Many institutional investors with net-zero targets evaluate whether their portfolio companies have directors with climate expertise. There is no consensus, however, on how to define such expertise and companies often use different criteria to identify and disclose the relevant skills on their boards. This makes it difficult for investors to assess the climate expertise of directors in a consistent manner across a portfolio. Our framework for assessing relevant director experiences may help address this challenge.[1]
Climate-expertise criteria based on relevant experience
We defined a set of professional positions and associated experience that are indicative of a director’s climate expertise. This includes relevant executive experience or select director qualifications, while excluding general statements in director biographies such as “climate experience” or “climate expertise.” Using this approach, we considered a director to have climate expertise if their biography included at least one of our relevant positions or types of experience.
Criteria for directors’ climate expertise
| Type of experience | Definition |
|---|---|
| Executive-level experience | Previous executive-level experience at a company where the biography includes a role that requires the development and/or application of technical climate-related expertise |
| Designations and qualifications | Select professional designations/certificates or graduate-level academic qualifications related to climate change |
| Professional network | Leadership role in a relevant climate-related professional or industry network/NGO |
| Public-sector expert | Climate-change executive or expert in the public sector |
| Academic | Academic in a climate-related, renewable/clean energy-related or environmental field |
| Consultant | A climate or environmental consultant (principal, executive or partner) in a consulting firm or practice |
Climate experts at high-carbon-emitting firms
We used our framework to identify climate experts at 164 firms targeted for engagement by the Climate Action 100+ investor alliance because of their substantial greenhouse-gas emissions and potential for driving the net-zero transition.[2]
Only 4% of directors (78 out of 1,986) at these companies met our criteria for climate expertise based on their publicly disclosed biographies, as of August 2024.[3] [4] Half of the climate experts we identified had relevant executive experience. While this may reflect the profile of director candidates, it suggests that some nomination committees may prioritize current or former senior managers with operational experience when recruiting climate experts.
Climate experts with executive experience were the most common
The climate experts we identified were spread out among the companies in our analysis. Approximately 35% of firms had at least one climate expert on their boards, while only 11% had more than one such expert.
Boards with multiple climate experts were few and far between
Important regional differences in directors’ climate expertise
According to our analysis, almost half (48%) of firms in EMEA had at least one climate expert on the board — higher than in the Americas (36%) and APAC (20%). This indicates that many boards of high-carbon-emitting companies in EMEA had direct and sustained access to climate expertise to inform their decisions.
Climate expertise from a regional perspective
Energy sector leading the way
Perhaps not surprisingly, the energy sector had the highest proportion of companies with at least one climate expert on the board (44%), compared to other sectors we analyzed.[5] In contrast, only 20% of firms in the consumer-staples sector had at least one climate expert on the board.
Share of boards with at least one climate expert across select sectors
Directors’ climate expertise varied widely, with consistent criteria lacking
Our criteria for defining the climate expertise of directors based on certain types of experience may help investors assess relevant board skills in their portfolios in a more consistent manner. Our analysis uncovered notable differences in the climate expertise on boards of high-carbon-emitting firms across sectors and regions, underscoring the importance of this assessment.