Rebuilding our economies following the COVID‑19 crisis provides an important opportunity to transform production processes and consumption patterns in a way that mitigates the impact of climate change and related environmental degradation. Both our own well-being and that of future generations depend on it.
Businesses will a play critical role in this transformation, helping to achieve the goals that are set out in the Paris Agreement through innovation and investment. A successful climate transition will also require that companies address and manage any climate‑related risks associated with their activities. It is critical that they regularly assess and disclose how they address climate change and the risks it poses to the sustainability and resilience of their businesses.
First, the framework for corporate disclosure of sustainability information needs to improve. Disclosure standards used by companies must ensure that the information provided is comparable and reliable. Second, company boards need to take account of the interests of all stakeholders, including on sustainability matters. The G20/OECD Principles of Corporate Governance, the leading international standard for corporate governance, highlight the importance of this, which is also the best way to create wealth for shareholders. Third, while many large companies already have climate transition plans, the mechanisms for shareholders and stakeholders to assess and engage with corporate boards to ensure that they are followed remain largely underdeveloped.
This report looks at the major implications of climate change for corporate governance and at some of the instruments that shareholders, boards and stakeholders can use in order to promote the corporate sector’s role in limiting global warming. It also supports the work currently underway to revise the G20/OECD Principles of Corporate Governance with a view to help guide the efforts by policy makers and regulators to adapt corporate governance frameworks to better address climate‑related challenges.
The revised Principles, which will be issued in 2023, will also provide guidance to support companies in the management of other risks related to their sustainability. The corporate governance framework advocated in the Principles also plays a key role in promoting corporate access to market-based financing, which will be essential to support the type of innovation and private investment needed in order to transition to a low-carbon economy. Consequently, the implementation of the Principles will not only improve the corporate sector’s ability to contribute to the net zero transition, it will also make it more dynamic and resilient to future shocks.
I count on us collectively making the most of this important report and wish to thank the OECD Corporate Governance Committee for taking the leadership in the area of climate change and corporate governance.
Mathias Cormann,
OECD Secretary-General