Vodafone 2024 Annual Report

66 Vodafone Group Plc Annual Report 2024

Strategic report



Other information

Climate-related risk (continued)

Our exposure to risks and opportunities across a range of scenarios We analysed our risks and opportunities across a range of scenarios: early policy action (<2°C), late policy action (<2.5°C), and no policy action (<4°C). These scenarios are applied to our assessment of climate-related risk in both Europe and Africa. Description and degree

Early policy action (<2°C) In the early policy action scenario, we foresee that physical risks increase but remain broadly manageable within the operating boundaries of our current business model and network infrastructure (which has already built in a level of climate resilience), and with limited or minor cost incurred. Our analysis indicates that in Europe a relatively small proportion (6.6%) of our network assets could be at high or very high risk of damage from climate perils that could incur more significant cost. Transition risks, if left unmitigated, could materialise into business impacts within the short to medium term (within the next five years), potentially incurring increased operating costs, costs to comply with regulation, loss of revenue from business customers and reputational damage. However, the severity of these impacts is unlikely to be financially material. The potential commercial value creation from capturing the growing market for green digital solutions is greatest in this scenario, as industries seek to decarbonise in response to policy and market incentives. Late policy action (<2.5°C) In the late policy action scenario, we can expect physical impacts of climate change to be more severe and frequent, incurring higher costs and disruption to operations and supply chains. Some transition risks would materialise, for the most part within the medium term, in relation to increasing regulatory and compliance costs and increasing expectations from business customers for sustainable products and services. No policy action (<4°C) In the no policy action scenario, our exposure to physical risks in Europe increases marginally, with an estimated 7.0% of our network assets at high or very high risk of damage from climate perils such as storms and heavy precipitation, which could cause damage to our network assets or operational disruption. The exposure of our own operations to physical risks could be more severe in Africa, where temperature increases could be 1.5 to 2 times the average global temperature increase. This scenario also results in the greatest physical climate change impacts for our supply chains, which could result in increased cost or supply chain disruption (particularly where the production of goods is concentrated in geographies vulnerable to climate change). Transition risks are lowest in this scenario. There may be market growth opportunities in this scenario as customers seek technology solutions to help adapt to physical changes in the climate. Building climate resilience into our business strategy As a fixed and mobile network operator, we have a large number of assets and infrastructure spread over a wide geographical area in all of the markets in which we operate. This means that our business is exposed to climate change impacts and transition risks across Europe and Africa. However, our analysis indicates that Vodafone’s underlying business model is relatively resilient to climate-related risk. Vodafone’s physical risk exposure is not expected to result in significant cost or asset impairment, with a relatively limited range of impacts expected across the range of scenarios analysed, particularly in Europe. This is partly due to the level of resilience that is already built into our network infrastructure and because the majority of our assets (such as radio equipment) are relatively short-lived with opportunity to adapt our network as part of our routine end-of-life equipment replacement programme. However, more widespread operational disruption (within both our own operations and in our value chain) due to extreme weather events and extreme heat can be expected over the medium to long term in the no policy action scenario, particularly in Africa. Across the scenarios, transition risks are unlikely to result in financially material impacts. We intend to undertake further quantitative scenario analysis of our highest priority transition risks to reinforce these conclusions.

of warming by 2100 above pre-industrial levels Early policy action: smooth transition <2°C Late policy action: disruptive transition <2.5°C No policy action: business as usual <4°C

Physical scenarios

Transition scenarios

Representative Concentrated Pathway (‘RCP’) 2.6 (emissions reduce to limit global warming to 1.6°C by 2100) (Physical risks were analysed over the range from <2°C to <4°C, therefore this specific scenario was not used in our analysis) RCP 8.5 (emissions continue to grow, leading to global warming of 4.3°C by 2100)

Paris ambition scenario

Stated policy scenario (in line with the latest international agreement on climate change)

No policy scenario

Time horizon

Physical scenarios Link to business-planning horizons

Short term 0 to 3 years (to 2027) Medium term 3 to 5 years (to 2029) Long term 5 to 26 years (to 2050)

Aligns with our enterprise risk management framework and long-range business-planning cycle Aligned with timeframes used for internal planning purposes Aligned with planning horizons for long-lived infrastructure assets, in line with global targets for reaching net zero



Our scenario analysis approach High-level qualitative scenario analysis (2024) High-level quantitative analysis, focused on selected infrastructure asset types in at high risk (2022-2023; 2024) High-level qualitative scenario analysis (2024)

Physical risks Risks related to the physical impacts of climate change, both event driven (acute) and longer-term (chronic) shifts in climate patterns, and which may have financial implications for companies Transition risks Growing external

pressures to transition to a lower-carbon economy result in changes to the regulatory or market environment, in ways that could negatively impact company costs, revenue or market share landscape in a net zero world opens new market and investment opportunities

Opportunities A shifting business

High-level qualitative scenario analysis (2024)

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