29 July 2025 – Canadian company directors who fail to address climate and nature risks, such as biodiversity loss, freshwater stress, or ecosystem degradation, could face legal action, according to a landmark legal opinion released today.

Commissioned by the Commonwealth Climate and Law Initiative (CCLI) and authored by Canadian law firm Resilient LLP, the opinion confirms that nature risks fall squarely within directors’ legal duties under Canadian law.

Under the Canada Business Corporations Act (CBCA) and similar provincial statutes, directors have a duty to act with care, diligence and loyalty in the best interests of the corporation. This includes a legal obligation to identify and manage foreseeable material risks.

According to the opinion, nature risks are no longer optional issues and are considered foreseeable and financially material by courts.

Directors have a duty to assess and respond to these risks accordingly. Boards that do not act on nature risks may be subject to negligence claims, shareholder lawsuits, greenwashing investigations, and other liability risks.

The full report is available in English. The legal opinion will be available in French in August 2025.

What are nature risks?

Nature-related risks are potential negative impacts that arise when nature – including the land, oceans, freshwater, atmosphere and all living organisms within them — is degraded, lost, or disrupted. These include:

• Physical risks such as wildfires, drought, floods, and pollinator loss
• Transition risks such as regulatory changes or market shifts away from ecosystem-intensive practices
• Systemic risks such as biodiversity collapse or ecosystem failure
• Legal risks including litigation for harm to Indigenous lands or breach of disclosure obligations

Why are nature risks relevant to businesses?

• Canada’s economy is fundamentally reliant on nature. Canada’s ecosystems provide an estimated CAD 4.9 trillion in services each year—including pollination, water purification, flood regulation, and carbon storage. This figure is more than twice the country’s GDP in 2018.

• Canada’s ecosystems are under acute stress:
  • More than 80% of wetlands in urban areas have been lost.
  • Around 80% of native prairie grasslands have disappeared.
  • One in five Canadian species is considered at risk of extinction.

• Nature and climate losses are already producing measurable financial impacts for businesses.  In 2024 alone, insured losses from extreme weather events and nature disasters reached CAD 8.5 billion, according to the Insurance Bureau of Canada. This is the highest level on record in Canada and nearly triple the total in 2023.

How are these risks legally relevant?

The opinion finds that directors are required by law to:

• At a minimum, identify and assess nature risks across the company’s operations, value chains, strategy and stakeholder relationships.

• Consider nature risks alongside other business risks and stakeholder interests, including the rights of Indigenous Peoples.

• Factor nature risks into board-level decision-making, although directors are not required by law to elevate nature risks above all interests.

• Regarding corporate disclosures of nature-related information, the opinion advises a precautionary approach. If there is uncertainty about whether a nature issue is material (i.e. whether it could influence investor or stakeholder decisions) directors should err on the side of caution and disclose it. Directors and companies who do not disclose material risks could be liable.

Which sectors are at greatest risk?

The opinion highlights that nature-related risks are particularly material in high-risk or high-dependency sectors. For example, the:

• Mining and energy sector faces risk of litigation, regulatory intervention or project delays due to biodiversity loss, water scarcity, and failure to consult or obtain consent from Indigenous Peoples.
• Agriculture and food sector is exposed soil degradation, pollinator decline, drought, flooding and related supply chain disruption.
• Real estate and construction sectors are vulnerable to increased flooding, wildfires, wetland loss, and planning restrictions on ecologically sensitive lands.
• Finance and insurance sectors face systemic exposure to nature-related risks through investments and underwriting of nature-dependent clients.

What consequences could Canadian directors face?

Directors who fail to properly consider and respond to nature risks may face a range of legal and financial consequences. These include:

• Shareholder or creditor lawsuits, including actions brought on behalf of the company where directors are alleged to have breached their duties.
• Claims from investors, creditors, directors and officers that the company’s decisions relating to nature risks caused them unfair prejudice.
• Claims for failing to meet disclosure obligations, particularly where companies omit or downplay material risks related to nature.
• Greenwashing claims under advertising and consumer protection laws.
• Legal action for negligence or nuisance, from third parties (if the director’s breach of the duty is the cause of imminent harm to a stakeholder)
• Liability for failing to consider the rights of Indigenous Peoples, especially where corporate activities affect Indigenous lands or resources.

Courts or regulators may scrutinise their decision-making more closely if harm results from directors’ inaction or oversight failures, and where directors are not protected by the “business judgment rule”.

What steps can directors take to fulfil their legal obligations?

The opinion advises directors to take steps to assess and manage nature risks. These may include:

• Seek information from management on the company’s nature-related dependencies and impacts. The Taskforce on Nature-related Financial Disclosures (TNFD) recently released a guide titled “Asking Better Questions on Nature” which sets out 12 critical questions to help directors surface critical insights about nature and inform decision making.
• Use external experts to identify nature-related risks and inform materiality assessments.
• Consult with Indigenous rightsholders.
• Apply frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) to guide governance, risk management and disclosures.
• Train boards and committees on nature risks and emerging legal expectations.

Authors and experts’ insights

Lisa DeMarco, Senior Partner and CEO, Resilient LLP, and lead author of the opinion:

“This opinion makes the legal position clear. Directors don’t need to be expert scientists or activists, but they are required to consider nature-related risks like any other foreseeable risk to their business. Ignoring nature risks is no longer legally defensible as proper corporate governance.”

Natalie Shippen, Executive Director, Commonwealth Climate and Law Initiative (CCLI):

“Nature loss affects every business and must therefore move from the margins to the centre of boardroom thinking. This legal opinion gives directors a solid legal basis to integrate nature in their decision-making – regardless of political headwinds or short-term market pressure.”

Dr. Janis Sarra, Professor of Law Emerita, University of British Columbia & Principal Co-Investigator, Canada Climate Law Initiative:

“This opinion will be helpful to Canadian directors as they adapt their business and strategic planning, oversight, and management of financial risks associated with biodiversity loss. It confirms that Canadian law requires directors to treat material nature-related threats as they would any other material business risk.”   

Kelly LaRocca, Chief of the Mississaugas of Scugog Island First Nation:

“As Chief of the Mississaugas of Scugog Island First Nation, I strongly support the legal opinion from Resilient LLP, which underscores the critical importance of addressing nature-related risks in corporate governance. Our Indigenous rights, deeply rooted in our relationships to the land and its ecosystems, are constitutionally protected and must be respected. This opinion rightly emphasizes that directors of Canadian corporations have a duty to consider the impacts of their operations on nature, including our traditional territories. By integrating Indigenous ecological knowledge and prioritizing meaningful consultation, corporations can mitigate risks, uphold our rights, and contribute to sustainable practices that honour the land for future generations.”

Kathy Bardswick, Board member and former chair of the Sustainable Finance Action Council:

“Nature-related risks are increasing in severity and frequency and demand serious consideration. This legal opinion delivers timely and authoritative guidance for boards to incorporate appropriate responses to complex, evolving nature-related challenges in their overall risk oversight.”

Patricia Fletcher, ICD.D, CEO, Responsible Investment Association:

“The legal landscape is shifting for Canadian company directors, where failing to address nature and climate-related risks, such as biodiversity loss, damage to Indigenous lands, and extreme weather, could expose companies to shareholder action and liability. This legal opinion outlines that, as investor expectations evolve, directors have a growing duty to assess and act on these risks to protect their company’s long-term value and resilience.”

Tony Goldner, CEO, Taskforce on Nature-related Financial Disclosures (TNFD):

“There is growing recognition that the duties of directors must encompass the identification and management of nature-related issues, and the publication of today’s landmark legal opinion in Canada highlights the elevated liability environment facing directors. Our recent “Asking Better Questions on Nature” guide (produced with CCLI, Chapter Zero, Competent Boards and the Green Finance Institute) equips directors with 12 key questions to ask their management team in order to discharge their duties and account for nature-related risks and opportunities in their governance, strategy, risk management and capital allocation decisions.”

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Contact: ccli-info@allard.ubc.ca

About the Commonwealth Climate and Law Initiative (CCLI): The CCLI is a global legal insights and stakeholder engagement initiative examining the legal basis for company directors and investors to address climate change and nature risks. We take a multidisciplinary approach to develop legal research and practical tools to help boards meet governance obligations and mitigate liability risks. For more information, visit www.commonwealthclimatelaw.org.

About the Canada Climate Law Initiative:  The Canada Climate Law Initiative provides businesses and regulators with climate governance guidance so they can make informed decisions towards a net-zero economy. Powered by the nation’s top expertise, we engage with boards of directors and trustees to ensure businesses understand their legal duties with respect to climate change. Our legal research allows us to stay one step ahead in a rapidly transforming policy landscape. For more information, visit https://ccli.ubc.ca/.

About Resilient LLP: Resilient LLP is a leading Canadian climate and energy law firm, specialising in climate change, clean energy, and Indigenous law. Over the past 25 years, the firm has built a global practice, with expertise spanning carbon markets, net-zero strategy, energy regulatory, projects and transactions, Indigenous rights, and sustainable finance. Resilient LLP has been recognised by Environmental Finance as the Best Law Firm in North America for GHG markets and leading global firm in voluntary carbon market rankings.

Lisa De Marco is Senior Partner and CEO at Resilient LLP. She is called to the bar in Canada and England and repeatedly recognized as a global expert in climate and energy law with three decades of experience in the sectors. She assists financial institutions, energy companies, innovators, governments, NGOs, and Indigenous business organizations on domestic and overseas renewable power and energy transition projects, sustainable and climate finance transactions, carbon dioxide removals, carbon capture use and storage, climate-related financial disclosure, corporate climate risk, environmental and social governance (ESG), green bonds, net-zero targets and strategy, the Paris Agreement, carbon trading (domestic, international, voluntary, and compliance), climate-related compliance and litigation, and sustainable business strategy. She also represents several governments and leading energy companies in a wide variety of international dispute resolution proceedings, and energy regulatory proceedings. Lisa is a director of the boards at the Toronto Hydro Corporation, the International Emissions Trading Association (IETA), MaRS Discovery District, and member of Climate Economy Strategic Council and of the Expert Advisory Group of Voluntary Carbon Market Integrity initiative (VCMI). Lisa regularly attends on the United Nations climate negotiation.