Since then we have been on a disclosure journey, involving the creation of future climate scenarios, running risk and opportunity workshops across the business and building strategic resiliency into our business plans.
The climate science is certain - humans have changed the climate but the final global warming temperature, the actual impact of climate change on extreme weather events and the response from government, corporations and society to climate change remain uncertain.
Current and future global policies indicate that 3.5 degrees of global warming is likely. The ‘Paris Agreement’ calls for well below 2 degrees, however as a preferred global target, many scientists are recommending 1.5 degrees, even though the world has already warmed by 1 degree and that will take unprecedented transformation of everything we know.
Strategic planning for these uncertain future climate impacts to an organisation requires a methodology referred to as scenario planning – a type of business planning that accounts for multiple plausible futures, rather than forecasting for one likely future outcome. Although scenario planning has been used in large multinational corporations for several years, using scenario planning for building strategic resilience to future climate related risks and opportunities is a new approach for both corporate sustainability and business planning activities.
In creating scenarios for disclosing under TCFD, there are many key uncertainties to try and account for, including the extent of climate impacts, degree of government intervention, societal and consumer responses, investor demand, rate of supply chain decarbonisation and many more. The scenarios created should be relevant to the business they are created for e.g. a property company will be impacted differently to an agricultural business. They need to be challenging enough to test the strategy of the company but remain plausible to the business.
To embed the scenarios within the business planning process the users of the scenarios need to be authentically transported into these future worlds quickly and deeply. Our approach to this engagement was to create decadal steps from today, out to 2050, painting a clear narrative to the future, grounded in current scientific and academic research, related back to related business activities and impacts. These pathways to 2050 can be found on our website.
To help with transporting users into these future worlds we created a short video for each scenario. The videos use images and prompts with a themed soundtrack to describe the narrative to the future as well as prompting the audience to think about the impacts to Lendlease.
The power of these engagement tools allowed our people to really think through the risks and opportunities, but they were also moved and agitated enough by what they saw to prompt immediate action from themselves in their roles to do more, to think differently and many took the opportunity to share the videos with their children and families to have a deeper conversation about climate change.
Our three climate scenarios that we are using to understand the impacts of climate related risks and opportunities to our business resiliency are grounded in global warming temperature bands but are built on society’s response to climate change.
Our current and future policy related scenario (3-4 degrees of warming) is called ‘Polarisation’ and sees the world falter on serious climate action, with a resultant national self-interest taking precedence over multilateral cooperation. This scenario sees higher levels of economic protectionism with significant impacts to global supply chains. Our Polarisation scenario is designed to test the impacts of a nationalist focused world on global businesses.
Our ‘Paris Alignment’ scenario sees a market led transition to a lower-carbon future through global government commitment to the Paris Agreement. This scenario relies heavily on emission reduction technologies, such as carbon capture and storage. Our Paris Alignment scenario tests the transitional risks and opportunities of a government commitment to climate action, leading to a high price on carbon and controlled decarbonisation.
Our third scenario called ‘Transformation’, which sees a 1.5 degree outcome, is driven by society on a rapid decarbonisation pathway, where global emissions peak in 2020 and are close to zero by 2040. Instead of relying on technological fixes, Transformation sees a substantial reduction in emissions through lifestyle changes and a reprioritisation of capital to community level investment. Our Transformation scenario is designed to test the transitional risks and opportunities of a possible increasing social licence to operate and community level governance structures.
Our fourth scenario is solely used to test the physical impact of climate change on our assets and projects. Called ‘Resignation’, it is based on greater than 4 degrees of global warming and is designed to test the underlying inherent risks of a worse case climate change scenario.
Embracing TCFD as a scenario planning led process rather than disclosure led process has created a powerful engagement tool within our business. We have seen shifts in decision making and commitment to action that we don’t believe would have occurred without engaging deeply on the future climate scenarios.
Keep an eye out for our annual report this year, where we will be disclosing more information about the outcomes of our risk and opportunity workshops and the next steps in our TCFD journey.