Directors' duties, responsibilities and disclosure obligations under Philippine law on climate change risks - we launch our legal opinion

On 27 April 2023, the Institute of Corporate Directors (ICD) of the Philippines, the Commonwealth Climate and Law Initiative (CCLI) and ClientEarth formally launched a legal opinion on directors’ duties and disclosure obligations under Philippine Law in respect of climate-related risks. The opinion was written by Dean Cesar Villanueva, Dean Lily Gruba, Atty. Angelo Advincula, and Atty. Joyce Wong. 

 The launch, held in person at the Fairmont Hotel in Makati City, Philippines, was attended by more than 170 guests, including directors and senior managers of publicly listed companies, regulators from the Securities and Exchange Commission (SEC), the Philippine Stock Exchange (PSE), Bangko Sentral ng Pilipinas (the Philippine central bank), and representatives from the legal community, think tanks and civil society organisations. 

 ICD President Ma. Aurora Geotina-Garcia opened the event, noting the climate crisis has prompted governments and businesses across the world to take decisive action to transition to a new economic model aligned with the Paris Agreement’s objective of net-zero greenhouse gas emissions by 2050. 

 In his keynote address, SEC Commissioner McJill Bryant Fernandez observed that climate change poses material financial risks to companies and their business models, potentially undermining not just the financial system, but also the real economy. He noted that some companies have begun responding to the climate crisis not only because it is the right thing to do but also because: 

1. Climate action is very good for business, particularly for early movers spotting opportunities in the transition
2. In some cases, like in the fossil fuel industry, doing nothing is existential
3. Climate action is increasingly what clients and markets are demanding of businesses

Commissioner Fernandez said the SEC “expressly recognises that climate risks, like other economic, environmental, social and governance risks, must be transparently communicated to the market in order to ensure that capital is efficiently allocated, investors are protected, and corporations are governed responsibly.”

 Alex Cooper, CCLI Corporate/Finance and Climate Lawyer, presented the key messages of the legal opinion and discussed how climate change poses risks to companies and what company directors ought to do to manage these risks. These include creating board-level sustainability committees, seeking expert advice, and conducting scenario analyses to understand what different temperature rises and policy changes might mean for their businesses. He also explained how climate risks engage disclosure obligations to enable investors to price in these risks to their investments. 

 Joyce Tan, ClientEarth senior lawyer, and Carlos Gatmaitan, ICD CEO, then moderated a panel discussion on corporate climate governance, which featured Dean Cesar Villanueva (lead author of the legal opinion), Thomas Clark (General Counsel, Asian Development Bank), Eric Francia (President and CEO, ACEN), Alexander Cabrera (Vice-President, Management Association of the Philippines), Sherisa Nuesa (Independent Director, Manila Water), Alex Cooper (lawyer, CCLI), and Roel Refran (Chief Operating Officer, PSE). The panellists emphasised the crucial role directors play in setting ambitious, science-based targets for their companies and supply chains to rally behind, and the importance of meaningful disclosures to enable the market to understand how, and whether, companies are managing the risks climate change poses to their long-term valuation and to hold companies to account for their targets and prevent greenwashing. 

PSE COO Roel Refran delivered closing remarks, calling on all stakeholders to properly manage climate risk, with boards taking the lead. Recalling UN Secretary-General António Guterres’s warning at the UN climate summit in Egypt (COP 27) that we are all on a highway to climate hell and everyone is still stepping on the gas pedal, Refran said that failure is not an option in responding to the climate crisis. 

The event provided an opportunity for company directors and regulators to come together to discuss corporate climate governance, an increasingly important mechanism for the private sector to act on climate and ensure net zero is placed at the heart of corporate strategy and decision making. 

You can also catch up on proceedings for the day.

1. Full video of the event
2. Highlights of the day