law: climate update for boards

on september 23, legal advisors and corporate directors convened virtually to discuss new standards and best practices in climate-related oversight.

focused on disclosing exposure to risks and opportunities in the capital markets, lessons are useful to entities establishing best practices.

issb standards come into effect on january 1, 2024 for the 2025 reporting period. notably, reporting is voluntary, and there is no expanded legislation currently, but case law is rising.

entities subject to climate-related litigation risks include:

1. private, public, ngos targeted for greenwashing and greenhushing
2. companies requiring permits or regulatory approvals
3. companies producing and selling carbon
4. publicly-traded companies under securities law
5. companies that own, operate, design, repair infrastructure

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following are highlights from the institute of corporate directors and chapter zero canada’s seminar navigating climate governance: legal update for directors:

standards: the international sustainability standards board (issb)'s inaugural standards were issued june 2023 and come into effect january 2024 for the 2025 reporting period. choose standards based on principles and values (to be debated and established between board and management) and set systems in place now.

liability: boards can mitigate risk of director liability by aiming for a transparent, authentic sustainability reporting strategy and being esg literate. litigation risk, class actions, shareholder activism are increasing and boards must be prepared.

oversight: map out climate oversight responsibilities for board and committees: who is responsible for what, how is it being evaluated, how much time is being allocated to understand and substantiate climate risks and opportunities? standards are evolving and duty of care is expanding: are oversight processes evolving and expanding too?

reporting: identify and explain the factors that will get you there and the factors that will not. ensure esg reporting is fact-based and avoids unattainable future performance or targets to avoid litigation risk. in capital markets, reporting on value creation is as important as reporting on risk mitigation.

communications: discern what to share and what not to share, and why, to level set stakeholder expectations. If the organization’s journey is not publicly documented, it's a missed marketing opportunity. communication needs to be consistent and updated continuously.

offsets: there is a lot of conflicting advice on carbon offsets, with standards frequently established and updated. generally, most companies are reducing carbon emissions as much as possible and using offsets only for those that they cannot reduce.

insurance: review and understand insurance cover related to weather events. do not make any assumptions. companies should be talking to energy distributors to understand what plans they have in place: understand their disaster management plans to develop your own disaster management plan.

seminar participants: andrew mclaughlin (major drilling group international); joan hertz (atb financial); patricia koval (transmountain corp), and sharon singh (bennett jones)

reference:
https://www.ifrs.org/content/dam/ifrs/project/general-sustainability-related-disclosures/project-summary.pdf