“Cafe BE” on Positive Impact Investing – Vienna
Panel Discussion at the Frankfurt Book Fair
Attention, discussion is in German. English subtitles will be added
October 8, 2014
Abstract: Directors’ personal liability for corporate inaction on climate change.
Sarah Barker (B.Comm, LLB (Hons), M.Env (Hons), MAICD, Special Counsel, Minter Ellison Lawyers) has nearly two decades’ experience advising on governance, disclosure and fiduciary duty issues. Her work on directors’ personal liability exposures for inaction on climate change was recently acknowledged by the United Nations PRI with the 2014 Sustainalytics Award for Excellence in responsible investment research. Her prize-winning paper first argues that developments in the science and economics on climate change mean that it is no longer a ‘non-financial environmental externality’ but a material financial risk. It then considers developments in the governance law context, with regulators and courts holding company directors to higher standards of professionalism, engagement and proactivity in order to satisfy their duty of due care and diligence (as against the standard of a ‘reasonable director’ in the relevant circumstances). Finally, it applies those two ‘new contexts’ to conclude that corporate governance inaction on climate change is increasingly likely to breach the directors’ duty of due care and diligence, by reference to the five most common rationales for inaction. These rationales include (a) denial, (b) honest ignorance, (c) uncertainty/complexity leading to strategic paralysis, (d) ‘the lemmings’ (ie default to benchmarks of industry norms or regulatory requirements) and even (e) cost/benefit analysis that concludes ‘business as usual’ is profit maximising – where the modelling assumptions and methodologies applied are historically, but not prospectively, fit for purpose.