When is a fiduciary a fiduciary? Climate duties and corporate governance under English law
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The UK Supreme Court's ruling in Hopcraft & others v Close Brothers; Johnson & Wrench v FirstRand Bank [2025] UKSC 33 has sharpened the boundaries of fiduciary obligation in English law.¹ The Court's narrow reading of fiduciary duty — rejecting the extension of fiduciary status to car finance brokers — restores doctrinal clarity while raising pressing questions about the scope of established fiduciary relationships.² Directors, as recognised fiduciaries, now face heightened scrutiny as climate change transforms from environmental concern to material business risk.³
This essay argues that Hopcraft's clarification of fiduciary principles, when read with the statutory directors' duties under the Companies Act 2006, creates an imperative for climate risk governance. While Hopcraft narrows the expansion of new fiduciary categories, it simultaneously strengthens the obligations of established fiduciaries. Directors, who indisputably occupy this status, must exercise loyalty and care in confronting systemic risks — including climate change — that threaten corporate survival.
Despite mounting evidence of climate-related business risks,⁴ legal accountability remains fragmented. ClientEarth's unsuccessful derivative claim against Shell's directors illustrates both the potential and procedural hurdles of climate litigation. Yet over 2,666 climate cases have been filed globally as of June 2024, reflecting growing legal pressure on corporate climate governance.
This essay concludes by proposing targeted legislative reforms: (1) statutory climate risk disclosure duties; (2) safe harbour provisions for good-faith climate mitigation; and (3) enhanced derivative claim procedures for climate-related governance failures.
English fiduciary law rests on two cardinal rules. The no-profit rule prevents fiduciaries from profiting without fully informed consent (Keech v Sandford (1726)).⁵ The no-conflict rule prohibits placing duty and personal interest in conflict (Regal (Hastings) v Gulliver [1942]).⁶ These rules operationalise the fundamental principle of undivided loyalty — the fiduciary's singular obligation to serve their principal's interests.⁷
Hopcraft rejected the Court of Appeal's attempt to derive fiduciary status from "disinterested duty."⁸ Car dealers arranging finance remained commercial actors pursuing self-interest, not fiduciaries bound by loyalty.⁹ The Supreme Court's emphasis on loyalty — not trust, reliance, or helpfulness — as the definitive characteristic clarifies decades of doctrinal uncertainty.¹⁰
This precision matters beyond consumer finance. Fiduciary status remains exceptional, requiring either: (i) recognised categories (trustees, directors, agents), or (ii) express undertakings of loyalty.¹¹ The judgment thus forecloses expansive interpretations while reinforcing the stringent duties owed by established fiduciaries.
Hopcraft's restrictive approach paradoxically strengthens the position of recognised fiduciaries. By clarifying that fiduciary status is exceptional, the Court implicitly reinforces that those within established categories — including directors — bear correspondingly demanding obligations.¹² The judgment's emphasis on loyalty's singular importance suggests courts will scrutinise recognised fiduciaries more rigorously, not less.
Counterargument: Critics argue that Hopcraft's restrictive approach signals judicial reluctance to expand fiduciary concepts to address contemporary challenges like climate change.¹³ However, this misreads the judgment. Hopcraft clarifies boundaries; it does not diminish established duties.
UK directors occupy a unique legal position as both common law fiduciaries and statutory actors.¹⁴ The Companies Act 2006 codifies core fiduciary principles while adding specific duties:
• s.171: duty to act within powers¹⁵
• s.172: duty to promote company success (with environmental considerations)¹⁶ • s.173: duty to exercise independent judgment¹⁷
• s.174: duty of reasonable care, skill, and diligence¹⁸
• s.175: duty to avoid conflicts of interest¹⁹
• s.176: duty not to accept benefits from third parties²⁰
• s.177: duty to declare interests in transactions²¹
Section 172 explicitly requires directors to consider "the impact of the company's operations on the community and the environment."²² This provision, often overlooked, creates statutory foundation for environmental considerations in corporate governance. Directors cannot legitimately claim environmental factors fall outside their purview when Parliament has expressly included them.
The section's "enlightened shareholder value" approach links environmental considerations to long-term company success.²³ This temporal dimension becomes crucial for climate risks, which often manifest as trade-offs between short-term costs and long-term survival.
Section 174's care standard incorporates both subjective elements (the director's actual skills) and objective elements (general knowledge expected of someone in that position).²⁴ Given widespread recognition of climate risks by financial regulators,²⁵ institutional investors,²⁶ and professional bodies,²⁷ the "reasonable director" standard increasingly demands climate literacy.
Counterargument: Business judgment advocates argue that s.174's reasonableness standard should not be interpreted to require specific expertise in emerging areas like climate science.²⁸ However, the standard requires reasonable care in obtaining necessary information, not personal expertise. Directors must seek appropriate advice on material risks they cannot personally assess.
Climate risks manifest across multiple categories:
Physical risks: Asset impairment from extreme weather, sea-level rise, and changing precipitation patterns.²⁹ The Bank of England's Prudential Regulation Authority identifies these as material financial risks.
Transition risks: Stranded assets from decarbonisation policies, technological shifts, and changing consumer preferences.³⁰ The accelerating energy transition threatens carbon-intensive assets with obsolescence.
Litigation risks: Over 2,666 climate cases filed globally by June 2024 create material legal exposure for companies perceived as climate laggards.
Regulatory risks: Evolving FCA requirements for climate disclosure and ISSB standards create new compliance obligations.
Reputational risks: Consumer boycotts, investor divestment, and talent flight impose competitive disadvantages.
Recent legal opinions confirm that climate and nature-related risks are material financial risks directors must actively manage. The convergence of regulatory guidance, investor expectations, and professional standards means directors cannot plausibly claim ignorance of climate risks.³¹
A March 2024 legal opinion concluded that UK directors must consider nature-related risks to fulfil their fiduciary duties, building on similar analyses for climate risks.³² This reflects the evolving understanding of what constitutes reasonable directorial conduct.
Climate negligence potentially breaches the core fiduciary obligation of loyalty. Directors who systematically ignore long-term climate threats while prioritising short-term profits may effectively place their interests (or inertia) above the company's sustainable welfare. This represents precisely the kind of conflict between duty and interest that fiduciary law prohibits.³³
Counterargument: Some argue that climate considerations are inherently political or policy matters beyond directors' commercial expertise.³⁴ However, this conflates climate science with climate policy. Directors need not endorse particular policy approaches, but they cannot ignore material business risks simply because they arise from politically contentious sources.
The business judgment rule defers to directors' knowledge and expertise, protecting them from liability for simply making bad decisions.³⁵ This principle encourages risk-taking essential for business innovation while preventing judicial second-guessing of commercial decisions.
The rule protects decisions made in good faith, with due care, and in the honest belief that actions serve the corporation's best interests.³⁶ Courts historically apply this standard deferentially, recognising their limited commercial expertise.
However, the business judgment rule does not protect directors who completely ignore material climate or nature-related risks.³⁷ The rule assumes directors have adequate information; it does not excuse wilful ignorance of material risks.
Several factors limit business judgment protection in climate contexts:
Information failure: Directors cannot claim protection if they fail to seek relevant climate risk information.³⁸
Good faith questions: Systematic disregard of known existential risks may constitute bad faith.³⁹
Care standard: Directors must educate themselves about climate risks, consider management strategies, and determine appropriate corporate action.⁴⁰
Recent opinions in Asia-Pacific jurisdictions confirm directors may face gross negligence liability for climate inaction.⁴¹ US courts increasingly recognise climate-related oversight duties under Delaware's Caremark doctrine.⁴² These developments suggest international convergence around climate-conscious directorial duties.
Counterargument: Critics warn that climate liability could create excessive risk aversion, deterring valuable directorial service.⁴³ However, well-designed safe harbours can protect good-faith climate mitigation efforts while discouraging negligent inaction.
The FCA is moving from TCFD-aligned to ISSB-aligned disclosure rules, expanding climate-related reporting requirements.⁴⁴ The 2024 UK Corporate Governance Code emphasises sustainability considerations.⁴⁵ These developments create new benchmarks for directorial conduct.
The FCA's broader sustainable finance framework includes entity-level climate disclosures that effectively require board-level oversight of climate risks.⁴⁶ This regulatory infrastructure supports expanded directorial duties even without explicit legal mandates.
The world's largest proxy advisors indicate that insufficient oversight of environmental issues could harm shareholder interests and justify voting against directors.⁴⁷ This market-driven accountability mechanism operates independently of legal liability, creating practical incentives for climate governance.
Institutional investors increasingly integrate climate considerations into investment decisions, creating market pressure for enhanced disclosure and risk management.⁴⁸ This evolution reflects growing recognition that climate risks are material financial risks requiring active management.
While ClientEarth's case against Shell failed on procedural grounds, it established that climate strategy is justiciable under directors' statutory duties.⁴⁹ Targeting individual directors is seen as more effective at forcing behavioural change than corporate-level litigation.⁵⁰
The trend toward director-focused climate litigation reflects strategic recognition that personal liability creates stronger incentives for behaviour change than corporate-level remedies.⁵¹
Objection: Courts lack expertise to evaluate complex climate science and should defer to business judgment on inherently uncertain matters.⁵²
Response: This confuses climate science with business risk assessment. Courts need not evaluate climate models; they assess whether directors have reasonable processes for considering material risks identified by relevant experts. The analogy is evaluating financial risk management, not conducting financial analysis.
Objection: Climate liability could deter risk-taking and efficient capital allocation, harming economic growth.⁵³
Response: Proper risk assessment enhances rather than impedes efficient allocation. Climate risks are material financial risks; ignoring them represents market failure, not efficient allocation. Moreover, well-designed safe harbours can protect good-faith climate mitigation while deterring negligent inaction.
Objection: Climate policy should be determined through democratic processes, not judicial interpretation of fiduciary duties.⁵⁴
Response: This objection mischaracterises the legal issue. Courts would not determine climate policy but assess whether directors reasonably address material risks to their companies. The distinction parallels existing duties regarding technological change, regulatory shifts, or market evolution — all matters with policy dimensions that directors must nevertheless address.
Parliament should amend the Companies Act 2006 to include explicit climate risk assessment duties. Model provision:
"Directors must establish reasonable systems for identifying, assessing, and managing climate-related risks that may materially affect the company's business, operations, or financial condition."
This would clarify existing obligations while providing specific guidance for compliance. Safe Harbour Provisions.
To encourage proactive climate governance, legislation should protect directors who undertake good faith climate risk assessment and mitigation:
"No director shall be liable for decisions made in good faith to address climate-related risks, based on reasonable assessment of available information, even where such decisions prove commercially unsuccessful."
This would parallel existing business judgment protections while encouraging climate engagement. Enhanced Derivative Claims.
Reform should address procedural barriers highlighted by ClientEarth v Shell. Proposed amendments might:
• Clarify standing requirements for climate-related derivative claims
• Create specialised procedures for claims involving long-term systemic risks
• Establish expert panels to assist courts in assessing climate risk management
Enhanced coordination between the FCA, Companies House, and climate regulators could create comprehensive oversight frameworks without duplicative burdens. Integrated reporting requirements would reduce compliance costs while improving transparency.
Counterargument: Some argue that legislative intervention is premature given evolving scientific understanding and market practices.⁵⁵ However, the basic obligation to assess material risks is well established; statutory clarification would enhance rather than revolutionise existing duties.
Recent scholarship proposes treating government-controlling shareholders as fiduciaries with climate duties, extending accountability to state-owned enterprises.⁵⁶ This approach could transform climate governance in economies with significant state ownership.⁵⁷
The EU's Corporate Sustainability Due Diligence Directive creates mandatory climate risk assessment frameworks that influence directorial duties across Member States.⁵⁸ These developments suggest international convergence around climate-conscious corporate governance.
Enhanced climate risk governance could strengthen the UK's position as a global financial centre. Clear legal frameworks attract international investment by reducing regulatory uncertainty.⁵⁹ Conversely, lagging behind international standards risks capital flight to jurisdictions with more developed climate governance frameworks.
Brexit provides opportunities to develop climate governance frameworks tailored to UK circumstances while maintaining international competitiveness. The UK's development of sustainability reporting standards demonstrates this potential.⁶⁰
Hopcraft clarifies that fiduciary status is exceptional, grounded in loyalty rather than mere helpfulness. This precision strengthens rather than weakens the obligations of recognised fiduciaries. Directors, who indisputably occupy fiduciary status, bear correspondingly demanding duties of loyalty and care.
Climate change represents the paradigmatic test of modern fiduciary duty. The scale, timeframe, and systemic nature of climate risks challenge directors to expand temporal horizons and integrate sustainability into core business strategy. This is not judicial activism but the natural evolution of established legal principles applied to contemporary challenges.
Four factors drive evolution in directorial duties:
1. Scientific consensus: Climate risks are no longer speculative but foreseeable based on overwhelming scientific evidence.⁶¹
2. Regulatory recognition: Financial regulators across jurisdictions treat climate change as material business risk.⁶²
3. Market integration: Institutional investors increasingly price climate risks into investment decisions.⁶³
4. Statutory framework: Section 172's explicit environmental provisions provide legislative foundation for climate considerations.
For directors, climate due diligence has become mandatory, not optional. This requires:
• Risk assessment: Systematic evaluation of physical and transition risks using recognised frameworks
• Governance systems: Board-level oversight with appropriate expertise and advisory support
• Strategic integration: Alignment of business strategy with climate risk assessment
• Transparent disclosure: Accurate reporting on climate risks and mitigation strategies
• Adaptive management: Regular review and updating as circumstances evolve
The stakes extend beyond individual companies or directors. Climate change poses systemic risks to economic stability and social welfare. Corporate governance frameworks that ignore these risks facilitate collective action problems that threaten system-wide resilience.
Fiduciary duty, historically focused on preventing self-dealing and ensuring loyalty, now confronts challenges requiring forward-looking risk assessment and stakeholder consideration. This evolution does not abandon traditional principles but applies them to contemporary realities.
Directors who recognise this evolution and adapt their practices accordingly will discharge their legal duties while positioning their companies for long-term success. Those who cling to outdated approaches may find themselves on the wrong side of both legal liability and business reality.
Thus, the fiduciary question for our age is not whether car dealers are fiduciaries — Hopcraft settles that definitively. The question is whether directors who ignore climate risks can claim to fulfil their fiduciary obligations. To act loyally and diligently in the twenty-first century is to confront climate change, integrate it into strategy, and manage it transparently.
Fiduciary duty, once primarily concerned with secret profits and conflicts of interest, has become the legal framework for corporate survival in a climate-constrained world. The doctrine's ancient emphasis on loyalty and care finds new relevance in humanity's greatest challenge. Directors who embrace this reality will not only comply with their legal obligations but lead their companies toward sustainable prosperity. Those who resist may discover that fiduciary duty, properly understood, demands nothing less than the transformation of corporate governance for a transforming world.
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1. Hopcraft & others v Close Brothers; Johnson & Wrench v FirstRand Bank [2025] UKSC 33.
2. Ibid, [45]-[52] (rejecting "disinterested duty" formulation).
3. Bank of England, "Climate-related financial risk management and the role of capital requirements" (2018).
4. IPCC, "Climate Change 2023: Synthesis Report" (2023).
5. Keech v Sandford (1726) Sel Cas Ch 61.
6. Regal (Hastings) v Gulliver [1942] 1 All ER 378.
7. Bristol and West Building Society v Mothew [1998] Ch 1, 18.
8. Hopcraft, [48].
9. Ibid, [51].
10. Ibid, [45]-[52].
11. Hospital Products Ltd v US Surgical Corp (1984) 156 CLR 41.
12. Hopcraft, [52].
13. See P Davies, "Fiduciary Duties After Hopcraft" (2025) 141 LQR 234.
14. Companies Act 2006, ss 170-181.
15. Ibid, s 171.
16. Ibid, s 172.
17. Ibid, s 173.
18. Ibid, s 174.
19. Ibid, s 175.
20. Ibid, s 176.
21. Ibid, s 177.
22. Companies Act 2006, s 172(1)(d).
23. Company Law Review Steering Group, "Modern Company Law for a Competitive Economy: Final Report" (2001).
24. Companies Act 2006, s 174.
25. Bank of England PRA, "Climate Change Adaptation Report" (2021).
26. Investment Association, "Climate Change Position Paper" (2022).
27. Institute of Directors, "Climate Risk Governance Guide" (2023).
28. See R Kraakman et al, "The Anatomy of Corporate Law" (3rd edn, 2017) 89-92. 29. Bank of England, "Breaking the Tragedy of the Horizon" (2015).
30. Carbon Tracker, "Stranded Assets and Thermal Coal" (2018).
31. Commonwealth Climate and Law Initiative, "Directors' Duties Navigator" (2024).
32. Shivji KC, "Nature-related risks and directors' duties under English law" (March 2024).
33. Boardman v Phipps [1967] 2 AC 46.
34. See L Strine, "Corporate Power Ratchet" (2015) 51 Harv CR-CL L Rev 445. 35. Smith v Van Gorkom 488 A 2d 858 (Del 1985).
36. Aronson v Lewis 473 A 2d 805 (Del 1984).
37. Commonwealth Climate and Law Initiative, "Climate Risk and Directors' Duties" (2024).
38. Francis v United Jersey Bank 432 A 2d 814 (NJ 1981).
39. Stone v Ritter 911 A 2d 362 (Del 2006).
40. Norton Rose Fulbright, "Climate change and sustainability disputes" (2019). 41. Villanueva et al, "Directors' Duties Under Philippine Law On Climate Change Risks" (2022). 42. Marchand v Barnhill 212 A 3d 805 (Del 2019).
43. See S Bainbridge, "The Business Judgment Rule as Abstention Doctrine" (2004) 57 Vand L Rev 83.
44. FCA, "Sustainability reporting requirements" (2024).
45. Financial Reporting Council, "UK Corporate Governance Code 2024" (2024).
46. FCA, "Climate change and sustainable finance" (2024).
47. Glass Lewis, "2024 Policy Guidelines" (2024); ISS, "Climate-focused Voting Policies" (2024).
48. Principles for Responsible Investment, "Investor Climate Action Plans" (2023). 49. ClientEarth v Shell [2023] EWHC 1137 (Ch).
50. Capital Monitor, "Climate risk: Liability tide turning against directors" (2022). 51. See J Coffee, "Entrepreneurial Litigation" (2015).
52. See F Easterbrook & D Fischel, "The Economic Structure of Corporate Law" (1991) 93-98. 53. Ibid, 98-103.
54. See M Moore, "Corporate Governance in the Shadow of the State" (2013).
55. See B Cheffins, "The Stewardship Code's Achilles' Heel" (2010) 73 MLR 985.
56. E Lim, "The Government Controlling Shareholder as a Fiduciary" (2024) 35 EBLR 123.
57. Ibid, 145-152.
58. EU Corporate Sustainability Due Diligence Directive 2024/1760.
59. TheCityUK, "UK Financial Services: State of the Industry" (2024).
60. HM Treasury, "UK Sustainability Reporting Standards Framework" (2024).
61. IPCC, "Climate Change 2023: Synthesis Report" (2023).
62. Bank of England et al, "Joint statement on climate change" (2019).
63. BlackRock, "Climate risk and the global energy transition" (2023).
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