ESRS E1 Climate Governance
Climate governance disclosures under CSRD sit primarily in ESRS 2 (GOV-1, GOV-2) but ESRS E1 requires additional disclosure of how governance specifically applies to climate strategy and transition planning. Board-level climate competence is increasingly scrutinised by investors and assurers.
Climate governance disclosures under CSRD sit primarily in ESRS 2 (GOV-1, GOV-2) but ESRS E1 requires additional disclosure of how governance specifically applies to climate strategy and transition planning. GOV-1 requires disclosure of the governance body or bodies responsible for oversight of sustainability matters — including climate.
What ESRS 2 GOV-1 requires for climate
GOV-1 requires disclosure of the governance body or bodies responsible for oversight of sustainability matters — including climate. For climate specifically, you must disclose: which board committee or full board has oversight; how frequently climate topics are discussed at board level; and whether board members have the competence to exercise effective oversight of climate risks and opportunities.
Board climate competence is a significant gap at many companies. ESRS 2 does not mandate that board members have climate expertise — but it does require disclosure of whether such expertise exists. The absence of climate expertise on the board is itself a disclosure that investors and proxy advisers will note.
Board training on climate: many companies are investing in board-level climate education (Cambridge Institute for Sustainability Leadership, ClimateAware, and similar programmes) specifically to address GOV-1 competence disclosure.
Executive incentives linked to climate
GOV-2 requires disclosure of whether executive remuneration is linked to sustainability performance — including climate targets. This is one of the most commercially sensitive CSRD disclosures.
For climate specifically: what percentage of executive bonus is linked to GHG reduction targets? Which targets trigger payment? Are the targets absolute or intensity-based? What is the look-back period?
Investors and proxy advisers (ISS, Glass Lewis) score climate-linked executive pay positively — and are increasingly voting against remuneration reports where no climate linkage exists. The disclosure creates accountability: an executive who receives a climate bonus despite rising emissions faces public scrutiny.
For Wave 2 companies designing new remuneration structures: build climate KPIs into executive pay frameworks now, before CSRD reporting begins.
Climate governance and transition plan integration
ESRS E1-1 (transition plan) requires disclosure of how the transition plan is embedded in the company's overall strategy — and this requires evidence of governance integration, not just a standalone sustainability strategy document.
Evidence of genuine governance integration: board approval of the transition plan (not just noting it); climate risk included in the enterprise risk register presented to the board; climate capital allocation reviewed at board level; and climate performance included in management reporting to the board.
The assurance test: assurers will look for board minutes, committee papers, and risk register entries to verify that climate governance disclosures are accurate. A GOV-1 disclosure claiming quarterly board climate review must be supported by board minutes showing this.
Frequently asked questions
Do we need a dedicated board committee for climate?
No — ESRS 2 does not mandate a separate climate or sustainability board committee. Many companies assign climate oversight to the audit committee, risk committee, or full board. What matters is that oversight responsibility is clearly assigned and evidenced through board minutes.
What percentage of executive pay linked to climate is considered adequate?
No minimum is mandated by ESRS. Investor expectations range from 10% to 30% weighting for climate KPIs in short-term incentive plans. ISS and Glass Lewis guidelines favour meaningful weighting — typically 20%+ — rather than token inclusion.
How do we disclose board climate competence without admitting gaps?
Disclose accurately — if the board lacks climate expertise, say so and describe how you are addressing it (training programmes, advisory expertise, plans to appoint a climate-competent director). Assurers will not penalise gaps that are acknowledged and addressed; they will penalise inaccurate claims of competence.