Governance Challenges 2022: Climate Governance

As corporate fiduciaries, directors are expected to be reasonably informed about key risks faced by the companies they serve and prepared to ensure appropriate response to those risks.1 For many companies, if not all companies, one risk is long-term change in the world’s climate. The NACD US Climate Initiative, part of a worldwide Climate Governance Initiative, offers this FAQ to guide directors in overseeing this risk. The following pages explain climate change and related terms such as global warming, and offer guidance on their implications for risk oversight and strategy.

Q: How can corporate directors oversee and respond proactively to climate change risk?

A: Response to climate change risk begins with understanding the nature of this risk, which can be defined as the likelihood and magnitude of potential losses, financial or nonfinancial, stemming from long-term changes in the earth’s climate. After an introduction establishing the current interest in climate change, this memo explains the term climate change and the related terms global warming and net zero and introduces the imperative of climate change governance for corporations. The following sections cover standards, metrics, and current board practices. The FAQ closes with a climate change glossary and an annotated list of climate change resources.