The Commonwealth Climate and Law Initiative (CCLI) has partnered with the Climate Governance Initiative to publish this briefing for board directors on the Climate Governance Hub.
A resource for navigating the rapidly-evolving landscape of sustainability-related corporate responsibilities, this:
- updates previous briefings on climate change litigation, climate-related disclosures and ESG-related risks in value chains and the major financial risks posed by biodiversity loss; and
- explores why, despite discontinuation of the ClientEarth v Shell derivative action, governance of climate and nature risks remains highly relevant for directors, including to avoid the risk of similar future claims.
KEY POINTS ON CLIMATE-RELATED LITIGATION, DISCLOSURES AND DUE DILIGENCE REQUIREMENTS
• Climate-related derivative claims are being tested. Two UK court judgements refused permission for climate-related derivative claims (brought by shareholders on behalf of the company against directors). Similar claims could in future apply to directors’ management of biodiversity-related risks.
• Due diligence regulations. The EU Regulation on deforestation-free supply chains has come into force and it is requiring companies to investigate the source of a range of commodities sold in or exported from the EU. The proposed EU Corporate Sustainability Due Diligence Directive has taken another step towards approval, which would require in-scope companies to undertake due diligence to identify, prevent, mitigate, monitor and report on negative environmental and social impacts in their operations, subsidiaries and value chains.
• Establishment of reporting standards. Comprehensive reporting standards for sustainability-related and climate-related financial disclosures were finalised by the International Sustainability Standards Board (ISSB) and endorsed by the Organization of Securities Commissions (IOSCO). The IOSCO called on securities regulators around the world to consider adopting the ISSB standards.
• International assurance standards. Consultations have been opened by the International Auditing and Assurance Standards Board (IAASB) on its proposed International Standard on Sustainability Assurance (ISSA) 5000.
