44 | Just Group PLC | Annual Report and Accounts 2023
SUSTAINABILITY STRATEGY: TCFD DISCLOSURE FRAMEWORK continued
The nature of the key risks have not changed in the reporting period but some areas have evolved as we move closer to our net zero target in the absence of government policy change. The table below shows key risks and whether there have been any changes in risk exposure:
Summary of key risks Our climate risk assessment remains that our investment portfolios (Credit portfolio and LTM Portfolio) are the areas with the largest potential exposure to climate-related transition and physical risks.
Risk
Impact
Type
Timescale
Mitigation
2023 change/update
No change to risk identified
More stringent energy performance standards – commercial and residential property
Residential 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. Potential government assistance for property owners’ energy improvement costs. Seek ways of helping lifetime mortgage borrowers to improve energy performance standards. 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. Vary lending policy to avoid vulnerable residential and commercial properties.
Increased impacts and threats from flooding and coastal erosion
For residential and commercial mortgages, 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 out 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 to meet stated commitments Reputational damage due to failure to maintain commitments
Physical
10 years+
No change to risk identified
Green investments become difficult to source or produce lower yields
Transition
<5years
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
<15 years
Reduce and avoid such investments in line with the Responsible Investment Framework.
No change to risk identified
Targets for reduced Scope 1 and 2 emissions are missed by Just Targets for reduced Scope 3 emissions are missed by Just
Transition
<5years
Commit and align with initiatives required to reduce emissions. Monitor progress closely. Pursue Responsible Investment Framework and align with relevant external initiatives/guidance. Enhance LTM proposition strategy to support customers with energy efficiency improvements. Engage with supply chain to reduce emissions. Monitor progress closely.
No change to risk identified
No change to risk identified
Transition
5 – 10 years
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