The Handbook of Board Governance, 2nd Edition

15Board Oversight and Climate Change: What Directors Need to Know

Patricia A. Koval

Experienced Corporate Director and Former Senior Partner, Torys LLP (Retired)

Climate change, once viewed as just an environmental or sustainability issue, is now seen as a critical issue which may have material financial impacts on businesses and affect their long-term growth and profitability. Indeed, it is now “mainstream,” driving questions for businesses such as: What impact will climate change have on the company's operations in the short, medium, and long term? What impact will it have on the viability of the company's current business model? How can the company ensure that its business model is resilient in the longer term as climate change occurs and the world transitions to a lower-carbon economy? The World Economic Forum's 2019 Global Risk Report identified “extreme weather events” as the macroeconomic risk with the highest likelihood and third highest impact over the next ten years, and the failure of climate-change mitigation and adaptation as second in terms of both likelihood and impact.¹

This chapter looks at why and how climate change is now a core business issue for companies, public or private, and suggests how it should be addressed within the board of directors' governance framework. It highlights important background and specific issues for boards, and suggests questions that directors should ask. Given that disclosure of climate change–related matters is a timely subject, ...