Canadian Corporate Boards Face Legal Risks Over Nature-Related Oversights

Canadian boards of directors could face legal consequences, shareholder action, and regulatory scrutiny if they fail to address nature-related risks such as biodiversity loss, extreme weather, and land degradation, according to a new legal opinion by Toronto-based law firm Resilient LLP. Commissioned by the UK’s Commonwealth Climate and Law Initiative (CCLI), the paper warns that these emerging risks are rapidly becoming a core part of corporate fiduciary duty — especially in resource-reliant economies like Canada’s. The opinion, backed by Canadian and international law schools and advocacy groups including the Canada Climate Law Initiative, outlines how directors could be held liable for not recognizing or disclosing material environmental risks — from misrepresentations to outright neglect. Companies could face lawsuits, proxy battles, or complaints under Canada’s new anti-greenwashing laws, in addition to reputational harm. “Boards of directors really have to understand the breadth and immediacy of nature-related risks,” said Lisa DeMarco, CEO of Resilient LLP and co-author of the opinion. “While climate risk has traditionally been seen as long-term, the nature-related threats are more immediate — particularly in areas like water, biodiversity, and land use.” Canada’s vulnerability is stark. The country’s ecosystems deliver an estimated $4.9 trillion annually in services like flood control, water purification, and carbon sequestration. Yet these are increasingly under threat: 80% of prairie grasslands have vanished, four-fifths of urban wetlands are gone, and 20% of species face extinction, the report warns. Industries face diverse threats: oil and gas operations are exposed to wildfires and droughts, forestry is strained by water shortages and pollution, and mining causes direct habitat destruction. The 2016 Fort McMurray wildfire, which caused $8.9 billion in losses and shut down major oil sands production, is cited as a stark example of nature-related risk becoming a material financial threat. The legal opinion stresses the importance of using credible disclosure frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) and guidelines by the Canadian Sustainability Standards Board. Though currently voluntary, these frameworks are expected to become a regulatory focus. The paper also urges companies to bring in external experts and consult Indigenous rights holders to ensure meaningful and context-sensitive risk management. As investors grow increasingly concerned with environmental risk, corporate directors are being put on notice. “This provides clarity on the onus for directors,” said Patricia Fletcher, CEO of the Responsible Investment Association. “Investors expect that these issues are not just acknowledged but actively addressed.”