Sydney, 19 August 2009: Boards that are already meeting best practice in corporate governance will be best equipped to respond to the emergence of climate change as a new and active stakeholder in corporate Australia, according to well-known corporate lawyer and Clayton Utz partner Rod Halstead.
Speaking at the latest seminar in the Climate Science and Risk in the Boardroom series co-hosted by Clayton Utz and The Climate Council Inc., Mr Halstead said while boards could no longer ignore climate change as a factor in corporate decision-making, those meeting best practice in governance standards were best placed to protect their and their company's interests.
"Factoring climate change risk into their operations is now a fact of life for Australian companies. Climate change is an active stakeholder whose interests need to be recognised in the boardroom, and carefully and actively managed," said Mr Halstead.
"Boards that are actively seeking to stay fully informed of the issues, risks and opportunities around climate change, and also ensure there is the relevant expertise at management level, will be best positioned to ensure they and their companies are meeting their current and future obligations in this area."
Mr Halstead said to the extent there was tension between the community's expectations of companies' obligations to contribute to a sustainable environment and the duties and obligations of a company's directors and officers under the Corporations Law, this was best addressed through specific, focused legislation.
"Historically directors and officers have had a duty to act in the best interests of the company and its shareholders, with limited recognition by the courts of other stakeholders," said Mr Halstead.
"There may well be pressure for change, particularly given the emergence of climate change as one of the most pressing global issues of our time. However, whether there is a need for legislative reform to specifically set out the duties and obligations of companies to the environment remains a moot point. Arguably the current legal framework governing the obligations and duties of directors and officers as set out in the Corporations Law is more than adequate to address this issue," Mr Halstead said.
The framework provides a pathway for directors and officers to recognise that the interests of their company will be best served by giving due regard to climate change issues.
Furthermore this framework includes the business judgment rule, which allows directors and officers to rely on rational, properly informed, good faith decision-making in discharging their duties and obligations. "We are likely to see a greater reliance by directors and officers on climate change science in discharging their obligations in the context of climate change," said Mr Halstead.
Mr Halstead was one of a number of high-profile speakers and panel members debating the place of climate change in business and investment decisions and the legal, commercial and investment risks as part of the Climate Change Think Tank series, a joint initiative of Clayton Utz and The Climate Council Inc.
Other speakers included Professor David Griggs, the CEO of ClimateWorks Australia and Director of the Monash Sustainability Institute, and Kingsley Jones, Portfolio Manager - International Equities at Macquarie Bank. The speakers' presentations were followed by a panel discussion that included scientists, investment and finance professionals from a range of industry associations and corporates.