Board responsibilities for company climate plans

Abstract

The major research question of this paper is: “What are boards’ responsibilities for the climate plans of their companies?” There is no current consensus on how to do so. This paper explores the challenges of boards to assess annual meeting proposals concerning “Say on Climate” by both their own corporations and activist investors (Eccles, 2021; McDonnell, 2022). The guidance for board self-assessment for climate governance is provided. Next guidelines for boards to assess company climate plans are offered, and finally, conclusions are given. The major recommendation in this paper is that boards use six of the ten areas of the Climate Action 100+ Net Zero Company Benchmark Initiative to assess company climate plans. These key areas are climate governance, decarbonization strategy, net zero greenhouse gas (GHG) emissions by 2050 (or sooner) ambition, long-term, medium-term, and short-term GHG reduction targets. It is critical for boards to develop an effective climate governance structure and ensure that a company takes appropriate strategic decisions to manage climate-related risks and opportunities. And the most important role for investors is to ensure board of directors’ accountability.