Task force on climate-related financial disclosures

Describe the organisation’s governance around climate-related risks and opportunities.

• The Board has ultimate accountability for SwireTHRIVE and our ESG performance
• The Group Risk Management Committee (GRMC), which reports to the Board, oversees climate and other sustainability risks. It is supported by the Swire Group Environment Committee (SGEC), the SwireTHRIVE Climate Working Group and the TCFD Working Group
• We use an enterprise risk management (ERM) system. We have corporate risk registers, in which climate change appears as an emerging risk
• The Group Head of Sustainability reports periodically to the Board on sustainability matters

Describe management’s role in assessing and managing climate-related risks and opportunities.

• The Chairman, divisional chief executives and the Finance Director meet twice a year to consider sustainability matters. These meetings provide direction and oversight to the SGEC, which comprises divisional sustainability heads and is chaired by a member of our leadership team. The SGEC meets three times a year. It has the following responsibilities related to climate change:
  • Oversee and implement SwireTHRIVE (including on climate) and sustainability policies
  • Report on Group sustainability activities and performance to the GRMC (including emissions and energy use) and on compliance with sustainability policies
  • Review and report on legislative, regulatory and other sustainability developments
• Our Climate Change Policy guides our approach to climate change mitigation, adaptation and resilience
• Climate change and the management of waste and water resources are priorities under SwireTHRIVE

Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.

• Climate change carries risks for our business. Flooding, extreme weather events and increasing temperatures can adversely affect our assets, operations, employees and suppliers. There are also regulatory, market and reputational risks
• Climate change appears on the Group risk register and is discussed in the Risk Management section of our 2020 Annual Report. It was highlighted as a key sustainability risk to the Group in a separate stakeholder engagement risk identification exercise
• Climate change stimulates business innovation and facilitates the transition to a lower carbon economy. Demand exists for climate resilient products and services. By addressing climate change, the costs of extreme weather conditions (maintenance and insurance premiums) can be mitigated

Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning.

• The table below presents findings from our climate risk analysis.

  Risk category	Risk and opportunities	Financial implications
  Physical risks
  Acute	More flooding in low lying areas damaging our assets or disrupting our services	More spending to improve the adaptive capacity of our assets and to mitigate adverse effects Flight delays and diversions due to flooding at airports, customer compensation and physical damage to aircraft and other assets
  	More fluvial flooding damaging our assets or disrupting our services	More spending to improve the adaptive capacity of our assets and to mitigate adverse effects
  	More and stronger typhoons damaging our assets or disrupting our services	Flight delays and diversions, customer compensation and physical damage to aircraft and other assets More spending to improve the adaptive capacity of our assets and to mitigate adverse effects
  Chronic	Extreme temperatures and heat stress	Lower productivity due to extreme heat More spending on cooling
  Transitional risks
  Policy and regulations	Carbon pricing for aviation, shipping and construction	Carbon taxes and more spending on offsets
  	More ambitious national decarbonisation plans	More spending to improve energy efficiency Lower operating costs because of higher energy efficiency
  	Tighter building energy codes	More spending on compliance
  Technology and innovation	More use of green and low-carbon technology	More spending on technology Lower operating costs because of higher energy efficiency
  	More use of renewable energy	More spending on renewable energy systems Sales of renewable energy to power companies
  Reputational damage	Vilification of aviation – flight shaming	Less demand for and therefore revenue from air travel
  	Increased reputation and litigation risks	Less revenue due to changes in what consumers want Litigation costs
  Markets	Changes in demand for products and services	Less demand for and therefore revenue from air travel, particularly from executives doing more video conferencing
  	More demand for energy efficient properties	More revenue because tenants will pay more to occupy energy efficient buildings
  	More demand for green finance	Reduction in interest costs by reference to green targets
  	Increase in insurance premiums	Higher insurance costs

Swire Properties Sustainable Development Report 2020 Cathay Pacific Sustainable Development Report 2020
• See the 2020 sustainability reports of Swire Properties and Cathay Pacific for details of their climate risk assessments

Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

• We are assessing the implications of different long-term climate scenarios. We are assessing the robustness of our climate strategy and the uncertainties associated with its execution

Describe the organisation’s processes for identifying and assessing climate-related risks.

• We are assessing how vulnerable our businesses are to flood, heat stress, water stress and extreme weather events. The findings will be incorporated into our ERM system
• We are using a tool developed by The Climate Service to assess the climate risks to our businesses and the resulting financial implications
  • We are assessing the physical climate-related risks to and opportunities for our key assets, under two climate change scenarios (RCP 4.5 and RCP 8.5)
  • We considered the impact of transition risks using carbon price models based on the IPCC Shared Socioeconomic Pathways SSP3-60 and SSP3-45
• Swire Properties has modelled acute and chronic physical risks to its assets associated with the four Representative Concentration Pathways (RCP 2.6, 4.5, 6.0 and 8.5) used by the IPCC. It has also looked at transition risks related to government policies and regulatory, technological and market trends, based on different climate scenarios
  Swire Properties Sustainable Development Report 2020 Cathay Pacific Sustainable Development Report 2020
  • Global climate models are being used to evaluate the exposure of specific assets and operations in 2025, 2030, 2050 and 2100. The vulnerability, of our assets and businesses and the places where we operate, to flooding, heat stress, water stress and extreme wind, is being assessed
  • Swire Properties has a plan to mitigate risks and build resilience which is being incorporated into its ERM system
• Cathay Pacific uses a risk taxonomy to identify and manage ESG risks to its business
  • Significant ESG risks are identified at cross-functional workshops attended by middle and senior management
  • Each business unit has a risk register that is reviewed annually. ESG risks from each of the registers are aggregated. Where appropriate, mitigation plans are developed
  • Risks are prioritised and reported to a risk management committee and a board risk committee

Describe the organisation’s processes for managing climate-related risks.

• We have set ambitious 2030 decarbonisation targets. Our goal is to achieve net zero carbon emissions by 2050
• Our Climate Change Policy deals with decarbonising our businesses and managing and adapting to climate risk
• Through the ISO 14001 Environmental Management System and ISO 50001 Energy Management System, we manage our operational risks related to climate change, carbon and energy management
• Our sustainable development fund makes available up to HK$100 million per year for sustainable development projects. The money is available for investments that would not otherwise meet our financial targets. In 2020, trials of new technologies intended to help our operating companies meet their carbon, water and waste targets were authorised
• Our business continuity plans cover extreme weather events. Swire Properties has crisis response plans for its buildings
• In 2020, all of Swire Properties’ projects under development achieved the highest green building rating, 97% of all its existing buildings were certified green buildings and over 98% of its 2020 gross rental income was from certified green buildings
• Swire Properties considers sustainability development criteria, including climate adaptation and resilience, energy efficiency and carbon emissions, when assessing acquisitions
• With Tsinghua University’s Joint Research Centre for Building Energy Efficiency and Sustainability, we have developed and tested methods to increase energy efficiency and improve environmental performance in our businesses. The collaboration began with Swire Properties and includes Swire Coca-Cola. It generates substantial energy savings
• Swire Coca-Cola uses independent third parties to assess water risk for its bottling plants, so as to form source vulnerability assessments. The findings are integrated into source water protection plans and are regularly reviewed
• Swire Pacific Offshore wants to decarbonise by using alternative marine fuels. With Nanyang Technological University, it studied the viability of hydrogen fuel
• We support the efforts of the Hong Kong Business Environment Council to promote awareness of climate change in the business community
• In 2020, Cathay Pacific held a climate risk workshop for senior managers. It assesses the impact of climate change by reference to financial, disruption, strategic, reputation, regulatory and human factors. Cross-functional stakeholders consider the impact of climate risks to the business and corresponding mitigation plans, which are owned and implemented by relevant departments
• Cathay Pacific is a member of the Roundtable on Sustainable Biomaterials and of the Sustainable Aviation Fuel Users Group Asia. It has a minority interest in Fulcrum BioEnergy Inc., which converts municipal solid waste into sustainable aviation fuel

Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management.

• Climate-related risks are identified and managed as part of our ERM system. Climate change is one of our top ten risks
• At Cathay Pacific, CORSIA compliance and policy are monitored by the corporate affairs team, whilst the finance team manages financial exposure, and the flight operations team oversees data collection

Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.

• We measure:
  • Carbon emissions (tonnes of carbon dioxide equivalent (CO₂e))
  • Energy consumed (GJ)
  • Kilowatt-hour (kWh) of renewable energy generated
• The metrics used by our operating companies can be found in their own sustainability reports

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG emissions, and the related risks.

• We measure and report our energy consumption and the Scope 1 and 2 carbon emissions from our operations in accordance with the listing rules of The Stock Exchange of Hong Kong Limited and in line with the GHG Protocol

Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.

• Our goal is to achieve net zero carbon emissions by 2050
• Our group target is to reduce our Scope 1 and 2 emissions (excluding jet fuel emissions) by 50% by 2030, compared with a 2018 baseline. Our operating companies’ targets are science-based targets or are set by reference to Nationally Determined Contributions (NDCs) or, in the case of our aviation and shipping businesses, international industry commitments
• Swire Properties was the first real estate developer in Hong Kong and the Chinese mainland to set science-based targets. The targets are these:
  • Reduce Scope 1 and 2 GHG emissions intensity by 35% per sqm by 2025 and by 52% per sqm by 2030 (from a 2018 baseline)
  • Reduce Scope 3 GHG emissions intensity from downstream leased assets by 28% per sqm by 2030 (from a 2018 baseline)
  • Reduce Scope 3 GHG emissions intensity from capital goods by 25% per sqm by 2030 (from a 2016-2018 baseline)
• Swire Coca-Cola’s science-based targets (approved by SBTi in 2020) are:
  • By 2030, reduce carbon emissions by 70% in its core operations (Scope 1 and 2) from a 2018 baseline
  • By 2030, reduce carbon emissions by 30% from its value chain (Scope 1, 2 and 3) from a 2018 baseline
• Swire Properties and Swire Coca-Cola have signed up to Business Ambition for 1.5°C
• Cathay Pacific has a goal of achieving net zero carbon emissions by 2050. It is developing targets for operational efficiency, sustainable aviation fuel and offsets
• In 2017, we set targets to reduce GHG emissions by 8-10% by 2020, compared with a 2015 frozen efficiency baseline. We achieved 61% decrease compared to our baseline, but largely because of COVID-19 related reductions in business activity
• We encourage the use of renewable energy. More than 20 million kWh of electricity was generated from renewable energy sources at Swire Properties, Swire Coca-Cola and HAECO Xiamen in 2020. Our sustainable development fund is available to support suitable renewables projects