The Handbook of Board Governance, 3rd Edition

22Board Oversight and Climate Change: What Directors Need to Know

Patricia A. Koval, BA, JD, MBA

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 that 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? At the same time, it is now recognized that businesses themselves can play a critical role in mitigating and adapting to climate change and, in particular, that businesses can play an important role in the achievement of the global goal of net-zero greenhouse gas (GHG) emissions by 2050.¹ The World Economic Forum’s 2022 Global Risk Report identified “climate action failure” as the greatest medium-term and long-term threat to the world and the risk with potentially the most severe impacts over the coming decade. Extreme weather events were ranked second in both of these regards and, as well, were ranked as the top short-term global risk (over the next two years).²

The following ...