Environment

Climate change and Downer’s TCFD response

TCFD disclosure

The effects of climate change will be pervasive and felt in some way by every person, organisation and society as a whole. The effects will impact across environmental issues, economic performance, social behaviour, infrastructure and other aspects of human existence. Changes will generally develop gradually but could also be abrupt, as seen in recent times.

Downer accepts the Intergovernmental Panel on Climate Change’s (IPCC) assessment of the science related to climate change and supports the Paris Agreement in transitioning to net-zero emissions by 2050 to limit global temperature increase to 1.5°C by the end of this century. Climate change has been identified as one Downer’s material issues.

Downer recognises the uncertainties and risks posed by climate change on its long-term viability and to society. Downer’s current exposure to thermal coal represents a medium-term risk and informs Downer’s shift away from the Mining Services business. Other risks that Downer is exposed to need to be monitored and mitigated, or adapted to, dependent on the program of works affected.

Downer also recognises that there are significant opportunities to contribute to a lower carbon economy. Downer may leverage its already significant contribution to the renewable energy sector by providing further construction and maintenance services where these market opportunities arise. There are further opportunities within emerging technologies, such as Hydrogen and Carbon Capture and Underground Storage, where Downer has capability in each phase of its implementation. In addition to contributing to mitigation measures, adapting to climate change will be increasingly necessary over the coming years. To that end, Downer’s existing Asset Services business, along with maintenance services we provide across a range of industries, will be increasingly called upon, particularly in the face of extreme weather events. These represent significant opportunities for Downer.

The diversity of Downer’s portfolio strongly positions us to mitigate and manage our exposure to climate risks and to maximise the business opportunities it presents. For Downer,

The diversity of Downer’s portfolio strongly positions us to mitigate and manage our exposure to climate risks and to maximise the business opportunities it presents. For Downer, these opportunities outweigh the identified risks and will assist in accessing lower cost capital and providing increased margins. This materialised in FY21 when Downer finalised a $1.4 billion syndicated Sustainability Linked Loan (SLL). The SLL is underpinned by KPI metrics relating to Downer’s greenhouse gas emission reductions (in line with Downer’s Science-Based Target) and bespoke social metrics. If Downer achieves its KPI targets it will result in lower borrowing costs.

these opportunities outweigh the identified risks and will assist in accessing lower cost capital and providing increased margins. This materialised in FY21 when Downer finalised a $1.4 billion syndicated Sustainability Linked Loan (SLL). The SLL is underpinned by KPI metrics relating to Downer’s greenhouse gas emission reductions (in line with Downer’s Science-Based Target) and bespoke social metrics. If Downer achieves its KPI targets it will result in lower borrowing costs.

Over the past three years, Downer has progressed its implementation of the Taskforce on Climate-related Financial Disclosure (TCFD) recommendations. Downer remains committed to integrating the TCFD work into its overall strategy. This year’s disclosure builds on the work completed over the past few years.

The scenario analysis performed in 2019/20 continues to inform strategic planning processes by looking longer-term to critically assess the products and services provided by the business in these changing markets. The outcomes of the scenario analysis contributed to Downer’s Urban Services strategy, which focuses on capital light services and limits our exposure to the effects of climate change through fixed, long lived capital assets.

In February 2020, Downer announced it would shift investment in high capital intensive activities to lower intensive and lower carbon activities and advised the market that it would take steps to divest its Mining Services and Laundries businesses. This strategic shift will support Downer’s decarbonisation pathway and market position as the global economy accelerates its transition to a low-carbon future. Downer is also well positioned to provide products and services to our customers that will enable them to decarbonise, contributing to a lower carbon future.

Downer intends to undertake a program of work during FY22 to refresh its understanding of key climate-related risks and opportunities and the further embed climate-related considerations into the capital allocation process. The outcomes of the analysis will be disclosed in future disclosures.

TCFD governance
TCFD risk assessment
TCFD strategy
TCFD scenario analysis
Physical impacts
Energy transition
(thermal coal transition)
Changing carbon/energy policy
Greenhouse gas emission
reduction targets