How Audit Committees drive action on nature and sustainability

Chapter Zero and Accounting for Sustainability (A4S) recently hosted a roundtable for Audit Committee Chairs and members to exchange insights and share practical solutions. The session explored:

• The link between climate and nature
• The Audit Committee’s role in overseeing controls and assurance over sustainability-related information
• How reporting frameworks can be used to guide consideration of climate- and nature-related matters

The key insights from the discussion are captured below.

Committee responsibilities

• With competing priorities, such as cybersecurity and geoeconomic disruption, dominating agendas, Audit Committees may need to lead conversations on climate- and nature-related risks, articulating the business case for action.
• Where regulatory reporting drivers are less pronounced, committees may need to frame the issue as both a fiduciary responsibility and a strategic imperative to secure management and board engagement. This reflects a growing belief among committee members that personal values and individual responsibility should play a role in shaping boardroom dialogue. Joint sessions with Risk or Sustainability Committees can strengthen oversight of collaboration and decision-making.

Climate- and nature-related risks and opportunities

• Nature-related risks remain underrepresented on Audit Committee agendas compared with climate issues; water is a notable exception. Yet biodiversity loss and ecosystem collapse pose systemic risks that are poorly understood and often underpriced.
• As emissions rise and nature declines, markets may reprice these risks, affecting financial performance, asset values and financial resilience. Audit Committees need to assess critically how climate- and nature-related risks have been quantified, including understanding the assumptions and scenarios used, and whether these are appropriately reflected in financial planning, capital allocation and reporting.
• As nature-related risks are highly localised, requiring site-specific responses and community engagement, nature-related impacts and risks can appear more tangible. This can support more informed committee discussion and decisions.
• The Audit Committee’s oversight of materiality should extend beyond risk to capture nature-related opportunities and the implications for driving long-term resilience and value creation. This includes challenging how capital allocation and investment decisions support nature-positive outcomes.

Insurance and flood risk

• Flood and water scarcity risks are often underrepresented at board level despite their increasingly material effects, from rising premiums to shrinking availability of cover and reinsurance. Actuarial modelling shows that risks such as flooding are becoming harder to insure, with insurers adjusting prices each year to reflect rising risk. Audit Committees need to challenge whether risk assessments look beyond the next renewal cycle and reflect long-term exposure. Insurability needs to be treated as a core resilience issue.
• For lenders, a counterparty becoming uninsurable can trigger covenant and credit risks, especially in floodplain or water-stressed areas. In response, Audit Committees should challenge how climate and nature risks are identified across the portfolio and reflected in underwriting, covenants and stress-testing.

Internal audit and controls

• Audit Committees have independent oversight of the internal audit function and, with growing regulation (such as Provision 29 in the UK Corporate Governance Code) and expectations, Audit Committees need to assess the competence and experience of any outsourced internal audit providers and external auditors more closely, particularly those auditing climate- and nature-related information.
• Provision 29 requires directors to provide an annual declaration on the effectiveness of material controls. The first effective period (1 January 2026) will likely expose gaps and trigger greater investor scrutiny, increasing the need for robust controls testing and assurance. As responsibility for the internal audit function is delegated by the board to the Audit Committee, the Audit Committee faces growing accountability for controls over non-financial information. New regulations will heighten accountability of the Audit Committee and require greater oversight of the design, implementation and assurance of controls, particularly those over climate- and nature-related information that may be less mature.

Climate- and nature-related reporting

• Growing regulation-led sustainability reporting, particularly in the UK and Europe, helps get nature on Audit Committee agendas but can drive a short-term, compliance-first mindset. Audit Committees need to focus on how reporting can generate insights that inform decisions and strategic improvements. Audit Committees can challenge management to produce disclosures that are credible, decision-relevant and not just volume-driven.
• Nature-related reporting uses similar finance and governance skills as climate-related reporting, but it is harder to consolidate information for disclosure as data is less structured and highly localised. Audit Committees can assess whether the finance function and assurance providers have the appropriate competence and capacity, particularly around climate and nature.
• Complex and highly localised nature data makes it more challenging to collate the data, analyse it, make decisions on it and report on it. AI can be used to analyse and simplify fragmented nature data. Audit Committees should oversee the risks associated with AI application and how it can be used to strengthen financial decision-making and reporting.
• Limited transparency over the energy sourcing of IT services (e.g. data centres and AI) creates disclosure challenges for scope 2 and 3 emissions. Audit Committees need to recognise these limitations, particularly as current economic and political conditions provide little incentive for large US technology providers to prioritise sustainable services.

These event takeaways were developed in collaboration with Accounting for Sustainability (A4S).