The first step is for Boards to include climate risk as a standing item of their quarterly agenda. This sends a clear signal to management of the Board’s expectation for climate risk to be identified, understood, reported, and managed.

For executive management, climate risk should be a standing agenda item at its regular meetings.

Most organisations will have an organisational risk management framework in place, which maps the process of communication and ownership of risk. Ideally, you will embed climate risk management into your existing risk management process.

If your organisation does not have this in place, the first action is to establish a process for capturing climate risk, clear lines for reporting these risks up to the Board, and clearly defined accountability for managing climate risk.

The frequency and procedure for climate risk reporting to the Board is key – this ensures that the Board is fully appraised of emerging risks, timelines are set for undertaking risk assessments, and developing mitigation and adaptation options are clearly understood, and adhered to. It also provides the Board the opportunity to challenge and test the process to ensure it is robust. Ultimately, accountability sits with the Board – failure to adhere to the standards could result in fines up to $5 million for entities or up to $50,000 for individual directors, and up to five years imprisonment.

If your organisation doesn’t have a climate change policy in place, now is the time to start thinking about drafting one. Your policy should set out your expectation of all employees on all areas of climate risk management and accountability. It serves as a clear reference point and ideally will be supported by either standards and/or guidance which can inform the expected level of service or design specifications, setting the baseline for performance in the climate change context.

If your organisation hasn’t already carried out a climate risk assessment, then this will be the first topic to discuss on the climate risk agenda. The XRB requires disclosers to explain how they have accessed the appropriate level of climate change expertise, so you will need to consider whether to bring in external experts, and if so, who.

The second topic to discuss will be whether your organisation’s existing risk management system is capable of capturing climate risk, given the issues that arise with the chronic nature of climate risk, and the methodology and outputs of assessing climate risk. This will prove key to effective climate risk management - and we will explore this in close detail in next week’s instalment.

Until then, if you have any questions, please contact us directly.