The impact of climate risk on a company’s financial performance and the responsibility of directors to adequately address such risk is an important topic for aged care company directors.

The issue, highlighted by the ABC’s Four Corners program this week, raised questions about the impact of climate change and severe weather events on a company’s financial performance.

A key focus of the program was on the impact of climate risk on a company’s members, account holders and more generally, insurance and property prices in areas at increased risk of flooding.

“This is very now. It’s not a future problem in 10 or 20 or 30 years. When the market understands these risks, when it starts to reprice property based on those risks, that’s when things change,” Karl Mallon, Director of Science and Systems at Climate Risk Pty said.

Mr Mallon runs a software company that builds statistical models that assess risks to infrastructure from sea level rise. He is now modelling climate change risk in the real estate market.

Mr Mallon said as awareness of the financial impact of climate risk on property increases, such as the inability to insure property against ‘actions of the sea’, potential buyers are going to start factoring the risk of reduced property value into their decision making.

The potential impact of climate risk on property prices is one consideration for directors of residential care providers.

More broadly, climate risk should be considered in terms of physical risk, transitional risk and liability risk.

Sarah Barker, Special Counsel – Climate Risk for Minter Ellison, says the duty of care requirements under the Corporations Act make climate risk the same as any other financial risk to a company.

“It is clear that directors do have duties to take climate risk into account, as a foreseeable financial risk. And a failure to do so may expose them to liability for a breach of their duty of due care and diligence, potentially for liability for misleading disclosure to markets,” Ms Barker said.

“This is an issue that the Australian Prudential Regulation Authority in particular has been very clear about in articulating that the Corporations Act structures that we have now do encompass obligations in relation to climate risk in the same way they do any other financial risk to a corporation.”

Ms Baker has previously written about directors’ responsibilities for The Institute of Governance Australia. 

“To satisfy the duty of due care and diligence, it is the process of information gathering and deliberation that is critical,” she said.

“This is not to say that directors are duty-bound to decarbonise their operations, or that environmental sustainability must be universally prioritised. Nor does it suggest that directors must reconsider the nature of their shareholders’ “best interests” and extend them to incorporate external, ethical goals. But it does mean that boards must actively engage with how the issue of climate change impacts on their operations, risk and strategy.”

To watch the full episode of Four Corners visit