Chapter Zero’s recent publications on climate competency in the boardroom landed at a useful moment. They put a name and a framework to something we have seen directly in our work with UK mid- and small-cap boards for some time. There is often an unaddressed gap between a board’s awareness of climate risk and its capacity to interrogate it. Naming that gap is the easy part. Closing it is where the real difficulty lies.

Every board today is managing a genuinely challenging economic, political, and social outlook for their business and value chain. With attention being pulled in a dozen directions at once, it is easy to assume that climate has slipped down the agenda. There is little doubt it has for capital providers, whose interest and questioning on climate has noticeably cooled over the last couple of years. With less external pressure to go further, for many boards the climate conversation remains stuck in a compliance mindset. Is our climate policy in place? Is our disclosure right? Are we saying enough? How are the rating agencies scoring us? It is an understandable order of priorities, but it isn’t a strategy.

Our own recent research into how UK mid- and small-cap boards manage and view ESG, indicates similar underlying patterns to those that Chapter Zero describes for climate specifically. Boards are not short of activity or intent. Quite the opposite. But what is still missing is the translation of intent into financial and strategic terms. The question becomes: Do boards have the knowledge and skill to challenge a decarbonisation pathway and targets, to review the financial implications of a transition plan, to question changing physical risk outlooks and adaptation options, or to push back on management’s assumptions with real confidence?

Chapter Zero’s Foreword captures this well. Boards must interrogate the dynamics of strategic resilience, risk oversight, and long-term value creation “with judgement and confidence.” We agree that is the right bar, but climate judgement and confidence come from experience and expertise, which is hard to come by. This is a fundamentally more demanding proposition than most company governance frameworks and processes account for.

This is, of course, the factor of resourcing where larger-cap boards can meet the challenge head on through their scale, dedicated functions, and structured development programmes. This option doesn’t exist for many mid- and small-cap boards. But the main risk is that boards rely on disclosure as a substitute for oversight and judgement, and box-ticking as a substitute for action. Under resource pressure, many boards end up with the appearance of climate governance rather than the substance behind it. This doesn’t hold up when the risk actually materialises.

We agree with Chapter Zero’s ambition, but for many mid- and small-cap companies there is an earlier starting point before they even get to “building competency across knowledge, skills and mindset.” In our view, three things could make an immediate difference:

• Get climate out of the ESG silo. As long as it sits primarily with a sustainability committee or with a single NED, it will not get the data, financial management and Board time a full discussion requires.
• Implement an annual Board review and deep dive into climate. Most companies are reporting to TCFD or CFD annually anyway and will report under IFRS S2 in the near future, but in reality, Board and leadership team involvement in these reports is minimal. The whole board must learn to press management on the implications of transition plans and adaptation. Building the capability to do this, whether through the board itself or the right outside support, is the real work.
• Be honest about what is “good enough” given real constraints. Not every board can build FTSE-level capability, but every board can be inquisitive enough about its most significant blind spots and close those first. This means really questioning and understanding the drivers of climate change for that specific business to prioritise resource and attention.

Chapter Zero asks an important question that is easy to avoid. It is not whether climate is on your board’s agenda; it almost certainly is. It is whether your board is equipped to govern it, not just discuss it. As expectations rise, and they will, the gap will increasingly become a material point of differentiation. Boards must find the right way to ask sharper, more commercial questions on climate.

Our challenge to boards: at your next session, do not rest on “we have a climate policy and strategy.” Instead ask: If a knowledgeable customer or shareholder challenged your transition and physical risk adaptation plan, would you know how to respond with complete knowledge and confidence? In the not-too-distant future, one will.

Needless to say, the Chapter Zero report and checklist are a must read. Our most recent research, ESG: Where Is the Value? explores this same dynamic across the wider sustainability agenda.