ABSTRACT
It is well-established that climate-related risks pose a material threat to the financial performance of companies and the authorities in Hong Kong have issued or proposed a variety of measures to address these risks. Under Hong Kong law, directors are required to consider and address these risks. This is because directors are required to act bona fide in the best interests of the company. Applying this duty to the climate context, directors are required to monitor and manage the risks arising from climate change as the failure to do so will have an adverse impact on the business and operations of the company, and in turn, the financial interests of shareholders. Directors are also required to exercise reasonable care, skill and diligence in carrying out their functions. Applying this duty to the climate context, they are required to set up effective internal risk management systems, perform adequate due diligence, exercise supervision over those to whom they have delegated the monitoring and management of climate-related risks, ensure there is proper disclosure (of asset impairment and fair valuation) in the financial statements, and refrain from making greenwashing statements. Consistent with such common law and statutory obligations are those imposed by the Hong Kong Stock Exchange listing rules which require boards to bear overall responsibility for issuers’ environmental, social and governance (ESG) strategy and reporting, the obligations of which include but are not limited to detailed and granular disclosure of issuers’ policies and issuers’ compliance with regulations on carbon emissions …
Lim, Ernest, Directors’ Liability and Climate Risk: White Paper on Hong Kong (December 10, 2021).
First posted 2022-02-08 13:00:11
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