Legal Duties and Climate Risk: Why Directors Can No Longer Afford to Look Away

Climate change is not just transforming the physical world, it’s reshaping the legal responsibilities of corporate boards. As climate risks increase, directors in Southeast Asia must understand that inaction is no longer a neutral position. It could expose the company and individual board members to legal consequences.

Boards across the region are being called to go beyond awareness and act decisively in response to these growing risks. Climate-related oversight is now part of good governance, and failing to manage these responsibilities could result in legal, reputational, and financial damage.

Climate Risk Is Legal Risk

Under existing company laws across Southeast Asia, directors already have duties to act with care, diligence, and in the best interests of the company. These duties apply to all material business risks, including climate change.

Climate risks are increasingly considered foreseeable and significant, especially in sectors most exposed to environmental disruption or dependent on transition-sensitive assets. If a director fails to consider such risks as part of the board’s oversight, that may be interpreted as falling short of their legal duties.

The guide notes that around the world, legal systems are beginning to test this in court. Directors have been named in lawsuits for failing to manage climate-related financial risks. Others have faced scrutiny over vague or misleading climate claims. As legal precedents grow internationally, boards in Southeast Asia should take notice.

Greenwashing Carries Real Consequences

The risk of litigation or investigation increases when companies make bold climate claims but fail to back them with credible action. Misrepresenting a company’s climate credentials — often called “greenwashing” — is not only a reputational concern. It can also be viewed as a breach of consumer protection, securities, or disclosure laws.

Recent examples highlighted in the guide show how greenwashing can lead to regulatory penalties, public backlash, and loss of investor confidence. Directors have a duty to ensure the company’s public statements including sustainability reports, investor briefings, and advertisements are accurate, verifiable, and aligned with internal practices.

The legal trend is clear: climate-related inaction or misrepresentation is attracting legal attention. Boards must now treat climate performance and disclosure as matters of legal oversight, not marketing.

A Turning Point for Boardroom Accountability

Board directors do not need to be climate experts, but they must ensure climate is on the agenda - The legal environment around climate is evolving fast. Directors who view climate change as someone else’s responsibility are taking a risk, one that could prove costly in court, in regulatory investigations, or in board performance reviews.

Now is the time for boards to strengthen oversight, clarify internal processes, and ensure climate responsibility is embedded in governance. That means asking for legal advice where needed, documenting climate-related discussions in board minutes, and reviewing the credibility of public-facing climate claims.

In a world where inaction can be interpreted as negligence, strong climate governance is no longer optional. Boards that act with clarity, care, and credibility will not only meet their legal obligations — they will be better positioned to lead their companies through the transition ahead.

Download the full guide here.