In the fourth of our conversation series with Mehmet Sami; BDA Türkiye Chairperson and Pretium Advisory Founder and Merima Zupcevic Buzadzic; IFC Corporate Governance Thematic Lead and Regional Lead for Europe, we focused on the following questions:
ü Why is climate corporate governance emerging as an important concept – why should we care in the Turkish and global context?
ü Where to start as a director who wants to put climate on the board agenda?
To watch the webinar: https://www.youtube.com/watch?v=fVHlzSYW3VU
Discussion summary:
Climate governance in the private sector involves integrating climate-related risks and opportunities into a company’s culture, values, business strategy, and governance framework.
Boards play a crucial role in identifying and overseeing climate-related risks and opportunities.
Climate governance is important because climate change presents significant risks and opportunities, drives financial risk and opportunity, and the private sector faces increasing investor pressure, reporting requirements and climate litigation.
Steps to take as a director:
Directors can start by creating a climate mindset, putting climate on the board agenda, developing a climate strategy, allocating resources, and prioritizing climate risks.
Start thinking holistically about climate change – start big:
What does climate mean for me and the company?
How do we decarbonize operations?
How do we adapt company activity as the climate will continue to change and what opportunities may this adaptation bring?
This allows developing and sharing with the management and staff the purpose.
Next, directors should put climate on the board agenda, including topic-based sessions. Questions that can be discussed:
Do we have resources to tackle physical and transition risk (by checking management’s transition scenarios simulations)?
Do we have the capacity for climate-related disclosures?
Is the business designed for maximum impact in a net-zero economy?
Do the board and the management understand where the industry is heading?
Has the value chain been analyzed for the right opportunities?
Have we confirmed the strategic priorities with the climate overlay in mind?
Flexibility and adaptation are necessary in developing a climate strategy as full impacts are still being forecast – science and issues are complex. Staying informed and up to date is crucial, including on other businesses and entities.
A long-term perspective is needed rather than focusing on short-term results/gains. A culture and mind shift may be necessary, as well as managing stakeholder relations in this respect.
Integrating climate into the control environment, including internal control systems, internal audit, risk governance, and compliance functions, is essential.
The audit committee plays a key role in overseeing corrective actions, and the internal audit function should include climate change in its work plan.
IFC materials on climate governance are available at: www.ifc.org/climategovernance
IFC Climate Governance Progression Matrix: Based on IFC’s well-established Corporate Governance Methodology, the Climate Governance Progression Matrix is a tool to assist Boards of Directors in identifying and overseeing climate-related risks and opportunities. It provides practical and progressive climate-related actions (from Basic Practices – Level 1 to Leadership – Level 4) for each of the six Parameters of the Corporate Governance:
Commitment to Environmental, Social, and Governance (Leadership and Culture)
Structure and Functioning of the Board of Directors
Control Environment
Disclosure and Transparency
Treatment of Minority Shareholders
Governance of Stakeholders Engagement
https://www.ifc.org/content/dam/ifc/doc/2023-delta/climate-governance-matrix-may2023.pdf
IFC Climate Governance – Equipping Corporate Boards to Mitigate Climate Risks and Seize Climate Opportunities: The tip sheet offers guidance to Boards of Directors on climate governance and recommended practices to assist them in identifying and overseeing climate-related risks and opportunities. The tip sheet presents the business case for introducing climate governance and lays out a practical approach based on IFC’s well-established Corporate Governance Methodology. Boards are uniquely positioned to drive climate change action through corporate purpose and strategy and lead the fight against climate change. The tip sheet provides advice on incorporating climate into strategy deliberations and identifying, monitoring, and responding to climate-related issues.
https://www.ifc.org/content/dam/ifc/doc/2023-delta/tipsheet-climategovernance-may2023-ext.pdf
