Energy, ESG and the Board's New Agenda
- 7 October 2025
Exploring how energy transition policies impact ESG priorities and boardroom strategies.
The global energy transition is accelerating, and boards are at the forefront of balancing sustainability goals with political and economic realities.
In the wake of COP28, energy policies are evolving rapidly, reshaping ESG expectations and redefining business strategies. This session will offer a strategic lens into how energy politics intersect with governance, risk, and opportunity.
Join GCC BDI, Good Governance Academy and our panel of experts in this session:
In Brief:
Background information
As the global energy transition accelerates, boards of directors face growing pressure to align sustainability goals with shifting political, regulatory, and economic landscapes. Navigating this complexity requires strategic leadership and informed governance.
This session considers:
- Strategic Integration: How boards can effectively integrate energy transition and ESG priorities into core business strategy — not as compliance exercises, but as drivers of competitiveness and resilience.
- Oversight and Accountability: The governance mechanisms which are most effective in ensuring accountability for energy and ESG outcomes across management levels.
- Risk and Opportunity: How directors should approach the dual challenge of managing transition risk while capitalizing on new energy-related opportunities, such as decarbonization technologies or circular business models.
- Leadership and Stakeholder Trust: In an era of stakeholder scrutiny and regulatory pressure, what leadership behaviours and boardroom practices can best sustain trust, transparency, and long-term legitimacy.
Short 6-minute Explainer
Frequently Asked Questions
The convergence of the energy transition and ESG imperatives creates an unprecedented challenge for boards, which Professor Mervyn King describes as both a “huge intellectual exercise” and a “juggling act.” It is considered a “new” agenda because it forces directors to simultaneously balance a complex and often conflicting set of factors that were not previously central to board-level strategy.
According to King, boards must now weigh:
• Regulatory Changes: Keeping pace with evolving rules across multiple jurisdictions.
• Societal Expectations: Responding to shifting public sentiment on sustainability and corporate responsibility.
• Financing the Transition: Sourcing the immense capital required to shift away from fossil fuels.
• Political Realities: Navigating national policies, employment constraints, and economic pressures.
• Geopolitical Risks: Accounting for the impact of global conflicts, tariffs, and international relations on strategy and supply chains.
This complexity is amplified by the global financial and regulatory pressures detailed later, such as the North-South financing divide and the strategic impact of the EU’s Carbon Border Adjustment Mechanism (CBAM), showing how disparate elements create the juggling act King describes.
Peadar Duffy decisively reframes the ESG movement not as a corporate effort to be “kinder to the planet,” but as a pragmatic response from global capital markets terrified by rising uncertainty. The primary driver, he argues, is fear—specifically, the fear that traditional risk assessment tools are no longer fit for purpose.
Duffy explains that institutional investors, particularly pension funds, have become “quite petrified” by their inability to confidently place long-term investments in an increasingly uncertain world. This fear led them to demand better, more transparent data, which culminated in the creation of new frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). This initiative, born from the Financial Stability Board, was designed to give capital markets the common language and tools they needed to understand emerging risks.
The panel’s consensus is that ESG is a fundamental market shift, not a passing trend. Peadar Duffy states unequivocally that it is “not a trend thing” but an absolute market requirement driven by the need for better risk assessment.
Karina Litvack reinforces this by focusing on the physical realities of climate change, stating that regardless of political “bluster,” “the train has left the station.” She emphasizes that “physics is physics,” meaning the tangible impacts of a warming planet are realities that companies and their boards must continue to address. The underlying drivers are economic and scientific, ensuring their persistence beyond short-term political cycles.
Peadar Duffy offers a clear and practical distinction between these often-conflated terms, advising that they be viewed not as synonyms but as cause and effect.
- ESG: Duffy describes “ESG” as a somewhat unhelpful term that is, at its core, a “classification system.” It is a way of organizing non-financial data into three distinct “buckets”: Environmental, Social, and Governance. These buckets contain various topics with different taxonomies and units of measure. In short, ESG refers to the data inputs.
- Sustainability: In contrast, sustainability is “the outcome.” It represents the promise a company makes about its long-term viability, resilience, and ability to perform. This promise is—or should be—evidenced by trusted, verifiable ESG data.
In this framework, a company uses ESG data to prove its strategy will lead to a sustainable outcome for the business and its stakeholders.
This fundamental understanding of the new agenda prepares directors to move from theory to the practical application of their duties.
To manage the intricate demands of the transition, boards must adopt both new structures and a long-term mindset. Mervyn King suggests a practical structural change: appointing a dedicated “corporate stakeholder Relationship officer.” This role would be responsible for systematically understanding the “needs, interests, and expectations” of all key stakeholders, providing the board with the essential intelligence needed for balanced, timely decision-making.
From a strategic perspective, Karina Litvack adds that boards in long-cycle industries like energy must make carefully considered, long-term capital decisions (often with a 30-year life) and be prepared to stick to them. This involves defending the company’s strategic path against short-term policy swings or market volatility, ensuring the “supertanker” of the company continues moving toward its sustainable destination.
No, it is not. While regulatory compliance is essential, the panel stresses that it is merely the starting point. Karina Litvack puts it succinctly: compliance is “necessary, but not sufficient.”
Mervyn King elaborates on this from a fiduciary perspective, stating that a director’s fundamental “duty of care” is to the long-term health and value of the company. Fulfilling this duty requires thinking beyond “mindless compliance” with mandated rules. A board must proactively assess the full spectrum of risks and opportunities—including those not yet codified in law—to steer the company sustainably. This distinction is critical: it positions ESG not as a separate compliance stream, but as an integral component of the board’s core fiduciary duty to ensure the company’s long-term viability.
Traditional corporate structures are no longer “fit for purpose” in a world of rapid, interconnected change, according to Peadar Duffy. He uses a powerful analogy from the Iraq War, citing General Stanley McChrystal’s “Team of Teams” approach, which dismantled the US military’s siloed, hierarchical command doctrine and replaced it with a collaborative, cross-functional model better suited to a dynamic environment.
Duffy argues that corporations face a similar challenge. Most large companies operate with an “illusion” of enterprise-wide risk management because their functional systems for compliance, safety, environment, and operations are siloed and, critically, do not communicate with each other effectively. This fragmented approach is too slow and blind to the complex, systemic risks that define the modern landscape. Duffy’s critique of siloed corporate structures gives strategic weight to Professor King’s suggestion for a dedicated “corporate stakeholder Relationship officer”—a role designed to break down information silos between the company and its external ecosystem.
The new environment demands a fundamental mindset shift away from rearview-mirror analysis. Peadar Duffy explains that relying on recent history to predict the future no longer works. Instead, organizations must adopt a model of “always sensing,” “always learning,” and “always adapting.” This requires a culture of constant vigilance and agility, anticipating what is around the corner rather than reacting to what has already happened.
To operationalize this, Duffy advocates for a practical “tell me, show me, prove it to me” framework. Boards should not accept policies at face value but must demand evidence of procedures and proof of performance through data. He asserts that boards need tools allowing them to drill down into datasets to verify information themselves, rather than relying on curated PowerPoint presentations. For a board, this represents a shift from passive oversight of management reports to active verification of underlying data, fundamentally changing the nature of board-level accountability.
Effective internal governance, however, is only half the equation. A board’s strategy must also account for the powerful external forces—financial, regulatory, and technological—that define the global playing field.
Mervyn King highlights a significant North-South divide in financing the energy transition. He points out that the industrial pollution that created the climate crisis “started in the northern hemisphere,” yet nations in the South remain highly dependent on fossil fuels and now face daunting transition costs. He cites the example of South Africa, where the transition is estimated to cost $300 billion US dollars over 25 years.
The core financial challenge is that the Northern Hemisphere is primarily offering loans and export credits, rather than grants, to assist with this transition. As King notes, this approach simply adds to the “huge debt burdens” already carried by Southern Hemisphere nations, making a just and rapid transition financially unsustainable for them.
Karina Litvack provides a concise explanation of this key European Union policy. The CBAM is a mechanism designed to prevent “carbon leakage”—a situation where companies move carbon-intensive production to countries with less stringent climate policies. CBAM works by imposing a tariff on certain imports, ensuring that goods from countries without a carbon price face an equivalent cost to those produced within the EU.
Its strategic effect is profound. It compels export-dependent trading partners to either absorb the tariffs or introduce their own domestic carbon pricing systems. In this way, the EU is effectively “exporting” its regulatory model and accelerating the global effort to “internalize externalities” by putting a price on carbon emissions.
The panel’s discussion points toward a diversified future energy mix defined by a rapid, economically driven shift away from fossil fuels in power generation. Karina Litvack highlights that renewable energy is now cheaper to build for new power generation than fossil fuel plants and that investment in nuclear energy will be a necessary component for stable, carbon-free baseload power.
She respectfully disagrees with Mervyn King on the role of “clean coal,” arguing that limited Carbon Capture and Storage (CCS) capacity should be reserved for “hard-to-abate sectors” like aviation, cement, and steel, where viable alternatives do not yet exist. Using this scarce resource for power generation, where cheaper alternatives are available, is an inefficient use of a critical transition technology. The panel’s collective view points to a future where capital allocation in energy is governed by a strict hierarchy: renewables are the economic default for new power, nuclear is essential for baseload, and scarce technologies like CCS must be reserved for sectors with no other alternative—making notions like “clean coal” for power generation strategically and economically unviable.
These global dynamics underscore the need for boards not only to be strategic but also to build the internal capacity and external trust required to succeed.
The Climate Governance Initiative (CGI), established in collaboration with the World Economic Forum, is a global network founded by Karina Litvack. She explains that the initiative was born from her firsthand experience navigating climate transition issues on the board of a major oil and gas company.
Its primary mission is to “assist and support board directors in understanding all the implications of the transition.” CGI provides training and support to help directors be a force for constructive change. With a global network of chapters, including in the UAE and Southern Africa, it provides a critical platform for building the knowledge and confidence directors need to govern effectively on climate-related matters.
Shareholder resolutions on environmental topics are highly significant, even when they do not achieve a majority vote. Karina Litvack, drawing on her extensive board experience, explains that while such resolutions rarely pass, a vote of more than 10% is viewed by boards as a “very serious signal” from a key stakeholder group.
Furthermore, she emphasizes that the mere act of filing a resolution—or seeing a peer company receive one—is itself meaningful data that boards must analyze. These actions are leading indicators of investor sentiment and emerging expectations, providing crucial insight that allows a proactive board to stay ahead of future demands.
According to Karina Litvack, trust must be deliberately built with all stakeholders—investors, employees, suppliers, and communities. This is achieved through principled and transparent leadership that starts in the boardroom and radiates throughout the organization.
She illustrates this with a powerful anecdote about acting on a whistleblower’s report concerning a senior executive. By taking the concern directly to the chair of the audit committee, who then acted on it decisively, she participated in a chain of trust that reinforced the company’s ethical foundation. This microcosm, she explains, is what boards must foster at a macro level. The board must be the “embodiment” of the company’s ethical principles, demonstrating unwavering accountability and transparency to earn the confidence of all parties who rely on it.
Our guests
Glossary of Terms
Term | Definition |
Carbon Border Adjustment Mechanism (CBAM) | A mechanism, such as the one implemented by the EU, that imposes tariffs on certain goods imported from countries with less stringent carbon pricing policies. Its goal is to prevent “carbon leakage” and level the economic playing field for domestic industries. |
Carbon Leakage | The situation where companies in a region with high carbon costs move their production to countries with less strict emissions regulations, leading to a shift in emissions rather than a global reduction. |
Climate Governance Initiative (CGI) | A global project, born from a collaboration with the World Economic Forum, that aims to assist and support board directors in understanding the holistic implications of the climate transition, including nature, circular economy, and good governance. It operates through national chapters, such as Chapter Zero. |
Corporate Social Responsibility (CSR) | A traditional approach to corporate ethics, often managed by marketing or investor relations, which Peadar Duffy suggests led to “deeply green” reports that were not subject to the same level of scrutiny as modern, standards-based sustainability reporting. |
Duty of Care | A director’s legal and ethical obligation to act in good faith and in the best long-term interest of the company. Mervyn King stresses this duty requires boards to consider sustainability factors to ensure the company’s future health, going beyond mere regulatory compliance. |
Ecosystem of Ecosystems | A concept used by Peadar Duffy to describe the complex, interconnected nature of a large organization and its operating environment. It implies that a company is not a self-contained unit but is part of, and contains, multiple interdependent systems that must be understood holistically. |
ESG (Environmental, Social, and Governance) | As defined by Peadar Duffy, ESG is a classification system for data related to a company’s impact on the environment (E), its relationships with stakeholders like employees and communities (S), and its internal systems of leadership and control (G). He distinguishes it from “sustainability,” which is the outcome derived from managing these factors. |
GCC (Gulf Cooperation Council) | A political and economic alliance of six Middle Eastern countries: Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain. The webinar was a collaboration with the GCC Board Directors Institute. |
Greenwashing | The practice of making a company appear more environmentally friendly or sustainable than it actually is, often through misleading marketing or unsubstantiated claims. |
Stranded Assets | Assets that have suffered from unanticipated or premature write-downs, devaluations, or conversions to liabilities. In the context of the discussion, this refers to fossil fuel-related assets that lose their value because the product they produce is no longer in demand in a low-carbon world. |
Sustainability | As defined by Peadar Duffy, sustainability is the outcome of effectively managing ESG factors. It represents a company’s ability to maintain viability and perform over the long term. |
TCFD (Task Force on Climate-related Financial Disclosures) | An organization created by the Financial Stability Board to develop recommendations for more effective climate-related disclosures. Peadar Duffy notes its creation was driven by capital markets needing better tools to understand climate-related uncertainties. |
Value Creation Model | A modern governance approach, contrasted with the 20th-century shareholder primacy model, where the board’s objective is to create value in a sustainable manner. This involves embedding sustainability issues into the core strategy and considering the needs of all stakeholders. |
