This is a world without borders and while we have to address specific climate risk in certain geographic areas, we can do it with a coordinated effort.
Wild weather battering NSW has proven that climate change is a material risk for a lot of companies. An expert panel has urged lawyers to take notice.
The Chief Justice of the Land and Environment Court of NSW has called for lawyers to become “climate conscious and not climate blind”. In the first event of the Law Society of NSW’s Thought Leadership Series for 2021, Justice Brian J. Preston said this requires an active awareness of the way climate change interacts with daily legal problems.
“A climate conscious approach demands first, actively identifying the intersections between the issues of the legal problem or dispute and climate change issues,” Justice Preston said. “Secondly, giving advice and litigating or resolving the legal problem or dispute in ways that meaningfully address these issues.”
Justice Preston moderated a discussion between a panel of experts, including Cathie Armour, a commissioner at the Australian Securities and Investment Commission (ASIC); Sophie Marjanac, Climate Accountability Lead at environmental law charity ClientEarth; and Timothy Stutt, a senior associate who works as the lead for environmental, social, and governance business at Herbert Smith Freehills.
The event came on the back of weeks of wild weather that caused devastating flooding to large areas of the state. Justice Preston noted that climate-related risks to business don’t just include physical risks from extreme weather events but economic risks and liability risks. Increasingly, companies are being held liable for contributing to, or failing to adapt to, environmental issues.
Australia has seen two recent examples. Justice Preston referenced the inquiry and board shake-up that followed Rio Tinto’s destruction of the Juukan Gorge caves in Western Australia, and Cbus’s divestment of shares after Chinese mining company Shenhua threatened to destroy Aboriginal cultural artefacts in a northern NSW coal mine. It’s the difference, he says, between having a “legal licence” and a “social licence”. Public attitudes towards such commercial activities – even though they are legal – are starting to change.
“Climate law is hot law,” he said. “The law is relating to climate change and its consequences is rapidly evolving… and the view that [companies] have no or very few legal responsibilities is being challenged.”
From a regulatory perspective, Armour said, sustainable finance is a hot topic in many multinational groups and forums including the G20. Much is happening ahead of the next Rome summit in October.
“This is a world without borders and while we have to address specific climate risk in certain geographic areas, we can do it with a coordinated effort,” she said. “From our perspective, we’re very keen to ensure we can have global consistency, especially in relation to disclosure standards and accounting.”
When it comes to governance, however, Stutt said culture is evolving even where the law remains unchanged. This includes a “rising tide of disclosure” as well as increased expectations of companies.
“Even something like directors’ duties – the law is unchanged, but it’s well recognised by a lot of companies now that the framework of what reasonable care and diligence has changed,” he said.
“As people’s understanding of these risk areas is enhanced, and as regulators take stronger positions, that changes the goal posts. That’s why we’re seeing a bigger focus on how… companies are considering climate as a material risk and addressing it and communicating it to the market.”
The panel agreed that Australia is a “fertile ground” for future climate change litigation. Justice Preston said this meant lawyers needed to be climate conscious so they can give holistic advice, focusing not just on legal issues, but financial, social, environmental and ethical consequences of each course of action.