Company directors countries must take action to address material climate risk, or face legal and reputational risk.

The four national reports, covering Commonwealth nations Australia, Canada, South Africa and the UK, aim to encourage company directors to improve climate reporting.

Between them, Australia, Canada, South Africa and the UK account for a quarter of global pension assets. Their stock exchanges account for a third of the world’s listed fossil fuel assets and they are home to more than 10% of the world’s oil and coal reserves.

Ben Caldecott, director of the Oxford Sustainable Finance Programme at the University of Oxford said: ‘These four Commonwealth countries are heavily exposed to the risk of fossil fuel assets becoming stranded due to advances in policy and technology. They also face significant risks from physical climate change impacts, such as more regular and severe droughts, heatwaves, storms, and floods.

‘Company directors and fiduciaries in these countries are therefore heavily exposed to climate risk and it is now clear through our research that there are significant potential liabilities associated with misreporting climate risk, mismanaging climate risk, and directly contributing to anthropogenic climate change.’

Directors’ duties are designed to respond to evolving business norms and market dynamics, meaning that recent developments in climate risk awareness will inform views on how a reasonable director would act - redefining the boundary between legally acceptable and unacceptable conduct.

ClientEarth lawyer Alice Garton said: ‘Despite it becoming an accepted norm that climate change may present financial risks to companies, some directors remain reluctant to embrace climate risk analysis and disclosure. This may be because of a misconstrued fear of liability for forward-looking climate risk disclosures, or a misconception that considering ‘environmental’ issues such as climate change conflicts with prioritising the company’s financial success.

Report by Amy Austin