About 35% of firms targeted by Climate Action 100+ have at least one climate expert on their board, according to a recent report by MSCI. The EMEA region (Europe, the Middle East, and Africa) leads with 48% of firms having at least one climate expert, followed by 36% in the Americas and 20% in APAC (Asia-Pacific).
The report, titled “Who’s the Climate Expert on Board?”, highlights a significant gap in climate expertise among corporate board members.
It notes the challenges investors face in identifying directors with the necessary climate-related qualifications due to the absence of a standardized definition of climate expertise.
Since there is no standard or benchmark for climate experts, the report points out that the lack of a universally accepted definition complicates the assessment of board members’ qualifications across different companies.
To address this, MSCI developed a framework to identify climate experts based on specific criteria, including executive-level experience in climate-related roles, relevant professional designations, leadership in climate-related networks, public-sector expertise, academic qualifications, and consulting experience.
MSCI defined a set of professional positions and associated experiences 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, MSCI considered a director to have climate expertise if their biography included at least one of the relevant positions or types of experience.
The report analyzed 164 firms targeted by the Climate Action 100+ investor alliance, which focuses on companies with substantial greenhouse gas emissions. Only 4% of directors (78 out of 1,986) at these companies met MSCI’s criteria for climate expertise based on their publicly disclosed biographies.
Investors with net-zero targets often evaluate whether their portfolio companies have directors with climate expertise. However, the lack of a standardized definition and varying criteria used by companies to identify and disclose relevant skills complicate this assessment. MSCI’s framework aims to address this challenge by providing a consistent method for evaluating climate expertise.
The findings suggest that many companies, especially those in high-carbon-emitting sectors, need to enhance their board’s climate expertise to effectively navigate the transition to a low-carbon economy. The report calls for greater transparency and standardization in disclosing directors’ climate-related qualifications to help investors make informed decisions.
MSCI’s report underscores the critical need for improved climate expertise on corporate boards. As the world grapples with the impacts of climate change, having knowledgeable and experienced directors is essential for companies to meet their sustainability goals and contribute to global efforts to mitigate climate risks.