February 7, 2020

Insolvency Risk and Climate

There are numerous risks associated with climate change, including solvency risk. For example, there is a substantial shift in investment dollars away from carbon-intensive production activities towards new technologies in virtually every sector of the economy, which means diminished access to capital for some businesses. The Sustainability Accounting Standards Board has identified material financial impacts from climate change for companies in 72 of 79 industries. The breadth of these risks requires careful assessment of their impact on a debtor company’s business. Effective governance of the transition to a low-carbon economy is critically important to the continuation of businesses. Directors and officers need the skills to navigate the company through these changes, and insolvency professionals and financiers will need to understand the complex dynamics underpinning climate-related risks and opportunities as they advise and support financially troubled companies. The judiciary will be faced with new types of claims in their supervision of Canadian insolvency proceedings. This article identifies some of these climate-related governance and oversight issues.

In 2020 Annual Review of Insolvency Law, February 7, 2020, Vancouver, BC