TCFD report
Since 2021, ACEN has been a supporter of the Task Force for Climate-Related Financial Disclosures (TCFD), established by the Financial Stability Board to develop voluntary, consistent, climate-related financial disclosures to improve transparency on climate risks and opportunities. These disclosures revolve around four thematic areas: governance, strategy, risk management, and metrics and targets.
Governance
Board oversight on climate governance
The board plays an integral role in our climate agenda, including the increasing integration of climate-related issues into our broader corporate strategy. In particular, the board reviews and approves major strategic decisions proposed by senior management around energy transition, decarbonization strategy, portfolio of top risks including climate, and medium and long-term climate targets. Further, the board reviews and approves management’s specific responsibilities against ESG targets, including the development of science-based metrics and targets towards our Net Zero goal by 2050.
In recent years, key strategic decisions of the Board have had an increased focus on climate change. These include the establishment of our Environmental and Social Policy in 2020, which defines our transition to a low carbon portfolio and divestment of its coal plants by 2030, as well as the commitment to Net Zero by 2050 announced in 2021. The board was likewise instrumental to the divestment of the South Luzon Thermal Energy Corporation (SLTEC) coal plant through the landmark energy transition mechanism. In addition, the Board enabled management in developing our long-term aspiration to reach 20 GW of attributable generating capacity by 2030.
To sharpen our focus on our sustainability agenda, the Board created in 2022 the Sustainability Committee to review strategic objectives and monitor the progress of sustainability initiatives, including climate change and lead all climate-related matters. Since its inception, the Sustainability Committee has provided oversight on our key climate initiatives: the Net Zero commitment, transition to a low carbon portfolio and carbon emission reduction targets.
Additionally, the Board’s Risk Management and Related Party Transaction Committee has oversight of our Enterprise Risk Management system, which includes climate, as well as all material related party transactions.
Our ESG Committee provides management oversight on climate governance and supports the Board on policy and decision-making processes around ESG issues.
The COP28 in Dubai provided a global platform for us to trumpet our high-level sustainability commitments, including our landmark Energy Transition Mechanism deal and pilot Transition Credits scheme, to help shape climate action.
Management oversight on climate governance
Management is primarily responsible for the execution of Board-approved climate-related strategies and monitoring of performance.
In addition, it designs and implements adequate and effective system of internal controls and risk management processes to ensure achievement of objectives while maintaining compliance with laws, rules, and regulations.
To facilitate the flow of strategic and operational information among key decision-makers, we created in 2022 the ESG Committee at the executive level to review, monitor, to aid senior management and the Board on policymaking and decision-making processes around ESG issues.
The Committee is composed of the functional heads of governance and compliance, sustainability, investor relations, and headed by the Chief Risk, Human Resources and Administrative Officer. In addition, we created the Risk and Health and Safety Committee to provide oversight on operational safety and sustainability risks.
At the corporate level, the Sustainability team has oversight in managing sustainability initiatives, climate-related risks and opportunities, as well as climate-related disclosures. At the project level, project development leads proactively mitigate physical effects of climate change in the planning and design of new projects. The Sustainability team works closely with the project development teams to ensure that any environmental issues are adequately addressed. For operating plants, plant managers, health, safety, security, and environment teams work closely with the Sustainability team to address any environmental issues and manage physical risks of climate change.
Strategy
Climate action is naturally ingrained into our long-term strategy—and not just adjacent to it. This enables us to play a leading role in the energy sector’s transformation towards a low-carbon economy. In 2023, we included sustainability as part of our corporate key result areas which are regularly monitored and reported to the Board of Directors.
Climate-related risks
We engaged Aon and The Climate Service (TCS) for the enhancement of our climate analytics, particularly quantifying the impact of into climate-related risks, specifically modelling RCP 4.5 and RCP 8.5 scenarios until 2030, to 40 of the company’s existing sites. RCP 4.5 ”Low Emissions” scenario implies coordinated action to limit greenhouse gas emissions to achieve a global temperature warming limit of approximately 2 degrees Celsius. RCP 8.5 ”High Emissions” scenario assumes that no major global effort to limit greenhouse gas emissions will go into effect. In this scenario, it is estimated that end-of-century increases in global mean surface temperature will be in the range of 4.2 to 5.4 °C.
For both the analyses for climate-related physical risks and climate-related transition risks, the Modelled Average Annual Loss (MAAL) which determined the possible amount of less after considering the investments made on existing risk mitigation measures.
Through our 54 MW Guimaras Wind in Western Visayas, we are collaborating with the local government to rehabilitate over 90 hectares of fish sanctuary to serve as a breeding ground for marine life.
Climate-related physical risks
Extreme temperatures have been identified as the most significant physical risks. As global temperatures affect wind patterns and heat indices, our renewable energy projects may experience revenue reduction and property damages. We continue to look into modelling these extreme temperature scenarios and how to best mitigate against these.
As renewable energy projects tend to be situated in large land masses, and with wind farms usually situated in coastal areas, flooding becomes a major risk. To mitigate the risks, key equipment are situated in higher or raised areas while the rest of the power generation assets are built to become more resilient in the case of flooding.
Climate-related transition risks
As climate change affects the wind patterns, heat indices and the global supply chain, there is an expected loss of value from the investment, development, maintenance, upgrade or insurance of renewable energy technologies. This risk is expected to be gradual, affecting our business model more than the physical assets themselves.
A similar climate analytics study will be conducted in the coming years, following a three-year cycle. This is in recognition that our asset portfolio will be growing in the future and the underlying assumptions for RCP 4.5 and RCP 8.5 scenarios would have also changed.
Risk management
Climate-related risks are considered in our Enterprise Risk Management process, with climate-related physical and transition risks part of our risk universe and risk dictionary. Identifying climate-related risks is embedded in our project development and operational cycles.
Natural catastrophe analysis
Part of our project development process is an assessment of the risks around topography, weather patterns, hydrological studies, seismological studies, volcanic activities and water levels. These assessments inform mitigation measures that are implemented across the construction and operation phases.
For operating assets, we regularly review the risk of natural catastrophe to our projects sites, leveraging available tools such as the NATHAN tool from Swiss Re, a leading global insurance providers. See an example of a natural catastrophe report using the abovementioned tool.
We are the first energy company in Southeast Asia to announce a Net Zero roadmap that includes near-term scope 1, 2 and 3 greenhouse gas (GHG) emissions reduction targets, aligned with a 1.5°C pathway for the power sector.
Metrics and targets
Greenhouse gas emissions
Having established our near-term and long-term greenhouse gas (GHG) emissions reduction targets as part of our Net Zero roadmap in last year’s report, we have monitored our progress for 2023 covering scope 1, 2 and 3 GHG emissions.
Across this report, we have disclosed metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.
