Impact Blog
On climate change, boards have key role to play

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      By John StreurPresident and CEO, Calvert Research and Management

      Washington - Today, I'll have the privilege of participating in a webinar on climate change for the National Association of Corporate Directors (NACD). This issue can have broad consequences for business models, shareholder value and growth potential, which means that corporate board members need to examine the potential impacts of climate change on their operations.

      This follows the release earlier this year of the 2019 NACD Blue Ribbon Commission report, Fit for the Future: An Urgent Imperative for Board Leadership. It emphasizes the importance of board leadership acting as agents of change to help their companies adapt to the modern competitive landscape, which is constantly and rapidly changing. Many of these changes involve environmental, social and governance (ESG) issues, and climate change is among the most critical of these.

      Among the focuses of the webinar will be the risks that boards need to consider, and the role board members can play in helping to address them.

      Recognize the risks

      It has become more apparent that all companies should be concerned about climate risk, not just those operating in fields like energy where the connection is obvious. Many boards have recognized and embraced the need to examine this. Among the key areas of risk to consider are:

      • Regulatory
      • Litigation
      • Physical
      • Transition
      • Existential
      • Systemic

      Not all risks are equally applicable to every company or in every subindustry, but board members should consider which ones are material for their particular operations and examine them accordingly. Many of these risks may cause concern for companies of all sizes and in every industry.

      Necessary oversight

      Boards have a key role in overseeing company management. For climate change, board members should determine which metrics are material to company operations and examine those to ensure that management is responding appropriately. Boards should consider linking particularly important metrics to CEO compensation.

      Investors are paying increasing attention to client risk, demanding that companies demonstrate that they are prepared for the potential impacts of climate change.

      Bottom line: Increasingly, corporate boards are recognizing the impact of risks and opportunities associated with climate change on material areas of their businesses.