CLA News / Directors’ Duties in Canada: What the Law Says About Nature-Related Risks By Jasmin Fraser (Lawyer, Commonwealth Climate and Law Initiative) and Lisa (Elisabeth) DeMarco (Senior Partner and CEO, Resilient LLP)

Canadian corporate leaders are juggling a crowded risk agenda. AI, cybersecurity breaches, tariffs and geopolitical tensions all demand attention in the boardroom. But one major threat is still flying under the radar: the accelerating loss of nature.

In the boardroom, this has real legal consequences. In July 2025, the Commonwealth Climate and Law Initiative (CCLI) released Nature-related risks and the duties of directors of Canadian corporations (the Legal Opinion), authored by Elisabeth DeMarco, Senior Partner and CEO of Resilient LLP, and Dr. DT Vollmer. The opinion analyzes the extent to which Canadian corporate directors’ fiduciary duties and duty of care encompass the identification, consideration, and management of nature-related risks (NRR).

In this article for the Commonwealth Lawyers Association, we summarize some of the key legal findings in relation to directors’ legal duties and NRR.

Why is nature important?

There is international consensus that ecosystem degradation and biodiversity loss presents a systemic and financial risk, material to a number of sectors. PwC has reported that 55% of the world’s GDP, or USD 58 trillion of economic value generation, is moderately or highly dependent on nature and its services and is therefore very exposed to nature loss.

The position is similar for Canada – the economic value of ecosystem services in Canada’s ecozones is estimated to be at least USD 3.6 trillion per year, more than double Canada’s GDP in 2018. Three of Canada’s largest industries – real estate, rental, and leasing; manufacturing; and mining, quarrying, and oil and gas extraction – are all recognized as industries with high-level supply chain dependencies on biodiversity. These industries contributed over CAD 616 billion to Canadian GDP of CAD 2.142 trillion in 2023 (around 29%).

What are nature-related risks?

Nature-related risks can be split into the following categories:

1. Nature-related physical risks: Risks resulting from the degradation of nature (such as changes in ecosystem equilibria, including soil quality and species composition) and consequential loss of ecosystem services that economic activity depends upon. These risks can be chronic or acute.
2. Nature-related transition risks: Risks to an organisation that stem from a misalignment of economic actors with actions aimed at protecting, restoring and/or reducing negative impacts on nature.
3. Nature-related systemic risks: Risks that arise from the breakdown of the entire system, rather than the failure of individual parts.
4. Nature-related legal risks: Risks that arise from mismanagement of physical or transition risks that may lead to legal cases related to nature loss. These losses or damages can include potential pay-outs, fines, legal and administrative costs, insurance costs, financing costs, and reputational costs.

Whilst nature underpins economic activity in Canada, over 80% of urban wetlands are gone, and one in five species is at risk. The World Bank has estimated that if no action is taken, the collapse of three ecosystem services – wild pollination, provision of food from marine fisheries and timber from native forests – could result in a decline in global GDP of USD 2.7 trillion in 2030.

The legal duties of corporate decision-makers

Section 122(1) of the Canada Business Corporations Act (CBCA) sets out the fiduciary duty and duty of care of corporate directors. The analogous provisions of provincial and territorial legislation are consistent with the provisions of the CBCA.

• Fiduciary duty

The fiduciary duty: Section 122(1)(a) of the CBCA, sets out a director’s fiduciary duty to “act honestly and in good faith with a view to the best interests of the corporation.” This duty is subjective in nature, and the central focus of the duty is the director’s purpose and motivation.

The SCC has confirmed that the fiduciary duty requires directors to act honestly and in good faith vis-à-vis the corporation (Peoples Department Stores Inc. (Trustee of) v Wise (Peoples)). However, the director’s considerations are not limited to the corporation, and the SCC has confirmed that as part of discharging the fiduciary duty, a director may consider broader stakeholder interests, the environment, and the long-term interests of the corporation (s. 122(1.1), CBCA; Peoples; BCE Inc. v 1976 Debentureholder (BCE)). Acting in the best interests of the corporation may require directors to consider factors beyond shareholder profits (BCE).

Application to NRR: The Legal Opinion confirms that the current and potentially material context of NRR supports the view that NRR should be identified and considered by directors as part of their fiduciary duty to the corporation as it may fall within the environment, supply chains, customers, and the long-term interests of the corporation. More specifically, the fiduciary duty and Canadian jurisprudence both permits and may require corporate directors to, at a minimum, identify nature-related dependencies and impacts, and consider material NRR in the context of the best interests of the company. This is particularly so for directors in sectors known to be highly nature-dependent or have significant nature-related impact.

The fiduciary duty does not require directors to elevate NRR above all other interests. However, the Legal Opinion concludes that it is difficult to contemplate how a director may act in the best interests of the corporation and fulfil their duty, if they have not even identified the corporation’s NRR and assessed their materiality,

• Duty of care

The duty of care: Section 122(1)(b) of the CBCA, sets out the duty to “exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.” The director’s duty to manage and oversee the activities of the corporation (s. 102(1), CBCA) is often viewed as implicit within, and reviewed in the context of, the duty of care.

Directors are held to an objective standard, where the context and factual circumstances surrounding the actions of the director are important in determining whether the duty has been fulfilled (Peoples). Meeting this standard may require directors to make inquiries and seek further information and knowledge in order to gain a basic understanding of complex issues.

The duty of care imposes a standard of “reasonableness” on directors. Directors will not be in breach if they acted prudently, and the decision made was a reasonable business decision in light of all the circumstances the directors or officers knew or ought to have known (Peoples).

Unlike the fiduciary duty, the CBCA does not specify to whom the duty of care is owed. This opens the possibility that directors may owe a duty of care to stakeholders beyond the corporation, such as Indigenous rightsholders.

Application to NRR: Ignoring potentially material NRR does not constitute acting on an informed basis, and is not reasonable, prudent, or diligent in the current context and circumstances. Directors should, at a minimum: a) be informed and have sufficient knowledge of NRR, b) have governance oversight and risk management processes in place to identify NRR and their materiality, c) consider current and longer-term NRR, and (d) balance and manage material nature-related dependencies and impacts on nature. Directors may be in breach of their duty of care if they fail to do so.

The business judgment rule

The business judgment rule (BJR) is a fundamental principle of Canadian corporate law – as it is in many other common law countries. The BJR shields directors from personal liability in certain circumstances. Courts will defer to directors’ judgment – even if a decision resulted in a negative outcome – provided the decision taken is within a range of reasonableness (BCE), and the directors acted in good faith, prudently, informed themselves adequately, and avoided conflicts of interest (Maple Leaf Foods Inc. v Schneider Corp.).

If directors are unduly passive toward NRR, do not engage in a reasoned process to identify and analyze NRR, and have no governance process to oversee the corporation’s material nature-related dependencies and impacts on nature, they are very unlikely to be able to demonstrate that they exercised the appropriate degree of prudence and diligence in reaching related business decisions at this time, and thereby benefit from the BJR.

Breaches of duties

The success of any such claim will be highly contingent on the specific facts and circumstances surrounding the director’s conduct and decisions and the applicability of the BJR.

Claims alleging a director’s breach of fiduciary duty related to NRR may be brought by impacted and activist stakeholders and may follow the pattern that has developed for climate-related claims. Claims against directors may include:

• Derivative actions brought by a shareholder, the holder of a debt obligation, a creditor, or another person acting on behalf of the corporation.
• Oppression actions alleging that the corporation’s failure to consider NRR or the director’s exercise of their powers relating to NRR is oppressive or unfairly prejudicial to, or unfairly disregards the interests of, any security holder, creditor, director or officer.

The duty of care does not provide an independent legal action. However, it will be considered in claims brought under section 241 of the CBCA (oppression claims), as well as in tort claims brought by third parties (negligence, and possibly nuisance). Claims against directors may include:

• Derivative actions (as above).
• Oppression actions (as above).
• In the event that the breach of the duty of care leads to a breach of disclosure obligations, disclosure-related complaints and claims.
• Direct tort claims in negligence or potentially nuisance (if the director’s breach of the duty of care is the cause of imminent harm to a stakeholder).
• Failure to perform any delegated duty to consult and accommodate Indigenous rightsholders.

What does this mean for lawyers?

For Canadian lawyers, are your director clients aware of their legal duties in relation to nature-related risks? If not, there is now a clear case for advising them accordingly. The Legal Opinion confirms that failing to identify and consider potentially material nature-related risks could leave directors exposed to claims for breach of their fiduciary duty or duty of care.

For lawyers practising in other common law jurisdictions, the implications are no less relevant. Similar legal opinions have already been published in New Zealand, Australia, and the UK – and the underlying reasoning is transferable. It is increasingly recognized that nature-related risks, like climate change, can create foreseeable and financially material risks that fall squarely within directors’ duties.

Directors must understand their organisations’ impacts and dependencies on nature, and ensure the board has the information, expertise, and governance processes to integrate nature into decision-making, strategy, and disclosure.

Boards that act early to address nature loss can better manage risk, attract capital, and protect long-term value. Those that delay may find both courts and markets less forgiving.

By Jasmin Fraser (Lawyer, Commonwealth Climate and Law Initiative) and Lisa (Elisabeth) DeMarco (Senior Partner and CEO, Resilient LLP)

To learn more about the Commonwealth Climate and Law Initiative’s work in this area, contact jasmin.fraser@commonwealthclimatelaw.org

This publication is for educational purposes only and does not constitute legal advice. The CCLI and this publication’s author make no representations or warranties regarding its contents and accepts no liability for any loss arising from reliance on it. Readers should seek independent legal advice tailored to their specific circumstances.

The Commonwealth Climate Law Initiative (CCLI) is a global legal insights and stakeholder engagement initiative examining the legal basis for company directors and investors to address climate change and nature risks. We take a multidisciplinary approach to develop legal research and practical tools to help boards meet governance obligations and mitigate liability risks.