The Malaysian Bar’s International Malaysia Law Conference (“IMLC”) 2026 takes place from 27 to 30 Oct 2026 at MITEC, Kuala Lumpur.
By Sandhya Saravanan, Low & Partners
The session titled “Directors’ Duties in the Environmental, Social and Governance Era: Balancing Growth with Sustainable Governance” was moderated by Kiu Jia Yaw, who was joined by three speakers: the Honourable Justice Dato’ Ong Chee Kwan, Shyam Divan and To’ Puan Janet Looi.
The moderator set the scene by highlighting the recent haze crisis, which has shifted attention to broader accountability of plantation companies, their financiers and the due diligence behind their capital flows.
Against this backdrop, the first speaker, the Honourable Justice Dato’ Ong Chee Kwan observed that although section 213 of the Companies Act 2016 is silent on environmental, social and governance (“ESG”) obligations or climate risk management, its existing duties of good faith, care, skill and diligence are wide enough to encompass them. In contrast, section 172 of the United Kingdom’s Companies Act 2006 requires directors to consider factors such as the company’s environmental impact when promoting the company’s success. He further explained that the business judgment rule under section 214 of the Companies Act 2016 may protect directors from liability where they are adequately informed and exercise reasonable judgment. Properly documented due diligence can therefore support a defence, although directors cannot blindly rely on committee reports or expert opinions without exercising independent judgment. He emphasised that courts are more likely to scrutinise the decision-making process than substitute their own commercial judgment for that of the board, even where the decision ultimately proves unsuccessful.
The second speaker, Shyam Divan, discussed the recent Indian Supreme Court case of MK Ranjitsinh v Union of India [2024] INSC 280, which examined the intersection of critically endangered birds, overhead transmission cables and the Indian Constitution. The Court referred to section 135 of India’s Companies Act 2013, which mandates that any company meeting the prescribed threshold of net worth, turnover or net profit must spend at least 2% on corporate social responsibility (“CSR”) activities, and section 166(2), which imposes a duty on directors towards the community and the environment. Additionally, he identified four pressures on boards to integrate ESG considerations: statutory obligations, implied duties arising from judicial interpretation, mandatory reporting obligations and external risk arising from international regulations, particularly those affecting cross-border supply chains.
The third speaker, To’ Puan Janet Looi, highlighted section 213(2)(b), under which a director’s actual expertise may raise the standard of care. She identified blind spots in corporate governance and the discharge of directors’ duties, drawing on findings from the report “A LEAP for Nature: Advancing Nature-related Financial Risk and Opportunity Assessment in Malaysia” which found that although boards may recognise carbon emissions, they often overlook their businesses’ dependence on natural systems such as water, healthy soils and forests. Despite 51.3% of Malaysia’s gross domestic product in 2019 having a very high dependency on ecosystem services, only 22% of surveyed firms had conducted nature-related risk assessments. She emphasised that existing governance structures and sustainability reporting have yet to translate into meaningful changes in corporate decision-making. She also spoke about the “Locate, Evaluate, Assess and Prepare” approach as a framework for identifying nature-related impacts, risks and opportunities.
The discussion circled back to the haze crisis through a question from the floor, which asked how directors’ duties and potential liability would be assessed if their companies’ activities contributed to the crisis. In response, the Honourable Justice Dato’ Ong Chee Kwan outlined a five-stage test for assessing directors’ potential liability, focusing on the identification and materiality of risks and whether the board took reasonable steps to address them with due care. Interestingly, he added that the accessibility of information in the era of artificial intelligence may raise the standard of knowledge expected of directors.
In response to the moderator’s closing question on the most urgent shift directors must make to future-proof board governance, the panellists collectively emphasised that directors must actively consider environmental and climate risks in their long-term strategies and investment decisions.
*This article reports on Breakout Session 2, Stream C: Corporate and Commercial Law.