Governance and risk
Directors' Report
Financial statements
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Introduction Business performance Stakeholders Sustainability
Contents
Overall, based on information available at the reporting date, climate- related transition risk is not expected to result in structurally higher borrowing costs or to be a dominant driver of financing outcomes relative to traditional credit risk factors over the short to medium-term. The potential impacts identified through the analysis are not assessed
as material to the Group's financing costs, funding capacity or access to capital. However, long-term outcomes remain subject to significant uncertainty, reflecting the evolving nature of transition pathways, market conditions and regulatory developments.
Key assumptions
Summary output
• Cost of capital analysis focuses solely on the cost of debt, which is one component of the overall cost of capital. • The assessment considers the Group’s existing debt portfolio. • Potential changes in borrowing costs are assessed using scenario-specific emissions and decarbonisation pathways. Debt spread impacts are estimated through assumed interest rate spread outcomes or with reference to broader economy-wide transition pathways, informed by empirical research on climate-related influences on debt pricing. • The analysis provides a high-level indication of potential financing impacts under different transition scenarios and is not intended to predict borrowing costs based on the Group's specific emissions profile, decarbonisation strategy or expected transition trajectory. • The relationship between emissions and cost of debt is based on external research of historical data, rather than detailed forecasting of future credit markets.
• Impacts on borrowing spreads are not expected to be material in the short to medium-term across all modelled scenarios. Over the long-term, particularly under more ambitious transition pathways (e.g. Net Zero), some upward pressure on borrowing spreads may emerge.
Key judgements and uncertainties Scenario analysis of cost of debt
The analysis applies two complementary approaches to estimate potential impacts on borrowing spreads, informed by academic literature, market studies and expert judgement, reflecting the absence of a single accepted methodology. Judgement has been applied in selecting modelling approaches, given evolving methodologies and limited directly observable market data linking climate-related transition risk to financing costs. Estimates are inherently uncertain, particularly over longer time horizons, and are based on external research, scenario narratives and published literature rather than explicit modelling of credit market behaviour. Assumptions draw on historical relationships between emissions intensity and cost of debt, which may not fully reflect future investor responses or changes in credit market dynamics under different transition pathways. Available research indicates variability in how climate-related risks may be reflected in the cost of debt, and the relationship between emissions intensity, credit ratings and borrowing costs remains an evolving area of analysis. Accordingly, the assessment provides an indication of potential exposure to climate-related transition financing risks rather than a forecast of future borrowing costs. ¢
Opportunities: climate-related scenario analysis At this stage, the Group is not yet able to reliably quantify the medium to long-term financial effects of climate-related opportunities due to inherent measurement uncertainty and challenges in disaggregating value creation from broader climate risk management activities. The scenario analysis further indicates that Scope 1 emissions-related liabilities are not expected to be material, reflecting their relatively small contribution to the Group’s overall emissions profile. While initiatives to improve efficiency and reduce Scope 1 emissions are ongoing, including fleet management initiatives, these are not currently expected to result in material financial effects. The Group will continue to progress identified climate-related opportunities and refine its scenario analysis approach, including improving data quality, assumptions and methodologies, with the aim of enhancing the robustness and granularity of quantified climate- related financial disclosures over time.
e. R4 Structural changes to transport system R4 relates to potential long-term changes in mobility patterns, including modal shifts and the uptake of low-carbon transport alternatives, which may influence customer behaviour and demand for roads. Quantification of potential financial effects of this risk, including through scenario analysis, is currently not practicable due to limited and uncertain data, reliance on long-term assumptions, and the presence of offsetting factors, such as population growth, urban expansion and increasing freight demand. These factors make it difficult to attribute changes in the demand and network utilisation to this climate-related risk. The Group continues to monitor structural trends in transport systems, including changes in travel behaviour, uptake of low-carbon transport alternatives, and broader mobility developments, as part of its strategic planning processes. This monitoring is supported by a combination of real-time traffic data, tolling and sensor-based systems, and advanced analytics. These capabilities enable continuous tracking of traffic volumes, congestion patterns and network utilisation, supported by large-scale data analysis and external mobility insights, informing both short-term operational responses and long-term assessment of demand trends across the portfolio.
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