Exchange: Staying Current on Climate Risk and Response

Climate risk is affecting organizations of all sizes with growing direct impacts on financial performance. But climate impacts have an uncertain pace and trajectory, and corporate boards and their management teams can learn from others how to govern and manage these risks. 

The concept of exchange is the World Economic Forum’s eighth guiding principle for effective climate governance. This article offers ideas and resources to implement this principle and communicate the organization’s approach and response to stakeholders.  

“The Board should maintain regular exchanges and dialogues with peers, policy-makers, investors, and other stakeholders to encourage the sharing of methodologies and to stay informed about the latest climate relevant risks, regulatory requirements, etc.” 

Principle 8, How to Set Up Effective Climate Governance on Corporate Boards 
World Economic Forum 

A Need for Networking 

Exchange is particularly valuable in developing responses to emerging climate risks, as many issues may need a coordinated industry or enterprise value-chain engagement or response.  

Meaningful information exchange involves both learning from and communicating to others. Such an exchange goes beyond mere policy research and public relations. Rather, it requires the creation and cultivation of an ongoing dynamic, value-creating network that could be likened to a “climate exchange” through which directors and members of senior management can engage with a variety of climate stakeholders.  

Envisioning Exchange  

To create an effective exchange for the purpose of receiving and conveying meaningful climate information, each board needs to create its own pathway.  

In the typical case, the board, together with senior management, can consider a range of external relationships. Boards can engage with the C-suite to understand how and where the organization is engaging with stakeholders overall, and how the leaders of different functions are engaging with their peers and others on these topics. Engagement and exchange throughout the organization enables increased climate-risk knowledge and can help identify new opportunities for products and services. 

Climate risk rating agencies. It is notable that Fitch, Moody’s, and Standard and Poor’s all include climate risk in their ratings of company securities. (See, for example, the 2024 report from the Institute for Energy Economics and Financial Analysis.)  When communicating with these rating agencies, companies should bear in mind their sensitivity to specific aspects of climate risk. 

Industry peers. A board, working with company management, can identify other companies that are engaged in climate governance. Such networks already exist through a large number of nonprofit sustainability advocacy groups including CERES, BSR, WBCSD, and Sustainable Brands. NACD’s 24,000 members, representing a full range of industries, hosts an annual Directors Summit where climate risk is always a topic explored.  

Regulators. As extreme climate events continue to occur, regulatory frameworks are evolving around the world. The US regulatory landscape is uncertain following the 2024 US Supreme Court decision overturning the Chevron doctrine and a possible deregulatory impact of November 2024 elections. However, regulation of climate risk will continue as local, state, and federal government bodies set and enforce standards of corporate conduct and disclosure. In addition, many multinational and international companies are impacted by climate regulations around the world, such as the EU’s CSRD.  

In this evolving regulatory landscape, engagement with regulators is valuable. “Networking” with standard setters is not limited to traditional lobbying channels. There are multiple national and international forums that bring together public and private leaders to explore climate issues. For example, in June 2024, representatives from 14 companies representing a variety of industries (including communications, electric utilities, engineering, insurance, and technology) held a roundtable discussion with representatives of five federal agencies and offices on advancing climate resilience in the United States. The group, convened by C2ES, is only one of many examples of such dialogue. Events hosted around the world by the Climate Group are another example. 

Shareholders. Investors are focused on asking how boards are governing climate-change responses and are examining committee charters to assess that governance. Investors also want directors to possess a level of climate competence and to leverage that in working with management on company strategy. Finally, investors want meaningful disclosures about climate risk and response—especially as many have their own climate goals as well as goals for climate-resilient portfolios. Most important, they welcome face-to-face dialogue. Directors should build discussions around climate into shareholder relations planning.