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[1]:
World Economic Forum Principles
Principle 1 – Climate accountability on boards
“The board is ultimately accountable to shareholders for the long-term stewardship of the company. Accordingly, the board should be accountable for the company’s long-term resilience with respect to potential shifts in the business landscape that may result from climate change. Failure to do so may constitute a breach of directors’ duties.”
Principle 2 – Command of the (climate) subject
“The board should ensure that its composition is sufficiently diverse in knowledge, skills, experience and background to effectively debate and take decisions informed by an awareness and understanding of climate-related threats and opportunities.”
Principle 3 – Board structure
“As the stewards for long-term performance and resilience, the board should determine the most effective way to integrate climate considerations into its structure and committees.”
Principle 6 – Incentivization
“The board should ensure that executive incentives are aligned to promote the long-term prosperity of the company. The board may want to consider including climate-related targets and indicators in their executive incentive schemes, where appropriate. In markets where it is commonplace to extend variable incentives to non-executive directors, a similar approach can be considered.”
Climate change versus other global risks
The yearly Global Risks survey conducted annually by the World Economic Forum by experts from around the world indicates that the climate crisis is the most likely and at the same time potentially the most destructive threat we are currently facing. Furthermore, climate risks and threats have steadily grown in frequency and magnitude since 2008.
[1] World Economic Forum, How to Set Up Effective Climate Governance on Corporate Boards – Guiding principles and questions, 2019, http://www3.weforum.org/docs/WEF_Creating_effective_climate_governance_on_corporate_boards.pdf
