The Academy Audit Committee and Climate Change Risk

The United Nations describes climate change as the defining issue of our time. Action to limit future global greenhouse gas emissions will help restrict future changes in the climate system. Impacts from climate change are already being felt today and will continue to increase in the future.

The government has committed to achieving ‘net zero’ greenhouse gas emissions by 2050. Although there are a number of departments across government that are central to government’s response to climate change, the all-encompassing nature of achieving net zero means that all public-funded bodies, including schools and academy trusts, have their part to play.

Although formal climate risk reporting has yet to formally hit the sector, when it arrives (and it will arrive, cascaded down from elsewhere in government), it will require a potentially complex transformation of reporting processes, establishing mechanisms for data collection, and education of the management (particularly finance) team and in many cases the board and audit committee itself.

Audit Committee

Audit Committees play a key role throughout the whole risk management process. The Audit Committee are the “custodians of the risk management process” – meaning that they are not directly responsible for identifying and managing the risks – that is ultimately the responsibility of the Trust Board (but is in practice informed and actioned by the executive management team).

The Committee instead is there to make sure the process for managing these risks is working in practice, and to collate and report the results of management and external scrutiny/assurance. Risk management covers the full operations and activities of the Trust and hence climate change (ATH 2.38). Given the breadth and significance of climate risks, it is appropriate that all elements of the risk management process are scrutinised for their effectiveness in responding to climate change risks.

Audit Committees need to be aware of:

• risks that climate change may present generally and how these may impact the Trust / school (including but certainly not limited to ensuring severe weather plans are in place and robust);
• risks related to how the institution deals (and is seen to be dealing) with climate change, for example by considering net zero / environmental aspects in new builds, particularly where funded by the DfE (and in turn, helping the government achieve its own environmental strategies); and
• ensuring that the adults of tomorrow are being educated regarding climate change generally, and are being prepared for the new world and the jobs in it that evolving technologies and global strategies (for example net zero, carbon free) will bring.

As well as simply recognising how climate change risks could manifest themselves, the Audit Committee also needs to challenge senior management on their approach to managing these risks, and how this approach forms part of the Trust / school’s overall strategies.

There will be many aspects of climate change that need to be considered including:

• The built environment (heating, cooling, ventilation, flooding, melting tarmac, outdoor shade, drought)
• Schools meals (availability of food, storing food -chilled, demand for more vegetables, adapting menus for hot/cold days, removal of gas cookers)
• Pupil health (asthma, mental health)
• Timetabling (PE, lunch and after school clubs)
• School transport (electric minibuses)

This is not an exhaustive list, many more issues will surface as climate change evolves. As this is such a complex area it is likely that Academy trusts will need help to navigate their way through this developing risk.

Internal audit can also play a part in helping the Trust monitor its response to climate risk. This can take many forms – for example, helping to review and challenge strategies and action plans, validating reporting and implementation of actions, or even by helping to facilitate discussions at board.

There is also likely to be a short term cost impact associated with many of the responsive actions the Trust takes to combat climate risk. For example, new builds that incorporate forward looking climate, environmental and sustainable build factors may well not be the cheapest option, but are clearly the better choice in the longer term. However, in ever more challenging financial times, the value for money arguments here become increasingly complex.

Challenging climate risk management

Primarily therefore, Audit Committee members need to ensure they are properly equipped to ask and challenge about climate risk management, and then receive informative and regular management information to allow them to properly monitor the effectiveness of the Trust’s strategies for dealing with climate risk in practice.

Some initial “scene-setting” questions for Audit Committees to ask could include:

• Do we feel that we as a board / audit committee are suitably briefed and equipped to provide sufficient and appropriate challenge for the Trust’s approach to climate risk? If not, how will we become so? How will we then keep up to date with future emerging climate change risks and related policy/regulatory changes?
• Do we as a Trust fully understand the government’s strategy, policy and expectations for the sector? How as a Trust will we meet these?
• To what extent do we already consider climate risk as part of other risk discussions – for example, severe weather, new builds, equipping the workforce of the future.
• How is climate change risk considered in our overall strategy(ies), including our approach to value for money? IS there specific budget consideration for any associated additional costs?
• Can the management team articulate what climate-related risks are most significant / likely to impact the Trust and why?
• If the organisation considers climate change as an emerging risk, how confident are we that management has a clear understanding of the indicators which would cause it to escalate to a principal risk? Furthermore, is there sufficient recognition of the inherent uncertainty around how climate risk might change and escalate in future?

Over the next few years, as the government policy and related sector reporting requirements start to unfold, there will no doubt be a requirement for the climate change risk to become a regular point of review for Audit Committees and Boards.

Some final thoughts to summarise…

Climate change risk:

• Is Complex, but
• Is Present now, and
• Will continue to grow as a threat and equally become an ever greater government priority, and so
• Needs to start to be discussed, assessed and monitored by academy trust boards and audit committees if it hasn’t already been.