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Risk Management and Climate Change

Climate Risk ManagementThe impact of climate change on ecosystems and society is becoming increasingly evident. In turn, organizations are recognizing the effect of climate change on their operations. Companies also are increasingly recognizing that their customers want organizations to respond to the climate crisis, and that addressing climate change is good for their business. Several Seattle-area businesses, for example, have committed to a plan to achieve net-zero carbon emissions.

Compliance and risk professionals play an important role in this work. They help organizations assess and report the risks of climate change. They advance programs that fight climate change in government agencies and non-governmental companies. 

This work, which responds to the public’s desire to address the climate crisis, is an example of  our program’s “Compliance with a Conscience” motto in action. To learn more about it we spoke with Professor Holly Stout, JD, LLM. Professor Stout is a climate change expert and scholar who teaches regulatory compliance in the online Master of Legal Studies in Compliance and Risk Management program. 

Two Approaches for Government Environmental Programs 

Prof. Stout established the framework for her webinar discussion by explaining that all government programs have goals. In the case of environmental programs, a goal may be to restore habitat, reduce greenhouse gas emissions, or save fish. The rules associated with programs arise from the goals. 

When government responds to the goals and sets up programs, the approach taken may be a mitigation of an adaptation approach:

  • Mitigation programs stop additional greenhouse gasses from entering the atmosphere.
  • Adaptation programs adjust human behavior and resources to meet the changed circumstances caused by climate change. These programs acknowledge that climate change will continue to happen, and they adjust resources to respond to impacts we know will happen. 

A “Carrot” or “Stick” Approach 

Beyond a mitigation or an adaptation approach, government agency programs can employ a “carrot” or “stick” approach. “Carrot” programs are incentive programs that create public benefit from investments. Benefits may include ecosystem benefits, recreation benefits, or water quality benefits, among others. 

As an example, Prof. Stout reviewed California’s bond-funded water storage investment program. Investment in this program results in benefits important to the State of California and its voters, such as flood control, water quality control, and improved water storage to mitigate the effects of climate change.

“The really good thing about carrot programs,” Prof. Stout told us, “is that there is an incentive for third parties to comply.” It’s a much more cooperative effort, she said, than “stick” programs.

In contrast to incentive programs, “stick” programs require certain behavior, and failure to meet the requirements leads to enforcement actions. California’s cap-and-trade program, for example, requires gas emitters to reduce emissions. If emitters emit in excess of the established amount, as documented through a mandatory reporting process, enforcement actions follow. In contrast to incentive programs, programs like the cap-and-trade program can be much more adversarial. 

“In my personal observation,” she said, “with both the water storage program and the cap-and-trade program the stakeholders were very intelligent and intuitive.” Both sets of stakeholders wanted to help, but, Prof. Stout explained, in some cases the stakeholders for the water storage program were more helpful. This is because, she said, the water storage stakeholders recognized that ultimately they would receive funds from the project. In contrast, the cap-and-trade program was more protectionist, with stakeholders focused on whether they could meet their obligations.

There is a need for professionals who understand policy through a legal lens to engage in climate change work, Prof. Stout said. “Probably 50 percent of what I do is actually more policy than legal work,” she told us. There is absolutely a need, she continued, for professionals with legal knowledge and an understanding of how policy and law interact.

To hear more about the programs and climate risk management, see the webinar recording. Note that the opinions Prof. Stout expressed are hers alone, not those of the State of California. 


Master of Legal Studies in Compliance and Risk Management Program

Seattle U Law’s online Master of Legal Studies in Compliance and Risk Management program helps individuals who want to advance their careers and learn from respected leaders in ethics, compliance, and risk management. 

The program is shaped by its commitment to sustainability and to the motto of “compliance with a conscience.” As discussed in the webinar, the MLS program trains leaders who can model leading sustainable organizations, incorporating the three pillars of sustainability: the planet, people, and profit or prosperity. 

Depending on professional goals and interests, students in the fully online program can optionally choose to focus on financial compliance, healthcare compliance, corporate compliance, or data & cybersecurity compliance. The MLS program provides opportunities to solve problems through a legal lens and gain foundational knowledge of the law, but without a JD. It prepares graduates to lead compliance efforts in any organization, regardless of industry. Students graduate with a commanding knowledge of law, legal analysis, and the frameworks used to identify, assess, and respond to risk. The program’s values-based approach moves beyond a narrow sense of compliance and helps establish a sense of equity, justice, and inclusion.

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