Hems and Steven Discuss Potential Climate-Related Liabilities for Corporate Directors

March 25, 2022

Prompted by the Glasgow Climate Pact at the end of a year that saw increased climate litigation, McGuireWoods London partner Simon Hems and associate Katie Steven recently wrote an article for Corporate Disputes magazine on the potential liability of corporate directors who fail to consider environmental issues. The pact, formed at the COP26 summit in November 2021, has resulted in a renewed emphasis on climate-related considerations in corporate strategy.

In the article, the authors noted that several global landmark cases raised expectations for companies to drive climate policy and demonstrated a shift toward greater corporate or governmental liability. They also considered whether the scope of The Companies Act, which requires each UK incorporated private or public company to produce a strategic report, already extends to a duty to consider climate concerns.

“Ultimately, the extent to which shareholders are both able and inclined to take action against individual directors who fail to comply with their duty to take into account environmental considerations remains to be seen,” Hems and Steven wrote. Without an increased societal climate policy standard, it is unlikely that directors’ failure to consider environmental issues will outweigh their obligations to promote the success of their companies, which may or may not promote green initiatives, they noted.