Director duties and climate disclosure: what ASRS changes

ASRS did not create new director duties. It made existing ones impossible to ignore. Under the Corporations Act, directors must already inform themselves of material, foreseeable risks and ensure company disclosures are not misleading. Climate is now squarely inside that obligation, and ASRS S2 turns what used to be a voluntary judgement call into a hard reporting requirement with the board's name on it.

There is temporary relief on some forward-looking statements, but it is narrower than many directors assume, and it expires at the end of 2027. This article covers what boards are actually on the hook for under the regime.

What duties apply to climate disclosure?

Two provisions do most of the work. Section 180 of the Corporations Act requires directors to act with due care and diligence, judged against the objective standard of a reasonable director in the same position. Section 181 requires them to act in good faith and in the best interests of the company.

The due care duty is about process, not outcome. It asks whether directors took a proactive, informed approach to a foreseeable risk, not whether they made the perfect call. The bar for foreseeability is low: the legal test is that a risk is not far-fetched or fanciful. For most large Australian companies, climate clears that bar comfortably.

This is not new thinking. The widely cited Hutley Opinions concluded years ago that climate risk is a foreseeable financial risk directors must actively consider, and that some directors could be found personally liable for failing to do so. ASRS removes any remaining doubt about whether the risk is in scope.

Where does personal liability come from?

The sharper risk for directors is misleading disclosure. A statement is misleading if a reasonable reader would be led into error by the overall impression it creates, and silence or omission can be just as misleading as an inaccurate claim.

That cuts both ways. Overstating the company's climate response is greenwashing, which ASIC has made an active enforcement priority and has already pursued through the courts. Understating a material risk, or leaving it out, is equally a problem: directors attest to a true and fair view of the company's position and prospects.

For a board, the practical exposure is the gap between what the company says in its climate report and what it can actually evidence. A confident disclosure with no governance records behind it is the worst of both worlds.

Does the ASRS liability relief protect directors?

Partly, and only for a while. The regime includes a modified liability period running from 1 January 2025 to 31 December 2027. During this window, only ASIC can bring action over certain statements, and its remedies are limited to injunctions and declarations rather than damages.

But the protection is specific. It covers Scope 3 emissions, scenario analysis, and transition plan disclosures, plus all forward-looking statements in a Group 1 entity's first reporting year. It does not cover statements made outside the sustainability report, such as in the directors' report or operating and financial review, and it does not turn off the underlying director duties.

Crucially, the governance disclosures themselves are not forward-looking statements. How the board oversees climate risk is a present-tense description of fact, so the relief does not shield it. From 2028, the full liability regime applies to everything.

What should a board do about it?

Treat climate as any other material financial risk, because legally that is now what it is. In practice, that means being able to demonstrate the board informed itself, named who is accountable, met regularly on the issue, and documented its oversight. That evidence is both the ASRS governance disclosure and the director's defence if a disclosure is ever challenged.

It also means calibrating language. Disclosures should be specific and supportable: neither overstated nor silent on material risks. The discipline that protects the company from greenwashing claims is the same discipline that produces a defensible report.

The guide to ASRS governance and board requirements covers exactly what assurance providers look for and what the board needs to evidence for each governance disclosure point.

To map your board's current exposure, book a free 30-minute call with the Trace team.

Frequently asked questions

Are directors personally liable for climate disclosure under ASRS?

Directors remain bound by their Corporations Act duties of due care (section 180) and to act in the best interests of the company (section 181), which extend to material, foreseeable climate risk. A temporary modified liability period to 31 December 2027 limits who can sue over certain forward-looking statements, but it does not remove the underlying duties.

What is the ASRS modified liability period?

From 1 January 2025 to 31 December 2027, only ASIC can bring action over Scope 3 emissions, scenario analysis, and transition plan disclosures, plus all forward-looking statements in a Group 1 entity's first year. ASIC's remedies are limited to injunctions and declarations. The relief does not cover statements outside the sustainability report.

Does the liability relief cover governance disclosures?

No. Governance disclosures describe how the board currently oversees climate risk, so they are statements of present fact, not forward-looking statements. The modified liability relief applies only to specified forward-looking content, so governance disclosures sit outside its protection.

Can a company be liable for not disclosing a climate risk?

Yes. Misleading disclosure includes silence or omission where it creates a false overall impression. Leaving out a material climate risk can be as much of a problem as overstating the company's response, which is the conduct ASIC targets as greenwashing.

What should directors do to manage climate disclosure risk?

Treat climate as a material financial risk: inform the board, name accountability, meet on it regularly, document oversight, and make disclosures specific and supportable rather than overstated or silent. That evidence base is both the governance disclosure and the director's defence.

Trace is a climate reporting platform specialising in ISSB and AASB standards, helping businesses navigate mandatory climate disclosure with clarity and confidence.