Panel on climate risk: Its real, it's material, it's a board issue.

Position:BOARD LEADERSHIP

A matter of morality? No. A matter of corporate risk and performance? Yes.

Ed Note: "The Climate-Competent Board" was the theme tackled by a panel of Investors and other Involved executives in corporate governance and environmental oversight that Charles Elson brought together in October 2016 under the auspices of the John L. Weinberg Center for Corporate Governance at the University of Delaware. The program, sponsored by the Weinberg Center and the KPMG Board Leadership Center, addressed such questions as: What does "climate competency" mean? What should the role of the full board and/or specific board committees be with regard to the oversight of climate risk issues? Should boards add a director with specialized climate-competency skills? And there were many other sensitive and timely matters up for examination. IThe program coincidentally took place shortly after the EU ratified the Paris Climate Accord, an ambitious effort by the major trading nations to combat climate change.) From this robust panel discussion, a keen comment by each of the participants follows.

The KPMG Board Leadership Center recently surveyed corporate directors on the top issues that they would rather spend less time on. Sustainability and climate change was one of those issues that ranks low on the board agenda. What that shows is a deep disconnect between what the board thinks are its priorities and what shareholders think are the board's priorities. This is a surmountable challenge. We have to frame the issue correctly. If climate risk is framed simply as a morality issue, it can be easily dismissed. If it is framed as an issue of risk and business management, you have a much better shot at moving it up the board agenda.

--Stephen L. Brown Senior Advisor, KPMG Board Leadership Center

At BlackRock, internally, we talk a lot about the importance of our employees being students of the market. Similarly, we expect directors to be perpetual students of the companies whose boards they're serving on, of the industries they're involved in, and of the macroeconomic and geopolitical environment that influences companies and the way that they can operate. We are wary of using the term "climate change" in our dialogue with companies, as some of those we engage with see it as politically charged. Instead, we ask about the ways in which boards support and oversee management in setting and implementing strategy and anticipating future risks and opportunities, of which climate is one of many. Through this lens of operational excellence, we aim to link factors such as product innovation and plans for adapting to a low carbon economy to how well...

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