A recent survey conducted by WTW and the Nasdaq Center for Board Excellence revealed that almost half of respondents (48%) acknowledged their boards lacked the necessary skills and expertise to effectively oversee climate risks faced by their companies. Although improvement is expected over the next three years, gaps are likely to persist.
The launch of reporting frameworks such as the International Sustainability Standards Board’s IFRS S2 Climate-related Disclosures and the Transition Plan Taskforce’s Disclosure Framework has led to governance becoming a key pillar in addressing climate risks. Boards must have the necessary skills and understanding of climate change to review, challenge, and approve strategies for managing these risks effectively.
However, the survey also found that only 62% of respondents stated their boards dedicated sufficient time and resources to climate risk governance. Inadequate governance may expose organizations to various risks, including physical risks to operations and infrastructure, liability risks from inadequate disclosures, and transition risks from moving to a lower-carbon world.
Hannah Summers, Director of Executive Compensation and Board Advisory (ESG & Climate specialist) at WTW, emphasized that pressure from governments, investors, and civil society will significantly impact companies’ credit ratings, valuations, cost of capital, borrowing capabilities, and insurance possibilities. She stressed that placing climate governance at the forefront of boardroom discussions is crucial for business leaders to be aware of their responsibilities and effectively steer their organizations towards net-zero goals.
Three-quarters of board members participating in the survey recognized the value of a strong ESG strategy and acknowledged the need to improve oversight of climate and governance risks.
Climate Vista is a powerful tool that can be customized to suit each company’s specific geography and sector. By conducting tailored sessions led by WTW climate experts and board advisers, Climate Vista helps identify the board’s current level of understanding, barriers to action, and the level of ambition expected in climate action. The tool empowers boards to respond strategically to climate risk and foster engagement at all levels of the company.
The survey conducted by the Nasdaq Center for Board Excellence and WTW gathered insights into modern boardroom dynamics, aiming to assist boards in assessing and enhancing their effectiveness. The survey saw the participation of 349 board members from 44 countries across six continents in the Fostering Corporate Governance and Enhancing Board Effectiveness Survey.
About WTW, the company provides data-driven, insight-led solutions in the areas of people, risk, and capital. With a global presence in 140 countries and markets, WTW collaborates closely with organizations to enhance their strategies, resilience, workforce motivation, and performance, uncovering opportunities for sustainable success.
The Climate and Resilience Hub (CRH) is WTW’s focal point for climate expertise and capabilities, pooling knowledge from across its people, risk, and capital businesses. CRH delivers climate and resilience solutions in response to various pressures, such as regulatory, investor, consumer, employee, and operating demands. Under the Climate QuantifiedTM brand, CRH offers analytics, advice, and transactions to enable corporate, finance, and public sector institutions to embrace the climate decade ahead.