Climate Governance Initiative

Part III: Navigating Legal Duties & Sustainability in an Era of Divergence and Disruption

2 July 2025

Is your board ready for what’s happening?

By Charlene Cranny, Senior Manager for the CGI Financial Sector Programme

This is the final guide in a three-part series capturing insights from a workshop delivered by our Financial Sector team at Chapter Zero France's NED event, held alongside ChangeNOW in Paris.  

The session explored policy disruption and the increasingly polarised public discourse around ESG, climate, and sustainability. In this part, we focus on what the directors who attended the workshop say is working — and not — when it comes to climate governance.  


It’s a different world

Attitudes to ESG have shifted dramatically in the past five years. Directors now face more frequent climate disruption, resource security challenges, volatile regulatory support, geopolitical risk and investor pressure pulling in multiple directions. Boards are being asked to do more — with less certainty. And while risk awareness is improving, many boards still struggle to turn it into meaningful strategic action.

This article shares insights from a workshop discussion between non-executive directors (NEDs) attempting to cut through the complexity and co-create potential solutions for themselves and peers.  

Read on for discussion takeaways and suggested actions to help your board navigate today’s unique challenges with clarity.

1. Climate Risk is Financial Risk — and it’s Part of Your Legal Duty

As we covered in Part I, directors have a legal obligation to consider financially material risks, including those related to climate and nature. This is increasingly recognised across jurisdictions.

What this means for NEDs:

  • Climate and nature risks must be identified, assessed, mitigated, and disclosed like any other business risk.
  • The business judgment rule protects directors who act with diligence — not those who ignore foreseeable risks.
  • ESG belongs in strategy, finance, audit, and risk committees.

Suggested actions:

2. Quantify the Business Case  

Directors are more likely to consider sustainability issues when it’s tied to bottom-line metrics — not just values.

Key takeaway: 
“Doing nothing” has costs — inaction can lead to rising insurance premiums, reputational damage, and legal exposure. Meanwhile, action can unlock investment, innovation, and efficiency gains.

Make it tangible by assessing:

  • Impact on EBITDA (earnings before interest, taxes, depreciation, and amortization) or ROI (returns on investment).
  • Cost of capital, insurance, or supply chain volatility
  • Opportunities from blended finance or low-carbon tech adoption

Suggested actions:

3. Governance Gaps Undermine Progress  

Many boards still lack clear climate governance — and without ownership, no one is truly accountable.

What boards are missing:

  • Defined roles or committees with climate and nature oversight
  • Climate KPIs linked to executive performance
  • Integration of ESG into audit and risk reviews

Suggested actions:

4. Culture and Communication Are Often the Biggest Barriers

Participants noted that even with data, change can be slow due to cultural resistance and confusion.

Common challenges:

  • Short-termism: Pressure for quarterly results crowds out long-term risk planning.
  • “Everyone is involved, no one is accountable”: ESG touches all areas but has no clear owner.
  • Climate fatigue: Competing board topics like AI or cybersecurity often push ESG to the side-lines.

Suggested actions:

5. Regulatory Complexity Is Rising, But It’s Not an Excuse for Delay

Boards must prepare for regulatory divergence, such as reduced projected ESG data under the EU Omnibus Directive or anti-ESG backlash in the US.

This creates risks like:

  • Loss of comparable ESG data (especially from SMEs)
  • Dependence on expensive private data providers
  • Misalignment with investor expectations across jurisdictions

Suggested actions:

6. Transition Plans Must Be Realistic  

A credible transition plan is a must-have. It signals that your company is thoughtfully preparing for high-potential risks and capturing opportunities.

Strong plans should:

  • Be anchored in science and data (e.g. internal ops data, third party platforms, academia, supply chain mapping, insurers, etc)
  • Include measurable milestones and timelines
  • Be tied to core business strategy, not just public targets

Suggested actions:

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Checklist of priority actions: 

Get in touch with your local Chapter if you require further support to influence and act from the boardroom.

Special thanks to the contributions of our workshop participants and discussion co-facilitators Oliver Dudok Van Heel (CISL fellow), Nathalie Dogniez (Eurosif) Sarah Hill-Smith and Klara Lochem (CCLI). 


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