Working together on our climate change risks

9 September 2024

Our Enterprise Risk Management (ERM) framework is designed to identify key risks affecting our business and address their likelihood, their impact and how quickly they may materialise. During FY24, we integrated climate change risk into our risk framework with greater specificity than before.

Our Net Zero Delivery Group (NZDG), working with our Operations, Risk and Compliance teams and other relevant stakeholders, conducted discussions and two workshops with colleagues, in prioritising risks, testing mitigations, introducing new mitigations, and ensuring effective risk ownership.

Climate Scenario Analysis

The exercise adopted the standard methodology of Climate Scenario Analysis (CSA) (see table right), where risks – as well as opportunities – are considered in terms of likely impacts across three future time horizons (2030, 2040 and 2050) and three different scenarios for climate change, categorised as an approximate temperature increase of 1.6°C by 2050, 2°C by 2050 and 2.4°C by 2050. The CSA applied the firm's internal risk analysis criteria to its year ended 30 April 2024 revenue and operating costs to determine the impact of the identified risks and opportunities across these future horizons and scenarios.

The firm's updated climate risk matrix can be found in our FY24 Task Force on Climate-Related Financial Disclosure (TCFD). The result is a clearer impression of what climate change risk means to our business.

Climate Scenario Analysis – the scenarios

Scenario	Aggressive Response	Moderate Response	Business as Usual
Approximate temperature increase	1.6°C by 2050	2°C by 2050	2.4°C by 2050
Based on publicly available scenarios	IPCC RCP "2.6" scenario and "SSP1-1.9" scenario ------------- NGFS "Net Zero 2050" ------------- IEA "Net Zero by 2050" scenario	IPCC RCP "4.5" scenario and "SSP2-4.5" scenario ----------- NGFS "Nationally Determined Contributions" ----------------- IEA "Announced Pledges" scenario	IPCC RCP "8.5" scenario and "SSP5-8.5" --- NGFS "Current Policies"---- IEA "Stated Policies" scenario
Overview and assumptions	The world is on track to keep global warming to 1.5°C above pre-industrial levels by 2100. Stringent climate policies introduced early across all countries, allowing both physical and transition risks to be relatively subdued.	Reflects the world where all announced pledges and policy interventions (e.g. NDCs) are delivered. Delayed implementation of climate policies and technology uptake to support the transition.	Reflects how global energy markets would evolve if governments made no changes to their existing policies and measures. NDCs are not met, and emissions continue to grow, leading to severe physical risks.
IPCC RCP – Intergovernmental Panel on Climate Change Representative Concentration Pathways. NGFS – Network for Greening the Financial System. IEA – International Energy Agency. NDCs – Nationally Determined Contributions.