Biden And The Boardroom: Turning Up The Temperature On Climate Change


Michael Peregrine

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For those corporate boards that haven’t been paying much attention to climate change, now might be a good time to start reconsidering that position. For on Earth Day 2021 two separate but major initiatives were announced that are likely to increase the pressure on boards to recognize climate as a significant enterprise risk and to more closely monitor management’s engagement on climate matters.

First, and most prominent, was President Biden’s commitment that the United States would reduce its greenhouse gas emissions by at least 50% by the end of the decade. Made in a two-day summit focusing on the U.S. return to the Paris climate accord, Mr. Biden described the challenge of avoiding catastrophic warming as “a moral imperative, an economic imperative...but also a moment of extraordinary possibilities”.

There’s a general recognition that achievement of the Biden goals will require significant change to current domestic policies, and will reconfigure major sectors of the current U.S. economy, from energy to transportation. It’s the type of major governmental commitment that requires serious board-level consideration of its potential implications to the company.

And while the ultimate impact of the Biden commitment on individual industries is unclear, the economic imperative appears more clear. Indeed, there are indications that commercial leaders may be ready to support the basic goals.

For example, in advance of the President’s announcement over 400 executives from some of the nation’s largest companies signed an open letter encouraging the Administration to take aggressive efforts to reduce global warming emissions. And there’s also the important Climate Action 100+ report that identifies as record-setting the 22 climate related U.S. weather disasters in 2020, each causing over $1 billion in damages. The report also notes that for the current proxy season to date, over 135 climate-related shareholder proposals have been submitted. Even the most environmentally-recalcitrant boards will find it tough to ignore these developments.

But more directly relevant to the orientation of most corporate boards is the Earth Day announcement of the National Association of Corporate Directors (“NACD”)’s membership in the Climate Governance Initiative, a global project established by the World Economic Forum. The Initiative is designed to enhance climate awareness amongst directors and help boards guide their businesses in the difficult transition to a net zero economy. This collaboration reflects a conscious decision by NACD to firmly emphasize the board’s role with respect to climate change; i.e., as a strategic, long-term matter requiring board attention consistent with that of other emerging risks such as cybersecurity.

Characterizing it as a significant enterprise risk, NACD views directors as having a fiduciary duty to be informed on, and to encourage their board to determine, the company’s risk profile for climate. As envisioned by NACD, this duty would call upon boards to (i) gain climate awareness and skills; (ii) embed climate considerations into board decision making: and (iii) understand and act upon the risks and opportunities that the climate emergency poses to the long-term resilience and business success of their companies.


It’s a characterization that makes sense, especially considering what NACD leadership describes as the potential for increased pressure on boards from policymakers and investors to more aggressively address climate change initiatives within strategic planning efforts. Clearly, this has been the view of major asset managers such as Blackrock. And, as has been seen of late with respect to matters of social justice and similar issues, companies are paying greater attention to what they interpret as stakeholder preferences—especially those of their consumers and the workforce.

In that context, enhanced board engagement is perhaps best viewed as the logical next step in the evolution of climate governance, rather than as an exercise of woke CEO activism or brazen corporate efforts to ward off federal legislation and regulation.

It suggests a shift from viewing climate change as a peripheral ethical concern to that of a major enterprise risk with serious implications for board duties and corporate disclosure responsibilities. Or, to paraphrase NACD CEO Peter Gleason, climate is no longer a “bolt on” agenda item or something only to be discussed at the board committee level. Rather, it should be grounded in the most serious of board-management dialogues.

And so this was a pretty significant Earth Day, from a climate governance perspective. First with respect to a Presidential climate change commitment, the implications of which most American businesses and their boards will need to consider. Second with respect to the formal recognition of a leading corporate governance organization that indeed, the oversight of climate risk is a board responsibility. And one doesn’t need to be an environmental activist to recognize their immediate impact on the board.