Climate Strategy
Incorporating climate risks and opportunities into our business strategy to ensure we remain a resilient, thriving business well into the future.
Our climate strategy is integrated with our overall business strategy. It considers both the physical and transition risks our businesses face and forms part of the consideration of our future growth. Physical risks arise from changes to the climate (like more extreme and/or frequent weather events), while transitional risks result from shifts in policy, regulation and expectations as the world transitions to a low carbon economy.
Defining Climate Scenarios
In our assessment of risks and opportunities, we consider impacts at both the Corporate level and at each of our businesses under different climate scenarios and at different time frames. Our climate-related scenario analysis covers both physical and transition risks and opportunities across the entire portfolio. It draws on publicly available information from the Intergovernmental Panel on Climate Change (IPCC) for physical risks and the Network for Greening the Financial System (NGFS) for transition risks. Additional insights from the International Energy Agency (IEA) are also incorporated in our transition risk assessment.
For physical climate risks, our scenario analysis utilises data from the IPCC’s 2022 Representative Concentration Pathways (RCPs), specifically looking at RCP 2.6 (low emissions) and 8.5 (high emissions). The RCPs describe different levels of GHG concentration trajectories and the associated potential future physical impacts.
We undertake climate modelling to support the assessment of physical climate risks, providing insight into possible changes in the local environments of our businesses. Based on data availability and motorway attributes, we explore possible future business impacts arising from key climate-related variables, including flooding, wind speed, snowstorms, extreme precipitation, landslides and heatwaves.
For transition risks, our scenario analysis draws on information from the NGFS, utilising the Net Zero (Orderly Transition) and Current Policies (Hot House World) scenarios. Each scenario presents a different set of considerations, for example on climate policy, emissions and temperature.
NGFS Climate change scenario overview
Early, ambitious action to support the transition to a net zero CO2 emissions economy. This pathway assumes that policies and technological actions are adopted in a co-ordinated and timely manner, refl ecting a policy ambition to limit temperature increase to 1.5°C.
Limited action, resulting in continued global warming and significant increases in exposure to physical risks. This includes a Current Policies Scenario, resulting in potential temperature increases of 3°C+.
In 2024, we undertook a project to help quantify the financial impacts of changes in traffic demand from different physical climate risks at each of our businesses (including ADELAC but excluding APRR and AREA). While there was already anecdotal evidence that certain types of weather can impact traffic levels, the relationship had not previously been reliably quantified for our businesses. The research confirmed the largest components of weather impacts on traffic come from snowfall and from very hot and very cold temperatures. Other factors such as rainfall, visibility and humidity have minor but predictable impacts.