How to Set Up Effective Climate Governance on Corporate Boards

The report provides a practical guide for corporate boards to integrate climate change into their governance structures, emphasizing that climate risk is a financial risk that falls under directors' fiduciary duties. It outlines eight principles: climate accountability, subject command, board structure, materiality assessment, strategic integration, incentivization, reporting and disclosure, and external exchange.

• Corporate boards have a fiduciary duty to manage climate-related risks as they are foreseeable financial issues. Failure to oversee the company's long-term resilience against climate-driven business landscape shifts may constitute a breach of directors' duties.
• Effective climate governance requires a board composition that is diverse in skills and experience to ensure informed debate. Boards should conduct gap analyses of their climate competence and plan for succession to ensure awareness persists after key individuals leave.
• Boards must determine the most effective way to embed climate considerations into their committee structures, whether through existing committees or a dedicated sustainability committee, to ensure sufficient scrutiny of climate as a financial risk.
• Materiality assessments for climate risks must be conducted on an ongoing basis and cover short, medium, and long-term time horizons. These assessments should utilize scenario analyses to account for uncertainties in policy, technology, and extreme weather.
• Climate considerations should be systemically integrated into strategic investment planning and the organization's 'three lines of defence' (risk ownership, risk oversight, and independent assurance) to improve reporting quality and risk mitigation.
• Executive incentivization schemes should be aligned with long-term resilience, potentially incorporating climate-related KPIs, carbon emissions indicators, or ESG ratings to reward sustainable value creation.
• Climate-related disclosures should be transparent, consistent, and integrated into financial filings rather than kept in standalone sustainability reports. The report recommends following the TCFD framework to meet emerging mandatory regulatory requirements.
• Boards should maintain regular dialogues with peers, policymakers, and investors to share methodologies and stay updated on regulatory requirements and climate-relevant risks.
• There is a growing trend of strategic climate litigation targeting corporations for failure to mitigate emissions or adapt to risks, with energy companies being the primary initial targets.

APA

World Economic Forum (2019). How to Set Up Effective Climate Governance on Corporate Boards. https://www3.weforum.org/docs/WEF_Creating_effective_climate_governance_on_corporate_boards.pdf

Chicago

World Economic Forum. How to Set Up Effective Climate Governance on Corporate Boards. 2019. https://www3.weforum.org/docs/WEF_Creating_effective_climate_governance_on_corporate_boards.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=How to Set Up Effective Climate Governance on Corporate Boards |date=January 2019 |url=https://www3.weforum.org/docs/WEF_Creating_effective_climate_governance_on_corporate_boards.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2019how, author = {{World Economic Forum}}, title = {{How to Set Up Effective Climate Governance on Corporate Boards}}, institution = {World Economic Forum}, year = {2019}, month = jan, url = {https://www3.weforum.org/docs/WEF_Creating_effective_climate_governance_on_corporate_boards.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }