Publication: How to Set Up Effective Climate Governance on Corporate Boards: Guiding principles and questions

The goal of this paper is to propose tools that can be useful for the board of directors to steer climate risks and opportunities: the governance principles are designed to increase directors’ climate awareness, embed climate issues into board structures and processes and improve navigation of the risks and opportunities that climate change poses to business.

WEF Principles

In order to assists the boards in approaching climate change in a holistic way, The World Economic Forum has published guidance on How to Set Up Effective Climate Governance on Corporate Boards

Climate governance

The board is ultimately accountable for long-term stewardship of the company – it is therefore responsible for setting up governance mechanisms that ensure an appropriate level of climate change consideration at all levels of the organization – from the C-suite down.

Regulatory landscape

Principles of setting fees for greenhouse gas emissions, the European Green Deal, Climate Law, emission reduction plans and reporting on climate issues and other global and European regulations are basic knowledge that members and members of Supervisory Boards should have. Worldwide Carbon Pricing The World Bank defines Carbon Pricing as an „instrument that captures the […]

How does climate change impact businesses?

What is certain is that climate change will affect every business, to a greater or lesser extent. Losses might occur as a direct cause of extreme weather events, such as storms, droughts or floods, or indirectly, by higher risk of default due to economic and social disruption, litigation risk, reduced returns and falling economic growth – even in case of investments which avoid physical damage. Climate risks affects all economic sectors, however the level and the type of exposure differs by geography, sector, industry and asset and/or credit portfolio of the company.

Why is knowledge about climate change important for members of Supervisory Boards

The role of the non-executive director (the “NED”) is to provide oversight, strategic guidance and to challenge the executive directors with the objective of improving the corporate’s operations. Therefore, the NEDs can potentially make a huge contribution by introducing climate change to the board’s agenda and ensuring that climate-related issues are embedded in the company’s governance, risk management, strategic decisions and allocation of resources. In order to do that, the NED must be aware of the complexity of the issues, the potential impacts for the company and how they might be effectively addressed.