Global Electric Utilities Climate Change Adaptation Acclimatise Report

Carbon Disclosure Project

Report – Global Electric Utilities

Building business resilience

to inevitable climate change

The Adaptation Challenge

Agenda

Welcome address Graham Butler, Executive Partner, Energy & Utilities Industry Leader, IBM

CDP context James Howard,

Project Director, The Carbon Disclosure Project

Introduction to the report Michael Valocchi,

Partner, Global Energy & Utilities Industry Leader, IBM

Building business resilience John Firth,

Chief Executive Officer, Acclimatise

IBM viewpoint Graham Butler,

Executive Partner, Energy & Utilities Industry Leader, IBM

Q & A panel discussion Hosted by Peter RichardsonEnergy and Environment Marketing Manager, IBM

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4

“To collect and distribute high quality information that motivates investors,

corporations and governments to take action to prevent dangerous climate

change.”

• Global non-profit organisation, established in 2000

• Secretariat to 475 Signatory Investors with $55 trillion assets under management

• Largest climate change database in the world:

– More than 2,500 companies reporting in 2008, and even more in 2009

– Process supported by many global figures

35

95

155

284

315

385

475

2003 2004 2005 2006 2007 2008 2009

Number of Signatory Investors to CDP

Introduction to the Carbon Disclosure Project (CDP)

5

Example CDP Signatory Investors

6

New Expansions in 2009:

Russia – Central & Eastern

Europe – Portugal – Ireland

CDP’s Global Reach in 2009

CDP’s Perspective

CDP provides a Global Intersection between Government, Investors and Companies

475

INSTITUTIONAL

INVESTORS

COMBINED

ASSETS OF US

$55 TRILLION

3,700 OF THE

WORLD’S

LARGEST

CORPORATIONS

DATA MADE PUBLICLY AVAILABLE VIA

CDP

8

CDP – The Future

Expand number of disclosers

Improve quality and depth of disclosures

Work with and supplement the emerging and varied

disclosure landscape of mandatory reporting and

registries

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Adapting to inevitable climate change.

Climate change is underway.

– Whatever steps we take to limit GHG

concentrations we are now faced with decades

of increasing temperatures and possibly

centuries of sea-level rise.

– Limiting global average temperature rise to 2oC

is looking increasingly challenging. If we fail the

adaptation challenge becomes even greater.

Significant impacts of extreme events

and incremental changes in climate are

already evident.

Carbon neutrality does not create

business resilience.

Businesses face two climate

challenges, not one. They must:

– Reduce emissions to avoid the unmanageable

– Adapt to manage the unavoidable

Observed and modelled changes in temperature in Europe

Climate change: the business context

We have to act without delay to reduce emissions AND we need to

adapt to manage the unavoidable – there is no choice.

– Business as usual in the face of a changing climate is not an option.

Building business resilience:

– Climate change is not just an ‘environmental’ issue.

– Adapting to the impacts of inevitable climate

change is a mainstream business risk and should

be ‘internalised’ within business models and value

chains.

Corporate drivers for action on climate

change:

– Changes in their relative importance over time.

– Meeting the challenges of the energy revolution.

Our approach

Review responses from global electricity companies to the 2008

Carbon Disclosure Project.

Analysis using our proprietary Acclimatisation Index – a quantitative

approach creating a relative score for companies in the electricity

sector.

Allows the resilience of companies to inevitable climate change to be

assessed.

– The risks and opportunities they face.

– How they plan to adapt.

– Their position in the resilience landscape

Headline results

Adaptation: an unexplored corporate issue.

– 93% of companies acknowledge exposure, but only 27% indicate a ‘quantified’

analysis has been undertaken.

Companies are generally more aware of the risks than the

opportunities.

– 59% identified potential business opportunities.

Implications for governance.

– Only 6% provided evidence of integrating inevitable climate change into their

internal corporate governance procedures.

Building business resilience to the impacts of climate change

remains a new issue for most electricity companies.

The challenge of inevitable climate change to business models

An ‘energy revolution’ is required to meet the challenges of:

– Continuing urbanisation and intense competition for natural resources, driven by

population growth and economic development.

– National energy security concerns and supply reliability.

– Reducing emissions and shifting the focus to renewable sources of energy, low

carbon generation and more dynamic balancing of supply and demand requiring

significant levels of investment to transform the industry.

This has to be achieved within the context of a changing climate and

the impacts on social, economic and environmental systems:

– Causing significant changes in the demand for electricity against a backdrop of

supply challenges, ageing assets, impacts on asset performance and efficiency,

and prescriptive regulation

Maintaining a global perspective on climate change impacts on

social, economic and environmental systems.

How should businesses respond?

Avoid entirely ‘predictable surprises’.

– Need to foresee the implications and take appropriate steps.

Understanding impacts:

– Extreme events (acute) and incremental change (chronic).

– Direct and indirect impacts working through all elements of business models and

value chains.

– The ‘pinball machine’ effect.

Understanding opportunities:

– Companies are focussing on risks, immature landscape on opportunities.

– Building resilience creates a competitive advantage.

– New markets, products and services in response to the energy revolution.

– Financial crisis presents an opportunity for companies to revisit their business

models and build resilience.

How should businesses respond?

Learning lessons from the current financial crisis.

Short-termism, risk management and control, disclosure of potential

risks all have to be addressed.

Business risk ‘signals’ driven by climate change are already visible.

Uncertainties should act as a catalyst for companies to quantify the

risks, monitor the impacts and respond by changes to their business

models.

– Dealing with uncertainty is the measure of a well managed business.

An integrated approach to the challenges through:

– Optimisation of existing infrastructure assets, systems and information.

– Growth of existing capabilities.

– Acceleration of emerging technologies to a commercial scale.

A call for action by senior executives

Revisit fiduciary responsibilities.

Ensure corporate governance meets the challenge.

• Embed climate risk management into decision making.

• Develop a risk assessment process using the best available science.

Learn from others, engage with policy makers.

Improve internal expertise and capabilities, ensure knowledge

management systems are fit for purpose.

Disclose material risks.

Prepare-Adapt: 10 questions for senior executives

– To aid senior executives and help companies take the right steps towards

building business resilience by exploring risks, opportunities and responses.

Welcome address Graham Butler,










Q & A panel discussion Hosted by Peter Richardson

Energy and Environment Marketing Manager, IBM

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IBM Viewpoint: Adaptation will be crucial to business success

Electric utilities have taken positive steps to mitigate the impact of climate change

Electricity industry is at a critical point

– Increase generation - 36.8 % growth in energy demand by 2030

– Reduce emissions - responsible for 25% emissions

2 options

– Generate ‘cleaner’ electricity

– Drive down energy people are using

• 170 billion KW hours wasted each year by consumers – lack of power usage information

Climate change brings additional pressures

– Changes in

• demand - population migration, new demands (e.g. electric vehicles)

• supply chain - vulnerable assets

• availability of natural resources - competition for scarce resources

IBM Viewpoint: Adaptation will be crucial to business success

Electricity is a complex system of systems.

Balance will change and we need to redesign the way the industry works:

– more dynamic control of• power flows

• information

• money

– new sources of supply• Consumers to be part of the electricity management and efficiency story

3 practical steps

1. Optimise– existing assets to be more efficient and more robust to adapt to climate change

2. Grow – existing commercialised capability through smarter design and operation

3. Accelerate – new and emerging capabilities to commercial scale

Change is needed now to enable prosperity in a much different future

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To access the full report

For softcopy please go to:

– ON24 registration website

– www.ibm.com/uk/green

– www.acclimatise.uk.com

you can order paper copies of the documents from

– www.ibm.com/uk/green

– [email protected]

http://www.ibm.com/uk/green

http://www.acclimatise.uk.com/

http://www.ibm.com/uk/green

mailto:[email protected]

Documents

Global Electric Utilities Climate Change Adaptation Acclimatise Report