Leading Legal Opinion: New Climate Reporting Standards Keep Directors' Focus On Financially Material Risks

Incoming international reporting standards will provide a helpful blueprint for directors as they discharge their duties, with a new legal opinion confirming that Australian company directors should already be focussing on materially financial issues such as climate risk and other sustainability matters.

The opinion comes from one of Australia’s leading legal experts on financial climate risks, Sebastian Hartford-Davis, and Kellie Dyon of counsel. It builds on the landmark 'Hutley Opinions' by Mr Hartford-Davis and Noel Hutley SC, which confirmed that directors have a duty to consider and manage climate risk. MinterEllison acted as instructing solicitors on both the Hutley Opinions and the current brief.

The International Sustainability Standards Board (ISSB) draft standards, set to be finalised later this year, would require disclosure of material information about sustainability risks.

The legal advice, sought by a group on institutional investors - the Australian Council of Superannuation Investors (ACSI), Investor Group of Climate Change (IGCC) and the Responsible Investment Association Australasia (RIAA) – highlights that directors should not face increased liability risks under ISSB standards and should not need any kind of ‘safe harbour’.

The legal advice is clear that, while the ISSB standards may require an evolution of processes and disclosures across industries, ‘in practice [it] simply reflects the need for directors to adapt and respond to climate risk issues facing their companies.’ Furthermore, as the Standards would require disclosures of risks material to each company, it is expected that directors would already be considering and measuring those risks.

© Scoop Media