What the ICJ Advisory Opinion on climate change means for Australian directors

6 minute read 12.05.2026 Aaron Wood, Paul Schoff

The ICJ confirmed States must act on climate change. A new joint opinion explores what this means for directors' duties and climate-related risk in Australia.

Key takeouts

While the Advisory Opinion does not directly alter directors' duties in Australia, it translates as heightened transition risk.

The Advisory Opinion may well support or encourage stricter government policy on GHG emissions, a new wave of climate litigation, and sharpened greenwashing risk for corporations.

As directors grapple with new mandatory climate-related financial reporting, it is prudent for them to demonstrably remain abreast of climate-related developments that pose a foreseeable risk of harm to the corporation.

In July 2025, the International Court of Justice (ICJ) delivered its advisory opinion on the obligations of States, including Australia, concerning climate change (Advisory Opinion). It confirmed that States owe duties under customary international law to prevent significant harm to the climate system.

A new joint opinion (Advice) authored by Ruth Higgins SC (Banco Chambers), Zoe Bush (Banco Chambers), and Jennifer Robinson (Doughty Street Chambers, UK, and who appeared for Vanuatu in the ICJ proceedings) has unpacked the implications of the Advisory Opinion in Australia for directors' duties in relation to climate-related risk.

What did the Advisory Opinion say?

The Advisory Opinion concluded that:

States have legal obligations under international climate and environmental treaties, as well as under human rights and customary international law, to prevent and mitigate climate-related harm;
these legal obligations extend to States exercising due diligence, including emissions mitigation, adaptation and cooperation – and failure to do so may amount to a wrongful act;
in respect of private emitters, this obligation entails that States put in place a national system, including legislation, administrative processes and enforcement mechanisms, designed to achieve deep, rapid and sustained reductions of greenhouse gas emissions. States must regulate the conduct of private operators within their jurisdiction or control and accompany those rules with effective enforcement and monitoring mechanisms;
limiting warming to 1.5°C above pre-industrial levels is the agreed primary temperature goal and each party must do its utmost to ensure that the nationally determined contributions it puts forward represent its highest possible ambition in order to realise that goal;
States that commit wrongful acts (or omissions) may be subject to legal consequences and, depending on the circumstances of the particular case, may be required to cease that wrongful act, provide future guarantees of non-repetition, offer reparations, restoration or compensation; and
because climate change threatens fundamental human rights, States must exercise climate due diligence with due account to the protection of human rights.

ICJ advisory opinions are neither binding nor enforceable; however, they are considered authoritative interpretations of international law and historically have proven to have a profound influence on Australian domestic law. The Advice describes Australia's 'dualist' approach to international law in this regard and points by way of example to the influence of an ICJ advisory opinion in prompting the High Court's recognition of native title in Mabo v Queensland (No 2). Accordingly, there is the potential for the Advisory Opinion to open the door to a new wave of climate litigation in Australia, including against corporate emitters.

The Advice identifies at least three Australian cases where the Advisory Opinion has already been invoked to challenge fossil fuel project approvals, and the decision in Pabai v Commonwealth is currently under appeal, where the Advisory Opinion is expected to feature. Read our insights on the Pabai v Commonwealth decision.

What does the Advisory Opinion mean for corporations and directors?

The Advice makes clear that as the probability and magnitude of climate-related risks rises, so too does the standard of care expected of directors under the Corporations Act 2001 (Cth).

Section 180(1) of the Corporations Act 2001 (Cth) provides that directors must exercise their powers and discharge their duties with the requisite degree of care and diligence. Whilst this is an objective standard, identified by reference to a corporation's circumstances and the director's office and responsibilities within the corporation, it is a "fact-intensive" assessment. In this regard, the Advice makes the following observations:

climate change poses a foreseeable risk of harm to most, if not all, Australian corporations and a baseline level of knowledge of a corporation's climate-related risks are expected of directors;
s 180(1) is an expression of Parliament's intention to establish an objective normative standard of the degree of care and diligence for directors in discharging their duty, however, the normative standard is not static and evolves with the complexity of the times – in this regard the Advice points to the recent introduction of annual sustainability reporting and climate-related claims for alleged breaches of directors' duties in other jurisdictions as signals that the normative standard is rising;
s 180(1) requires a forward-looking balancing of the foreseeable risk of harm against the potential benefits that could reasonably be expected to accrue from the relevant conduct including consideration of non-financial interests, particularly as the regulation of emissions-intensive activities tightens and societal and market expectations evolve;
the "business judgment rule" in s 180(2) protects decisions to take or not take action in respect of a matter relevant to business operations where preconditions are met, such as the director informing themselves of the subject matter, acting in good faith and for a proper purpose, and rationally believing the judgment was in the best interests of the corporation – in this sense directors need to take a diligent and intelligent interest in the corporation's climate-related information, advice and processes; and
directors need to take all reasonable steps to ensure that a corporation's material climate-related risks are disclosed and all statements approved are accurate and do not omit any material climate-related risks.

Critically, the Advisory Opinion seems already to be influencing governmental action through tighter regulation, stronger emissions targets, and more stringent assessments of high-emitting industries and projects. A review of Australia's Safeguard Mechanism is looming, and the Advisory Opinion is a factor in favour of broadening and deepening its application.

For corporations, this translates, in effect, as heightened transition risk. Transition risk encompasses the policy, legal, technological, and market shifts associated with the transition to a lower-carbon economy, which can adversely affect a corporation's operations, assets or revenue, whether directly or through its value chain.

Perhaps the most immediate risk for directors is greenwashing. The intersection of the Advisory Opinion and Australia's newly introduced mandatory sustainability reporting regime creates a materially sharpened greenwashing risk. With mandatory climate reporting now in force for Group 1 entities, the Advisory Opinion's confirmation of 1.5°C as the primary temperature goal provides a clear benchmark against which corporate climate claims will be measured.

Claimants may allege that a corporation contravenes statutory prohibitions on misleading or deceptive conduct if it describes its business activities and/or emissions reduction targets as "Paris aligned", despite increasing its production of fossil fuels or not otherwise aligning its activities and/or targets with the 1.5°C temperature goal.

As the recent ACCR v Santos decision has shown, the ESG landscape and greenwashing risk remains dynamic as corporations face dual pressures from regulators and the public whilst the standard of expected knowledge, evidence, terminology and context continue to rise. Read our insights on the ACCR v Santos decision.

What should directors do?

The Advice emphasises that uniform guidance cannot be given. What is required will depend on the particular circumstances of the corporation and that individual director. However, several principles of general application are noted.

Directors will reduce the risk of breaching their duty of care if they:

Stay informed. Directors should be sufficiently apprised of the corporation's climate-related risks, including the heightened transition risks flowing from the Advisory Opinion. In particular, directors should understand the significance of current and anticipated impacts on a corporation's value chain. As recent geopolitical events have demonstrated in the energy sector, external shocks can rapidly reshape the operating environment for corporations across all industries. Climate and energy risk should be on every company's risk register and every director's radar.
Engage with the detail. Directors should take a diligent and intelligent interest in information about the corporation's climate-related risks, ensure they understand that information, and apply an enquiring mind to their responsibilities. The Advice emphasises that the days of the passive director are well and truly over, and that directors cannot eschew these expectations due to an inability to cope with the volume of information they receive.
Act rationally and on advice. Having considered and sought advice on a corporation's climate-related risks, directors should act, or decline to act, based upon a rational and informed assessment of the corporation's best interests. A director who considers and takes advice on a corporation's climate-related risks is in a far better position than one who does nothing at all.
Ensure accurate and complete disclosure. Directors should take all reasonable steps to ensure those risks are disclosed in accordance with the corporation's disclosure obligations.
Do not approve misleading statements. Directors should take all reasonable steps to ensure that statements they approve, especially statements contained in annual sustainability reports, are accurate and do not omit any material climate-related risks.

The bottom line

Now is the time to critically assess your board's understanding of the corporation's climate-related risks, stress-test your disclosure and reporting processes against Australia's mandatory sustainability reporting obligations and ensure that climate considerations are embedded in strategic decision-making.

Proactive boards that stay informed, seek expert advice, and act on it will be best positioned to protect both the corporation and themselves.

Our team can help you navigate the risks and opportunities in this changing landscape. Please contact us if you would like to discuss the implications for your organisation.