With today’s signing of the Paris climate change accord, one question that now arises is how do activists get corporate boards to focus on climate change issues? They talk softly and carry a big stick. And, according to this article in BNA Accounting Policy and Practice, that big stick is proxy access. More support for the notion that proxy access may be more commonly used as a threat to compel board accountability than as a method of actually nominating directors.

According to the article, concerns about climate change and the related financial risks may be “increasingly making their way up to the board level.” A climate change expert who is also a corporate director argues that “[f]or those people thinking about long-term financial investments, you kind of have no choice but to think about climate change as a factor.” However, a 2014 survey by PwC of over 800 public company directors regarding their attention to issues of corporate social responsibility, including climate change, showed that, in the preceding 12 months, only 6% spent substantial time discussing climate change, while 56% said that the board never discussed it at all and 22% said that they didn’t discuss it very much.

In connection with revisions to its voting guidelines, CalPERS’ investment committee recently decided to start requiring that the boards of companies in which it invests must include people with expertise in climate change risk management strategies. According to the head of corporate governance at CalPERS, “we need people on these boards of energy companies who can look forward and be part of that change, not resisting it.”

To address this issue, a network of institutional investors called the 50/50 Climate Project has teamed up with CalPERS (California public employees’ retirement system) to encourage boards of primarily energy companies – at least initially – to start to tackle climate change. They see the efforts made in 2015 “to press for expanded proxy-access rights to nominate directors as part of the effort to push for boards’ climate competency.” The article reports that, although prior attempts to require board climate change expertise have largely failed, the “unprecedented campaign for proxy access” may present an opportunity to rectify that. A number of energy companies were targeted with proxy access proposals in 2015, providing more leverage to the climate-change advocates. The CalPERS representative characterized the strategy as “‘our Teddy Roosevelt approach, you know, speak softly but carry a big stick….Shareholders have not had a big stick until recently because they’ve neither had the right to vote against board members nor to put forward candidates.’”

However, the concept of “climate competence” — and the directors who may help to establish it — is apparently still a work in progress. The 50/50 Climate Project is reportedly identifying a group of “climate-friendly director candidates.” The Project is also performing sector-by-sector research to assess which boards are more able to deal with climate-related risks, more “climate smart.” In addition, the article observes, board committees may need to be reexamined to be sure that climate issues are taken into account: for example, is climate change primarily the province of the audit committee or risk committee, if any, and is it covered in the committee charter? Does the compensation committee link incentive pay to carbon reduction or only to more energy production? The article also reports that investors are similarly focused on corporate political spending and lobbying in relation to climate policy. The NACD and Ceres have both also provided some guidance for directors on climate issues. For example, Ceres offers strategies for effective board engagement related to environmental and social issues, including ways to incorporate sustainability into board governance systems and board actions.