Connect with us

Business

The Modern Board: How boards can close the climate change gap

If U.S. corporate boards weren’t taking climate change seriously, the Securities and Exchange Commission recently prodded them to act.

In a proposed rule change this past March, the SEC called for public companies to make mandatory climate-related disclosures to investors. That information includes climate risks with a reasonable chance of materially affecting their business, as well as greenhouse gas emissions. The SEC expects to finalize its new rule this fall.

“That rule elevated climate risk to a material financial risk, which is part of the duty of a fiduciary, of a corporate board member,” says Mindy Lubber, CEO and president of Ceres, a Boston-based nonprofit that works with capital markets players to solve sustainability challenges.

Lubber got wind of the impact in April, when she spoke at the Women Corporate Directors S&P 500 Directors’ Summit in New York. “Every single board member there—and they were all corporate board members—said climate has risen to their board level due to the SEC rule.”

Climate change may be high on their agenda, but boards admit they could do more to confront the huge potential risks. As they seek to understand those dangers and make climate part of company strategy, directors are feeling the heat from investors.

Some companies occupy the leading edge on climate change and other ESG topics, but many others have a ways to go, says Rich Lesser, global chair of Boston Consulting Group (BCG). “Boards are on a learning curve with this issue probably not so different than the way they were on a learning curve on digital five or eight years ago.”

That education starts with general climate science awareness and extends to regulatory reporting, says Steve Varley, London-based global vice chair, sustainability, with Ernst & Young (EY). “There’s some basics that I see happening in boardrooms around education of the non-executives, so they can get to the level on climate change of challenging both the strategy and execution of the management team.”

New York–based Lesser points to a recent global survey of 122 board members by BCG and French business school INSEAD. “In that, 91% of directors think that their boards should devote more time to the strategic aspects of ESG, and 53% said that they’re not effectively focused on embedding sustainability into their long-term plans sufficiently.”

For respondents, carbon emissions are a top ESG concern. However, among companies with a net-zero commitment, only 55% of directors polled said their organization has prepared and published a plan to hit that target.

Meanwhile, shareholders are ratcheting up the pressure. For example, last year activist investors concerned about climate change added three new directors to ExxonMobil’s 12-member board, including one with climate expertise. “It was a shot heard around the world,” Lubber says. “Every corporate board now is saying, Am I next?”

Lubber also cites Climate Action 100+, a group of 700 investors controlling a combined $68 trillion in assets that is pushing the planet’s biggest greenhouse gas emitters to take action. “With them and with others, there are about 190 shareholder resolutions this past year, and about 175 the prior year, dealing with climate risk.”

Board members are hearing from their companies’ largest owners, Lubber adds. “They’re saying to the companies, We want you to address climate risk as a matter of good management.”

There’s no precise way to predict the magnitude of climate-related risk, notes Carol Liao, an associate professor at the University of British Columbia’s Peter A. Allard School of Law, where she directs the Centre for Business Law. “Climate change differs because of the systemic and interconnected risks that can act as a risk multiplier.” But climate risk has a material financial impact on 93% of U.S. public companies, according to a 2016 report by the Sustainability Accounting Standards Board.

Companies and their boards also need to understand the legal risks, Liao explains. “There are currently more than 1,000 climate-related lawsuits in court in 28 countries,” she says. “So directors of public companies should be aware that disclosure is a legal obligation and there is potential civil liability for failure to disclose climate-related financial risk.”

Lesser thinks boards are fairly well prepared to handle the regulatory and compliance requirements around climate change. “The more challenging risk is that the markets are moving faster, and technology is moving faster, than companies realize,” he says. “They’re missing opportunities to think about how to embed climate into the core of what they offer and into how to build competitive advantage—or, in some cases, eliminate a competitive disadvantage.”

Then there’s reputational risk, which can ensnare not only companies inattentive to climate but also those that engage in greenwashing, Varley observes. “Boards need to be careful not to make external announcements that can’t be backed up by data and by evidence.”

For boards worried about being climate laggards, education is good place to start. Liao is a principal co-investigator with the Canada Climate Law Initiative (CCLI), whose mandate is to help Canadian businesses consider, manage and disclose climate risks. The CCLI is halfway toward its goal of making 250 free, confidential board presentations by June 2023.

Climate change creates business opportunities, too, Liao emphasizes. She sees a chance “for companies to access new markets nationally and internationally with the development of technological innovations such as battery storage, artificial intelligence, smart metering, and new, lower-emissions products and services.”

What other steps can boards take to show they’re serious about climate risk? Businesses can choose from many integrated assessment models of climate change, Liao says. “Companies are now using scenario analysis as a tool to test their strategic resilience to different climate outcomes.”

Liao also recommends asking five questions:

  1. Does the company have a climate plan?
  2. Does the board have effective oversight of its climate strategy, including identifying climate-related risks that are emerging or increasing in significance for the company?
  3. Has the board identified strategic opportunities for the business over the short, medium and long term?
  4. Who in the company is responsible for climate-related risk and accountable for implementing the company strategy?
  5. Is the board approving the disclosure of the company’s efforts to manage climate change to investors and stakeholders, including integrating disclosure in its financial reporting?

During Ceres’ frequent climate change training with boards, one question that Lubber hears is whether directors should add an environmentalist to their ranks. “That’s not the answer,” she maintains. “Yes, have somebody with credentials who understands climate risk. But what we don’t want to see is one special green representative that only deals with climate. The board needs to look at the risk from climate as they would any other risk facing the company.”

Lubber also often gets asked where climate change belongs in board committees. “I don’t know that there needs to be a special climate or ESG committee,” she says. “Whichever committee is looking at risk, that’s what should do so, so it’s not seen as a special, cute project but it is an essential part.”

Smaller businesses could add a director who’s a sustainability expert, Lesser says. “That’s unlikely to work for a bigger and complicated company where [sustainability] touches many aspects of the business, but that can help a smaller organization that doesn’t want to lose sight of this.”

Varley sees an opportunity for leading boards to engage with climate activists, who tend to be in their 20s and 30s. “Putting them in the mix with a board who might be quite a bit older, I’ve seen that work really well to forge a new level of understanding,” he says. “Maybe not agreement, but at least mutual respect between both parties.”

As for board expectations of management, Lubber says directors should get a progress report on short-, medium- and long-term goals related to climate. And if climate change is important to the company, boards should link it to CEO compensation. “Let that water fall down throughout the enterprise,” Lubber says. “If you say it’s a priority, make it a priority.”

Source link

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published.

Business

Kwasi Kwarteng vows ‘no more distractions’ after scrapping key U.K. tax provision

U.K. Chancellor of the Exchequer Kwasi Kwarteng sought to reassure jangled nerves in his ruling Conservative party with a pledge to deliver on the government’s economic strategy just hours after making a humiliating U-turn on a plan to cut taxes for top earners.

“No more distractions,” he told the Conservative party conference in Birmingham on Monday. “We have a plan and we need to get on with it.”

Kwarteng’s keynote speech to the Tory faithful came after he backtracked on a plan to scrap the 45% rate of income tax in order to head off the growing threat of a party rebellion. He began the speech remarking: “What a day. It has been tough but we need to focus on the job in hand.”

The policy reversal—just 10 days after first announcing the measure—is a major embarrassment for Kwarteng and Prime Minister Liz Truss. The abolition of the top rate was a signature part of their “plan for growth”, as they unveiled the biggest set of unfunded tax cuts in half a century in a dramatic fiscal statement on Sept. 23.

The package sparked a market rout, sending the pound to an all-time low against the dollar and forcing the Bank of England into a dramatic intervention to stave off a gilt market crash. 

‘A Little Turbulence’

“I know the plan from 10 days ago has caused a little turbulence,” Kwarteng said. “We are listening and have listened and now I want to focus on delivering major parts of our growth package.” 

Kwarteng said he planned to push ahead with other elements of his fiscal strategy, including reversing an increase in the National Insurance payroll tax brought in earlier this year by former Chancellor Rishi Sunak, bringing forward a 1 percentage-point cut in the basic rate of income tax, and canceling Sunak’s plan to raise corporation tax to 25% from 19%. 

“This government will always be on the side of those who need help the most,” he said.

That was an attempt to undo the damage of the original plan on the 45% tax rate, which had triggered dismay among some Conservative MPs over the apparent unfairness of a tax cut for the rich while poorer Britons struggle during a cost-of-living crisis. 

Benefits

At the same time, government ministers have been laying the ground for more public spending cuts including on welfare payments. Earlier in the year, Sunak said benefits would increase in line with inflation later in the year, but on Monday, Work and Pensions Secretary Chloe Smith told Bloomberg TV that no decision had yet been taken.

That’s sparked concern among some ex-ministers, who warned they could not support any real-term cuts in welfare payments. Esther McVey, a former holder of Smith’s post, told a side event at the conference it would be “a huge mistake not to give a cost of living increase in benefits.”

Michael Gove, the former minister who has become an unofficial recruiting sergeant for unhappy Tories, told Times Radio he also would “need a lot of persuading” to back benefits not being uprated in line with inflation.

But Gove did indicate he would support the government’s tax measures now the abolition of the top tax rate had been shelved.

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.



Source link

Continue Reading

Business

Elon Musk’s ‘peace’ plan for Russia and Ukraine met with backlash

Elon Musk took a break from his day job of leading carmaker Tesla and space cargo company SpaceX to post a “peace” plan for ending the war in Ukraine. But his proposal was quickly met with backlash—including from Ukrainian President Volodymyr Zelensky.

On Monday, Musk posted a poll on Twitter with four suggestions to ending the war. The first: Enlist the United Nations to supervise a redo of the recent sham elections by Russia of four Ukrainian regions that it formally annexed last week. Next, he called for Crimea—invaded by Russia in 2014 and currently occupied by it—to formally become part of Russia. Then, he said Crimea’s water supply should be assured. And lastly, he argued, Ukraine should remain neutral rather than joining NATO. 

“This is highly likely to be the outcome in the end – just a question of how many die before then,” Musk wrote, as a follow up. “Also worth noting that a possible, albeit unlikely, outcome from this conflict is nuclear war.” 

Less than three hours after his first tweet, Zelensky responded to Musk with his own poll, mocking Musk’s plan. 

“Which @elonmusk do you like more?” Zelensky asked. The two choices? One who supports Ukraine, and one who supports Russia. 

Ukraine’s ambassador to Germany, Andrij Melnyk, also piled on Musk in atypical fashion for a diplomat. “Fuck off is my very diplomatic reply to you,” he wrote. Melnyk later added that no Ukrainian would ever buy a Tesla, telling Musk “good luck.”

Musk, however, persisted. 

“Let’s try this then: the will of the people who live in the Donbas & Crimea should decide whether they’re part of Russia or Ukraine,” he wrote—asking his Twitter followers to answer either “yes” or “no.”

Financial Times correspondent Christopher Miller replied to Musk’s tweet, referring to the Ukrainian Independence Referendum, when Ukrainians were asked to vote on the country’s independence.

“Let’s not try that, @elonmusk,” he wrote. “The people of Donbas & Crimea made their decision in 1991, when Ukrainians from those areas & all others voted freely & unanimously to be in Ukraine.” 

Donbas, a region in Eastern Ukraine, is now nearly fully occupied by Russia. But Ukraine has vowed to liberate it. 

In suggesting Crimea—a peninsula that’s been at the center of Russia and Ukraine’s conflicts—should formally become part of Russia, Musk made clear his belief that the region belongs to Russia, adding that Crimea’s being transferred to Ukraine from Russia by Soviet Premier Nikita Khrushchev was a “mistake.” 

A top advisor to Zelensky responded sarcastically to Musk’s Twitter diplomacy  by saying there was a “better peace plan”—including Ukraine liberating its territories, Russia demilitarizing and denuclearizing so it can no longer threaten others, and war criminals be put on trial. 

It’s not just Ukrainian officials who pushed back against Musk. Many of his Twitter followers sounded off in the comments, calling him a “disappointment” and asking that he refrain from weighing in on a topic so outside of his expertise.  

Despite the often hostile response, Musk gave his peace plan one more push on Twitter. 

“Russia is doing partial mobilization. They go to full war mobilization if Crimea is at risk. Death on both sides will be devastating,” the tweet said. “Russia has >3 times population of Ukraine, so victory for Ukraine is unlikely in total war. If you care about the people of Ukraine, seek peace.”

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.



Source link

Continue Reading

Business

Global recession could happen because of wealthy nations raising interest rates, United Nations says

Governments around the world are determined to bring down inflation whatever the cost, but a growing chorus of voices is pointing out that aggressive monetary policies could have some serious and long-lasting consequences on the world economy.

Central banks in the U.S., Europe, and the U.K. have pursued relentless monetary tightening policies this year to reduce domestic inflation, but transnational institutions including the World Trade Organization and the International Monetary Fund have warned that this approach could push the world into a long period of low economic growth and persistently high prices, according to a Monday report.

“The world is headed towards a global recession and prolonged stagnation unless we quickly change the current policy course of monetary and fiscal tightening in advanced economies,” the UN Conference on Trade and Development (Unctad) cautioned in an annual global trade forecast report released on Monday.

The report predicted that current monetary policies in wealthy nations could spark an economic downturn worldwide, with growth slipping from 2.5% in 2022 to 2.2% next year. The UN says that such a slowdown would leave global GDP well below its pre-pandemic norm, and cost the world economy around $17 trillion, or 20% of the world’s income. And developing nations will be the most negatively impacted, according to the report, and many might be facing a recession worse than any financial crisis in the past 20 years.

“The policy moves that we have seen in advanced economies are affecting economic, social, and climate goals. They are hitting the poorest the hardest,” Unctad director Rebeca Grynspan said in a statement accompanying the report’s release.

“They could inflict worse damage than the financial crisis in 2008,” Grynspan said.

A ‘policy-induced’ recession

The UN agency made clear it will hold central banks around the world responsible for causing the next global recession.

“Excessive monetary tightening and inadequate financial support” in advanced economies could backfire spectacularly, resulting in high levels of public and private debt in the developing world, the report says.

Rising interest rates and fears of a coming recession have sent the value of the U.S. dollar soaring against all other currencies this year. And while this has been great news for American tourists traveling abroad, it’s a fiscal nightmare for developing countries, where import prices are rising fast and servicing dollar-denominated debt is becoming untenably expensive.

Debt levels in emerging markets have been hitting record highs for months, but the strong dollar has exacerbated uneven balances and raised inflation in developing nations as well, according to a separate economic report from the UN published on Monday.

With debt becoming more expensive to service, emerging economies have fewer funds available to invest in health care, climate resilience, and other critical infrastructure, the Unctad report warned, which could lead to a prolonged period of economic stagnation.

“We may be on the edge of a policy-induced global recession,” Grynspan said. 

The report urged advanced economies to consider ways to reduce inflation other than raising interest rates. Grynspan insisted that inflation in every country today is because of a “distributional crisis,” caused by supply-chain bottlenecks unresolved from the pandemic-era, and recommended wealthy nations invest more in developing nations and optimizing supply chains around the world.

Grynspan also called for more debt relief and restructuring packages for emerging economies that are struggling to service their debt.

Unctad joins a growing number of transnational institutions calling on wealthy nations to consider what their efforts to reduce inflation at home is doing to the global economy. Last week, World Bank president David Malpass urged wealthy countries to focus on the supply side of the inflation problem by investing more in production in developing nations and in optimizing supply chains.

Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.

Source link

Continue Reading

Facebook

Latest

In a workshop, IAS officer said, girls have to change their thinking, know what else they said In a workshop, IAS officer said, girls have to change their thinking, know what else they said
National5 days ago

In a workshop, IAS officer said, girls have to change their thinking, know what else they said

In response, a senior woman IAS officer said that there is no end to this demand. She further said, 'You...

Government increased dearness allowance of central employees by 4%, this would benefit 50 lakh employees Government increased dearness allowance of central employees by 4%, this would benefit 50 lakh employees
National5 days ago

Government increased dearness allowance of central employees by 4%, this would benefit 50 lakh employees

Along with this, the work of redevelopment is going on in 199 railway stations of the country. Tenders have been...

Twitter denies Elon Musk's claim of fake accounts, you also know what is the news Twitter denies Elon Musk's claim of fake accounts, you also know what is the news
National5 days ago

Twitter denies Elon Musk’s claim of fake accounts, you also know what is the news

Documents obtained from two data scientists employed by Musk showed they estimated in early July that the number of fake...

Yogi cabinet will have an important meeting, dozens of proposals may be approved Yogi cabinet will have an important meeting, dozens of proposals may be approved
National5 days ago

Yogi cabinet will have an important meeting, dozens of proposals may be approved

It is being told that more than a dozen proposals can be approved in the meeting to be chaired by...

Congress leader raped air hostess in Delhi, know the whole matter Congress leader raped air hostess in Delhi, know the whole matter
National6 days ago

Congress leader raped air hostess in Delhi, know the whole matter

Female air hostess. When the police reached the spot, the woman told that a person named Harijit Yadav, whom she...

People will be able to watch live streaming of Constitution Bench hearing, beginning with Uddhav vs Shinde case People will be able to watch live streaming of Constitution Bench hearing, beginning with Uddhav vs Shinde case
National6 days ago

People will be able to watch live streaming of Constitution Bench hearing, beginning with Uddhav vs Shinde case

It started today with the Uddhav vs Shinde case. Senior advocate Kapil Sibal argued on behalf of the Uddhav faction.

NIA arrested 170 PFI workers from 8 states of the country, Section 144 implemented in Jamia Nagar NIA arrested 170 PFI workers from 8 states of the country, Section 144 implemented in Jamia Nagar
National6 days ago

NIA arrested 170 PFI workers from 8 states of the country, Section 144 implemented in Jamia Nagar

. So the same, NIA team raided Delhi's Shaheen Bagh on Tuesday morning and detained 30 people. The NIA had...

New disclosure in Ankita murder case, former female employee said, suspicious boys and girls used to come to the resort New disclosure in Ankita murder case, former female employee said, suspicious boys and girls used to come to the resort
National6 days ago

New disclosure in Ankita murder case, former female employee said, suspicious boys and girls used to come to the resort

After leaving the job, Pulkit, Saurabh and Ankit put a lot of pressure on me to return to the job....

Modi urges environment ministers to give maximum boost to circular economy Modi urges environment ministers to give maximum boost to circular economy
National2 weeks ago

Modi urges environment ministers to give maximum boost to circular economy

It was inaugurated when I became the Prime Minister. A huge amount of money was wasted due to this delay....

BJP MP Janardan Mishra cleans the school toilet with his hands, shared the video on Twitter BJP MP Janardan Mishra cleans the school toilet with his hands, shared the video on Twitter
National2 weeks ago

BJP MP Janardan Mishra cleans the school toilet with his hands, shared the video on Twitter

When the MP saw that the toilet of the center was very dirty, it was not cleaned, he decided to...

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.