Holding Boards Accountable for Climate Engagement....

BlackRock has made a clear statement on which Boards and senior management should focus (if they haven't yet):  the asset manager is ready to vote against directors of companies viewed as insufficiently planning to transition to a low-carbon economy. What factors will be assessed?  BlackRock helpfully identified the following:

• How the board and management are considering the physical and transition risks of climate change on the company, alongside opportunities for energy efficiencies and use of renewable resources.
• How the company is adjusting its strategy and/ or capital allocation plans to address the risks and opportunities identified.
• How the company is assessing the potential for changes in demand for goods or services due to climate change (including consumer preferences).
• How the company has assessed its current emissions baseline, set rigorous targets, and evaluated whether it is aligned with net zero GHG emissions by 2050.
• Whether the company is stress-testing its assets and assessing the resilience of its strategy under a less than 2° C scenario; including the impacts of policies, such as a carbon tax, fuel selections, and/ or efficiency standards, on profitability.
• How the company may be harnessing sustainable solutions to take advantage of new investment opportunities, business lines, or products and access to capital.
• How the company is monitoring the regulatory landscape and whether it is participating in relevant policy discussions, including international, national, and local requirements and trends.

While many companies are in the midst of grappling with these issues, some have reported that there is room for improvement in terms of Board engagement - now is the time as part of the governance process to review and consider these important questions.