticut Insurance Law Journal 189, 198.
  97. 97. James Fernyhough, “Climate change on track to make world ‘uninsurable’: IAG,” The Australian Financial Review (15 November 2018), https://www.afr.com/business/insurance/climate-change-on-track-to-make-world-uninsurable-iag-20181115-h17xu5.
  98. 98. Barker, Mulholland, and Caldecott, n 72.
  99. 99. See n 9 and accompanying text.
  100. 100. Sustainability Accounting Standards Board, Climate Risk: Technical Bulletin, TB001-10182016 (October 2016), 1.
  101. 101. World Economic Forum, Global Risks Report 2019, 14th ed. (January 2019).
  102. 102. Barker, Mulholland, and Caldecott, n 72.
  103. 103. Ibid.
  104. 104. Ibid.
  105. 105. John Armour et al., “Private Enforcement of Corporate Law: An Empirical Comparison of the UK and US” (2009), 6(6) Journal of Empirical Legal Studies 687, 690.
  106. 106. Ibid.
  107. 107. Brian R. Cheffins and Bernard S. Black, “Outside director liability across companies” [2006], 84 Texas Law Review 1385, 1475–1476.
  108. 108. Barker, Australia—Country Report, n 47, 23, 56; Williams and Sarra, n 47, 12; Reddell, n 47, 11–12; Staker and Garton, n 47, 38–39.
  109. 109. In re Caremark Int'l Inc. Deriv. Litig., 698 A.2d 959 (Del. Ch. 1996)
  110. 110. See, e.g., In re Yahoo! Inc. Shareholder Litigation (2018) 17-cv-307054 (consolidated shareholder derivative actions for breach of fiduciary duty and securities class actions relating to data breaches caused by cyberattack, settled for US$29 million in 2019); Kevin LaCroix, “Yahoo Data Breach-Related Derivative Suit Settled for $29 million” (21 January 2019), The D&O Diary, https://www.dandodiary.com/2019/01/articles/cyber-liability/yahoo-data-breach-related-derivative-suit-settled-29-million/; Northern California Pipe Trades Pension Plan v. Hennessey, et al. (2019), 19-cv-00149 (shareholder derivative complaint alleging breach of fiduciary duty against the board of Google parent company Alphabet Inc. relating to sexual misconduct).
  111. 111. Columbia Law School Sabin Center for Climate Change Law, n 8.
  112. 112. Ramirez v ExxonMobil Corp (2016), 16-cv-3111 (Federal District Court for the Northern District of Texas), http://climatecasechart.com/case/ramirez-v-exxon-mobil-corp/?cn-reloaded=1.
  113. 113. McVeigh v. Retail Employees Superannuation Trust (2018), NSD1333/2018 (Federal Court of Australia), http://climatecasechart.com/non-us-case/mcveigh-v-retail-employees-superannuation-trust/.
  114. 114. ClientEarth v Enea SA (2018), (Regional Court in Poznań), http://climatecasechart.com/non-us-case/clientearth-v-enea/.
  115. 115. People of the State of New York v Exxon Mobil Corp (2018), 452044/2018 (New York Supreme Court), http://climatecasechart.com/case/people-v-exxon-mobil-corporation/.
  116. 116. Ibid, complaint filed 24 October 2018, [8].
  117. 117. Paul Carroll, “PG&E: ‘We're Not Gonna Take It Anymore,’” Insurance Thought Leadership (22 January 2019), http://blog.insurancethoughtleadership.com/blog/pge-were-not-gonna-take-it-anymore.
  118. 118. Williams derivatively on behalf of PG&E v Earley (2018), 3:18-cv-07128-EDL (Federal District Court for the Northern District of California), https://www.courthousenews.com/wp-content/uploads/2018/11/PGE.pdf. Some commentators have defended their climate risk disclosure, pointing to warnings to investors in earnings calls and filings of financial risks to their business from the increased risk of wildfires due to climate change: David R. Baker and Eric Rosten, “After PG&E's Climate-Driven Bankruptcy, Who's Next?” Bloomberg (22 January 2019), https://www.bloomberg.com/news/articles/2019-01-22/why-a-pg-e-bankruptcy-could-change-climate-calculus-quicktake. For disclosures of PG&E's climate governance processes, such as its Climate Change Vulnerability Assessment and Climate Risk Officer Committee, see PG&E, Climate Change (2018), http://www.pgecorp.com/corp_responsibility/reports/2018/en02_climate_change.html.
  119. 119. Barker, Mulholland, and Caldecott, n 72.
  120. 120. Commonwealth Climate and Law Initiative, Minter Ellison, and the Centre for Policy Development, The Climate risk reporting journey: A corporate governance primer (November 2018), < https://ccli.ouce.ox.ac.uk/wp-content/uploads/2018/11/CCLI-Climate-Risk-Reporting-Journey-vFINAL.pdf>.
  121. 121. World Economic Forum, How to Set up Effective Climate Governance, n 4.
  122. 122. http://www.unepfi.org/news/industries/insurance/unep-fi-working-with-16-global-insurers-to-better-understand-risk-implement-tcfd-recommendations/.
  123. 123. UNEP Finance Initiative, Extending Our Horizons: Accessing credit risk and opportunity in a changing climate (2018), www.unepfi.org/wordpress/wp-content/.../04/EXTENDINGOUR-HORIZONS.pdf; UNEP Finance Initiative, Navigating a New Climate (2018), http://www.unepfi.org/wordpress/wp-content/uploads/2018/07/NAVIGATING-A-NEW-CLIMATE.pdf.
  124. 124. Ceres and B Team, Getting Climate Smart: A primer for corporate directors in a changing environment (2018), https://www.ceres.org/climatesmartboards.
  125. 125. Eccles and Youmans, n 56; Robert G. Eccles and Tim Youmans, “Why Boards Must Look Beyond Shareholders,” MIT Sloan Management Review (3 September 2015), https://sloanreview.mit.edu/article/why-boards-must-look-beyond-shareholders/; Bob Eccles, “Why It's Time for Boards to Take a Stand on Sustainability,” Forbes (30 March 2016), https://www.forbes.com/sites/bobeccles/2016/03/30/why-its-time-for-boards-to-take-a-stand-on-sustainability/; Robert G. Eccles and Tim Youmans, “The Board That Embraced Stakeholders Beyond Shareholders,” MIT Sloan Management Review (9 June 2016), https://sloanreview.mit.edu/article/the-board-that-embraced-stakeholders-beyond-shareholders/.
  126. 126. Telia Company AB, Statement of Materiality and Significant Audiences, https://annualreports.teliacompany.com/en/governance/statement-of-materiality-and-significant-audiences-/.
  127. 127. Barker, Mulholland, and Caldecott, n 72.
  128. 128. Mark Carney, A Transition in Thinking and Action (Bank of England, 2018), https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/a-transition-in-thinking-and-action-speech-by-mark-carney.pdf.
  129. 129. Ibid.
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