Risk & Economy » Climate change » Climate competent boardrooms “absolutely essential” for navigating ESG

Climate competent boardrooms “absolutely essential” for navigating ESG

Boardrooms should be a “safe space” for investors and stakeholders to discuss company performance on ESG, according to Andy Griffiths, executive director at The Investor Forum

Setting up sustainability and ESG committees on boards are “absolutely essential” to support the organisation’s ESG initiatives, according to Andrea Abrahams, advisor on net zero and carbon markets.

Speaking at this year’s City and Financial Global Virtual Summit, Abrahams said due to the broadness of topics that fall under ESG, such as diversity, inclusion and biodiversity, it’s “really important to have a standalone committee to focus on that”.

Catherine Howarth, CEO at ShareAction, added that climate competent boards and programs of learning to understand the ESG space and terminology are “critical”.

Boards should “self-examine” whether they have the right skills or need to hire people to manage what are becoming “pressing new risks that need not just the right strategy setting but the right oversight of execution”.

Howarth added, that shareholders should “have the confidence that the boards have the right skills on them” to execute company set ESG-related targets.

Andy Griffiths, executive director at The Investor Forum said that many investors and stakeholders have an “external perspective” of the company so the boardroom should be a “safe space to have a tangible and open conversation” around climate.

“[Organisations] need to provide the outside world with enough evidence that we have confidence that we can trust them to get on with their responsibilities,” he added.

Scenario analysis key for establishing climate resilience

The pandemic has meant scenario analysis planning has become essential for companies’ ESG strategies and in “establishing resilience”, according to Ian Simm, CEO of Impax Asset Management.

“This is a highly uncertain outlook, in terms of where the world is heading from a climate perspective. So, developing scenarios in line with emerging good practice is really important  to think outside the box as to what might happen to their business in lots of different circumstances.”

Stress testing the balance sheet and cashflow forecasts around transient climate response is also important, added Simm.

“[Boards] don’t need to reinvent the wheel to look at climate change, they can build on the tools that they have already been using,” he said.

“Boards should be looking at climate change in the context of their risk registers and thinking about other types of risk that fit into the same sort of enormous impact, high uncertainty, category of pandemics.”

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