TCFD REPORT 2022
Vector's journey to a new energy future
Our climate risks and opportunities based on the recommendations of the Task Force on Climate-related Financial Disclosures
August 2022
Purpose of this report and limitations
This report is a summary of Vector's assessment of future climate risks and opportunities and its resulting strategy. It is intended to inform readers about Vector's business strategy with respect to climate risk and opportunity but it is not earnings guidance nor financial advice for investors, and it is unaudited.
Given its focus on future risks and opportunities, this report contains estimates, projections and assumptions about future socio-economic, policy and regulatory, technological, physical climate and other conditions, as at 26th August 2022. Although the use of scenario analysis is rapidly developing to support this future focus, there are limitations to the modelling methodology and available data, and therefore scenario analysis. These limitations are identified throughout this report and in particular are outlined in Sections 2 and 3.
While Vector has taken efforts to ensure that such assumptions have a reasonable basis and are coherent and plausible (including basing them on modelling, public scientific information, market knowledge and projections, government policy proposals, and reasonable/expert opinions), assessments of the future are challenging and inherently uncertain. The assumptions, estimates, projections and modelling relied on in this report may not be realised at the scale and pace anticipated and/or the future may involve circumstances that are different to that anticipated in this report.
In light of the above, while Vector has taken all due care in preparing this report, including its scenarios and assumptions, Vector makes no representation as to the report's accuracy, completeness or reliability, in particular in relation to Vector's assumptions regarding future events.
To the greatest extent possible under New Zealand law Vector expressly disclaims all liability for any direct, indirect or consequential loss or damage occasioned from the use or inability to use this report, whether directly or indirectly resulting from inaccuracies, defects, errors, omissions, out of date information or otherwise.
Vector makes no representation as to the accuracy of any information in this report. We recommend you seek independent advice before acting or relying on any information in this report. Vector reserves the right to revise statements made in, or its strategy or business activities described in, this report, without notice.
Our position on climate change
Vector is well-positioned to enable decarbonisation within New Zealand, the Asia- Pacific region, and globally. We are guided by our vision, which is to create a new energy future. Despite the challenges of climate change today, our integrated Group strategy we call Symphony is preparing us to seize the opportunities of
a decarbonised future. Symphony aims to transform the traditional one-way energy chain into an intelligent, multi-directional energy system that gives the customer more choice and control. Fundamentally, it is about creating a decentralised energy system that opens future possibilities, delivering decarbonisation consistent with safe, reliable and affordable energy solutions for customers.
2 Vector TCFD 2022
OUR | KEY | GOVERNANCE RISK AND | STRATEGY RISK 1: INABILITY | RISK 2: | RISK 3: | OPPORTUNITIES METRICS | |||||||
POSITION | INSIGHTS | OPPORTUNITY | TO EFFICIENTLY | UNMANAGED | INCREASE | AND | |||||||
MANAGEMENT | MANAGE | TRANSITION | IN EXTREME | TARGETS | |||||||||
PEAK LOAD | FROM GAS | WEATHER EVENTS | |||||||||||
Vector acknowledges the climate change science underpinning this need to act. We welcome the pivotal role we can play in this decarbonisation transition, and we recognise climate risk as a material risk with Board oversight. Vector is a founding member of the Climate Leaders Coalition, a partner of the Sustainable Finance Forum, and member of the Sustainable Business Council. Our participation
in these coalitions also includes our commitment to reducing our own carbon emissions to help with New Zealand's transition to a low carbon economy, and is consistent with our support for the Paris Agreement and the establishment of the Climate Change Commission.
Decarbonisation brings both risks and opportunities
Electrification of the energy economy is a key part of global decarbonisation efforts. Vector is one of the leading players in the transformation of the energy sector, identifying, developing, and enabling options that will provide value, choice and service for our customers while delivering sustainable shareholder returns. The impacts of climate change, and more broadly, of global responses to climate change, represent material risks and opportunities for our business, as covered in this disclosure. We are working with policymakers and regulatory bodies and closely monitoring developments in New Zealand and our other key markets around climate action and just transitions [1].
Why the Task Force on Climate- related Financial Disclosures (TCFD) matters to us and our primary users
The TCFD framework provides a way for companies to produce consistent climate- related disclosures, demonstrating how climate-related risks and opportunities are incorporated into their risk management and strategic planning processes. Why
is this so important? As customers, regulators, policymakers, existing and potential investors, lenders, and other creditors further their understanding of the financial implications associated with climate change, markets will be empowered to channel investment to the solutions, opportunities, and business models needed for a new energy future.
When it launched in 2017, the TCFD recommended that companies make 11 disclosures to identify the possible climate impacts on their business. In October 2021 New Zealand was the first country to pass law to create a mandatory TCFD reporting obligation on major private sector entities. While the External Reporting Board's Climate-related Disclosure Standard remains under development, and those mandatory reporting obligations will only commence from 2023, Vector has nonetheless embarked on this journey in advance. Our reasoning is simple: it is in our interest as a company to lead the transformation of the energy sector and to ensure that the management and maintenance of our physical assets and business strategy takes into account, anticipates, and proactively responds to climate-related risks and opportunities. Vector also sees a clear role for businesses like ours to provide our stakeholders with transparent information that supports robust, long-term business strategy and investment decisions.
Electrification of the energy economy is a key part of global decarbonisation efforts
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Vector's climate-related opportunities and risks
Climate change brings both risks and opportunities for Vector, as detailed in this report. With a diverse business portfolio of energy solutions, Vector is well-positioned to lead the energy transition to our customers' advantage. Many of our climate-related opportunities correspond with the role we can play in creating new solutions and driving efficient, sector-wide decarbonisation. Many of our risks emerge from the possibility that decarbonisation occurs in a way that is inefficient and costly, impacting Vector and our customers. In identifying these risks and opportunities, our intentions are more firmly resolved than ever. We are working to be a first-class energy company globally, playing a leading role in enabling a bright future for our customers.
Scenarios
Orderly
Decarbonisation
Risks/ Opportunities
Page 10 | Mitigating | Energy | ||
consumer | Platforms | |||
burden through | Page 25 | |||
a managed | ||||
transition | Warming | |||
up to | Advanced | |||
1.8°C | Metering | |||
by 2100 | Page 26 | |||
(RCP 4.5) | ||||
Distributed | ||||
Energy | ||||
Resources | ||||
Page 27 |
Mitigating
Hothouse climate change through decarbonisation
Disorderly Decarbonisation
Energy
Efficiency
Page 28
Inability to | |
Efficiently | |
Manage | |
Peak Load | Page 18 |
Scenarios represent plausible, challenging descriptions of how the future may develop based on a set of assumptions about key driving forces and relationshipsincluding physical and transitional climate risks. Scenarios are used to test Vector's business strategy but are not intended to be probabilistic or predictive or to identify the 'most likely' outcomes.
Extreme | Unmanaged |
Warming | Transition |
up to | from Gas |
3.7°C | Page 20 |
by 2100 | |
(RCP 8.5) | Increase in Extreme |
Weather Events | |
Page 22 |
4 | Vector TCFD 2022 |
OUR | KEY | GOVERNANCE RISK AND | STRATEGY RISK 1: INABILITY | RISK 2: | RISK 3: | OPPORTUNITIES METRICS | |||||||
POSITION | INSIGHTS | OPPORTUNITY | TO EFFICIENTLY | UNMANAGED | INCREASE | AND | |||||||
MANAGEMENT | MANAGE | TRANSITION | IN EXTREME | TARGETS | |||||||||
PEAK LOAD | FROM GAS | WEATHER EVENTS | |||||||||||
Time Period | Strategy | |||||||||||||||
Strategic | ||||||||||||||||
SHORT TERM | MEDIUM TERM | |||||||||||||||
Partnerships | ||||||||||||||||
0 - 3 years | 3 - 10 years | |||||||||||||||
Developing data-driven products and services with leading technology partners to enable a greater uptake of renewable electricity supply, and electrify energy demand.
SHORT TERM | Working with governments, and regulators to drive the importance | ||||||||||||||||||||||||||
Unlocking | of unlocking data from advanced meter uptake in New Zealand and | ||||||||||||||||||||||||||
Data | Australia. Vector also partners with distributors, retailers, and global | ||||||||||||||||||||||||||
0 | - | 3 | years | ||||||||||||||||||||||||
technology platforms to drive energy management innovation. | |||||||||||||||||||||||||||
MEDIUM TERM | LONG TERM | |||||||||||||||||||||||
3 | - | 10 | years | 10 | - | 30 years | ||||||||||||||||||
SHORT TERM | MEDIUM TERM | LONG TERM | ||||||||||||||||||||||
0 | - | 3 | years | 3 - 10 years | 10 | - | 30 years | |||||||||||||||||
LONG TERM | ||||||||||||||||||||||||
10 | - | 30 years | ||||||||||||||||||||||
MEDIUM TERM | LONG TERM | |||||||||||||||||||||||
3 - 10 years | 10 | - | 30 years | |||||||||||||||||||||
SHORT TERM | MEDIUM TERM | LONG TERM | ||||||||||||||||||||||
0 | - | 3 | years | 3 - 10 years | 10 | - | 30 years | |||||||||||||||||
Network | Developing network virtualisation software that uses dynamic |
simulations to manage the complexities of bi-directional power and | |
Virtualisation | |
therefore enables a greater uptake of distributed energy resources. | |
Technology | Ongoing product innovation in building efficiency systems |
Management | keeps Vector at the forefront of new technology, and new |
and Innovation | channels to market. |
Enabling and | Working on the alignment of regulatory, and policy settings, |
Advocating for | together with energy industry solutions that leverage digitalisation |
Demand Flexibility | of the energy sector, to realise energy flexibility. |
Managed | Working with government, and the wider industry on the Gas |
Gas | Transition Plan, to establish realistic transition pathways for the |
Transition | fossil-gas sector to decarbonise. |
Network | Addressing actual and potential physical risks through a framework |
Resilience | that breaks physical resilience into three categories: robustness, |
Plan | resourcefulness, and recovery. |
Governance Page 6
Board of Directors | |||||||||
Board Audit Committee | Board Risk and Assurance Committee | ||||||||
Executive Management | |||||||||
Climate Change Steering Committee | Chief Public Policy and Regulatory Officer | ||||||||
Group Sustainability | Group Risk and Resilience | ||||||||
Group Finance | Group Insights | ||||||||
Business Level Senior Management | |||||||||
Business Level Risk Partners | Business Level Insights | ||||||||
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Vector Limited published this content on 25 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 August 2022 21:00:19 UTC.