Just Annual Report and Accounts 2024

Just Group plc | Annual Report and Accounts 2024

sustainability: TCFD continued

The introduction of minimum energy standards or retrofitting technologies could impact the value of properties which fail to meet these standards. Significant costs associated with retrofitting or repairing properties could impact the ability of commercial property owners to repay their debts, posing a risk to the company’s financial stability. Similarly for residential property owners, without central government funding of private-sector options, a large number of property owners could struggle to fund the needed improvements. One consideration made was that even in the ideal scenario of Net Zero 2050, where physical and transition risks remain the lowest, we should still expect to see a risk emerge around demand from property owners for retrofitting technologies. In all scenarios, but especially those with a high physical risk, flooding poses a significant risk to existing infrastructure and income producing real estate. In addition, coastal erosion and subsidence risks should be considered to increase in all scenarios, with flooding the physical risk of most concern. With scenarios that present high transition risks, the demographics of a particular area could amplify this risk. For example, minimum EPC standards may disproportionally affect areas that have a high concentration of property owners who live below the poverty line (who may typically have less available funds in which to pay for energy improvements), which produces a concentration risk of properties falling behind such standards. Without central government or local authority financial assistance, this could create a significant concentration of stranded or significantly devalued assets in particular geographic areas. Particularly in high physical risk scenarios, with more properties being at risk of flooding, there could be a risk that increasing amounts of our assets become stranded. Interlinked with risks around flooding and stranded assets, the concept of compulsory purchase orders was discussed. This would look similar to those made for projects such as High Speed (rail) 2 but for flood alleviation projects to protect towns or other important national infrastructure. It was identified that for all scenarios, whether transition or physical risks were the prevalent risk, there could materialise a risk that particular geographical areas (or postal code areas) become uninsurable or uninvestable. This risk is already materialising for some areas of the UK affected by extreme coastal erosion or repeated flooding. METRICS AND TARGETS The metrics below are used for our Investment Portfolio: Metric Description Calculation Methodology

A risk metric which is an estimation of scenario-specific valuation impact for transition and physical impacts, at both an issuer and portfolio level. A risk metric derived from analysing the potential reduction in property values to derive a value at risk.

The CVaR for the in-scope¹ credit portfolio is provided for three scenarios: Delayed Transition, Net Zero 2050 and Current Policies. Each scenario is presented as an aggregate of physical CVaR and transition CVaR and is calculated by normalising the aggregate of the physical CVaR and transition CVaR by the market value (GBP) of the portfolio. PVaR is the estimated reduction in property value due to climate change as modelled using RCP8.5 in 2080. We apply the climate scenario to the current LTM portfolio and property values in 2024, with no assumed change in portfolio composition. This is a simplification as we expect the geographic concentration of the portfolio will change as climate risk underwriting changes the composition of new business over time. Reduction in property value is calculated for increased risks of flooding, subsidence and coastal erosion. The carbon footprint for the in-scope¹ investment portfolio includes the credit portfolio and the LTM portfolio. • Carbon footprint of credit portfolio: calculated by normalising the financed emissions (Scope 1, 2 and 3) of our credit portfolio by the sum of the nominal USD dollars invested. • Carbon footprint of the LTM portfolio is the ratio of total financed carbon emissions to the total outstanding loan expressed in USD millions. The carbon footprint for each property in the LTM portfolio is determined by using data from the EPC, where one exists and is active, using shared building data or from modelling. The carbon footprint is used specifically to monitor our progress towards achieving our net zero commitments. The ITR for the in-scope¹ investment portfolio includes the credit portfolio. • ITR of the credit portfolio: a weighted average of the temperature alignment of the investments in our credit portfolio, where available, normalised by the sum of the nominal USD dollars invested. We do not have an ITR for the LTM portfolio. The ITR provides a forward-looking measure to understand the temperature alignment of individual issuers.

CLIMATE VALUE-AT-RISK (“cvar”)

property VALUE-AT-RISK (“Pvar”)

An impact metric that gives the financed emissions (Scope 1, 2 and 3) at an issuer and portfolio level. This metric represents performance against our net zero targets.

CARBON FOOTPRINT

We use ITR as a forward-looking metric for our credit portfolio, expressed in degrees celsius, which can show the temperature alignment of the issuers we invest in and the portfolio as a whole. For LTMs we monitor the EPC ratings of the portfolio using actual and modelled ratings to monitor our exposure to any introduction of minimum EPC standards.

IMPLIED TEMPERATURE RISE (“ITR”)

1 Our methodology excludes funds or positions where data is not available or position sizes are immaterial (<5% of the in-scope credit portfolio) and reinsurance assets, cash positions, derivatives and liquidity funds which are not relevant to this analysis.