Canadian corporate directors who fail to address environmental and climate-related risks could face legal consequences, according to a new legal opinion released by law firm Resilient LLP and commissioned by the Commonwealth Climate and Law Initiative (CCLI).
The opinion concluded that nature and climate risks are no longer optional considerations for boards but are legally foreseeable and financially material under Canadian law.
Under the Canada Business Corporations Act and comparable provincial legislation, directors have a duty to act with care, diligence and in the best interests of the corporation. The opinion stated that this duty includes identifying and managing material risks, including those linked to nature degradation, extreme weather and ecosystem disruption.
The opinion also pointed to risks such as wildfires, floods, drought, pollinator loss and biodiversity decline as examples of issues directors must assess. Transition risks, including shifting regulations or market expectations, and systemic risks, such as ecosystem collapse, are also considered material.
Directors who fail to evaluate and respond to these risks could be exposed to negligence claims, shareholder lawsuits, and allegations of greenwashing or disclosure failures.
These findings come as Canadian insurers continue to report increasing losses related to environmental risks. According to the Insurance Bureau of Canada, insured losses from natural disasters and extreme weather events reached $8.5 billion in 2024, the highest level recorded to date and nearly three times the 2023 total.
The opinion linked this financial impact directly to directors’ obligations, stating that failure to disclose or manage such risks could give rise to legal action from investors, creditors or consumers.
While the legal risks apply across all industries, the opinion notes that sectors such as mining, agriculture, energy, and real estate are particularly exposed due to their dependence on natural systems. The insurance sector is also identified as facing systemic exposure through underwriting and investment activities tied to nature-dependent businesses.
Directors are advised to integrate nature-related considerations into governance and risk management processes. Steps may include requesting information from management about the company’s nature-related dependencies, seeking expert assessments, engaging with Indigenous rightsholders, and aligning with frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD).
Lisa DeMarco, senior partner and CEO of Resilient LLP, said: “Directors don’t need to be expert scientists or activists, but they are required to consider nature-related risks like any other foreseeable risk to their business.”
Other stakeholders, including IBC and responsible investment groups, have echoed concerns about liability exposure tied to biodiversity loss and extreme weather.
As climate and nature-related events increase in severity and cost, the opinion also underscored that boards must treat these issues as material business risks with potential legal consequences.
