Analysis: Many U.S. corporate boards don’t fully understand the climate crisis

Many corporate boards in the U.S. are unprepared to tackle the environmental risks posed by the climate crisis, primarily because few of their members have the background to truly understand what’s at stake.

Of the 1,188 directors at 100 of the biggest U.S. companies, just 6% had “relevant credentials” in environmental protection and only 0.3% had expertise in either climate- or water-related issues as recently as 2018, according to a study released by New York University’s Stern Center for Sustainable Business.

The numbers are especially alarming given that about 1,500 companies have announced net-zero emissions goals, and just a small fraction of them have “concrete plans” in place that will get them to their targets by 2050, according to a survey of more than 600 corporate and institutional investors by Bank of America Corp.

Almost all corporate boards suffer from “inadequate expertise in financially material ESG matters,” said Tensie Whelan, the director of NYU’s Stern Center for Sustainable Business.

Climate change, water scarcity and pollution, as well as employee diversity, human rights abuses and supply chain scandals, represent a handful of the environmental, social, and governance issues that are creating material risks and opportunities for corporations and investors, and still many boards have little related oversight or expertise, Whelan said.

For example, none of the 13 consumer discretionary companies in the Fortune 100 had a board member with environmental credentials despite the sector’s large energy, waste and water footprint; health-care equipment and services companies, which have a similarly large environmental footprint, had only three of 120 board members with environmental credentials. Insurers have material environmental risks and also incorporate ESG-related investment policies to incentivize good behavior, yet only 11 of 149 board directors had relevant “E” credentials.

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