CDP Climate Change 2022 Reporting Guidance

(C2.4a) Provide details of opportunities identified with the potential to have a substantive financial or strategic impact on your business.

Question dependencies

This question only appears if you select “Yes” in response to C2.4.

Change from last year

Modified question for FS only.

Rationale

Your response to this question will allow CDP data users to see, in one place, details of the opportunities posed to your organization by climate-related issues, and also the estimated potential scale of these opportunities at the corporate level and your response strategy to take advantage of these opportunities.

Connection to other frameworks

TCFD

Strategy recommended disclosure a) Describe the climate related risks and opportunities the organization has identified over the short, medium, and long term.

Strategy recommended disclosure b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.

Please note: columns 1-7 align with the TCFD recommendations.

SDG

Goal 7: Affordable and clean energy

Goal 12: Responsible consumption and production

Goal 13: Climate action

Response options

Please complete the following table. The table is displayed over several rows for readability. You are able to add rows by using the “Add Row” button at the bottom of the table.

[Add Row]

Primary climate-related opportunity driver drop-down options (column 4)

Select one of the following options:

Primary potential financial impact drop-down options (column 5)

Select from the following options:

• Reduced direct costs
• Reduced indirect (operating) costs
• Increased revenues resulting from increased demand for products and services
• Increased revenues through access to new and emerging markets
• Increased revenues resulting from increased production capacity
• Increased access to capital
• Increased value of fixed assets
• Increased diversification of financial assets
• Increased portfolio value due to upward revaluation of assets [Financial services only]
• Returns on investment in low-emission technology
• Other, please specify

Requested content

General

• For the purposes of this response, the opportunities identified should only be those which may pose substantive impacts in your business operations, revenue, or expenditure.

Identifier (column 1)

• Select a unique identifier from the drop down menu provided to identify the opportunity in subsequent questions, if required, and to track the status of the opportunity in subsequent reporting years. Please select from Opp1-Opp100 and use the same identifier in subsequent years for the same opportunity. For any new opportunities you are adding, always use a new identifier that you have not used previously.

Where in the value chain does the opportunity occur? (column 2)

• Upstream value chain refers to activities, products and services that are inputs to the activities of your business, sourced from third parties. This may include the regulations and policies applied by governments; the products and services provided by your suppliers (i.e. the supply chain).
• Downstream value chain refers to the third parties benefiting from the outputs, products and services of your business activities. This may be your customers and clients, or the organizations and projects your business invests in.

Opportunity type (column 3)

• Select an option from the drop-down menu that best describes the type of the identified opportunity:

- Resource efficiency – opportunities related to improving resource efficiency across production and distribution processes, buildings, machinery/appliances, and transport/mobility.
- Energy source - opportunities related to shifting energy usage toward low emission energy sources.
- Products and services - opportunities related to innovation and development of new low-emission and climate adaptation products and services.
- Markets – opportunities in new markets or types of assets that may help organizations to diversify their activities and better position themselves for the transition to a lower-carbon economy.
- Resilience – opportunities related to the development of adaptive capacity to respond to climate change. They may be especially relevant for organizations with long-lived fixed assets or extensive supply or distribution networks; those that depend critically on utility and infrastructure networks or natural resources in their value chain; and those that may require longer-term financing and investment.

Primary climate-related opportunity driver (column 4)

• Opportunity driver describes the source of the opportunity and will depend on the opportunity type selected in column 3. Select an option from the drop-down menu that best describes the identified opportunity. If you select “Other”, please provide further details in column Company-specific description (6).

Primary potential financial impact (column 5)

• This column refers to the potential financial impact that the opportunity could have on your organization. The financial impacts of climate-related opportunities on organizations are not always clear or direct, and for many organizations there might be more than one financial impact associated with a climate-related opportunity;
• Select the option that you deem to have the biggest impact. You can provide additional details on other financial impacts in the column Explanation of financial impact figure (column 14);

Company-specific description (column 6)

• Provide further context on the opportunity driver, including more detail on the exact nature, location, and/or regulation of the effect concerned, as well as any notable geographic/regional examples.
• Be sure to include company-specific detail, such as references to activities, programs, products, services, methodologies, or operating locations specific to your company’s business or operations.

Likelihood of impact (column 8)

• The likelihood of the impact occurring, along with the magnitude (see below) are the building blocks of a risk/opportunity matrix – a common method of identifying and prioritizing risk and opportunities.
• The likelihood refers to the probability of the impact to your business occurring within the time horizon provided, which in the case of an inherent opportunity might be similar to the probability of the climate event itself.
• For example, if the opportunity relates to a piece of new legislation which has already been prepared in draft form, the likelihood of the impact associated with that opportunity occurring will be relatively high.

Magnitude of impact (column 9)

• The magnitude describes the extent to which the impact, if it occurred, would affect your business. This should consider the business as a whole and therefore the magnitude can reflect both the opportunity and the extent to which it applies throughout the organization.
• It is not possible to accurately define terms for magnitude as they will vary from company to company. Therefore, companies are asked to determine magnitude on a qualitative scale. Factors to consider include:

- The proportion of business units affected;
- The size of the impact on those business units; and
- The potential for shareholder or customer response.

Are you able to provide a potential financial impact figure? (column 10)

• Your selection will determine whether column 11 or columns 12 and 13 will be presented.
• It is acknowledged that these will be estimates and, where possible, assumptions made in arriving at a financial impact figure should be stated in the column 14 ("Explanation of financial impact").
• If you are unable to provide a figure for a financial impact, you may use column 14 to provide a description of the impact in relative terms; for example, as a percentage relative to a stated or publicly available figure, or give a qualitative estimate of the financial impact

Potential financial impact figure (currency) (column 11)

• Provide a single figure for the financial impact of the opportunity. This figure should be in the same currency that you selected in question C0.4 for all financial information disclosed throughout your response.

Potential financial impact figure (currency) (columns 12, 13)

• Provide the estimated range for the financial impact of the opportunity. This figure should be in the same currency that you selected in question C0.4 for all financial information disclosed throughout your response.
• Potential financial impact figure – minimum (currency): use this field to report the lower point of your estimated financial impact associated with the opportunity. For example, if the range is from US $5,000 to $50,000, "5,000" should be reported here.
• Potential financial impact figure – maximum (currency): use this field to report the upper point of your estimated financial impact associated with the opportunity. For example, if the range is from US $5,000 to $50,000, "50,000" should be reported here.

Explanation of financial impact figure (column 14)

• Use this open text field to explain the figure provided in the “Potential financial impact” (columns 10, 11, 12).
• Describe how you arrived at this figure (or range), including:

- What approach was employed to calculate the figure;

- The figures used in your calculations;

- Any assumptions the figure is dependent on.

• If ‘We do not have this figure’ was selected in column 10, use this column to provide a description of the financial impact in relative terms (for example as a percentage relative to a stated or publicly available figure) or give a qualitative estimate of the financial impact. Otherwise, if you have no information about the financial impact, please state “The impact has not been quantified financially”.
• You can also describe here other financial impacts of the selected climate-related opportunity (other than the main impact identified in column 5), and provide more details on the nature of the impact in case you selected “Other, please specify” in column 5.

Cost to realize opportunity (column 15)

• Provide numerical data on the cost to realize opportunity. If there are no costs to this, enter 0.
• If you cannot provide absolute values you may provide a value in the “Comment” column (column 17).

Strategy to realize opportunity and explanation of cost calculation (column 16)

• Use this text field to provide information on methods you are using or plan to use to exploit the opportunity and maximize its potential realization. Make sure to include an example of company specific activities, projects, products and/or services which are aiming to realize the opportunity. Make sure to include:

- An example of company-specific activities, projects, products and/or services which are aiming to realize the opportunity; and
- An explanation of how the figure for the cost to realize opportunity (in column 15) was calculated, including the figures used in your calculation. If you entered 0 in column 15 “Cost to realize opportunity”, you should still explain how you arrived at a figure of 0, even if the cost is absorbed into business-as-usual activities.

Comment (column 17) (optional)

• You can use this text field to enter any additional relevant information.

Note for electric utility sector companies:

• In answering the questions above, please consider:

- Opportunities that may arise from emissions trading;
- The opportunities that national or international targets on energy efficiency and demand management might present for your company e.g. revenue implications from energy services business units;
- Your company’s views on any opportunities that may result from policies on renewable energy or low emissions technologies e.g. current or planned investments in these areas; and
- The extent to which you receive financial incentives to reduce the electricity use of customers.

Note for agricultural sector companies:

• Agricultural companies should report on opportunities that the revenue associated with the agricultural/forestry, processing/manufacturing and/or distribution of raw materials and goods. For example, opportunities might arise from:

- Increased efficient by reducing energy use during the production of raw materials and/or the manufacture of food, beverage and other goods;
- Reduced costs due to carbon payments by adopting practices or technology to reduce carbon footprint;
- Government of private financial incentives for adoption low impact agriculture/forestry.

Note for financial services sector companies:

• Consider opportunities associated with products and services such as green bonds, green infrastructure, green loans/mortgages, green insurance products, products and services ensuring resiliency, specialty climate-related risk advisory services and others.
• Note that if providing a potential financial impact figure, this figure should represent the financial impact on your business. For example, the potential revenues generated by green loans should be reported, as opposed to the potential size of the green loan book.
• You should consider providing a description of your opportunities by sector and/or geography, as appropriate.

Note for capital goods sector companies:

• In line with the TCFD’s recommendations, companies in this sector should consider opportunities for products or services that improve efficiency, reduce energy use and support closed-loop product solutions.

Explanation of terms

• Likelihood: The terms used to describe likelihood are taken from the Intergovernmental Panel on Climate Change’s (IPCC) 2013 reports. They are associated with probabilities, indicating the percentage likelihood of the event occurring. It is not necessary for respondents to have calculated probabilities for the risks they are considering, however they can give an indication as to the meaning of the terms:

- Virtually certain: 99–100% probability;
- Very likely: 90–100%;
- Likely: 66–100%;
- More likely than not: >50–100%;
- About as likely as not: 33–66%;
- Unlikely: 0–33%;
- Very unlikely: 0-10%;
- Exceptionally unlikely: 0–1%.

• Direct costs: Also known as “costs of goods or services sold”. These expenses can be attributed to the manufacture of a particular product or the provision of a particular service.
• Indirect (operating) costs: Refers to the essential expenses incurred in order to maintain the business including wages, rent, transport, energy (electricity, fuel, etc.), maintenance, and so on. These expenses cannot be attributed to the manufacture of a particular product or the provision of a particular service - they are standard costs that apply regardless of the volume of goods produced.
• Revenue: Income arising in the course of an entity’s ordinary activities (less returns, allowances and discounts) - before deducting costs for the goods/services sold and operating expenses to arrive at profit (based on the International Financial Reporting Standard)
• Access to capital: Cash flows from sources other than an organization’s sales and other revenues. It includes cash infusions from investors or securing lines of credit with banks and other lenders.

Example response