A group of lawyers have warned that company directors in the UK could be held personally liable for failing to properly account for nature and climate-related risks.
A legal opinion published this week found that board directors had duties to consider how their business affected and depended on nature. These included climate-related risks as well as wider risks to biodiversity, soils and water.
The analysis showed that directors of UK firms faced serious personal consequences for breaching these duties, potentially including claims for damages or compensation by their shareholders. Even in cases where it was difficult to work out exactly how much money the company had lost, directors could lose their jobs or have their remuneration or exit packages cut.
According to reports, only few lawsuits have so far been brought personally against company directors on environmental challenges, and none have yet succeeded.
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Legal experts commissioned by the climate advisory firm Pollination Group and the Commonwealth Climate and Law Initiative said that failure to assess financial risks from a company’s unaddressed nature-related impacts and dependencies could expose directors to increased shareholder scrutiny under the Companies Act.
Legal opinions commissioned for other jurisdictions, including Australia, New Zealand and the Philippines, have come to similar conclusions.
Nature-related risks are clear for some industries. The food production sector, for example, is heavily dependent on healthy soil and pollinators to produce crops and livestock. However, most companies depend on and affect nature in some physical way. Banks that hold mortgages in homes at risk of coastal flooding, for example, risk losing a key asset.
Story was adapted from the Guardian.
