Corporate boards: climate disclosure and climate liability

Canadian companies aren’t doing much about the climate crisis. Are they ignoring the science? The regulators? Or the risk of liability?

The science is beyond reasonable doubt. Canada is heating up twice as fast as the global average. Wildfires are increasing, growing seasons are changing, extreme weather damage is rising. Many people hope that “normal” will come back, but the climate we grew up with is gone and cannot return. Nor have we reached a “new normal”. Instead, we are beginning to see the end of “normal”. 

If we want a world that is less stable and safe than today, but with manageable transition risks and reasonable food security, we can’t let world average temperature rise more than 1.5°C. Unless we’re willing to bet our planet on some magical technology that doesn’t yet exist, that means everyone slashing fossil use more than 5% every year.

Canadian companies aren’t. Instead, Canada is a surprisingly big part of the problem. Despite our tiny population, Canada is a world top 10 climate polluter. Most Canadian boards seem to blithely expect that business can continue much as usual. Investment in clean and renewable energy is rising, but banks keep putting billions of dollars into fossil fuels and into the urban sprawl that burns them. These investments will worsen economic, health and environmental damage during the lives of today’s children. 

Do boards and investors know it? Disclosure of such risks by Canadian publicly traded companies “needs improvement” (according to the Canadian Securities Administrators) and regulators are taking notice. Just in 2019: 

  • 1.     The Bank of Canada recognized climate change as a key vulnerability in the Canadian financial system. 
    • warned pension funds and insurance companies:

    To quantify their [climate risk] exposure and develop strategic approaches for making the transition to fewer carbon-linked assets, and

    To analyze their exposure to carbon-based asset repricing and develop policies to reflect possible future changes.

    • are “well on their way to becoming the global benchmark” and there is “intensifying pressure on companies and investors to adopt” them, including federal government support in Budget 2019. However, inadequate disclosure of climate risks is harming financial markets:

    A reliable, consistent and comparable bottom-up view of climate risk exposure is essential to proper assessment and pricing…[This is]particularly relevant to Canada, given the severe physical and financial risks associated with our country’s accelerated rate of warming.

    Climate change-related risks are mainstream business issues

    even if they are more uncertain, and have a longer time horizon, than other business risks. Climate risk disclosure must now be clear, understandable, and entity specific, and must take longer-term risks and consequences into account. Boards with little expertise in climate risks must acquire it.

    Every Canadian board of directors is therefore now on notice: it must get serious about its climate risks. And many should worry about liability. 

    The Superintendent of Financial Institutions had good reason to recognize climate liability as “a top concern”. The more than 1200 climate-related court cases around the world are having some success. Just in 2019, courts blocked billions of dollars of projects, including an Australian coal mine, and coal-fired power plants in Kenya, Turkey, and Poland. A German higher court allowed a Peruvian villager to sue a German electric utility for its 0.5% share of emissions that are melting the glacier that protects his village. The state of Rhode Island has won its preliminary battles and may now sue Chevron, Shell, BP and others for billions in climate damage. Scientific advances, e.g. improved attribution of the causes of disasters,are making these cases stronger.

    In Canada, climate liability got a big boost this year when the Quebec Court of Appeal ordered tobacco companies to pay Quebec smokers $15 billion. The court ruled that tobacco companies had intentionally sold their product without informing consumers of the deadly consequences, actively casting doubt on more accurate information. As documented in The Merchants of Doubt, fossil fuel companies have done the same. 

    Investors in tobacco companies have long known about the risk of liability, but shrugged it off as the day of reckoning never seemed to arrive. The Quebec class action was only one of 20 lawsuits against Canada’s tobacco companies.Yet this single decision instantly made the Canadian tobacco companies insolvent. Within two weeks, they were in bankruptcy protection.

    Other Canadian boards are fooling themselves if they think this cannot happen to them. Foreseeability is the fundamental moral glue of tort law. Today, foreseeable climate damage is already in the tens of trillions of dollars, enormously larger than that of liability for either asbestos or tobacco, and fossil fuel use is the known main cause. No one can claim ignorance any more.

    Published in the Toronto Star, August 25, 2019

    More Posts

    Receiving the Law Society Medal

    On December 8, 2020, Treasurer Theresa Donnelly, head of the Law Society of Ontario officially awarded me a 2020 Law Society Medal for leadership in environmental law, on behalf of Ontario's 55,000 lawyers and 9000 paralegals. This is what I...

    Read More

    Why I am running for the Greens in University- Rosedale

    Thank you for the overwhelming warm welcome for my decision to run for the Ontario Green Party in the 2022 election. After 45 years of being meticulously non-partisan, I can no longer stand aside and merely shout at the radio...

    Read More

    Excellent Massey climate conference

    What a great finale we had yesterday to Massey is #MissingCOP26. It’s been an exciting two weeks. Massey is Missing COP26 climate conference This fifth and last session of the Massey is Missing COP 26 climate conference, hosted by Rosemary McCarney and...

    Read More

    Why teachers must teach climate action

    A special issue of the Journal of the Philosophy of Education includes an interview with me on why teachers owe their students concrete lessons in climate action. Here's a video intro to the chapter. If you are interested in climate...

    Read More

    I’m a guest on How Public Works

    Listen to my interview with experienced municipal public servant Ilmar Simanovskis, P.Eng, MBA, on how the public sector works. As he describes the episode: Dianne Saxe is an environmental lawyer who has an extensive career in advocating for environment, climate...

    Read More
    View All Posts