The Guiding Principles for Climate and Nature Governance

The World Economic Forum’s (WEF) Global Risks Report 2026 places extreme weather events and pollution in the top ten short-term risks, while extreme weather, biodiversity loss and ecosystem collapse, and critical change to earth’s systems are ranked as the top three long-term risks.

To help directors factor these challenges into their oversight responsibilities, Chapter Zero Alliance and WEF released Board Leadership for Growth and Resilience: Guiding Principles for Climate and Nature Governance (Guiding Principles). The report’s four principles and three foundations provide guidance for directors as they oversee management’s strategic decision-making. This article outlines the guidance and highlights considerations for adapting it to US boardrooms.

Climate- and nature-related risks may manifest as extreme weather, changing demand for energy and energy-dependent products, lack of access to clean water or concerns about deforestation among other things. Each of these alone or together may influence asset productivity, capital allocation, supply chains, and end markets. The ability of the board to oversee management’s risk assessment and strategy is based on three foundations:

• board understanding of climate and nature-related risks
• effective stakeholder collaboration
• establishing a boardroom culture that encourages dialog about challenging topics

Guiding Principle 1: Oversight and Responsibility

The board is accountable for promoting long-term resilience and value creation. It oversees systems and processes that formalize responsibility for the impact of changes to climate and natural resources on organizations.

Boards are responsible for understanding whether and how climate and nature-related risks affect business value. This may include directing management to address these topics in board reports and meeting agendas and including relevant information in capital allocation and strategy development decisions. Board leaders, particularly nomination and governance committee members, can regularly review how the board carries out its oversight responsibilities and ensure the board has sufficient knowledge of material climate and nature-related topics to enable informed dialog with management.

Directors may ask management to clearly articulate whether and how actions related to climate change and nature influence business drivers and, in turn, long-term success. The board can promote a culture where directors discuss climate topics in business terms and feel comfortable engaging with each other and management. Regulation addressing climate change, water pollution, or land protection, for example, will rise and fall across administrations—directors can provide balance and stability by steering conversation toward issues that have or may have a material effect on financial results while keeping a focus on the horizon.

Guiding Principle 2: Strategy

The board oversees systemic integration of material risks and opportunities into organizational strategy and policy development. It steers the inclusion of climate- and nature-related considerations into decision-making to drive long-term value creation.

As part of their long-term stewardship of organizational value, boards serve a critical role in engaging with management on the strategic direction of their organizations and in overseeing operations and risk management.

Agile leaders can protect value and position their firms for growth by being mindful of the ways that climate and sustainability are factors in business strategy and success. For example, the cost or continuity of operations can be affected by changes in energy demand and use driven by data center buildout, mounting physical impacts of extreme weather events across the United States, or the growth of state-level extended producer responsibility laws and PFAS regulation. At the same time, these challenges may create an opportunity to better serve customers or develop new products.

The board’s review and approval of capital allocation, understanding of revenue-generating assets, and questions about supply chain resilience are at the intersection of strategy, risk, and climate and nature-related matters. Directors can ask management to describe the adaptation and resilience measures in place to enhance long-term enterprise value.

Guiding Principle 3: Risk and Opportunity

The board oversees material risks, opportunities and dependencies to protect and enhance stakeholder value. It considers how climate and nature both shape and are shaped by the organization's activities and financial performance.

According to NOAA’s National Center for Environmental Information, “The US sustained 403 weather and climate disasters from 1980–2024 where overall damages/costs reached or exceeded $1 billion (including CPI adjustment to 2024).”

Against this backdrop, the board's stewardship role in preserving and delivering value for shareholders innately means addressing climate and nature as key financial risks facing businesses. The board may ask management whether and how it sought to capitalize on climate and nature-related opportunities by understanding customer needs and challenges in the value chain. Has management connected these opportunities to growth or innovation goals? Are there established business development processes or described investment plans designed to capture value?

It is the role of the board to oversee and be accountable for the assessment, management, and integration of material-, climate-, and nature-related risks and opportunities—a responsibility made even more important given the inconsistencies in climate and sustainability regulation. As Persefoni and NACD note in this boardroom tool, boards can ask for assurance that shifting regulatory requirements and differences across jurisdictions do not stall forward progress in building a resilient business.

Regulation or no, these issues are making their mark—whether through rising US energy costs that open opportunities to strengthen competitiveness or through water scarcity that threatens the productivity of a revenue-generating assets in drought-prone areas such as the West, High Plains, or Southwest.

Guiding Principle 4: Disclosure and Transparency

The board promotes transparency, integrity and accountability through disclosures that fairly inform investors and stakeholders. It oversees systems that enable true and fair reporting of how changes in climate and nature affect financial performance and long-term prospects.

As noted above, regulation related to climate and nature disclosures is evolving and uneven across jurisdictions where companies operate. Federal requirements are dissipating in the United States, while states such as California and New York are building climate reporting requirements. Though Europe has slowed and narrowed its Corporate Sustainability Reporting Directive (CSRD), 36 countries have adopted or are finalizing International Sustainability Standards Board (ISSB) reporting standards, particularly in Asia Pacific, Africa, and Latin America.

While the SEC announced in May 2025 that it would no longer defend its climate-related disclosure rule, companies are still obliged to disclose material sustainability issues. Boards can ask management to ensure that companies are communicating in a clear and transparent manner about the topics that are relevant to the success of the business. With fiduciary duty clearly in mind, directors should use financial materiality as a guide.

Questions Directors Can Ask

• How does management identify and evaluate potential material, climate-, and nature-related risks and opportunities across the value chain?
• What core weather-related assumptions do we have about the performance of our supply chains, corporate infrastructure, and critical assets?
• How do these assumptions inform our strategy, risk assessments, and capital allocation decisions?
• Which company assets, future development plans, or critical supply chains are affected by climate change or dependent on natural capital, such as access to abundant clean water, or productive farm- and forestland? What are we doing about it?
• How prepared is our management team to manage future risks and capitalize on future opportunities?
• Are we tracking costs to the company (e.g., insurance premium changes, annual damage, or repairs) due to extreme weather such as floods, fires, or storms? 
• What information does our board receive from management about sustainability?
• Is our board equipped to understand and engage management on climate- and nature-related risks to the business across different time horizons?
• Does management present sustainability information to the board in a way that facilitates discussion of the connection to value creation?
• How do we meet the expectations of suppliers and customers regarding sustainability reporting, resilience, and related opportunities?
• Has the company consistently communicated the underlying business drivers of resource efficiency, innovation, and cost management?