With its myriad physical, regulatory, and market-based risks, ‘climate’ can no longer be simply the domain of CSR (corporate social responsibility) or ESG (environment, social, and governance) teams.
Investors are increasingly looking for evidence that companies are integrating climate considerations into business decisions and future planning. At the same time, new disclosure requirements will put a spotlight on corporate climate action and risk management.
Here, we explore where the responsibility for ‘climate’ sits in the modern corporation, how to best structure a climate team, and what your team needs in the way of support in order to succeed.
Investors want strong climate governance
Investors value companies with strong corporate governance, as they are better equipped to navigate business risks and opportunities and are less susceptible to known (and sometimes unknown) threats. As climate risk is a known threat across industries, strong climate governance is seen as a core component of strong corporate governance.
Climate risk frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and IFRS S2 encourage firms to construct robust climate governance mechanisms. These require skilled individuals delegated with real power to work effectively. Many companies are assigning climate responsibilities to C-suite executives, suggesting that climate is a top-level concern that influences these companies’ entire approach to business.
Separating climate from sustainability
We recommend building a climate team that sits separately from (although is closely aligned and integrated with) existing sustainability or ESG teams. Although climate is traditionally considered a subset of the ‘E’ within ESG, the risks associated with a changing climate and decarbonizing economy are now so numerous — and the reporting requirements so extensive — that climate requires a team of its own.
A number of well-known organizations have climate-specific committees or teams with distinct climate responsibilities. For example, Australian bank ANZ has a Climate Advisory Forum, made up of its chief risk officer, ESG manager, and other executives. Mining giant BHP has a dedicated Climate Change Steering Committee, while commodities heavyweight Glencore has a Climate Change Task Force which is accountable to the board and includes the company’s CEO and CFO, among others.
How to structure your climate team
Rather than being built from scratch with newly hired climate specialists, climate teams should be cross-functional, made up of key team members from several critical departments. But not all companies will be ready to build an entire climate team from the get-to. We recommend a phased approach: first, design a climate ‘committee’ or ‘task force’ made up of existing stakeholders from relevant departments; then, when the time is right, build out a designated climate team.
- The Climate Champion
Your climate team should be headed by a climate champion, a high-profile leader responsible for company-wise climate strategy and management. Your champion may be a chief sustainability officer, head of climate, or something similar. They work closely with sustainability teams and are empowered with the access they need to work across the company. They are given adequate resources and backing from leadership and are typically responsible for reporting to the C-suite and the board on climate matters.
- Investor Relations
A comprehensive climate strategy and ongoing management require deep insight into what investors are looking for and how best to communicate your climate risks, opportunities, and action. A representative from your investor relations team needs a seat at the climate table.
Climate risk is financial risk, which means climate is increasingly becoming the responsibility of CFOs and finance teams. Whether you’re setting internal carbon prices, allocating resources for decarbonization and mitigation, or assessing the impact of climate risk on operations and the bottom line, it’s critical that your climate strategy gets input from finance.
From the threat of greenwashing accusations and liability lawsuits, to the complexity of disclosure and regulatory compliance, climate risk has a number of legal considerations and consequences. It’s important that your legal department gets representation within your climate team, ideally from someone familiar with climate disclosure, reporting requirements, and claims guidance.
- Risk Management
Amid a changing climate, tightening regulation, and evolving public interest, climate is one of the biggest risks corporations face today. Adding a representative from your risk management team is a critical step in integrating climate risk into your organization’s broader risk management.
The right tools and support
Assigning climate responsibility to senior leadership and board members demonstrates to investors and team members that your company is taking climate risk seriously. It also gives your climate team the backing they need to make real progress.
Manifest Climate’s analysis finds that many companies now disclose who at the top of their hierarchies have climate-related responsibilities and are assigning specific climate oversight duties to a wide range of individuals and committees.
Of the 420 companies in our database that disclose this information, 85 say their CEOs have climate-related responsibilities, 32 their board or board committee chairs, and 32 their chief risk officers. When it comes to board committees with climate responsibilities, 86 firms say their audit committees play a role, while 82 have dedicated sustainability committees.
Tools and resources
Coming from disparate teams and disciplines, the individual members of your climate team need a single place to store and manage climate intelligence. Manifest Climate offers a single software solution to supercharge your climate strategy, allowing you to assess the quality of your climate disclosures and management across multiple frameworks and standards. You can also benchmark against industry peers and build a roadmap of necessary actions for meeting evolving stakeholder expectations.
Manifest Climate is the central ‘climate hub’ that can be used across the various departments represented in your climate team. Team members can access the data they need and clearly understand which insights are relevant for individual teams and departments. You’ll also get unparalleled insights into what other organizations are doing in these areas.
With all your climate data stored in one place, your climate action won’t be disrupted by the departure of key personnel. Additionally, new and existing team members can quickly build climate competency with our up-to-date resources and content library.
Manifest Climate is the competitive advantage behind successful corporate climate teams around the world. Request a demo today.