With news feeds promoting COP26 and following the two letters sent (separately) to Alok Sharma (President for COP26) and Archie Young (the UK’s Lead Climate Negotiator), this week’s spotlight shines on Stephanie Betts, who represented WIBF at the Glasgow meeting and spoke on the Finance Sisters panel organised by SHE Changes Climate.
Essentially the discussion focused on the need to upgrade the definition of ‘fiduciary duty’ in a context where GDP growth may no longer be the correct barometer of success. Until then, it seems sensible to acknowledge that money makes the world go round and we should tweak the existing system to deliver the outcomes we need and exert pressure on a few critical pain points to reach better climate and social outcomes, faster. Corporate governance offers solutions that, if used holistically, could create positive feedback loops.
Two key points would prompt change:
- Working with high-profile stock exchanges to force climate disclosure or ultimately risk being de-listed
- Linking executive pay to climate/social initiatives using granular KPIs, with a significant share of variable pay at risk.
- The conversation on the second initiative resonated with many given this provides a sophisticated mechanism to drive change and mandate better company disclosures, especially if the percentages linked to incentives were 30%+ rather than a nominal 5%.
By properly rewarding executives (and employees) to ‘green’ operations and business models, we have a far higher chance of progressing the debate, driving action and engendering successful outcomes. In aligning incentives with the right outcomes, we would move away from an economic and legal model primarily designed to encourage investment and consumption and restart economies after the 1929 crash. This model is no longer adequate and its downside has been well documented.
Instead, we could challenge how we allocate financial flows, rewarding decision makers for the right behaviours instead of short-term market returns.
In fostering transparency around strategic transition plans (or the lack thereof) and aligning incentives to the outcomes we need, we would transform corporate priorities. This change starts with mandatory disclosures, a cornerstone being developed through a new prototype of global accounting rules from the International Financial Reporting Standards (IFRS) Foundation, which sets a new baseline for sustainability reporting in over 140 countries. This would then lead to the next steps: mitigation; remediation; and regeneration.
This would also take the work of the Carbon Disclosure Project to the next level. With employees, consumers and investors aware of the issues, climate resilience would become embedded in business strategies and, in turn, inform everything from business processes to HR policies.
To help shape this important debate, WIBF had to ‘take a seat at the table’ and begin linking our efforts with those of other organisations to ensure critical mass.
Although we do not yet have enough seats at company tables, women account for 85% of global consumer spending. Flexing our spending power allows us to help drive meaningful change and send clear messages to companies that are part of the solution versus those which continue to ignore the climate crisis.
This is a very important part of what we can do, as a group, to ensure a safer future for everyone.