MIT Sloan Management Review Article on Defining 'Material' Climate Risks

Most national governments and their regulatory agencies recognize climate change as a material risk to society, the natural environment, and economic and financial stability. These agencies want companies that contribute to their economy’s financial stability to factor in climate change as a material risk, thereby aligning the material concerns of society and economy. But, encouraging such alignment is easier said than done.

Companies know that climate change is relevant to their businesses. If they don’t address it in corporate reports, however, it’s because corporate leaders don’t believe climate change is material to their business: Either they think the effects of climate change are beyond their planning horizon or it’s just not clear whether or how climate change might be a material business risk.

About the Author

Bob Eccles is a professor of management practice at Harvard Business School and chairman of ESG Quant fund Arabesque Partners. Lois Guthrie is the founding director of the Climate Disclosure Standards Board.

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