Australian companies could face new liability for nature-based risks
Source: Middle East Insurance Review | Dec 2023
Company directors in Australia who fail to account for nature-related risks may be liable under Australian corporations law 2021, according to a new legal opinion document backed by lawyers and environmental groups.
The new 21-page opinion document Australian company directors and nature-related risk: A new legal opinion released in November 2023 and written by barrister Sebastian Hartford Davis and Environmental Defender’s Office senior solicitor Zoe Bush said the most egregious violations of director duties can face legal action, carry large fines or lead to being disqualified from managing a company.
The opinion document commissioned by Pollination Law and the Commonwealth Climate and Law Initiative said directors who rely on nature for success could face consequences if they do not consider, disclose and manage risks to the environment. According to the legal opinion, these directors have a duty under the Corporations Act 2001 to do so.
There needs to be proper governance, proper information gathering, proper consideration of all the ways that nature-related risk might manifest and be relevant for a company. Companies and investors are becoming increasingly aware of risks posed by non-traditional business considerations, like deforestation, water stress, pollution or species loss.
Pollination executive Laura Waterford said companies could be liable because their behaviour “makes them vulnerable” to activism or litigation that may be pursued by their shareholders. “It could be that their exposure is to supply chain or operational disruptions because of physical nature-related risks,” she said.
About half of Australia’s gross domestic product depends on nature to at least a moderate degree. For example, the recent outbreak of a deadly parasite ravaged bee populations in Australia and around the world. That, in turn, affects agricultural products that rely on the pollinators.
Residential and commercial construction also depends on nature for building materials or land for development. Tourism, apparel and the construction industries are also highly dependent on nature. M