Board Oversight of Climate and Other Risks
There are two Board committees responsible for oversight of sustainability issues and climate-related risks and opportunities. The Sustainability Committee, formed in 2021, oversees sustainability topics, including climate-related risks and opportunities as well as other environmental and social topics. The Nominating and Corporate Governance Committee of the Board maintain oversight of governance matters. All of the members of both committees are independent directors.
The Sustainability Committee and Nominating and Corporate Governance Committee Chairs communicate regularly with management regarding our sustainability progress and performance, including monthly updates on assessments of our sustainability performance.
In addition, the full Board communicates regularly with management as part of its oversight of risk management for the Company, including the oversight of material risks, including transition risks relating to climate change. Examples of climate-related risks that management discusses with the Board include, among other things, evolving market demand for lower-emission services and technology, capital investment decisions relating to the development of lower-emissions technology and the purchase of lower-emissions equipment, strategic decisions relating to climate risk, including current and forecasted macroeconomic responses to climate change risk, investor feedback on climate risks and our sustainability practices, and policy and regulatory developments related to climate change.
These types of risks are discussed by the Board and management at the regular quarterly Board meetings, and also during regular meetings outside of the formal Board meeting context.
The Board also reviews communications from and engages with, shareholders and other stakeholders in response to their climate-related and other inquiries, and directors keep up to date on the latest trends and information relating to climate-related risks. The Board routinely addresses matters relating to corporate responsibility, governance, and sustainability at Board and committee meetings.
Our Audit Committee oversees management’s execution of Quantanergy’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Quantanergy to the public and government and regulatory bodies, Quantanergy’s system of internal accounting, Quantanergy’s financial controls, and the annual independent audit of Quantanergy’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Quantanergy’s codes of conduct and ethics and with legal and regulatory requirements.
Among other things, our Compensation Committee sets and administers the policies that govern the compensation of executive officers of Quantanergy, and meets regularly to consider executive compensation matters and to review how Quantanergy’s plans and policies work in practice.
The Compensation Committee considers ESG matters in its setting of executive compensation. Since 2017, a percentage of the payout under our executives’ cash incentive plan has been linked to the Company’s performance against a target on a Health, Safety, and Environment key performance indicator (KPI). This Health, Safety, and Environment KPI includes, among other things, targets for safety and environmental performance, as the Compensation Committee views these topics as crucial to the well-being of the Company’s employees and the Company’s risk management.
In 2020, the Compensation Committee increased the proportion of our executives’ cash incentive plan linked to the Health, Safety, and Environment KPI to 20%. The 2021 Health, Safety, and Environment KPI included metrics related to safety incident rates, environmental incidents, audits, and training.
In addition to its role as one of our governing bodies, the Nominating and Corporate Governance Committee, among other things, identifies individuals qualified to become Board members, recommends for selection by the Board director nominees for the annual meetings of stockholders, recommends nominees for Board committees, reviews Quantanergy’s Code of Business Conduct and Corporate Governance Guidelines, develops and continually makes recommendations concerning the best corporate governance principles and oversees the annual review of the Board and management.
Each of these committees is comprised entirely of independent directors. As part of the director nomination process, our Nominating and Corporate Governance Committee, in evaluating a candidate for nomination to be a director, considers, among other things, diversity in professional background, experience, expertise, and perspective (including age, gender, and ethnicity). The composition of our Board of Directors is 37.5% female and 25% racially diverse. The Board’s diversity is reflective of its commitment to promoting a diverse and inclusive work environment for all.