The ICJ’s climate opinion raises the bar for Australian boardrooms: directors of fossil fuel and emissions-intensive companies face increasing exposure on climate risk
A new joint legal Opinion has concluded that the International Court of Justice’s (ICJ) Advisory Opinion on the Obligations of States in respect of Climate Change (ICJ Opinion) is already driving legal and regulatory developments that heighten climate-related risks for fossil fuel and other emissions-intensive companies in Australia, which may raise the standard of care expected of directors of those companies.
It is the first comprehensive legal opinion in the world to consider the implications of the ICJ Opinion for directors’ duties, and, in particular, the duty to exercise care and diligence under s 180(1) of the Corporations Act 2001.
The Opinion is authored by Ruth Higgins SC (Banco Chambers), Zoe Bush (Banco Chambers), and Jennifer Robinson (Doughty Street Chambers, UK, and who appeared for Vanuatu in the ICJ proceedings). It was commissioned by not-for-profit research and advocacy organisation, Climate Integrity Ltd. Counsel were instructed by Jennifer Balding, Principal, Viridis Legal and Chair of Climate Integrity.
The ICJ Opinion
Delivered in 2025 as a unanimous decision of a 15-member Court, the ICJ Opinion said that States have a duty to prevent significant harm to the climate system. This requires States to regulate the conduct of private operators within a State’s jurisdiction or control so as to “achieve deep, rapid, and sustained reductions of GHG emissions.”
The ICJ expressed the view that a breach of the obligation to protect the climate system constitutes an internationally wrongful act, giving rise to State responsibility, which could attract consequences such as an obligation to pay financial compensation to another State for the damage caused by climate change.
The ICJ emphasised fossil fuel production and consumption, the granting of fossil fuel exploration licences, and the provision of fossil fuel subsidies as conduct that may breach those obligations.
The joint legal Opinion, authored by Higgins, Bush and Robinson
The authors were asked to provide an opinion on the implications, if any, of the ICJ Opinion for directors’ duties in relation to climate-related risks, by reference to a director’s duty of care and diligence under s 180(1) of the Corporations Act 2001 (Cth) (Act).
The Opinion expresses the view that:
Climate change poses a foreseeable risk of harm to most, if not all, Australian companies.
The ICJ Opinion “has already precipitated legal and regulatory developments that create or amplify climate-related transition risks to which some Australian corporations, particularly those that derive revenue from fossil fuels or other emissions-intensive activities, are exposed. We expect it will continue to do so. As the magnitude of those risks or the probability of their occurrence rises, so too may the standard of care expected of directors of those corporations.”
The bar for how directors manage these risks is rising –- even before taking into consideration the ICJ Opinion. This is particularly true for directors of companies subject to Australia’s mandatory climate reporting regime, which commenced in 2025.
There is no one-size-fits-all approach for how directors should discharge their duty of care in relation to climate-related risks. However, a director can take steps to minimise the risk of being found liable for breaching their duty of care.
The Opinion expresses the following further views:
Directors of companies in the fossil fuel sector are perhaps most exposed:
“Corporations in the fossil fuel sector are perhaps most exposed to the potential for the Opinion to drive regulatory developments adverse to their interests, given that the ICJ emphasises fossil fuel production, fossil fuel consumption, the granting of fossil fuel exploration licences, and the provision of fossil fuel subsidies as conduct that may constitute an internationally wrongful act.” (par 77)
“A corporation that generates revenue from the production and/or supply of fossil fuels is exposed to the risk that those profit-generating activities may be limited, prohibited or rendered financially unviable. A corporation with assets associated with fossil fuel extraction, production and/or supply is exposed to the risk that those assets will become stranded and give rise to significant decommissioning liabilities. In our view, directors of such corporations would be required in their decision-making processes to at least consider such risks.” (par 83)
Directors must weigh not just financial impacts but all corporate interests:
“... the balancing exercise is not necessarily confined to commercial considerations or to a comparison of monetary consequences. It extends to considering all the interests of the corporation, including its reputation and interest in pursuing lawful activity. That is significant in the context of climate-related risks. Even if a corporation’s contributions to climate change do not pose foreseeable risks of harm to the corporation’s financial interests, they may pose risks of harm to its other interests, particularly as the regulation of emissions-intensive activities tighten and societal and market expectations evolve.” (par 29)
The ICJ Opinion may inform litigation against companies, particularly greenwashing claims:
“The Opinion may also provoke direct litigation against companies. For example, claimants may allege that a corporation contravenes statutory prohibitions on misleading or deceptive conduct if it describes its business activities and/or emissions reductions targets as “Paris aligned”, despite increasing its production of fossil fuels or not otherwise aligning its activities and/or targets with the 1.5℃ temperature goal.” (par 108)
“More significantly, claimants may rely on the Opinion to support claims that corporate emitters are tortiously liable for climate-related harms. The potential for such liability is already crystallising in foreign jurisdictions…” (par 109)
Jennifer Balding, Chair of Climate Integrity, and instructing solicitor, Principal - Viridis Legal, says:
“As Counsel highlight in their Joint Opinion, the law regarding climate-related risk continues to evolve. Directors — particularly those operating in fossil fuel or emissions-intensive sectors — face increasing personal exposure to legal claims and regulatory action if they fail to properly consider, disclose, and address climate-related risks.”
“The ICJ Advisory Opinion now paves the way for significant claims to be brought for reparations by countries harmed by climate change, with potential liabilities likely to reach into the trillions of dollars. It is only a matter of time before the law recognises that similar claims may be brought against companies and, critically, against directors personally.”
“The profitability of fossil fuels is increasingly at risk, and the case for transitioning away is no longer just environmental, it is legal and financial.”
Geoff Summerhayes, Chair Zurich Australia, Chair Beyond Zero Emissions, says:
"The energy supply crisis has further underscored the material risks Australian companies face. Calls to press pause on decarbonisation are shortsighted. We can and must address the immediate supply shock, while accelerating the energy transition to build long term resilience. Physical climate risk is here and is not going to pause.
“The Higgins, Robinson, Bush opinion is further evidence that the legal and regulatory ground beneath Australian corporate life is shifting and will continue to do so. There is no option for Boards to press pause.”
Jacqueline Peel, Redmond Barry Distinguished Professor at Melbourne Law School and Director of the Laureate Program on Corporate Climate Accountability. says:
“As this new opinion shows, the ICJ’s climate advisory opinion was not just a landmark in international law - it also has very significant implications for law in Australia, including the legal obligations of company directors.”
“Directors can no longer just attend to their own corporate backyard. They need to be aware of broader legal developments, like the ICJ advisory opinion, that are shaping the risk landscape in which companies now make decisions about their response to climate change and investment in fossil fuels."
Claire Snyder, Executive Director, Climate Integrity, says:
“The historic ICJ advisory opinion is already influencing government policy and regulation, and is being cited in important cases in domestic courts. Its impact will continue to unfold in the coming years. It is clear that Australia faces a rising obligation to prevent climate harm, and this will have flow-on implications for Australian companies.”
“We hope this joint opinion is a helpful tool for directors grappling with rising climate risk and encourages decision-making that accelerates companies' transitions away from fossil fuels.”
“What’s clear is that if directors fail to appropriately consider climate related risks, including emerging transition risks and reputation risks, they may be exposed to personal liability.”
