Exploring questions about climate-related governance practices and strategies
Business leaders face many questions with the impacts of climate change creating new and emerging operating landscapes.
Those questions include: Is climate change affecting my business or could it in the future? Could severe weather events occur in places where my organization operates facilities or cause disruptions to my global supply chain? Could government policy responses to climate change to meet targets under the Paris Agreement create new business risks and opportunities?
Unfortunately, far too often when it comes to climate change, organizations are not taking action – even though there is wide recognition that this is a significant issue with potential consequences. According to a fall 2017 survey by the Institute of Corporate Directors, 50 per cent of boards believe climate change is an important challenge, but 64 per cent are not incorporating it in their current strategy.
“From a business perspective, climate change can have implications for corporate strategy, risk management and oversight, financial performance and shareholder value,” says Sarah Keyes, principal, research, guidance and support, at Chartered Professional Accountants of Canada (CPA Canada). “Directors must provide leadership in helping organizations factor climate change issues into a company’s strategic decisions.”
The likelihood and impact of climate issues will differ by industry and company. As climate change is growing in prominence as a top global risk – the World Economic Forum 2018 global risks report lists extreme weather, natural disasters and failure of climate change mitigation and adaptation among the top risks – investors are looking for greater clarity on how companies are responding to the issue in both the short and long term. As Canada transitions to a low-carbon economy, expectations for climate-related disclosures are changing to enable the efficient allocation of capital by investors, insurers and lenders.
Through good governance practices, companies must respond to these changing expectations by enhancing their disclosures on climate-related risks and opportunities. Companies are already required to disclose material risks associated with environmental issues in their regulatory filings.
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