Legal Opinion 2021
The Aotearoa Circle has sought advice as to the legal duties of New Zealand trustees to manage climate change-related risk to trust investments.
Co-authors Nicola Swan (Chapman Tripp) and Daniel Kalderimis (Thorndon and Richmond Chambers) conclude that trustees’ duties of prudent investment, of impartiality towards beneficiaries, and to act in the best interests of beneficiaries all align in relation to addressing climate change investment risk. In light of the increasing awareness of climate-related risk in New Zealand in 2021, trustees will be expected to identify and assess whether climate-related risk may have a material impact on trust investments. While ever context-dependent, trustees should actively consider whether trust investments are at risk of material financial impact as a result of physical impacts or regulatory, market or legal developments connected to climate change. If so, then those trustees should appropriately manage that risk over the mid to long term, including by diversification and/or divestment if appropriate. These assessments are not easy, but they are important for trustees to work through to properly discharge their duties to present and future beneficiaries.