Boards will play a bigger role than ever in steering their organizations along this new path. They will do this by overseeing the effective management of the risks the pandemic has exposed, but also by helping to repair social contracts and address societal challenges. Yet, our Global Board Risk Survey identified that only 43% of board members in Asia-Pacific felt their organization was “more than somewhat effective” in managing atypical and emerging risks, compared to 58% for traditional risks. This indicates that board members have a way to go in supporting their organizations through the process.
With this in mind, we’ve identified three issues we believe should be top of mind among board members in the region. While these priorities complement the ones identified for boards in the US and EMEIA, they also reflect the unique blend of challenges and opportunities facing boards in Asia-Pacific more specifically.
1. Leading the drive to combat climate change
Evidence shows climate change takes a particularly big toll on APAC markets. Which is likely why in the 2019 EY CEO Imperative survey more CEOs in Asia-Pacific (40%) cited it as a top global challenge than any of their counterparts in the Americas or Europe. In the same survey, investors globally ranked climate change as the joint number one issue along with national/corporate security. However, more important than the ranking perhaps is their expectation that CEOs respond appropriately.
COVID-19 pandemic has upped the ante by unveiling unsustainable business practices. It’s also shown that climate action is integral to becoming a resilient, responsible organization that puts long-term impact over short-term gain. And many governments, including China, Japan, South Korea and New Zealand, have announced plans to use their economic recovery to stimulate low-carbon industries in their respective nations.
Investors are also raising the stakes: according to the 2020 EY Global Institutional Investor survey (pdf), they’re evaluating ESG disclosures more rigorously. At the same time, they’re factoring in disclosures made as part of the Task Force on Climate-related Financial Disclosures (TCFD) framework.
With the backing of investors and government, board members in Asia-Pacific are in a prime position to advocate for their organizations to reduce their carbon footprint.
But the 2019 EY Global Climate Risk Disclosure Barometer shows that Australia was the only market in Asia-Pacific to make the list of top performers. Meanwhile, China, Indonesia and Malaysia continued to rank among the lowest performers, signaling across all markets that there’s an opportunity to improve.