LEGAL MEMORANDUM concerning DIRECTOR DUTIES AND LIABILIT Y FOR CLIMATE RISK UNDER SOUTH AFRICAN LAW

The memorandum argues that while South African law does not yet have a specific statute requiring directors to prepare for climate change, existing fiduciary duties, the duty of care and diligence, and emerging legislation like the Climate Change Act 22 of 2024 create a legal basis for accountability. It highlights that South African courts are increasingly relying on non-binding governance standards, such as the King IV Report, and international obligations to interpret directors' duties. The document outlines several avenues for liability, including derivative actions under section 165 of the Companies Act, piercing the corporate veil under section 20(9), and criminal liability under the National Environmental Management Act (NEMA). It concludes that directors should proactively manage climate risk to avoid potential litigation as legal frameworks evolve.

• Climate risk is categorized into three types: transition risks (shifting to a lower-carbon economy), physical risks (extreme weather impacts on operations and supply chains), and liability risks (litigation for breach of duties regarding climate change).
• South African courts have shown a willingness to use non-binding corporate governance guidelines, specifically the King Reports, to determine the standard of reasonableness and conduct expected of directors.
• The Climate Change Act 22 of 2024, assented to on 23 July 2024, introduces statutory offences for failing to provide data to the Minister, providing misleading information, or failing to submit greenhouse gas (GHG) mitigation plans.
• Under the National Environmental Management Act (NEMA), directors can be held personally liable for environmental offences committed by their firm if the offence resulted from the director's failure to take all reasonable steps to prevent it.
• Directors may be protected from liability for breaching the duty to act in the best interests of the company via the 'business judgment rule' if they took diligent steps to be informed, had no material personal financial interest, and had a rational basis for their decision.
• The memorandum identifies the derivative action under section 165 of the Companies Act as a tool for shareholders or other permitted persons to recover losses sustained by the company due to directors' failures.
• Section 20(9) of the Companies Act allows courts to 'pierce the corporate veil' and hold directors personally liable if the use of the company constitutes an 'unconscionable abuse' of its separate legal personality.
• The 'oppression remedy' under section 163 of the Companies Act may be relevant for shareholders, particularly institutional investors, if a failure to address climate risk is deemed 'unfairly prejudicial' to their interests.
• Section 162(7) of the Companies Act provides a mechanism to place directors on probation if they act in a manner 'materially inconsistent with the duties of a director', which could include a disregard for climate risk.

APA

SC, S. K., SC, N. R.-B., Soekoe, N., & Gwaza, K.-K. (2024). LEGAL MEMORANDUM concerning DIRECTOR DUTIES AND LIABILIT Y FOR CLIMATE RISK UNDER SOUTH AFRICAN LAW. Centre for Environmental Rights. https://cer.org.za/wp-content/uploads/2024/10/Final-Director-Duties-and-Liability-for-Climate-Risk-under-SA-Law.pdf?x21779

Chicago

SC, Sandile Khumalo, Nasreen Rajab-Budlender SC, Nicola Soekoe, and Khanya-Khanyiso Gwaza. LEGAL MEMORANDUM concerning DIRECTOR DUTIES AND LIABILIT Y FOR CLIMATE RISK UNDER SOUTH AFRICAN LAW. Centre for Environmental Rights, 2024. https://cer.org.za/wp-content/uploads/2024/10/Final-Director-Duties-and-Liability-for-Climate-Risk-under-SA-Law.pdf?x21779.

Wikipedia

{{cite report |last1=SC |first1=Sandile Khumalo |last2=SC |first2=Nasreen Rajab-Budlender |last3=Soekoe |first3=Nicola |last4=Gwaza |first4=Khanya-Khanyiso |title=LEGAL MEMORANDUM concerning DIRECTOR DUTIES AND LIABILIT Y FOR CLIMATE RISK UNDER SOUTH AFRICAN LAW |publisher=Centre for Environmental Rights |date=September 2024 |url=https://cer.org.za/wp-content/uploads/2024/10/Final-Director-Duties-and-Liability-for-Climate-Risk-under-SA-Law.pdf?x21779 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sc2024legal, author = {SC, Sandile Khumalo and SC, Nasreen Rajab-Budlender and Soekoe, Nicola and Gwaza, Khanya-Khanyiso}, title = {{LEGAL MEMORANDUM concerning DIRECTOR DUTIES AND LIABILIT Y FOR CLIMATE RISK UNDER SOUTH AFRICAN LAW}}, institution = {Centre for Environmental Rights}, year = {2024}, month = sep, url = {https://cer.org.za/wp-content/uploads/2024/10/Final-Director-Duties-and-Liability-for-Climate-Risk-under-SA-Law.pdf?x21779}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }