Do Natural Disaster Experiences Influence Corporate Climate Policies?
New research from the United States shows that corporate directors who have lived through severe natural disasters tend to push for lower emissions and stronger climate governance in the companies they oversee. The findings help explain why some firms manage to reduce their carbon footprint after climate shocks while others see emissions rise temporarily. For UK businesses, the research raises practical questions about board composition, governance structures, and how lived experience might influence climate strategy.
The study centres on a simple idea: directors who have experienced abnormally severe weather events bring that perspective into the boardroom. Consequently, the firms they govern often show measurably lower greenhouse gas emissions. This matters because it connects physical climate risk to corporate behaviour through people rather than regulation alone. It also suggests that governance design can determine whether disaster exposure translates into meaningful climate action or remains a missed opportunity.
Understanding this relationship is important for UK SMEs facing increasing pressure on carbon reporting, supply chain emissions, and tender requirements. Boards are being asked to take greater responsibility for climate performance. Therefore, knowing which governance structures actually deliver results can help firms avoid box-ticking and focus on arrangements that drive real change. This research provides evidence that who sits on your board, and where they sit, can make a tangible difference to emissions outcomes.
Directors with disaster experience drive lower emissions
The research, titled "Do Natural Disaster Experiences Make Directors More Prosocial?", was published as a working paper by the National Bureau of Economic Research and later summarised by Harvard Law School's corporate governance forum. It examined US listed companies to assess whether boards that included directors with abnormal disaster experiences showed different emissions and governance outcomes compared to those without such representation.
Abnormal disaster experience means exposure to climatic events that were significantly more severe than the historical norm for a given location. The study measured this by tracking where directors had lived and worked, then comparing the severity of natural disasters in those areas against long-term averages. Directors who had lived through floods, hurricanes, wildfires, or droughts that were statistically unusual were classified as having abnormal disaster experience.
The findings were clear. Firms with more of these directors on their boards exhibited lower Scope 1 and Scope 2 greenhouse gas emission intensity. Specifically, adding one such director per ten board members was associated with roughly a three per cent reduction in GHG emission intensity. This effect held even after controlling for firm size, sector, financial performance, and other governance characteristics.
Moreover, these firms were more likely to assign formal climate responsibility to the board itself. They set explicit emissions targets more frequently. They also gave management climate-related incentives more often than comparable firms without disaster-experienced directors. The European Corporate Governance Institute described the findings as evidence that lived disaster experience can make directors "more prosocial" and more inclined to support climate action.
Importantly, the research found that the effect was strongest when disaster-experienced directors served on governance, audit, or dedicated ESG and sustainability committees. In contrast, the study found little comparable effect when those same directors sat on compensation, finance, or risk committees. This suggests that formal authority over climate policy and oversight is necessary for disaster experience to translate into measurable emissions reductions.
Governance structures determine whether experience becomes action
The research challenges the assumption that climate disasters automatically improve corporate environmental performance. Physical shocks can disrupt operations, damage infrastructure, and raise emissions in the short term. However, whether a firm responds with stronger climate governance depends on who is empowered to shape board-level policy and how climate responsibility is embedded in committee structures.
For UK businesses, this has direct implications. Many SMEs are building out climate governance for the first time in response to reporting requirements, supply chain pressure, or public sector procurement standards such as PPN 06/21. The research suggests that simply appointing directors with relevant experience is not enough. Instead, firms need to position those individuals where they can influence climate strategy and oversight.
Audit and governance committees typically have authority over risk management, compliance, and board-level policy. Consequently, when disaster-experienced directors sit on these committees, they can embed climate considerations into core governance processes. In contrast, placing those directors on finance or compensation committees may limit their ability to shape climate policy, even if they bring valuable perspective.
This finding aligns with emerging practice in the UK, where listed companies and larger private firms are increasingly establishing dedicated sustainability or ESG committees. These committees often have explicit responsibility for climate targets, emissions reporting, and alignment with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD). The US research provides evidence that this structural choice matters for outcomes, not just disclosure.
It also highlights a potential gap for smaller firms. Many UK SMEs do not have formal board committees or separate governance structures for climate issues. Therefore, climate responsibility often sits with the managing director or finance director by default. The research suggests that embedding climate oversight into governance structures, even informally, can help ensure that climate considerations receive consistent attention and that relevant experience is brought to bear on decision-making.
Another implication concerns board recruitment. The research indicates that disaster experience can change directors' preferences and priorities, not just their understanding of physical risk. This means that boards seeking to improve climate performance may benefit from recruiting directors who have direct experience of climate impacts, provided those individuals are given the authority to act on that experience through appropriate committee roles.
Finally, the research underscores the importance of formal climate targets and management incentives. Firms with disaster-experienced directors were more likely to set explicit emissions targets and tie management compensation to climate performance. These mechanisms help convert board-level intent into operational action. For UK businesses, this suggests that governance improvements need to be paired with clear accountability mechanisms if they are to deliver measurable emissions reductions.
What the evidence shows about climate shocks and corporate emissions
The following summary captures the key findings from the research and their relevance to UK businesses considering governance improvements:
- Firms with directors who experienced abnormally severe natural disasters show lower Scope 1 and Scope 2 emissions intensity compared to similar firms without such board representation.
- Adding one disaster-experienced director per ten board members is associated with approximately a three per cent reduction in greenhouse gas emission intensity.
- The effect is strongest when these directors serve on governance, audit, or ESG committees rather than compensation, finance, or risk committees.
- Firms with disaster-experienced directors are more likely to assign formal climate responsibility to the board and set explicit emissions targets.
- These firms also give management climate-related incentives more frequently, suggesting that governance changes translate into operational accountability.
- The research was based on US listed companies, so direct applicability to UK SMEs depends on comparable governance structures and reporting pressures.
- The findings indicate that lived experience of climate impacts can influence corporate behaviour through governance, not just through regulation or investor pressure.
How UK businesses can apply these insights
The research offers practical lessons for UK firms building or strengthening climate governance. First, board composition matters. If your business is recruiting non-executive directors or considering governance changes, it may be worth seeking individuals who bring direct experience of climate impacts, whether through previous roles in affected sectors or personal exposure to severe weather events.
However, recruitment alone is insufficient. The evidence shows that directors need to be positioned where they can influence climate policy. For smaller firms without formal committees, this might mean explicitly assigning climate oversight to a specific board member and ensuring that climate performance is a standing agenda item at board meetings. For larger firms, establishing a dedicated ESG or sustainability committee with clear terms of reference can help ensure that climate considerations receive consistent attention.
Second, formal climate targets appear to matter. Firms that set explicit emissions reduction targets are more likely to achieve measurable improvements. These targets create accountability and provide a clear benchmark for board oversight. In addition, tying management incentives to climate performance can help ensure that operational teams have both the authority and the motivation to deliver on board-level commitments.
Third, the research highlights the value of integrating climate governance with existing risk and audit processes. Climate risk is not separate from financial risk, operational risk, or compliance risk. Therefore, embedding climate considerations into audit and governance committees can help ensure that climate issues are treated with the same rigour as other material risks.
For UK SMEs facing procurement requirements such as PPN 06/21, this integration is particularly important. Public sector buyers increasingly expect suppliers to demonstrate not just carbon reporting but also credible governance of climate issues. Being able to show that your board has formal responsibility for climate performance, that targets are in place, and that management is accountable can strengthen your position in tenders.
Fourth, the research suggests that governance improvements can have a cumulative effect. Disaster-experienced directors appear to influence not just emissions but also the adoption of other climate governance mechanisms such as board-level responsibility and management incentives. This creates a reinforcing cycle: better governance leads to clearer accountability, which in turn drives better performance and further governance improvements.
Finally, the findings underscore the importance of treating climate governance as an ongoing process rather than a one-time compliance exercise. Physical climate risks are increasing, and firms that build governance structures capable of responding to those risks are likely to be better positioned over the long term. This applies whether your business operates in a sector directly exposed to physical climate impacts or in a supply chain where customers and partners are demanding stronger climate performance.
We support UK businesses with carbon reporting and emissions reduction programmes designed to meet compliance requirements and strengthen governance. Our approach focuses on practical, cost-effective measures that integrate with existing business processes rather than creating additional administrative burden.
Where to find authoritative guidance on climate governance
The research discussed in this article was published as a working paper by the National Bureau of Economic Research and summarised by Harvard Law School. The European Corporate Governance Institute also provided analysis of the findings. These sources offer detailed technical discussion of the methodology and results for readers seeking greater depth.
For UK-specific guidance on climate governance, the Financial Reporting Council provides resources on board responsibilities under the UK Corporate Governance Code. The Department for Energy Security and Net Zero publishes updates on mandatory climate reporting requirements, including TCFD-aligned disclosures. The Environment Agency offers guidance on emissions measurement and reporting for UK businesses.
UK firms preparing for procurement requirements or supply chain expectations may benefit from reviewing Procurement Policy Note 06/21, which sets out carbon reduction plan requirements for public sector suppliers. The British Standards Institution publishes PAS 2060, the specification for demonstrating carbon neutrality, which many UK businesses use as a framework for target-setting and verification.
Training and skills development can support governance improvements. SBS Academy offers practical training on carbon reporting, Scope 3 emissions, and climate governance designed for UK SMEs. The Institute of Environmental Management and Assessment provides professional development resources for individuals responsible for environmental and sustainability governance within their organisations.