Landmark Opinion impacting Sustainable Finance 

Abstract: A landmark legal opinion by Resilient LLP, released on July 29, 2025, may dramatically reshaped the expectations placed on Canadian corporate directors by establishing that failure to address nature-related risks (NRR) may now constitute a breach of fiduciary duty under the Canada Business Corporations Act (CBCA). These risks — from biodiversity loss to water stress and extreme weather — are no longer theoretical, but financially material and legally actionable. Boards that fail to assess, disclose, and govern around NRR may face derivative lawsuits, greenwashing claims, or loss of protection under the business judgment rule. While some policymakers retreat from climate mandates, this opinion signals a legal and market-level pivot: sustainable governance is now a matter of core risk management, fiduciary obligation, and competitive advantage. For the financial sector, nature-positive governance is no longer optional — it is required.

A important legal opinion issued by Resilient LLP on July 29th, 2025, warns that company directors who ignore nature-related risks — biodiversity loss, ecosystem collapse, water stress, extreme weather, and harms to Indigenous lands — are not just being negligent. They may now be liable.

The opinion, authored by Lisa (Elisabeth) DeMarco & Dr. DT Vollmer, is clear: nature risk is business risk. And directors who fail to manage it may now be exposed — not just reputationally, but legally.

Nature-related risks (NRR) — such as supply chain disruptions, ecosystem degradation, regulatory shifts, and operational exposure to climate extremes — are no longer hyperthetical. They are foreseeable, well-documented, and financially material. In the words of the legal opinion: “not far-fetched, but real risks.”

In 2024 alone, Canada saw CA$8.5 billion in insured losses from natural catastrophes — the highest on record. Meanwhile, the Canadian economy leans heavily on CA$4.9 trillion worth of ecosystem services, from pollination to flood control. These are no longer externalities. They are fundamental inputs to growth and stability.

Under Section 122 of the Canada Business Corporations Act (CBCA), directors must act “honestly and in good faith with a view to the best interests of the corporation,” and with the care, diligence, and skill of a reasonably person.  According to the Resilient LLP opinion, directors who ignore foreseeable, material NRR may fail that obligation.

This matters. Failure to incorporate NRR into governance and oversight may:

• Expose boards to derivative lawsuits under CBCA s.239;
• Trigger oppression claims under CBCA s.241;
• Lead to tort-based negligence claims;
• Invalidate protection under the business judgment rule;
• Invite greenwashing liability under securities law.

Critically, legal exposure increases when boards fail to document a process for assessing and disclosing NRR, particularly in sectors where dependencies on nature — such as agriculture, mining, energy, forestry, and finance — are significant.

Financial Institutions

Financial institutions are exposed via their lending, insurance, and investment portfolios. Retailers rely on global supply chains vulnerable to drought, disease, or regulation. Real estate is exposed to floodplain redesignation and climate risk.

Investor sentiment is shifting. A 2025 survey shows that 63% of institutional investors — managing over CA$4.5 trillion — are already integrating nature risk into their asset-allocation decisions. Sentiment, as ever, drives capital. Directors who delay response may find themselves unable to attract capital, clients, or talent in a nature-conscious market.

Some view the global retreat from climate mandates — including Canada’s shift following Trudeau’s departure and the U.S. rollback under a second Trump presidency — as a signal that ESG is on the wane. (See my article https://www.canadianlenders.org/blog_post/trump-in-trudeau-out-where-is-sustainable-finance). In reality, it marks a maturing of the sustainable finance agenda. The focus is moving away from chasing the regulator’s tail to addressing the business of material risk, financial opportunity, and strategic transparency.

Boards that embrace nature-positive governance will not just avoid lawsuits — they will outperform in the long term. The same governance systems that reduce exposure to fires and floods also build resilience, reduce capital costs, and drive long-term value creation.

Boardroom To-Do List

The report indicates that while Canada lacks a standalone legal regime for nature-risk disclosures, existing securities law requires all material facts to be disclosed. The Resilient opinion states clearly: material NRR must be disclosed. And when in doubt, disclosure is the prudent course. Misrepresentation or omission can lead to enforcement or shareholder action — especially where nature risk intersects with Indigenous rights and community impact.

Frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) and Canadian Sustainability Standards Board (CSSB) offer directors a blueprint. These tools help boards assess both financial materiality (how nature affects the firm) and impact materiality (how the firm affects nature). Both dimensions matter — and both should inform governance strategy.

The report indicated that in order to fulfill their legal obligations and meet market expectations, directors must:

• Identify nature-related dependencies and impacts;
• Assess whether they are financially and operationally material;
• Establish governance systems to monitor and manage those risks;
• Engage meaningfully with Indigenous rights-holders;
• Disclose material risks transparently and consistently;
• Educate themselves and their boards on nature risk and TNFD tools.

These are not optional. They are the baseline for sound governance in the 2020s. As the legal opinion from Resilient LLP makes clear, ignoring it is no longer just irresponsible — it may be illegal.

Five Key Insights:

1. Directors May Be Held Liable for Ignoring Nature Risk
   Under CBCA Sections 122, 239, and 241, directors who fail to manage material nature-related risks may be exposed to derivative lawsuits, oppression claims, or negligence actions — particularly in sectors with high environmental dependencies.

2. Nature-Related Risks Are Now Financially Material
   From insured climate losses (CA$8.5B in 2024) to ecosystem service dependencies (valued at CA$4.9T), nature is no longer an externality. It is a fundamental economic input that must be monitored, governed, and disclosed.

3. Legal Protection Requires Documented Governance
   Boards must show clear processes for identifying, assessing, and disclosing NRR — including meaningful engagement with Indigenous communities. Failure to do so may void protections under the business judgment rule.

4. Disclosure of Material NRR Is a Legal Requirement
   Even without standalone NRR legislation, Canada’s existing securities laws mandate disclosure of all material facts. Misrepresentation or omission — especially involving Indigenous rights or high-risk sectors — can trigger enforcement.

5. Sustainable Governance Is a Strategic Advantage
   Institutional capital (63% of CA$4.5T) is now aligned with nature risk. Boards that act early, using tools like TNFD and CSSB, will not only reduce legal exposure — they will attract capital, reduce costs, and build long-term resilience.

Legal Source: “Nature-related risks and the duties of directors of Canadian corporations,” Resilient LLP, 29 July 2025. Authors: Lisa (Elisabeth) DeMarco & Dr. DT Vollmer  Read the full opinion →

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