This paper updates our 2019 discussion paper Public authority directors’ duties and climate change, and climate change risks for governments have risen substantially since the publication of that paper. Physical risks have increased as emissions continue their growth trajectory. Transition risks are also growing, particularly as investors are starting to focus on climate change risks for sovereign borrowers. Liability risks too, are increasing, with governments facing increased attention by litigators.
Building on the 2019 paper, the authors show that in addition to Commonwealth and Victorian public authorities, directors of government-owned companies (GOCs) in NSW, WA and QLD may also be subject to a duty to account for climate change risks. However, there are limitations on the extent to which such duties create direct liability risks for such directors.
Considering the emerging but still inadequate response to public authority climate change risk management, the authors recommend that governments concentrate their future policy response on six areas to maximise the quality, effectiveness, and impact of climate change risk management:
- Give clear and transparent policy direction through ministerial statements.
- Standardise the technical frameworks for risk assessment, particularly around financial risk disclosure (eg. by adapting the private sector framework from the Task Force on Climate-related Financial Disclosure, TCFD).
- Create a whole-of-government picture of climate risk exposure.
- Leverage audit offices’ authority to consider climate change risks among government agencies and/or public authorities.
- Invest in building capability and capacity.
- Influence private sector take-up of climate change risk reporting.