Directors urged to get advice as nature risk turns liability

afr.com:

Boards have been warned to consider the toll on the natural environment from the way they do business as part of directors’ duties under the Corporations Act.

In a groundbreaking legal opinion to be released on Thursday, two lawyers found directors should, at a minimum, be identifying nature-related dependencies and considering potential risks these pose.

“Directors who fail to consider nature-related risks could be found liable for breaching their duty of care and diligence,” concluded the advice, written by barrister Sebastian Hartford-Davis and solicitor Zoe Bush, and commissioned by Pollination Law and the Commonwealth Climate and Law Initiative.

Australian banks have $47bn of loans for livestock agriculture, the sub-sector with the biggest impact on nature. Getty

It is the first legal opinion setting out how nature-related risks – which go beyond carbon emissions and include the impact of commercial activity on land, water supplies and biodiversity – form part of common law directors’ duties.

It follows a series of landmark legal opinions, penned by Noel Hutley SC and Mr Hartford-Davis, that elevated directors’ duties in relation to climate-related governance. The Centre for Policy Development, which commissioned Mr Hutley’s original opinion in 2016, have endorsed the new advice.

Over the past year, the Australian government has signed up to global commitments to protect nature, which need to be considered by directors. There is also growing pressure from investor groups, such as the Finance for Biodiversity Pledge and Nature Action 100, raising potential obligations around continuous disclosure.

The advice says awareness from regulators and the broader public make it more foreseeable that nature depletion could