Corporate Governance and Climate Change: Smoothing Temporal Dissonance to a Phased Approach
Business Law Review 40(4) (2019) 146-160
Posted: 17 Jul 2019
Date Written: July 14, 2019
Projections for climate change extend decades into the future, and usually to the end of this century due to the long-lived nature of greenhouse gases (GHGs). Predominant normative frameworks for corporate governance are primarily short-term in nature, creating a temporal dissonance within the context of corporate governance and climate change. Adding to this complexity, the energy transition itself has temporal paradoxes and implications for the global economy – the transition away from fossil fuels cannot be too sudden and sharp, but an urgent yet stable, phased transition is required. Statutory interventions in the UK have imposed on directors the requirement to consider the long-term profitability of companies. New initiatives, such as the task force on climate related disclosures (TCFD), the Enterprise Principles, and the Oxford-Martin Principles, also advocate for directors to consider the risks from climate change, including emissions scenarios which take into account short, medium and long-term scenarios. It is by using a phased approach to climate risk that a smoothing of this temporal dissonance between corporate governance and climate change can be initiated by businesses. While many of these new governance initiatives do not yet provide the requisite level of specificity to demonstrate how a phased approach could be adopted by particular companies, the TCFD guidance does provide some tools which would allow companies to adopt a phased approach, however the types and levels of detail of these tools should be increased for a variety of types of industry.
Keywords: climate risk, corporate governance, Task Force on Climate Related Financial Disclosures, short-termism, enterprise obligations
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