As COP 26 approaches, expectations build, as does apprehension. The future of humanity hinges on the progress of policy makers in agreeing frameworks, levers and incentives to decarbonise. And business too will have to make an extraordinary contribution if Net Zero is to become a reality. Against this backdrop business focus on climate change is increasing dramatically. There is also a growing realisation that exceptional leadership will be required within business, as in government. It’s abundantly obvious that climate change competence is needed in corporate Boardrooms. In both Search and Evaluation assignments Fidelio is seeing pressure from shareholders increase; put bluntly they want comfort that the Boards of the companies they invest in are climate change competent. “In terms of the board composure, you’ve got to have expertise in climate, just as you do in other areas. It doesn’t necessarily have to be a climate scientist, per se, but certainly someone who understands climate scenario analysis.”
- Mark Carney, Strategy + Business, July 2021
Demands for climate change competence in the Boardroom are also coming from stakeholders. Particularly interesting is the clear upward pressure from employees who want to see climate change competence on the Board, including Non-Executive Directors who are able to challenge and guide management on the transition to Net Zero. The importance of Board leadership on climate change was clearly underscored in a recent Chapter Zero webinar with Mark Tucker, Group Chairman of HSBC Holdings plc; Nicola Brewer, Non-Executive Director of Iberdrola SA; and Emily Farnworth, Co-Director at the Centre for Climate Engagement. Climate change will be a major determinant of value and the Board cannot be passive. Until recently climate change competence was frequently deemed to be “nice to have”. Too often the discussion was framed in terms of specialist expertise and it was relatively easy to argue there simply wasn’t space within the Board for such a dedicated role. Equally some sectors felt climate change to be of much less relevance to their business model. While Fidelio occasionally still hears this type of push back, in most Boardrooms the debate has moved on significantly. Yes, the impact of climate change varies across sectors but increasingly it is recognised to be a risk – and opportunity – for all businesses and business models. To navigate this complexity, Boards need access to climate expertise but the scientist does not need to sit on the Board. Much more important is baseline climate change competence across all Board Members. Without this promoting the long-term success of the company will be impossible.
To continue reading ‘The Search for Climate Change Competence’, including implications for Board Committees, click here.