If Hurricanes Harvey, Irma, Florence, and Willa—and their collective millions of dollars in damages and losses—haven’t convinced you that climate change poses real risks to business, perhaps the recent Intergovernmental Panel on Climate Change report will.

In no uncertain terms, the report lays out a vision, grounded in science, of the stark future that awaits us all if we fail to keep the planet from warming more than 1.5 degrees celsius. Increased sea-level rise and flooding, warming oceans, more and ever-intensifying coastal storms, and widespread drought—and all the destruction they bring to human lives and business operations—will become the norm unless we act in the next 12 years or so to significantly reduce global greenhouse gas emissions.

Investors are taking these risks extremely seriously and raising pressure on companies and their boards to do the same. From taking action during proxy season via shareholder statements and other measures to staying engaged with management in the off-season, investors are signaling they expect serious corporate commitments and action on climate change, starting with rigorous analysis of climate risk to their investments.

Smart, proactive, and effective disclosure is critical to helping investors do their job well—and assess which companies are well positioned in the face of climate change risks. Fortunately, tools that can help companies provide such disclosures are emerging.

Last year, a body convened by the Financial Stability Board released a framework that companies can use to disclose the kind of information investors need to accurately price climate risks. Called the Task Force on Climate-related Financial Disclosures (TCFD), the group’s recommendations quickly garnered widespread support. Heavy hitters in the financial community, including BlackRock, JPMorgan Chase, and TIAA, helped develop the recommendations, and more than 160 investors representing $86.2 trillion in assets have issued statements supporting them. Over 500 major companies, including PepsiCo, Unilever, and eBay, have publicly supported the TCFD.

Why should boards pay attention?

The TCFD recommendations are a great example of the growing integration that investors are looking for between corporate governance structures and disclosure on environmental and social issues such as climate change.

Investors don’t just want companies to disclose data on how climate change is affecting them: they want to know how companies are addressing these risks in the long term, including how they factor into corporate strategy and decision-making. As part of this, they are paying close attention to the effectiveness of companies’ governance systems allowing for this integrated decision‑making—systems like board oversight of climate change.

Yet, in its 2018 report on the status of TCFD-based disclosures, the TCFD Secretariat notes that companies are still in the early stages of demonstrating their climate-related financial impacts.

Disclose What Matters, a recent Ceres report, echoes this finding. In analyzing the sustainability disclosure practices of nearly 500 of the world’s largest companies, we found that while most large global companies disclose their sustainability performance, and indeed provide a wealth of information, these disclosures are still not presented in a financially relevant way. Specifically, companies still don’t demonstrate how their approach to climate and other environmental, social, and corporate governance (ESG) issues impacts their business strategy and performance.

To meet investor expectations, companies need to step up the maturity of their disclosures, evolving from “disclosing more” to “disclosing what matters.”

Boards can do a lot to help their companies make this transition—and by doing so, get credit from the investor community for their work on climate change and other ESG issues. Disclose What Matters outlines specific steps boards can take:

1. Keep track of ESG issues that your investors care about. Boards should encourage a company’s sustainability and investor relations teams to work together to understand ESG issues their top investors are focusing on—and then drive the assessment of whether these issues are indeed material to the company. They can take this a step further: a number of investors are seeking to engage directly with corporate boards on ESG issues such as climate change.
2. Encourage disclosure in a way that your investors are looking to see. For many companies, the plethora of ESG disclosure standards can lead to confusion. Instead, boards can encourage their companies to approach each standard as an opportunity to hone or focus ESG disclosures for specific audiences. For instance, most investors are very interested in disclosures based on the Sustainability Accounting Standards Board (SASB) standards. Indeed, Glass Lewis recently integrated SASB’s materiality guidance across its research and vote management products. In a step that will ease the standards burden, a number of disclosure standards are updating their frameworks to incorporate the TCFD.
3. Demonstrate decision-making. Most large global companies disclose that they have the relevant governance systems to prioritize and address ESG issues. But they do not disclose how these systems drive decision-making on business performance. Boards can work with management and leadership to provide disclosure that bridges this gap.

Markets run on good disclosure. Boards have a key role to play in helping their companies begin to provide the kind of climate risk disclosure that investors demand. Adopting comparable, financially relevant, and reliable ESG disclosures will help boards demonstrate their companies are resilient and prepared for whatever risks the future brings.

Veena Ramani is the program director of Capital Market Systems at Ceres. Ceres is a sustainability nonprofit organization working with the most influential investors and companies to build leadership and drive solutions throughout the economy. All thoughts expressed here are her own.