Essential insights for board members on climate governance. Learn about understanding climate risk, managing timelines, and embracing uncertainty. Read now for proactive governance in addressing climate change challenges.

Navigating Climate Governance: What Every Board Member Should Know

Written by 
Mark Siebentritt, Executive Director

Navigating Climate Governance: Board Members

While this responsibility has been a constant, the emergence of climate change as a critical factor requires directors to tread new ground. 

With 20 years of experience in public and private sector governance, including 15 years dedicated to delivering climate risk processes, I believe that there are crucial aspects of climate governance that every board member should be well-versed in. 

In the fast-evolving landscape of corporate governance, directors are tasked with safeguarding the best interests of their businesses. 

Whether through the identification of specialised expertise or upskilling for all directors, the need for climate governance proficiency is undeniable and has been emphasised by professional bodies such as the AICD.

Climate risk, akin to regular risk, has two main forms: physical risk and transition risk. 

The former encompasses the risks associated with a changing climate, including heatwaves, floods, and bushfires. 

On the flip side, transition risk involves the challenges of moving toward a low-carbon economy. Directors must comprehend the nuances of both and assess their organisation's vulnerability. Despite their distinctiveness, these risks inevitably trickle down to impact strategic, financial, and operational aspects.

Timeframes and Decision Lifetimes: Deciphering the Puzzle

The timelines for climate risk assessment and response planning differ significantly from traditional business planning. Physical risks unfold over decades, presenting a unique challenge for directors.

The decision lifetimes approach becomes a valuable tool, acknowledging that decisions made today have varying spans. Directors must consider the longevity of decisions, from the choice of electrical equipment in a tolling booth to the construction of bridges on a highway, with the latter spanning 80-100 years. 

This perspective guides the incorporation of long-term climate change into current decision-making processes.

Understanding Climate Risk: More than Just a Coin Toss

We have released a Discussion Paper titled, 'How to Thrive in the New Era of ESG Disclosure" to help organisations understand and navigate the complexities of the future ESG disclosure landscape. Download it here.

Living with uncertainty is a fundamental aspect of climate governance. The ever-changing landscape of future climate conditions, influenced by global emissions reduction policies and unpredictable climate responses to greenhouse gases, demands a proactive approach.

Embracing Uncertainty: The Role of Scenarios

Directors can embrace uncertainty through scenario thinking, a core element of climate disclosure strategies outlined in TCFD requirements. Familiarising themselves with multiple scenarios enables directors to navigate the unpredictable nature of climate change with resilience.

Building the Evidence Base: An Iterative Approach

For businesses embarking on their climate risk journey, there is no one-size-fits-all formula to precisely gauge the financial impact of future risks. 

An iterative approach involving risk screening, enterprise-level risk assessment, and the development of specific financial impact models is essential. Drawing from past and current hazards, such as floods and heatwaves, provides valuable data to build a robust evidence base over time.

Aligning with ISO31000: Recognising the Differences 

While aligning climate risk assessments with ISO31000 is considered a leading practice, directors must recognise the subtle yet crucial distinctions. Adaptation measures, aimed at reducing climate risk vulnerability, take center stage in climate risk assessment. 

Unlike traditional risk assessment, which considers only current conditions, climate risk assessment prompts directors to evaluate risk changes over multiple decades. 

As we collectively address the challenges of climate change, informed and proactive governance will be the key to success. Read more about our climate change services here.

Learn how to Thrive in the New Era of ESG Disclosure with our latest Discussion Paper. Read it here.

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By embracing a tailored, dynamic, and integrated approach to metrics, businesses can navigate the challenges of climate risks while contributing meaningfully to a sustainable future. Read more.

Metrics that Matter: Guiding Climate Action Through Informed Decision-Making

Guiding Climate Action Through Informed Decision-Making 

As pressure mounts from both shareholders and stakeholders to address environmental concerns, the need for evidence-based decision-making becomes imperative. Beyond being a good practice, it is also a requirement for climate disclosure reporting.

Here are 6 key considerations to help guide your climate action decisions:

1. Understanding Thresholds and Tipping Points: A Time-Strategic Approach

Effective response to climate change requires a strategic approach that spans both short and long-term actions. The key lies in identifying thresholds and tipping points, pivotal moments that indicate the need for immediate action.  

By monitoring specific metrics, such as the occurrence of floods in successive years at a particular location, organisations can anticipate potential asset failures and allocate investments accordingly. This proactive approach not only mitigates risks but also spreads financial commitments over time, avoiding upfront financial strain.

2. Tailoring Metrics for Diverse Climate Risks: Physical vs. Transition 

Not all climate risks are created equal, and recognising the differences between physical and transition risks is crucial. Metrics and targets should be specifically designed to address each type of risk. For instance, physical risk metrics might focus on observable changes, such as extreme weather events or shifts in climate patterns.  

In contrast, transition risk metrics should delve into the intricacies of scope 1-3 reporting, going beyond mere emissions reporting. This tailored approach ensures that organisations are equipped to monitor and respond to the unique challenges posed by different climate risks

In the ever-evolving landscape of corporate responsibility, the adage "you can't manage what you can't measure" holds more significance than ever, especially when it comes to climate change.  

While much attention has been rightly placed on the connection between transition risk and scope 1-3 emissions reporting, it is not sufficient. Transition risk metrics require a more comprehensive approach, encompassing factors beyond emissions.  

3. Moving Beyond Scope 1-3 Reporting: Unveiling the Nuances of Transition Risk Metrics

Recognising the clear link between emissions and carbon prices is essential, but a nuanced understanding involves exploring broader aspects of transition risks. Metrics should delve into the resilience of supply chains, the adaptability of business models, and the potential impact of policy changes. This holistic approach ensures a more robust evaluation of transition risks. 

Learn how our climate change services can empower your organisation to build resilience to the physical and transition risks of a changing climate. Contact Us Today.

4. Building a Knowledge Base through Careful Metric Selection  

Forecasting the financial risks associated with climate change is a challenging task, particularly due to the lack of business-specific impact models. However, the careful selection of reporting metrics can build the necessary evidence base. 

Organisations, especially those in the early stages of addressing climate risk, can leverage a strategic set of metrics to develop a nuanced understanding of potential financial impacts. This iterative process enables continuous learning and refinement of risk assessment models over time.

The dynamics of climate change necessitate a learning system that adapts to current events. Metrics should not be static but responsive to the evolving environmental landscape.  

5. Integrating Current Events into a Learning System: A Dynamic Approach

By linking metrics to risk assessment, organisations can create a feedback loop that incorporates real-time data and insights. This dynamic approach ensures that climate action remains relevant, effective, and aligned with the ever-changing challenges posed by climate change. 

 6. Exploring Alignment with Existing Targets: Maximising Impact through Integration  

To enhance the effectiveness of climate disclosure, organisations should explore how existing targets for other reporting align with climate disclosure metrics. By integrating climate-related metrics into broader sustainability goals, companies can maximise the impact of their actions.

This alignment fosters a more cohesive and comprehensive approach to corporate responsibility, reinforcing the interconnected nature of various environmental, social, and governance (ESG) factors. 

By embracing a tailored, dynamic, and integrated approach to metrics, businesses can navigate the challenges of climate risks while contributing meaningfully to a sustainable future. 

Guiding Climate Action Through Informed Decision-Making

Recently, the world’s leading scientific body on the effects of climate change, the Intergovernmental Panel on Climate Change (IPCC), released its sixth assessment report (AR6). We discuss a selection of key findings from the latest IPCC report that are important for those organisations wanting to take a leadership position on responding to climate change.

IPCC Assessment Report 6: Take Away Messages for Sustainability Leaders

Recent weeks have seen a community wide discussion about the dire need for emissions reduction as COP26 brought the governments of the world together to pledge to do more to address climate change. But it was only a couple of months ago that the world’s leading scientific body on the effects of climate change, the Intergovernmental Panel on Climate Change (IPCC), released its sixth assessment report (AR6). These reports are produced every 5-6 years and provide arguably the most important updates on the latest climate science. In this article, we discuss a selection of key findings from the latest IPCC report that are important for those organisations wanting to take a leadership position on responding to climate change.

Until recently, there was regular debate in the media about whether climate change was real. While on the one hand this debate has largely subsided, on the other the evidence of the change that has already occurred is rapidly increasing. The science is clearer than ever that human-induced climate change is already affecting weather and climate extremes in every inhabited region across the globe. For example, AR6 found that human activities are responsible for approximately 1.1°C of warming since 1850-1900, with warming picking up pace in recent decades. The scale of recent changes are considered to be unprecedented over centuries to thousands of years and mean that attention needs to be given to current as well as future climate when undertaking resilience planning. 

Climate model projections show that the uncertainties in atmospheric CO2 concentrations by 2100 are dominated by the differences between our anthropogenic emissions scenarios. The rate and severity of future climate change is therefore still entirely under our control. The transition to a decarbonised economy is already underway and must be accelerated if we are to avoid the worst impacts of climate change in the coming decades.

Frequency and intensity of extremes is set to increase 

Most physical climate risk is associated with extreme climate events which exceed the coping capacity of our natural, built, social and economic systems. AR6 found that extreme climatic events which are entirely unprecedented in the observational record, will occur with increasing frequency, even if we limit global warming to the now very ambitious target of +1.5°C above the pre-industrial average. Australia’s record hot, dry and charred Black Summer of 2019-20 is a clear reminder of the compound and cascading nature of future climate extremes on the horizon.   

A key driver of the increasing intensity and frequency of extremes is the intensifying water cycle. Additional heating enhances evapotranspiration from the biosphere and with every degree of warming the lower atmosphere is able to hold 7% more water vapour. This combination brings more intense rainfall and associated flooding, as well as more intense drought across many regions. 

The magnitude of feedbacks between climate change and the carbon cycle becomes larger and more uncertain in high CO2 emissions scenarios. AR6 makes it clear that additional ecosystem responses to warming are not yet fully included in climate models, such as CO2 and methane fluxes from wetlands, permafrost thaw and the giant wildfires we have witnessed around the world since 2000. These feedbacks will further increase concentrations of greenhouse gases in the atmosphere and their combined effects are not yet resolved in the models.  

Up until AR6, there has been a focus on the most likely outcomes of climate change. This is now being tempered with a balanced view across low likelihood, but very high consequence outcomes. Abrupt changes and low-likelihood, high-impact outcomes could occur at global and regional scales even for global warming within a very likely future emissions scenario. The probability of low-likelihood, high impact outcomes does increase with higher global warming levels. Abrupt responses and tipping points of the climate system cannot be ruled out and therefore need to be built into scenario development and planning exercises. 

AR6 provides the strongest evidence yet of the continuing changes being experienced in the Earth’s climate. Given the increasing focus on climate risk disclosure, especially for government agencies and large corporate entities, the results of this new modelling need to be incorporated into current and future risk assessment to provide a better understanding of the challenges we face – and where to invest in building resilience. 

AR6 reminds us that with dark impermeable surfaces our cities act to amplify many aspects of climate change. As the global population continues to rapidly urbanise, our cities become denser and we remove urban canopy cover, parks, cool green zones, floodplains and groundwater infiltration sites. These are the often-undervalued urban natural capital assets which all act to counter the effects of climate change. 

In the Australian context the most deadly impact of climate change is the increasing severity and frequency of heatwaves. The impacts of these events are further amplified by the well known urban heat island effect. Urbanisation also increases mean and heavy precipitation over and downwind of cities which results in increased runoff intensity and impacts from flash flooding. In coastal cities, the combination of more frequent extreme sea level events (due to sea level rise and storm surge) and extreme rainfall/riverflow events will make flooding much more probable. 

People can still make a positive change 

Climate model projections show that the uncertainties in atmospheric CO2 concentrations by 2100 are dominated by the differences between our anthropogenic emissions scenarios. The rate and severity of future climate change is therefore still entirely under our control. The transition to a decarbonised economy is already underway and must be accelerated if we are to avoid the worst impacts of climate change in the coming decades.  

The choice of societal responses to future climate change impacts will act to either increase or decrease community resilience to subsequent extreme events. Smart building design, holistic planning and low cost risk treatments can act together to effectively buffer our communities from climate impacts and markedly increase our resilience. Employing nature based solutions also provides us with an opportunity to sequester carbon while also protecting communities and assets from many climatic hazards. 

AR6 provides the strongest evidence yet of the continuing changes being experienced in the Earth’s climate. Given the increasing focus on climate risk disclosure, especially for government agencies and large corporate entities, the results of this new modelling need to be incorporated into current and future risk assessment to provide a better understanding of the challenges we face – and where to invest in building resilience. This is especially the case for organisations wanting to show leadership in how they assess and respond to climate change. AR6 also serves as a strong reminder of the need to rapidly decarbonise the global economy and why global gatherings such as the recent COP26 are essential for coordinated global action to reduce emissions.

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Mark has 25 years of experience in the sustainability services sector and is the Global Climate and Nature Practice Lead. With 17 years in climate risk, reporting, and advisory, he specialises in Liveable Cities, Sustainable Agriculture, and Water Management.

Working across the public and private sectors, Makr has delivered over 100 climate change projects in the past seven years. He has held roles as Operations Manager at Waterfind and Senior Program Manager at the Murray-Darling Basin Authority.

Outside of Edge, Mark is also a Councillor with the City of Adelaide, where he chairs the City Finance and Governance Committee.

Mark has 25 years in the sustainability services sector and is the Global Climate and Nature Practice Lead. With 17 years in climate risk, reporting, and advisory, he has expertise in Liveable Cities, Sustainable Agriculture, and Water Management, drawing on experience across both the public and private sectors.

Articles by Dr. Mark Siebentritt