Vodafone Group Plc Annual Report 2025 63
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Climate-related risk continued
Our exposure to risks and opportunities across a range of scenarios Our FY25 quantitative scenario analysis examines our climate risks and opportunities against three temperature pathways: 1.5°C (Paris-aligned), 2°C (Paris upper limit-aligned) and 4°C (business- as-usual). Across the scenarios, our latest climate-related risk analysis indicates that Vodafone’s physical risk exposure may be relatively limited at a regional level across short- and medium-term time horizons, with the greatest potential exposure from coastal inundation and riverine flooding across the long-term time horizon in the 4°C scenario. At a group-level, in the 1.5°C and 2°C scenarios, some transition risks (in relation to energy costs, expectations of business customers and greenwashing risk) have the potential to be significant without existing or further mitigation. Our latest risk analysis (including assessment of our current and planned mitigation activities) has identified one climate-related risk associated with greenwashing that has the potential to result in a financial impact to Vodafone in the short term. We have treated the analysis outcome with caution due to uncertainties in the risk modelling parameters, the constant developments in greenwashing legislation, the subjective nature of potential legal action and challenges in assessing likelihood. We have taken a conservative approach by assessing ‘greenwashing’ as having a potential material impact in the short term. We will continue to monitor the upcoming regulatory and policy environment as new information becomes available. Our assessment identifies the risks associated with energy costs and business customer expectation could be financially material across the medium- term and long-term time horizons, respectively.
1.5°C Paris-aligned scenario In the 1.5°C scenario, our exposure to physical climate risks is limited across the short-, medium-, and long-term time horizons. The global implementation of policies to achieve this pathway could result in higher exposure to energy costs and carbon pricing in the medium term, especially in Africa where our dependency on fossil fuels is currently greatest. In this scenario, the expectations of our business customers to decarbonise are highest. Failure to meet these expectations could put revenue at risk. Within this year’s assessment, we may see an elevated risk of penalties for ‘greenwashing’ as regulatory frameworks become more stringent, and consumers and other stakeholders demand greater transparency and substantiation of environmental claims. There may be market growth opportunities in this scenario as customers seek internet-enabled technology solutions to help adapt to physical changes in the climate. 2°C scenario Paris upper limit scenario Exposure to both physical and transition risk is considered to be an average of that experienced in the 1.5°C and 4°C scenarios. Physical risk is considered limited across the short-, medium-, and long-term time horizons. Vodafone faces limited exposure to transition risk in relation to energy and carbon costs in the short- and medium-term time horizons and a limited exposure to business customer expectation risk across all time horizons. Transition risk related to ‘greenwashing’ is similar to that assessed for the 1.5°C scenario. 4°C business-as-usual scenario In the 4°C scenario, in the short and medium term, exposure to physical risk remains limited. In the long term (beyond 2040), in absence of any further measures being implemented to build climate resilience, Vodafone could potentially experience higher levels of site damage from climate hazards, particularly coastal inundation and riverine flooding. Since there is no change to business-as- usual, this scenario results in no exposure to any transition risk.
Our scenario analysis Scenarios
Description
1.5°C Paris- aligned scenario
– Global decarbonisation trajectory and policies implemented in line with achieving 1.5°C pathway by 2100. – Uses Representation Concentration Pathway (‘RCP’) 2.6 Economic constraints aligned to Shared Socioeconomic Pathway 2 (‘SSP2’). – Global decarbonisation trajectory to the upper limit of the Paris agreement. – Assumes Nationally Determined Contributions (‘NDCs’) are successfully delivered up to 2030. Post-2030, cost-effective emissions reduction measures are implemented. – Uses RCP 4.5 (averaged between RCP 2.6 and RCP 8.5). Economic constraints aligned to SSP2. – Emissions continue to increase in line with current business-as-usual pathway, with no further climate policy intervention. – Uses RCP 8.5. Economic constraints aligned to SSP2.
2°C scenario Paris upper limit scenario
4°C business-as- usual scenario
Time horizon Physical scenarios
Link to business-planning horizons Aligns with our enterprise risk management framework and long-range business-planning cycle.
Short term
0 to 3 years (to 2028) 3 to 5 years (to 2030)
Medium term Aligned with timeframes used for internal planning purposes. Long term 5 to 25 years (to 2050) Aligned with planning horizons for long-lived infrastructure assets, in line with global targets for reaching net zero.
Category Physical risks
Description
Our scenario analysis approach Quantitative scenario analysis of physical risks to Vodafone infrastructure assets by region (2025). Quantitative scenario analysis of transition risks at a global level (2025).
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.
Opportunities
A shifting business landscape in a net zero world opens new market and investment opportunities.
High-level qualitative scenario analysis only (2024).
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