Asia: D&O face climate change fiduciary responsibilities
Source: Asia Insurance Review | Sep 2015
Directors and officers face a wide range of liability exposures including those of social and environmental considerations as it has been argued that these issues fall within the purview of fiduciary responsibility of board members, said Mr Jason Howard, Vice President, Asia Pacific Regional Manager – Chubb Specialty Insurance, in a booklet titled “Climate Governance in Asia: Considerations for Corporate Directors & Officers”, to be launched early this month.
The insurance implications for directors and officers’ liability are varied. Mr Howard said: “Increased shareholder and investor sophistication, coupled with regulatory activity surrounding the climate change issue suggest increased liabilities in the future. While the treatment of liability for climate change-related issues by the courts and governmental entities is in an early stage of evolution, the liability and regulatory machinery is grinding forward. If a claim is made against directors and officers for an alleged wrongful act in relation to climate change risks, directors and officers may face personal financial liability to pay defence costs, settlements or judgments. In this context, insurance is just another form of capital – a very specific form of contingent capital that becomes available when a company experiences a loss. Ensuring that corporate indemnities and insurance are in place to respond is critical.”
Leadership in creating a low carbon economy
The booklet, co-authored by Ms Arati Varma, Assistant Vice President, Underwriting Manager, Chubb Specialty Insurance and ASrIA (Association for Sustainable & Responsible Investment in Asia), highlights five investment risks, together with guidance for investors and company boards to mitigate these risks, create a sustainable competitive advantage and enhance shareholder value relative to their peers.
It examines some of the pertinent issues that should be considered by all directors and officers from a good corporate governance perspective, including those in relation to the management of climate change and related liability risks. And it notes that in spite of the long-term challenges, based on the sector reviews, there is huge potential for Asia to show leadership in creating a low carbon economy.