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Vodafone Group Plc Task Force on Climate-related Financial Disclosures Report 2023
Overview
Risk Management
Metrics and Targets
Governance
Strategy
Strategy continued
Physical climate risk portfolio analysis Approach
The project assessed the physical impacts of eight major climate change perils across select Vodafone assets under both RCP 8.5 and RCP 2.6 climate pathways. Over 650 key infrastructure assets across Spain, Italy, UK, Germany and Greece were included.. The analysis utilised a multi-step materiality modelling approach that is fully aligned with the UK Government’s recommended TCFD physical risk modelling methodology.
As damage to our infrastructure has been identified as a very long-term risk for Vodafone, we have purposely chosen to focus on long-term to very long-term time horizons, as well as extend analysis up to 2100, which is beyond the usual time horizon we use for our climate risk assessments.
The purpose of the analysis is to understand how the impacts of physical natural catastrophe damage on our asset portfolio may evolve in the long-term under different climate change scenarios. In this exercise, we focused on three broad infrastructure asset categories: low-rise structure assets (such as office buildings, bunkers etc.), control room assets (such as warehouses and data centres), and station assets (railway stations).
Figure 3: Key factors used for the analysis Climate perils – Coastal inundation – River flood – Surface water flood
Climate scenarios – RCP 2.6: greenhouse gas (GHG’) emissions are reduced, resulting in an estimated global average temperature rise of 1.6°C by 2100 compared to the pre-industrial levels – RCP 8.5: GHG emissions continue to grow, resulting in an estimated global average temperature rise of 4.3°C by 2100 compared to the pre-industrial levels
Physical impact evaluation The following criteria were used: – Damage ratio (average proportion of damage to an asset in a given year) – Expected cost of damage (financial cost of remedying damage sustained) – Failure probability (annual probability of a climate hazard causing the asset to stop working)
Risk level definition – Low : Possible superficial damage, which may have minor cost implications – Medium: Superficial damage, minor cost impact – High: Expected cost of damage notable, potential cost implications – Very high: Widespread damage/ disruption
Time horizon 2020 2025 2035 2050 2100
– Extreme heat – Extreme wind – Wildfire – Freeze thaw – Drought-driven subsidence
Results Portfolio analysis confirmed that the biggest impact would be felt in the very long term. We estimate 6.6%-7% 1 of analysed sites could be at high or very high risk of damage from climate perils by 2050, with an increase to 7.2-8.1% 1 by 2100. The number of assets at high or very high risk of damage was largely the same in 2035 and 2050, but we noted an increase in the number of assets when looking at the 2100 time horizon. As the RCP 8.5 scenario is the highest baseline emissions scenario, where the physical risks would impact us most significantly, we used the project to understand our portfolio of high-risk and very high-risk assets in each of the countries which were part of the analysis.
The chart below illustrates the amount of tested assets which were classified as very high-risk or high-risk by 2050 under RCP 8.5 scenario. Proportion of tested assets at high or very high risk of damage from climate perils (%)
Now that we have data for which assets are at high or very high risk in the short term, medium term, long term and very long term, we will use that list to conduct a deep dive analysis into five key assets, which represent the majority of the expected cost of damage across the portfolio, to better understand what further actions we can take to increase their climate resilience.
12.20%
11.00%
6.90%
5.35%
4.45%
1. The two numbers represented by RCP 2.6 and RCP 8.5 scenarios.
Spain
Greece
Germany
United Kingdom
Italy
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