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

This legal memorandum analyzes the potential for company directors in South Africa to be held personally liable for failing to address, disclose, and prepare for climate-related financial risks. It examines the intersection of the Companies Act 71 of 2008, common law, the National Environmental Management Act (NEMA), and the recently enacted Climate Change Act 22 of 2024, arguing that climate risk is a material financial risk that falls under existing directors' duties of care, skill, and fiduciary loyalty.

• 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).
• While no South African statute expressly mandates directors to prepare for climate change in daily operations, the memorandum argues that the duty to act in the 'best interests of the company' under section 76(3)(b) of the Companies Act may incorporate climate risk management as a material financial risk.
• South African courts are increasingly using non-binding governance standards, specifically the King IV Report, to determine the 'yardstick of reasonableness' for directors' conduct, including their responsibility for risk management.
• The Climate Change Act 22 of 2024, assented to on 23 July 2024, introduces statutory offences for directors and companies, including failure to provide required data to the Minister or failure to submit a GHG mitigation plan.
• Under section 34(7) of the National Environmental Management Act (NEMA), a director can be held personally liable for environmental offences committed by the company if the offence resulted from the director's failure to take all reasonable steps to prevent it.
• The memorandum identifies several legal avenues for holding directors accountable: derivative actions under section 165 (for the company's benefit), claims for oppressive conduct under section 163 (for shareholder benefit), and applications for probation under section 162(7).
• Financial statements that fail to disclose foreseeable and material climate-related risks may be considered 'incomplete' or 'false and misleading' under section 29(2) of the Companies Act.

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} }