This legal opinion sets out guidance for company directors in India regarding their obligations to consider climate change-related risks in the discharge of their duties under Indian law. The report provides a detailed overview of the impact of climate change on India and national policy outlook.

Directors’ duties under the Companies Act

The report affirms that Indian directors of companies must have regard to climate change-related risks in the discharge of their duties under section 166 of the Companies Act, 2013. Directors’ duties extend beyond shareholders to the community on matters concerning the environment.

Disclosure obligations

The Securities and Exchange Board of India (SEBI) stipulates that disclosures on risks and concerns are mandatory for public listed companies. In particular, SEBI requires disclosures from top 1000 listed entities (by market capitalisation) under the Business Responsibility and Sustainability Report (BRSR). The report requires disclosures related to climate change-related risk.

The report notes that disclosures regarding climate change and environmental risks have been high in annual reports of listed companies, and Indian companies have been receptive to the changing regulatory landscape, incorporating sustainability information in their statutory annual reports.

Litigation risks to companies

The report notes that litigation risks to companies are increasing as a result of climate change, and companies may be held liable for failing to address environmental risks. It highlights the National Green Tribunal and Environmental Regulators as potential avenues for litigation.

Public interest litigation

Businesses in India also face potential suits under public interest litigation, under which citizens and NGOs can seek legal intervention in environmental matters. This presents a potential reputational risk for companies whose practices have an impact on the environment.

Recommendations

Board members should assess the risks and impact of climate change-related risks and ensure that these risks are properly identified, assessed, and managed. Companies must consider how climate change-related risks may have fiduciary implications in disclosures to stakeholders. The report advises directors to engage with stakeholders to understand their expectations, concerns, and perspectives regarding climate change as an ESG issue.

Threshold of Materiality Applied to Information Disclosed

The report discusses the threshold of materiality applied to information required to be disclosed under Indian law. In the authors’ opinion, identifying climate change-related risk and associated information is material information for regulation purposes under the SEBI Regulations. Companies must disclose relevant material information in their Annual Report to comply with requirements under the Companies Act and SEBI Regulations.