How Can Corporate Governance Address the Accelerating Challenges of the Climate and Nature Crises?

Policy Discord: Compounding the challenges of addressing the climate and nature crisis is a growing lack of clarity and cohesion concerning climate and nature legislation, regulation, and taxation, as well as a growing policy discord across Europe, China, the U.S., and other emerging and developing economies. Despite the emergence of new standards and disclosure regimes, this policy discord and lack of clarity can impede corporate action. How can corporate directors help set effective corporate strategy in this context, when corporate strategy often depends on clear and predictable government policy?

Standards and Disclosure Regimes: What role will emerging practices and standards, driven by disclosure regimes and other risk and regulatory measures like the new IFRS  Standard (S2) on Climate-related Financial Disclosures and the work of the Taskforce on Nature-related Financial Disclosures (TNFD), play in harmonizing policy and enhancing corporate action?

Managing Governance Risk: As these emerging standards move disclosure requirements into corporate audit committees, what are the climate- and nature-related risks and governance issues that directors should understand in managing the corporate approach to climate change and ecosystem degradation? What is the right lens for these issues – compliance, business opportunity, balancing of divergent stakeholder interests, existential threat?  All of the above? What more should companies be doing now in the absence of, or anticipation of, more (or less) regulation? 

Incentives and Tools: There is no global price for carbon to require emitters to pay for the increasing harm that carbon emissions impose on society. Does carbon need to be on the balance sheet to justify fundamental changes to corporate investment and resource allocation? Or, are there other price-based and non-price-based policy approaches that should be considered? Many corporations are adopting voluntary emission reduction and other targets for their corporate activities and investing in forestry and other projects to offset (or inset) emissions that cannot be reduced. How can directors ensure effective oversight of measures like transition pathways, internal carbon pricing, corporate net zero targets, offsets, and insets?  

Equity: There are significant governance and equity issues to be considered, particularly with respect to the development of markets for carbon and nature. There is concern that businesses may rely on offsets without making the investment needed to address their direct and indirect impacts.  There is also concern about the integrity of these investments and their potential to violate the rights of Indigenous Peoples and and historically disenfranchised communities by commodifying nature. In many industries and locations, workers in corporate supply chains are exposed to dramatically greater health risks from climate change.  Should stakeholders and rights-holders like local and Indigenous communities, those representing future generations, or workers have a governance role in these markets or on corporate boards or committees of companies that consider using these mechanisms? What role will historical emissions play in future policy approaches to equity and climate justice?

Governance Structures: What new governance structures beyond traditional corporate structures should be considered to accelerate corporate action and to improve the flow of capital to solve these issues?  What is the role of new actors, structures and mechanisms for collective action like B corps, public/private/non-profit joint ventures and other legal mechanisms?