DiscoverIE : TCFD Report 2023

TCFD REPORT

At discoverIE, we understand the urgent need to preserve our planet for future generations and to mitigate the impact of climate change. We contribute to the transition to a low carbon economy through our products that help others reduce their emissions, and through our operations by committing to become a net zero emissions business.

Climate-related risks and opportunities are routinely considered in our strategic and financial planning, operational management, M&A and capital allocation decisions. In this report, we outline how we identify, assess, and manage these risks and opportunities, as well as our plan for transitioning to a low carbon economy.

This report is prepared in accordance with UK Listing Rules 9.8.6 and is consistent with the recommended disclosures of the Taskforce for Climate-Related Financial Disclosures ("TCFD"). Being in the electrical and electronic components sector, the Group follows the TCFD's All Sector Guidance in preparation of this report.

What's in the TCFD report:

12

Governance Strategy

Page 67	Page 69
3	4
Risk	Metrics
Management	& Targets

Page 79

Page 81

66

1

GOVERNANCE

While the Board has responsibility for overseeing our approach to sustainability, the Sustainability Committee (the "Committee"), on behalf of the Board, reviews

the Group's sustainability strategies and policies, and oversees and monitors practices and performance against commitments and targets.

Strategic Report

The Sustainability Committee was established in April 2022 and currently encompasses all Board members. As all members of the Board are present at Committee meetings, the full Board is aware of the matters discussed, including climate-related issues.

The Group Chief Executive, supported by the Group Management Committee ("GMC"), is responsible for setting the Group's sustainability strategies and targets. The GMC oversees implementation and reviews progress against our sustainability commitment and targets. All papers and updates prepared for the Sustainability Committee, including those relating to climate change, are reviewed and discussed by the GMC before submission to the Sustainability

Committee, allowing GMC members to develop their understanding of sustainability matters and provide input.

The Group Sustainability Team ("GST"), comprises members with sustainability, finance, legal and operations experience, and is responsible for monitoring, reviewing, consolidating and reporting the Group's operating businesses' progress on sustainability implementation.

It reports to the Sustainability Committee and the GMC. The GST drives sustainability initiatives throughout the Group, and works closely with divisional management and individual operating businesses on implementing the Group's sustainability strategy.

Together with the Group Risk and Internal Audit and Group Finance teams, the GST identifies and assesses climate-related risks and opportunities, which are then reviewed and discussed by the GMC. Action plans to mitigate such risks are drawn up and agreed upon by the GMC, and investment required to implement these plans are factored into the annual budgets.

Our sustainability governance framework describes our approach to managing sustainability, including climate-related issues.

Annual Report and Accounts

TCFD recommended disclosures		Further information
a. describe the board's oversight of climate-related risks		■	Corporate Governance Report Pages 102 to 113
and opportunities		■	Risk management pages 87 to 90

1. describe management's role in assessing and managing climate related risks and opportunities

fordiscoverIEtheGroupyearplcended 31 March

Sustainability Governance Framework

During FY2023, the Sustainability Committee met three times and climate change-related matters were discussed by the Committee at all of these meetings. The Sustainability Committee reviewed each key action of the Group's three sustainability pillars and progress against our targets. Further details of our sustainability performance can be found on pages 64 to 65 and 84 of this Annual Report and Accounts.

During the year, the Sustainability Committee reviewed and approved the Group's net zero commitment and associated plans. Alongside this, the Sustainability Committee also spent time considering the climate change-related risks and opportunities facing the Group in the context of the TCFD pillars. Each of the risks and opportunities was reviewed, and those identified as the most potentially impactful to the Group were discussed in detail. The Sustainability Committee acknowledges that this is an evolving

process, with the methodologies applied being continually refined, and that the discussions support the development of the Committee's understanding of these risks and opportunities and provide context for our net zero plans.

Details of our net zero plans can be found on pages 81 to 86 of this report

2023

67

TCFD REPORT

Group Management Committee

• Chaired by the Group Chief Executive
• Management responsibility for the Group's sustainability strategies, targets and performance, guided by the Sustainability Committee
• Ensures sufficient funding for the implementation of the sustainability plans
• Ensures sustainability matters are factored into the consideration of acquisitions

discoverIE Board

Sustainability

Committee

• Chaired by an independent Non- Executive Director with years of combined operational, management
  and board level experience in ESG
• Responsible for the governance of ESG matters
• Oversees the Group's sustainability approach, policies, performance and commitments
• Ensures that effective systems and processes are maintained

Other Board

Committees

• Audit and Risk Committee assesses and reviews climate- related risks and opportunities as part of the risk management process
• Remuneration Committee works closely together with the Sustainability Committee to ensure pay is aligned with the Group's sustainability objectives

See Directors' Remuneration Report on page 125 to 146 for more details

Corporate

Governance Code, management systems,

Divisional

Management

• Comprises the heads of the two divisions and divisional finance
• Ensures that operating business management holds primary responsibility and accountability for sustainability performance in collaboration
  with the Group Sustainability Team
• Oversees major climate mitigation capital expenditure

Group Sustainability Team

• Comprises members with sustainability, operational, finance and legal experience
• Responsible for driving sustainability initiatives throughout the Group
• Provides guidance to operating businesses on sustainability practices and facilitates knowledge sharing
• Ensures alignment with global best practice
• Reports to the Sustainability Committee and the GMC

Group Risk and

Internal Audit

• Identifies and assesses ESG-related risks, including climate change,
  in collaboration with the Group Sustainability Team
• Evaluates existing mitigating actions and controls

processes, policies and standards

Operating Business Management

• Responsible for the implementation of sustainability initiatives guided by the Group Sustainability Team and progress against their individual ESG objectives
• Provides suggestions for initiatives and feedback (including from the wider workforce)
• Shares best practices with other operating businesses

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2

STRATEGY

In 2021, we undertook an initial qualitative and quantitative analysis of the resilience of our business model and strategy under two climate scenarios - RCP2.6 and RCP8.5, being the best- and worst-case scenarios projected by the Intergovernmental Panel on Climate Change ("IPCC"). The analysis showed that the Group's business model and strategy were not expected to be materially affected by climate-related risks and opportunities, and that the net financial impact of climate change was considered to be immaterial.

See pages 47 to 50 of our 2022 Annual

Report for more details

TCFD recommended disclosures	Further information
a. describe the climate-related risks	■ Principal risks and uncertainties, pages 91 to 96
and opportunities the organisation has identified over
the short, medium and long term

1. describe the impact of climate-related risks and opportunities on the organisation's businesses, strategy, and financial planning
2. describe the resilience of the organisation's strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario

Strategic Report

Annual Report and Accounts fordiscoverIEtheGroupyearplcended 31 March 2023

69

TCFD REPORT

In order to better understand the potential financial impact of climate- related risks on the Group's Statement of Financial Position and future cash flows, during the year we conducted further analysis and detailed financial modelling for the identified risks and opportunities. The financial impact is considered in the estimates of future cash flows used in the Group's goodwill impairment and viability assessment, as detailed on pages 97 and 98 of our 2023 Annual Report.

We assess and report the climate change-related transition risks and opportunities on short (up to 3

Global average surface temperature change (relative to 1986-2005)

	6
	4
(˚C)		39		RCP2.6 RCP4.5 RCP6.0 RCP8.5
2
	0		32
	-2
	2000	2050		2100
		Year

years), medium (3-7 years) and long (more than 7 years) term bases. For physical risks, we define short term as the period up to 2030, medium term up to 2050 and long term up to 2100. Given the fast-changing and unpredictable nature of economic and environmental conditions,

the potential financial impact was modelled up to 2030 only.

During the process, we identified and assessed 12 climate change-related risks, of which eight were transition risks and four physical. Following this, we then prioritised four transition risks and two physical risks, being those with the highest risk scores, based on a combination of impact magnitude and likelihood.

We also identified three climate- related opportunities. We modelled the financial impact of these six risks and three opportunities. Assessment of the 12 climate-related risks, and their potential financial impact, can be found on page 72.

Climate-related risks and opportunities

			Estimated
			financial						Scenario
			impact	Timeframe					sensitivity
				Short	Medium Long		2DS	BAU
	1	Capital markets shifting
		investment to low carbon							■■■■	■■
		activities	Unquantifiable
	2	Changing customer	} £5-9m						■■■	■■
Transition		preferences
risks	3	Substitution of existing
		customer products							■■■	■■
		and services
	4	Commodity and raw							■■■■	■■■
		material price increases	£4-8m
Physical	5	Acute risks, e.g.	} £7-9m						■■	■■■■
	extreme weather events
risks	6	Chronic risks, e.g. rising sea
							■	■■■■
		levels and temperature
	7	Acceleration of							■■■■	■■■
Climate		renewable energy market	£9-17m
8	Electrification of							■■■■	■■■
related		transportation	£1-2m
opportunities	9	Electrification and
		automation of plant							■■■	■■
		and machinery	£4-9m

Anticipated onset of risks and opportunities Estimated full impact of risks and opportunities

■■■■

■■■

■■

■

High likelihood

Low likelihood

70