Climate transition plans - Legal opinion on disclosure liabilities for directors and companies

The UK Government is currently consulting on how to implement mandatory disclosure of climate transition plans. While the initial focus is on UK-regulated financial institutions and FTSE 100 companies, more companies and sectors are likely to be included in future regulations.

With that in mind, it is interesting to see this legal opinion published by Erskine Chambers at the same time. Commissioned by ClientEarth, it assesses potential liabilities for companies and directors under English Law if climate transition plan disclosures become compulsory. It follows ClientEarth’s derivative action claim against Shell’s board of directors for alleged mismanagement of the company’s climate risks, which we considered here.

A climate transition plan outlines how a business will adapt to a low carbon economy, covering emissions, financial risks, supply chain, governance and business model changes. Erskine Chambers concludes that companies and directors are unlikely to face materially heightened legal risk if climate transition plan disclosure requirements are introduced. Their view rests on detailed analysis of current disclosure obligations, existing legal protections and the high standards required to establish liability.

Introducing mandatory disclosures may impose an extra burden on companies to gather and verify information, and could expose directors to some additional risk - particularly when relying on inputs from specialist staff or expert advisers. However, Erskine Chambers considers this risk to be limited because of legal protections afforded to those acting honestly, and expressing statements with genuine belief. Directors are also permitted to delegate tasks, provided they do so with due care, skill and diligence, and maintain oversight by asking appropriate questions. Simply relying on advice without scrutiny is not enough.

On the flip side, Erskine Chambers highlight potential benefits for directors and companies in meeting such disclosure requirements. For example, a well-prepared transition plan could help defend against greenwashing claims by substantiating climate-related statements.

They also note that liability exposure may be reduced, as:

• unrealistic targets, expectations and plans are more likely to be identified early;
• detailed disclosure frameworks require broad statements to be supported by evidence, limiting the scope for overstatement; and
• preparing such plans is likely to help prevent directors from making reckless forward-looking statements.

To minimise liability concerns, Erskine Chambers recommends several practical measures for companies and directors:

• Establish robust processes - Assign responsibility for preparing the plan to skilled teams, ensure board oversight through regular reporting and questioning, and seek external advice where needed.
• Verify information - Confirm the completeness and accuracy of disclosures and understand any omissions or uncertainties.
• Use clear caveats - Explain assumptions, methodologies, disclaimers and levels of confidence to provide context for forward-looking statements.
• Keep thorough records - Document board and committee discussions and decision-making processes to evidence diligence and oversight.
• Apply genuine judgment - Directors must engage meaningfully with the content of the plan and avoid making statements they do not genuinely believe, or lack reasonable basis for believing.

The takeaway is clear: when approached with care and integrity, climate transition plan disclosures do not present significant new liability risks for companies or directors under England and Wales law.

On the contrary, they potentially offer a structured path to compliance, transparency and resilience in the face of climate-related scrutiny. Boards that act honestly and follow sound processes should have robust defences available; and liability should not arise simply because targets are not met or plans evolve over time.

Discover the rest of the articles in our ESG in the boardroom series on our In Focus page.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.