Just Group plc | Annual Report and Accounts 2024
46
sustainability: TCFD continued
SUMMARY OF KEY RISKS Our climate risk assessment remains that our investment portfolio is the area with the largest potential exposure to climate-related transition and physical risks. As we continue to develop our process some new key risks have been identified in the reporting period, which can be seen in the table below and are covered in more detail within the Further analysis of key risks section on page 48. The table below shows the key risks that have been identified and whether there have been any changes in risk exposure for those identified in the previous reporting period. Additionally, the key risks are categorised as either a physical or transition risk, or both. Physical risks are those related to the physical effects of climate change and transition risks are those relating to an economy-wide transition to a low-carbon economy. We treat the timescale as to when we could expect the risk to become a material concern to the business.
Risk
Impact
Type
Timescale
Mitigation
2024 change
More stringent energy performance standards for commercial and residential property
Property values may fall below the level of the loan leading to losses
Transition
5 – 10 years
Fund EPC ratings for new LTM customers to improve the energy performance data we hold and help borrowers to improve the energy efficiency of their property. We offer discounted mortgage rates to customers with more energy efficient homes. Potential government assistance for property owners’ energy improvement costs. Consider energy performance ratings when lending on LTMs. Structure commercial loans to include key performance indicators for energy efficiency and other climate-related factors. Potential government action to protect populated areas. Review technical and environmental due diligence reports to avoid vulnerable infrastructure and income producing real estate.
No change to risk identified
Increased impacts and threats from flooding and coastal erosion and furthermore that particular geographical areas become uninsurable or uninvestable. Green investments become difficult to source or produce lower yields
For infrastructure and income producing real estate, the borrower’s ability to service and repay the loan could be affected by increased costs due to physical risks Unable to meet the objectives outlined under our Responsible Investment Framework while meeting investment return needs Income should continue but with increased risk of default if issuers cannot refinance at an affordable price Reputational damage from failing
Physical
<5 years
No change to risk identified
Transition
<5 years
Increase the range of sources of origination for potential investments. Availability of green investments expected to continue to increase due to government focus.
No change to risk identified
Credit investments seen as exposed to climate risks lose market value
Transition and physical
10+ years
Reduce and avoid such investments in line with the Responsible Investment Framework.
No change to risk identified
Targets for reducing emissions are missed by Just
Transition
<5 years
Commit and align with initiatives required to reduce emissions. Monitor progress. Pursue Responsible Investment Framework and align with relevant external initiatives/guidance. Enhance LTM proposition strategy to support customers with energy efficiency improvements. Engage with our supply chain to reduce their emissions.
Marginal increase to risk identified
to meet stated commitments
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