Directors fiduciary duties

What are Fiduciary Duties?

Under the Corporations Act 2001 (Cth) (Act), a director of a corporation must exercise their powers and discharge their duties:

  • with the same care and diligence that a reasonable person would exercise in the corporations circumstances if they occupied the office held by that director (s180(1)); and
  • in good faith in the best interests of the corporation (s181(1)(a)); and

Generally, the best interests of the corporation are represented by maximising financial performance.  As result, it is not for the directors to infuse their own ethical considerations into decisions that it may lawfully make.

Having said this, the interests of the corporation can include the physical, political and regulatory environment in which it operates and so the Courts have held that directors can take these matters into account to the extent that they are linked with the interests of the corporation.


Historically, climate change was often regarded as an ethical issue for investors – a 'non-financial environmental externality' that was secondary to, and largely inconsistent with, the imperative to maximise financial returns.  Recently, however, the question of climate change has transformed into one of assessing material financial risk. 

More recently, the financial risks and opportunities presented by climate change have become a mainstream issue for the business community.  Debates over 'stranded asset' exposures (eg the IMF, OECD, WorldBank) and asset divestitures play out in the financial press.  Recognised economic and financial institutions warn of the significant economic consequences of climate change. And, globally, we are witnessing a surge in political and regulatory interventions in an attempt to deal with climate change and the resulting community concerns.