General Counsel (GCs) are increas-
ingly under pressure to address risks
related to climate change. As CEOs
face questions regarding what they,
and their organizations, are doing
in respect of climate change, GCs
will need to guide their responses
in light of board responsibilities,
disclosure obligations, and investor
inquiries. GC approaches vary, of-
ten depending on their industry, lo-
cation and regulatory environment.
Consequently, many are only now
beginning to "know what they don't
know" and acknowledging the need
for active ongoing supervision.
In spite of this uncertainty, all
GCs share one core goal: their or-
ganizations have to understand and prudently manage climate-
related legal risks. In this respect, the following six practical
approaches should help GCs improve their organization's man-
agement of climate-related risks.
Understanding Climate Risk: GCs should understand the impact
of climate change on their organization and treat it like any other
risk. To aid their analysis, GC should develop a framework to
evaluate potential climate-related risks and obligations that may
impact their organization. For instance, State Street Global Ad-
visors, one of the largest global asset managers, has divided cli-
mate risk into three primary categories: physical risk, regulatory
risk, and economic risk. Once these risks are identified, mitiga-
tion measures can be implemented and, as required, appropriate
changes can be brought to existing policies, procedures and prac-
tices to protect the interests of their organization.
Board Oversight: GCs should help evaluate climate competence of
the board and establish mechanisms for review of climate risk by
the appropriate board committee. GCs may liaise with the nomi-
nating committee for evaluating sustainability expertise of direc-
tors and support implementation of protocols to ensure director
education on evolving climate risks. An important aspect of this
task is to determine the most appropriate board committee(s)
to handle climate accountability. For example, as the Canadian
Coalition for Good Governance (CCGG) notes, climate-related
risks could be addressed by a stand-alone sustainability commit-
tee (that deals with corporate social responsibility issues), or be
included within the mandate of environmental, health and safety
committee. On the operational side, GCs may consider engag-
ing in regular dialogue with the management to review ongoing
climate-related risks and outlining sustainability responsibilities
for finance, investor relations, and strategy teams.
Climate-Related Disclosure: GCs should ensure that their orga-
nizations avoid boilerplate climate risk disclosure that is vague,
incomplete, or inconsistent while being mindful that their disclo-
sure may be used against their organization in potential litigation.
A key focus of stakeholder groups (including regulators, investors
and proxy advisors) in the climate risk debate is entity-specific
disclosure. GC's should ensure that public disclosure addresses
the regulatory, physical, and operational trends and reflects their
organization's estimate of climate-related uncertainties, materiality
assessments, and governance mechanisms. At the same time, they
should be cognizant of exposure to litigation risk as such disclosure
may be used in potential court actions against their organization.
Monitoring Guidelines of Major Investors: GCs should put in place
appropriate monitoring mechanisms for the opinions, policy
statements and proxy guidelines of their organization's key inves-
tors to ward off unexpected surprises at annual meetings or im-
portant corporate events. Major institutional investors like Black-
rock have taken the lead on climate-related issues, and in certain
cases, they are well ahead of the regulatory curve.
Climate Litigation: GCs, particularly those in carbon-intensive
industries, should analyze their organization's vulnerability to
climate change litigation. ere is a new wave of climate liability
lawsuits aimed primarily at oil and gas companies that draw upon
the experience of tobacco litigation.
Transition Risk: GCs should take a holistic view and be aware of
the so-called "transition risk" of dealing with rising public pres-
sure to shi economies to a low-carbon footprint. Transition risk,
said to be the "most challenging" by Mark Carney, Governor of
the Bank of England, can be either direct, stemming from a com-
pany-specific action, or indirect, in the form of public perception
of the overall industry. A poor reputation on climate may hurt
sales through consumer boycotts, adversely impact the regulatory
environment, or damage relationships with local communities.
GCs that identify the vulnerabilities, think through how they
relate to one another and put in place suitable oversight measures
can begin to manage the challenges ahead.
"State Street Global
Advisors, one of the
largest global asset
managers, has divided
climate risk into three
primary categories:
physical risk,
regulatory risk,
and economic risk."
By Ravipal S. Bains
GCs share one core goal: their organizations have to understand and prudently manage climate-related legal risks
Risks in Climate Change
Ravipal S. Bains is an associate at McMillan LLP
in its Vancouver office.
24 LEXPERT MAGAZINE
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JULY 2019
COLUMNS CHANGE AGENT