Just Annual Report and Accounts 2021

JUST GROUP PLC Annual Report and Accounts 2021

SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK CONTINUED

Scenario analysis undertaken has adopted the ‘Net Zero 2050’ as the central scenario, with NDC and DNZ as the variant scenarios to test the key risk sensitivity. Transition and physical risks for these scenarios have been examined to better understand Just’s exposure to risks associated with broad areas such as transport and energy supply. Scenario pathways were projected for 50 years to allow transition risks to fully materialise and physical risks to begin to crystalise. The political momentum behind climate change initiatives gave the NDC scenario priority in the analysis. The DNZ scenario was chosen given Just’s exposure to residential properties through lifetime mortgages. The scenario analysis indicates that the Group’s primary exposure is to transition risk before the carbon net zero 2050 target, with a secondary exposure to physical risk over a more extended timescale. The DNZ scenario associated with higher transition risks is estimated to have the most onerous financial impact on Just (see “Transition risks to property due to climate change” section). However, the methods used to model the impact of climate change are expected to evolve over time, which may change this conclusion. Areas of climate risk have been categorised and mapped in accordance with their potential impact on Just and event horizon as shown in the chart below. These include transition risks as shown in the key, with risk drivers grouped into themes linked to market changes, political, regulatory and legal developments, and shareholder preferences. While the probability of specific risks differ across risk areas, risk management discussions are more focused on those with greater impact and/or shorter event horizon. EWIs and management actions related to these risks have been identified where appropriate.

CLIMATE RISK – CREDIT INVESTMENT PORTFOLIO Our climate risk investment strategy for the credit portfolio is based on the following key principles: • understand the risks to our investments posed by climate change; • take advantage of opportunities afforded by the transition to a lower carbon economy; • decarbonise our portfolio at a rate commensurate with the need to compete in the retirement marketplace. WHAT’S OUR APPROACH TO DECARBONISING OUR INVESTMENT PORTFOLIO? We have developed a Responsible Investment Framework, which is overseen by the Investment Committees and seeks to manage the risk exposure arising from climate change by: • increased investment in green assets, such as renewable energy, clean technology and green buildings; • limiting or excluding investment in fossil fuel-related and mining companies; • gradually divesting from the liquid corporate bonds with the poorest Climate Value-at-Risk (“CVaR”) scores, including some utility and energy companies over the next ten years; • seeking opportunities in investments that will benefit from the transition and physical effects of climate change; and • engaging directly with borrowers where possible to bring about positive climate outcomes. The rate of decarbonisation of our investment portfolio has to be aligned with the availability of investable stock and the cash flows needed to make income payments to our customers. Investments which are attractive from a climate change perspective are much in demand, leading to a suppression of yields.

CLIMATE RISK AREAS – INITIAL IMPACT ASSESSMENT

M and TS: Business and Industry

PR and L: Political

M and TS: Residential Property

High Impact

M and TS: Commercial Property

PR and L: Green Financing

MediumHigh Impact

PR and L: Climate Change Litigation

SP and R: Stakeholder Behaviours

M and TS: Food Production

Physical: Residential Property

Medium Low Impact

M and TS: Energy Supply

Five to ten years

Physical: Mortality

M and TS: Transport

Monitoring

Planning

Physical: Physical risks M and TS: Market and Transition Shifts PR and L: Political, regulatory and legal SP and R: Shareholder preference and reputation