Governance and risk
Directors' Report
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Introduction Business performance Stakeholders Sustainability
Contents
Section D: Risk management This section outlines the Group’s processes to identify, assess, prioritise and monitor climate-related risks and opportunities across its operations, projects and value chain.
Transurban identifies, assesses and manages climate-related risks and opportunities through processes set out in its ERM Framework, which is applied across operational, strategic and project activities and outlined on page 80. Climate-related risks and opportunities are integrated into the ERM Framework through an ESG and Sustainability risk category. Material climate-related risks and opportunities identified through this process are disclosed in this report, informs the Group’s strategy and supports the development of its climate transition plan. Identification The Group identifies climate related risks and opportunities by assessing the context in which it operates, including its business activities, products and services, geographical footprint, regulatory environment, key resources and relationships across the value chain. Based on this understanding, the Group assesses whether critical asset components (relating to the Group’s concession arrangements), resource inputs and value chain interdependencies are exposed to climate-related risks or present opportunities that could affect the Group’s ability to generate cash flows. The Group identified six climate-related risks and opportunities considered relevant for disclosure in this report, to support primary users’ understanding and decision making. In identifying the climate- related risks and opportunities that could reasonably be expected to affect the entity’s prospects, the Group considered both of the following: • financial materiality thresholds; and • qualitative factors relevant to primary users informed by stakeholder engagement, industry trends, and other inputs noted below. Climate-related risks and opportunities are subject to ongoing monitoring and assessment as part of the Group’s risk management processes. The climate-related risks and opportunities identified for disclosure will be reassessed on an annual basis. The Group draws on internal and external inputs to identify climate- related risks and opportunities, including: • internal asset performance data and historical weather - related incident records; • external climate science, including Shared Socioeconomic Pathways (SSPs) and Representative Concentration Pathways (RCPs) – aligned climate projections; 1 • stakeholder insights from the annual double materiality assessment (which considers both the financial effects of ESG issues on the Group, including climate-related risks and opportunities, and the Group’s impacts on people, the planet and the economy), community feedback, government consultations and other stakeholder engagements; • asset-level CCAPs identifying localised acute and chronic climate vulnerabilities;
• supplier disclosures through the Carbon Disclosure Project (CDP), including emissions profiles and transition plans; • traffic modelling and anonymised GPS data to estimate customer travel emissions; • regional climate projections and regulatory developments; • strategic planning workshops; and • scenario analysis incorporating both quantitative and qualitative factors to explore the potential impacts of different climate-related physical risks and transition pathways across the Group’s operations and value chain. This analysis supports the identification of climate- related risks and opportunities based on their likelihood and potential impact on the Group’s prospects, while considering strategic and operational resilience, including in the assessment of residual risk. Assessment The identified risks and opportunities are assessed using the Group’s ERM Framework, which considers likelihood and magnitude of impact to determine overall risk ratings (Low, Medium, High, Very High) as defined within the Framework. Climate-related risks and opportunities are categorised as either physical (acute or chronic) or transition risks and opportunities (policy, legal, market, or reputational), supporting a clear understanding of their source and how they may affect the Group. The assessment considers the risk and opportunity situation and context, including the identification of plausible worst-case scenarios, their underlying causes and potential impacts. Likelihood assessments draw on the above internal and external inputs. The potential magnitude of impacts is assessed across several dimensions, including financial (cash flows, access to finance or cost of capital), operational, health and safety, reputational and legal impacts enabling a multi-dimensional view of potential impacts. Prioritisation To ensure climate-related risks and opportunities are appropriately prioritised, the Group applies an assessment methodology that includes: • Consequence mapping: Risks and opportunities are ranked according to a risk matrix that considers both likelihood and magnitude of impact and classifies risks and opportunities as Very High, High, Medium or Low aligned with the Group’s Risk Appetite Statement. This enables resources to be prioritised toward the most significant risks and opportunities across various time horizons; and • Strategic relevance: Risks and opportunities are considered in the context of broader enterprise risk management and strategic decision-making, helping to identify threats and opportunities that may influence the Group’s long-term objectives. Following risk and opportunity assessment and prioritisation, the Group develops controls, proactive actions and fallback strategies to address risk and opportunity likelihood, potential consequences, and reduce any negative outcomes.
1 The analysis is based on a combination of external climate science projections, including SSP and RCP data, depending on when the analysis was conducted and the availability of data. In the future, all analyses will continue to use the most recent and available Intergovernmental Panel on Climate Change Coupled Model Intercomparison Project (CMIP) data
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