Incentivizing Boards Of Directors To Address Climate Change, At ChangeNow Summit

To truly avoid reaching that potentially irreversibly devastating 1.5 degrees Celsius warming – which the UN’s World Meteorological Organization just announced that we’ll cross in a few years – we need every aspect of the economy to take action, literally.

At the ChangeNow 2023 Summit in Paris, France last week with over 4,000 attendees from 120 countries and across industries, gathered to strategize how to do that and share solutions, as well as to make deals.

A few of the panels I moderated addressed a key point of leverage in driving this change that is very effective yet has been somewhat in the shadows: company boards of directors.

Board of directors are in effect the “boss” of the CEO and executive team, so they are critical to this transition.

Women CEO’s and engaged board members transitioning energy companies

That includes the fossil fuel energy companies that need to transition to clean fuels. How do they transition? I spoke with a woman at ChangeNow who did it in France.

Isabelle Kocher de Leyritz explained in one of my sessions at ChangeNow how she did just that as CEO of Engie, one of Europe’s largest fossil fuel energy companies. She talked about how the board asked her, then CFO, to develop a plan to transition the company and then elevated her to the CEO role to execute her plan. She told us about the robust debates she had with Engie’s board of directors, and how she persuaded them to sell off coal assets and invest that money into renewable energy assets instead. Now CEO of Blunomy, a consultancy, her Engie contract was not renewed, but Engie remains in renewable energy.

Helle Bank Jorgensen, CEO and Founder of Competent Boards training programs and author of “Stewards of the Future” about the power of boards, talked about how important language is on boards, meaning literally the words you use and how you use them.

Getting Mother Nature on the board

Clover Hogan, CEO and Founder of Force of Nature, herself a force of nature climate activist, consultant and board member representing future generations, reminded us that we need Mother Nature represented on the board of directors.

That means making sure the climate change challenge and the impact of the company’s business practices on all its stakeholders – employees, suppliers, customers, and communities – not just shareholders, are valued equally.

Isabelle Grosmaitre, of Goodness & Co consultants, reminded us that the board has a personality of its own, and the directors themselves define it. Therefore, she, Hogan and Jorgenson emphasized, having diversity of genders, stakeholders, experiences, generations and backgrounds is critical. Aligning values toward what the company’s role is in saving the planet and doing so in an equitable way is vital too, they added.

Antoine Argouges of Tulipshare, who has had success using activist investor strategies to force boards to be held more accountable – and to hold their companies more accountable – for their impact on the environment, helped us learn some strategies that investors can take themselves. We talked about the ExxonMobil board being forced by activist shareholders to replace three fossil fuel-focused board members with climate-focused ones, though Argouges emphasized that it isn’t exactly a silver ticket to transition Exxon rapidly to renewable energy.

A fascinating study on incentivizing the board to make the company more environmentally responsible

Anne Désérable of Quantis. summarized the findings from their small but fascinating study on boards and climate responsibility. One key, she explained, is to make sure the board understands the transition that that particular company needs to take to become carbon neutral. One idea is to link board compensation to the company’s performance on ESG – environment, social, governance – criteria and it’s environmental impact.

Bertrand Badré, CEO of Blue Like Orange investment firm and former Managing Director of the World Bank, who has also had success using activist investor tools, described some of the strategies they have used to drive change, from proxies to voting on the directors, and more.

Badré reminded us that we all have some form of leverage to drive the organizations to make the changes we want to see. He asked us to consider, “What can we do where we are?”