Institutional investors are making it clear through engagement and voting that they expect boards to actively address climate risks and disclose how those efforts are progressing, including by tying climate metrics to pay. This emerging climate performance perspective follows previous shareholder efforts to encourage companies to disclose industry-specific climate risks such as greenhouse gas emissions.
Companies should anticipate increased pressure to actively mitigate climate risks, whether by reducing their own footprints or building resiliency to regulatory or environmental changes. A recent article in Directors & Boards presents an overview of this evolving governance issue and offers some useful advice on classifying climate risks (such as physical risks or liability risks) and opportunities (immediate opportunities to capitalize on an emerging market sector or long-term, wholesale strategic shifts which may carry short-term pain).
- 41% planned to introduce ESG measures in long-term incentive plans in the next three years
- 37% looked to add ESG measures into annual incentive plans