esg-policy-strategy

Why Climate Risk Must Be Brought to the Boardroom

Climate risk is shifting from an operational duty for environmental teams to a top-tier agenda that must be directly overseen by the board of directors, now evaluated as a financial risk and opportunity rather than non-financial information. Succeeding the TCFD, the ISSB and South Korea's KSSB Disclosure Standard No. 2 place 'Governance' first among their four core elements, requiring disclosures on board and management oversight responsibilities, reporting frequency, and the linkage of climate targets to compensation—effectively making climate risk a mandatory boardroom agenda item. As South Korea's Financial Services Commission pushes for mandatory disclosures starting after 2026, building the internal capacity to handle repeated annual quantitative disclosures like scenario analyses is critical, a matter requiring board approval given its control over budgets and organization. In global governance discussions, the view that climate oversight failures could lead to breaches of directors' duty of care and legal risks is spreading (such as Delaware jurisprudence and ISS standards), though interpretations vary by jurisdiction and it should be noted that South Korea's legal system does not automatically adopt them. Recognizing that 'climate risk is investment risk' and that investors read board oversight systems as valuation metrics, companies need to calmly prepare through three measures: regularizing board agenda items, clarifying oversight responsibilities, and linking targets to compensation.