Command of the Climate Subject in the Boardroom 

Effective climate governance requires climate fluency—a level of knowledge necessary to govern an organization during times of critical transition. Board understanding of climate- and nature-related risks is one of the foundations of Board Leadership for Growth and Resilience: Guiding Principles for Climate and Nature Governance developed by Chapter Zero Alliance, the World Economic Forum, and Deloitte. This article offers guidelines on how to build and maintain board climate fluency.

Climate Oversight as a Necessary Board Competence

Boards need the necessary insight to govern their organizations through periods of unprecedented change, including an understanding of how the physical and transition effects of climate change impact the organization. While directors do not need to be climate experts, each member should have enough awareness to understand the key drivers and risks of climate change and how they impact the organization’s physical operations, business ecosystem, and value creation capabilities.

Determining the specific components of directors’ baseline climate competence will vary across industries based on materiality considerations. For example, those involved with the development of energy or AI infrastructure may need to deepen their understanding of how competition for water, land, and electricity could impact their strategy. Meanwhile, those in the retail industry may need to study how climate trends will impact consumer behaviors. The necessary depth of knowledge will be influenced by the organization's specific risk profile, strategy, and stakeholder expectations.

Develop a Structured Approach to Build and Maintain Climate Knowledge

It is important to have a clear and structured approach to assess, develop, and maintain climate competence in the boardroom. Often, the nominating and governance committee is responsible for assessing and overseeing the board’s continuous education and may be tasked with the process of defining and considering the board’s climate competence. That noted, while the board can establish board-level competencies, directors should also consider their individual climate competence and identify opportunities to bring themselves up to speed as necessary.

A structured approach to build the board’s climate competency can include the following five elements:

Define climate competence and necessary knowledge. After identifying the organization’s potential climate risks, the board should define which skills, knowledge, and experience each director needs to adequately contribute to discussions and oversight decisions. The board may work with the chief sustainability officer to consider the right baseline for the organization, including familiarity with systemic climate changes, evolving regulatory or disclosure requirements, reporting metrics and frameworks, and key elements of plans for climate adaptation, mitigation, and transition.

Develop and sustain a learning plan. Continuous education is needed to enhance and maintain the board’s climate knowledge. These forward-looking programs should be integrated into the board’s broader educational calendar and include emerging topics tailored to the industry, climate commitments, and/or regulatory requirements impacting the organization. Each organization’s learning needs and approach will be unique, but common attributes of an effective learning program include:

• focusing on trends affecting the organization’s industry,
• defining topics the board must be conversant in and build the learning plan around these topics,
• establishing the framework and approach to building climate competence,
• allowing for varying director needs, educational formats, and resources, and
• allocating time for collective learning to build a shared language and fluency across the board.

Use external resources as needed. Many boards may find it beneficial to engage outside climate experts from consulting firms, legal firms, audit firms, or academia. Directors may also wish to attend external events to stay up to date on new climate information and governance implications.

Evaluate the board’s skill set. Similar to other necessary governance-related skill sets, climate competence should be built into the individual and overall evaluation process. Evaluations should be measured against the skills and experiences relevant to the organization. The nominating and governance committee typically leads this evaluation process and may rely on practices such as 360-degree assessments to evaluate board knowledge and identify areas of improvement. This may entail an external provider conducting a biannual evaluation of the CEO and/or senior management team. Key improvement areas can be built into the ongoing and individual education programs.

Ensure the board recruitment process assesses the required level of climate competence. As part of its recruitment process, the board should consider baseline climate competencies and identify new director candidates who can fill in gaps where needed. Candidates should diversify boardroom perspectives and allow for richer, more dynamic contributions regarding climate initiatives. If opting to recruit a “climate expert” to join the board, it is important they have a “T-shaped” skill set—meaning they have a deep climate expertise, while understanding how climate can materially affect the company's risks and opportunities to create long-term value.

Questions for Boards to Consider

As boards define climate competence and build a learning plan around this definition, they can consider these questions:

• How does the board define climate competence? How does this align to the needs and strategy of the organization?
• How do we determine and assess the key climate competence gaps in the boardroom?
• How is the board ensuring that directors consistently stay up to speed on necessary climate knowledge? What practices are used to measure this?
• How does the board utilize external and internal resources to enhance their climate knowledge and skills?
• How are climate-related issues intertwined with the most important factors for the company’s value creation model and how are these issues evolving?
• How does the board determine the relative priority of climate-related risks and opportunities compared to other strategic issues?