A legal opinion on climate risk that directors should have on their radar

A new legal opinion on directors' duties and climate from three eminent counsel connects an international court ruling to Australia's boardrooms. Directors cannot afford to be asleep at the wheel, writes Geoff Summerhayes.

In April, Ruth Higgins SC, Jennifer Robinson and Zoe Bush published a joint opinion examining how a recent ruling of the International Court of Justice (ICJ) may bear on directors' duties in Australia.

The ICJ found that countries, Australia among them, have an obligation under customary international law to prevent significant harm to the climate system including from greenhouse gas emissions.

Higgins SC and Bush are members of Banco Chambers, while Robinson, of Doughty Street Chambers in the UK, appeared for Vanuatu in the ICJ proceedings. Higgins SC has since been appointed Solicitor-General for Australia. The joint opinion was commissioned by Climate Integrity Ltd, a not-for-profit research and advocacy organisation, with counsel instructed by Jennifer Balding, Principal of Viridis Legal and Chair of Climate Integrity.

It is the first substantive legal opinion in the world to consider the implications of that ICJ ruling for directors' duties, and in particular for the duty of care and diligence required by the Corporations Act 2001 (Cth).

It warrants careful consideration in Australian boardrooms.

What the international court ruling found

The joint opinion does not emerge from nowhere. It flows from the Advisory Opinion handed down by the ICJ on 23 July 2025.

The ICJ concluded that inadequate action to prevent significant climate harm may constitute an internationally wrongful act under customary international law. The consequences could include claims for compensation or reparations against Australia.

While advisory opinions of the ICJ are not binding, and in Australia international law norms ordinarily only apply domestically if adopted into domestic law, the opinion can be expected to influence policy and regulation relevant to Australian corporations and amplify climate-related transition risks.

For example, in March 2026, the NSW Government announced that it will no longer consider applications for new greenfield coal mines. That announcement followed the Spotlight Report on Coal Mining Emissions by the Net Zero Commission of NSW, an independent NSW Government agency, which noted the ICJ Advisory Opinion and concluded that its findings should inform both the regulation of emissions from existing coal mines and NSW's planning and assessment framework for coal mine expansions and extensions.

At the federal level, the Climate Change Authority, in its 2035 Targets Advice to the Minister observed that, while non-binding, the ICJ opinion “carries significant weight and can be expected to influence future climate litigation, international negotiations, and national climate policies.”

Why such legal opinion matters

The joint opinion is not the last word, and it does not pretend to be. But it is further evidence that the legal and regulatory ground beneath Australian corporate life is shifting and will continue to do so.

That shift has been underway for some time. The Australian corporate sector is already grappling with climate risk, albeit with policy and regulatory headwinds, and must keep evolving. Australia's largest corporate entities are already producing their first mandatory climate-related financial disclosures. Physical climate risk is here and is not going to pause, regardless of what happens in international oil markets or energy supply chains.

What the new joint opinion adds is a sharper articulation of the role of directors in this environment. Proactive, transparent and robust approaches to mitigating climate risks, it argues, will only work to strengthen business models, supply chains and resilience to future shocks. The current fuel supply crisis is not the first such crisis that global markets have been forced to navigate, nor will it be the last.

The bar for how directors manage climate risks is rising. Directors cannot afford to turn a blind eye or treat it as a regulatory abstraction.  

It is also worth noting that the joint opinion argues that a more exacting level of care may be expected of directors with particular experience, skills or responsibilities in sustainability or climate-related matters.

Important note for directors regarding climate risk

The joint opinion is a clear reminder of the importance of factoring climate risks into overall risk management, and of considering implications for company strategy and core business decisions.

Several practical steps follow. Directors should acquaint themselves with the joint opinion and, where appropriate, seek advice on its implications for their specific sector. Mandatory climate-related disclosure obligations should be treated as more than a compliance exercise; they are an opportunity to proactively manage climate risks and to prepare credible climate transition plans that build long-term resilience.

Internal risk processes that do not yet treat climate as a standing consideration warrant scrutiny. As I warned in my 2017 speech, “if entities' internal risk management processes are not starting to include climate risk as something that has to be considered, even if risks are ultimately judged to be minimal or manageable, that seems a pretty reasonable indicator there might be something wrong with the process.”

The key for directors is to engage meaningfully with climate risks, seek appropriate advice and make informed judgements – even if others might, with hindsight, have chosen a different course.

Company directors cannot be asleep at the wheel; they need to be cognisant of the issues and oversee robust risk management processes. For those who have not yet engaged with the joint opinion, or with the ICJ ruling that underpins it, that is a gap worth closing.

About the author

Geoff Summerhayes is a Senior Advisor at climate investment and advisory firm Pollination, Chair of Zurich Financial Services Australia Ltd and Chair of Mercer Investments. He was formerly an Executive Board Member of APRA and Chaired the Council of Financial Regulators Working Group on Climate Change whose members include APRA, ASIC, RBA and Treasury. He is Chair of the Climate Governance Initiative Australia Advisory Council, hosted by the AICD.