🌍 Climate risk & Directors’ Duties in South Africa 🌍
📢 The Commonwealth Climate and Law Initiative (CCLI), in partnership with the Climate Governance Initiative published the fourth edition of the 'Navigator on Directors' Duties: Climate Risk and Sustainability Disclosures'! —a tool designed to help lawyers and directors around the world navigate their climate-related duties, in rapidly evolving regulatory landscapes.
🌱 This week we are focussing on #SouthAfrica, where there have been two notable developments this year (1) the signing of the Climate Change Act into law by President Ramaphosa in July 2024 and (2) a legal opinion commissioned by Centre for Environmental Rights and Institute of Directors South Africa on #DirectorsDuties and #Liability for climate risk.
As #climatechange increasingly impacts financial and operational conditions, regulators in South Africa are shifting focus on the need for companies and their directors to adopt climate resilience measures in business practices and disclosure.
📖 Key Findings on Directors’ Duties in South Africa 📖
🌡️ Companies Act (2008): Under South African law, directors’ responsibilities in relation to climate risks are shaped by fiduciary duties. Under the Companies Act 2008, directors must act in the best interest of the company with appropriate care, skill, and diligence. This duty requires directors to assess and address any foreseeable, material risks—including those posed by climate change—that may affect the company’s long-term stability .
📘King IV Report (2016): According to the King IV Report, boards are advised that, in preparing their integrated report, they must address “matters that could significantly affect the organisation’s ability to create value”. The King IV Report explicitly links value creation to natural capital, amongst others.
📑Climate Change Act (2024): The Climate Change Act (CCA), signed into law in July 2024, is designed to define, manage, monitor, and implement South Africa’s response to climate change. It takes precedence over other climate-related laws, requiring all Government policies and measures to align with its goals. The CCA will come into effect upon presidential proclamation.
💼 Disclosure Guidance: The Johannesburg Stock Exchange (JSE) and Prudential Authority are pushing disclosures aligned with Taskforce on Nature-related Financial Disclosures (TNFD). The JSE Guidance currently makes reference to carbon reporting, sets out principles for useful disclosure and provides guidance on what climate-related information a company should disclose. Boards may wish to prepare for such disclosures becoming mandatory.
➡️ To find out more, download the Navigator South Africa section (link in the comments)
Many thanks to Zahra Omar (Centre for Environmental Rights Chapter Zero Southern Africa) for authoring this section and to Leanne Govindsamy for her support.
#CorporateGovernance #ClimateRisk #LiabilityRisk