Introduction

The Commonwealth Climate and Law Initiative (CCLI) legal opinion examines how Philippine corporate law applies to nature-related and biodiversity risks. The report concludes that directors of Philippine corporations must consider foreseeable nature-related risks and opportunities as part of their fiduciary duties or risk breaching legal obligations.

Why this matters

The report highlights the Philippines’ dependence on natural ecosystems. As one of the world’s 17 megadiverse countries, around 56% of Philippine GDP is linked to nature-dependent sectors. Ecosystem services contribute an estimated PH₱2.3 trillion (US$470 billion) to the economy.

Agriculture and fisheries accounted for 18.4% of GDP and generated US$4.1 billion in exports in 2016. The banking sector is also exposed, with assets equivalent to 125% of GDP and nearly half of loans connected to nature-dependent industries.

The report states that biodiversity loss, ecosystem degradation and climate change create material financial, operational, legal and reputational risks for corporations. Investor scrutiny, ESG expectations and expanding sustainability disclosure obligations are increasing pressure on boards.

Directors’ duties under Philippine law

The opinion states that nature-related risks fall within directors’ duties of diligence, loyalty and obedience under Philippine corporate law. Directors must act in the best interests of the corporation while considering broader stakeholder impacts.

Boards are expected to identify, assess and manage material nature-related risks through enterprise risk management processes. Directors should also consider nature-related opportunities, including resilience, long-term value creation and strategic adaptation to environmental transition risks.

The report notes that directors must evaluate trade-offs involving climate, biodiversity, social and financial impacts when making decisions.

Governance and risk management

The report recommends integrating nature-related risks into governance frameworks, strategic planning and disclosure processes. Directors should ensure appropriate board oversight, internal controls and risk governance systems are established.

The opinion identifies physical, transition and liability risks as key concerns. Examples include supply chain disruption, biodiversity loss, changing regulation, market shifts and litigation exposure.

Strong enterprise risk management practices may provide directors with greater legal protection by demonstrating that risks were appropriately identified, mitigated and monitored.

Disclosure obligations

The report highlights growing sustainability disclosure requirements for Philippine listed companies. SEC Sustainability Reporting Guidelines will become mandatory from FY2026 for Tier 1 companies, alongside existing governance reporting obligations.

Directors may face liability where disclosures are false, misleading or contribute to fraudulent market activity under the Securities Regulation Code. The report therefore recommends stronger board oversight of sustainability reporting and environmental risk disclosures.

Legal liability and indigenous peoples’ rights

The opinion states that directors acting with gross negligence or bad faith in managing nature-related risks may face civil, criminal and administrative liability.

The report also highlights Indigenous Peoples’ rights obligations. Companies operating in ancestral domains must secure Free, Prior and Informed Consent before commencing projects. Failure to comply may expose directors and corporations to legal liability.