Director Spotlight - Gale Rubenstein

 

GALE RUBENSTEIN
Chair, Board of Trustees, University Pension Plan; Counsel, Goodmans LL

Director Spotlight is a regular feature that provides an opportunity for a prominent director to discuss practical insights and critical developments on climate governance important for boardrooms. Chapter Zero Canada recently spoke with Gale Rubenstein on recent climate governance trends and developments, what directors can do to enhance their climate competency, and how boards are adapting their governance framework to ensure effective oversight.

Can you discuss recent legal and regulatory trends and developments on the international front that boardrooms within Canada are particularly monitoring closely? How are these impacting climate-related conversations within the boardroom?

There are several emerging trends on the international front that should be on the radar of boards across Canada. These include:

1. A growing movement to hold directors personally liable for failing to adequately prepare their companies for future risks, culminating in a recent UK lawsuit where Shell’s directors were sued based Shell’s climate strategy. Indeed, more organizations around the world have expanded their definition of fiduciary duty to include the active management of climate-related risks;

2. The development of more formalized disclosure standards, both in Canada and globally. New global accounting rules for measuring and reporting a climate-related impact from the International Sustainability Standards Board (ISSB) are scheduled to take effect in January 2024. These standards are specifically targeted to tackle greenwashing and, in turn, enable investors to make more informed decisions. Recent climate risk guidelines released by the Office of the Superintendent of Financial Institutions, or OSFI, also seek to improve climate-related disclosures by 2025; and

3. The emergence of a notable difference in approaches to climate policy. The US recently introduced the Inflation Reduction Act (IRA), offering companies a regulatory “carrot” through sizeable tax incentives for clean technologies and green energy. The IRA differs from the European approach, which relies on funding programs and regulations. These distinct approaches by large economic powers have already served to increase global competition for clean tech dollars—essential in the net-zero transition.

Stakeholders are paying closer attention to a board’s sustainability knowledge and experience as transition plans are incorporated into strategy and risk assessment. What advice would you give boardrooms looking to ensure they have the required skills and competencies as climate-related issues get more scrutinized and grow in complexity?

Instead of siloing a board’s climate and sustainability expertise with only one or two members, raise the knowledge and experience level of the whole board through dedicated education and training sessions. These sessions are critical as regulatory and disclosure frameworks become formalized. The board should have a firm understanding of the stakeholder and regulator’s expectations on the path ahead.

Choose advisers with differing backgrounds. It is appropriate to consult those with expertise in your specific sector, but speaking to climate practice and disclosure leaders is important, no matter their sector background. The consultation will help provide more comprehensive insight into the risks and opportunities of the global transition to net-zero emissions.

As environmental and social issues gain greater prominence among investors and other stakeholders, how are boards adapting their governance structures to this changing landscape? What kinds of changes do you see at the committee level?

A major shift is a move away from standalone or compartmentalized climate and ESG governance. Increasingly, this work is being incorporated and integrated into existing ‘traditional’ governance frameworks. For example, committee mandates are being updated to identify where ESG oversight occurs alongside non-ESG oversight specifically.