Climate change and the long-term outlook for the Group’s business
Progressive climate change and stopping it is one of the most important challenges in the world today. Climate change is a complex process affecting every area of life. It can also directly affect business operations, including the construction industry.
Prospects for the future
In its latest report, the IPCC indicates that climate change is already affecting every inhabited region around the world, with human influence contributing to many of the observed changes in weather and climate extremes.1
In the most optimistic scenario presented in the IPCC report (SSP1-1.9), which assumes that CO2 concentrations peak and fall during the 21st century, land and oceans begin to absorb less carbon dioxide in response to falling CO2 concentrations in the atmosphere. This scenario assumes the achievement of global zero-carbon by 2050, and will bring global temperature levels to a standstill of 1.5°C relative to pre-industrial times. The implementation of this scenario involves regulatory pressure to, for example, increase the price of emission allowances and the need to implement ambitious solutions to reduce greenhouse gas emissions by business.
In opposition to the optimistic scenario are business-as-usual scenarios, in which the global community does not take sufficient steps to reduce its negative impact on climate. Realisation of pessimistic IPCC scenarios (SSP3-7.0 and SSP5-8.5), in which maximum increase of average temperatures fluctuates around 7-8.5°C in XXI century, may mean materialisation of many threats related to rising temperatures. For Central and Eastern Europe this could mean, for example, significant difficulties in access to clean water, losses in biodiversity and a significant increase in the frequency of sudden events such as fires, floods or severe storms. Recognizing a significant potential impact of climate change on the operations of the Budimex Group, the Management Board decided to conduct, among others, a Climate Risk Analysis.
Analysis of climate risks in the Budimex Group
In 2021, climate change risks were identified and further analysed in the Budimex Group. As part of the risks, the opportunities and threats arising from them were identified and assessed.
The study was carried out according to the AXIS© methodology through an external consulting firm. The aim of the study was to identify short-, medium- and long-term physical and transformational risks related to climate change and sustainability issues. The categorisation of risks was done according to TCFD (Task Force on Climate-Related Disclosure) guidelines and on definitions from ISO 3100.
The study was conducted in three stages:
- analysis of significant climate risks in the comparison group,
- questionnaire survey of an expert group selected in the company,
- calculation of results and categorisation of identified risks, threats and opportunities.
The study included 30 risks divided into 8 groups. Within the risks, 26 potential opportunities and 37 potential threats were identified. According to the AXIS© methodology, risks are assessed on the basis of three dimensions: probability of occurrence, magnitude of impact and time horizon. Probability represents the possibility that a given hazard/opportunity could occur with a given impact. Impact represents the significance of the effects of a given threat/opportunity if it occurs. The time horizon is predetermined by the validity date of the materiality assessment. The horizon was assessed on a point scale containing five time frames (2021-2022, 2023-2025, 2025-2030, 2030-2040, 2040-2050).
When time horizons are referred to in the survey results, they are defined as follows:
On the basis of the rating assigned to the opportunities and threats, a classification into one of the groups is made. Threats and opportunities identified as significant are placed in Group S (Seizure). Opportunities and threats assigned to Group I (Intensification) and Group A (Amplification) are at this stage subject to monitoring and only in selected cases to management. Opportunities and threats assigned to Group X (eXclusion) are subject to monitoring in selected cases.
In the study described above, the following groups were classified:
Group A (Amplification) – high probability and low severity:
- 0 opportunities
- 1 threat
Group X (eXclusion) – low probability and low severity:
- 14 opportunities
- 26 threats
Group I (Intensification) – high severity and low probability:
- 7 opportunities
- 4 threat
Group S (Seizure) – high probability and high severity:
- 5 opportunities
- 6 threat
In the table below we present the risks classified as significant in the analysis process:
|Risk||Threat / opportunity||Time Horizon||Management|
|Long-term physical risks|
|Risk of rising average temperatures||Threat of the impact of rising average temperatures on contract working conditions||Medium – long||GBudimex Group cares about ensuring compliance with health and safety conditions on construction sites, including proper adjustment of the planned works to the prevailing weather conditions so that they do not pose any threat to its own employees and subcontractors.|
|Policy and regulatory/legislative risks|
|Risk of introducing taxes, tariffs or other carbon levies||Threat of increased costs due to introduction of tax, tariff or other carbon charges||Medium||The Budimex Group is actively increasing the mix of low-carbon and zero-emission energy and works on green mobility. This topic is a fixed point in strategic plans.|
|Risk of changes in legislation and energy efficiency standards||Threat of stricter legislation on energy efficiency of buildings||Short||Risk management is implemented primarily through planning to increase the share of certified raw materials and products for Budimex Group projects and LEED and BREEAM certification.|
|Risk of changes in legislation and energy efficiency standards||Opportunity to reduce emissions and energyconsumption by increasing the energy efficiency of constructed buildings||Medium||Risk management is implemented primarily through planning to increase the share of certified raw materials and products for Budimex Group projects and LEED and BREEAM certification.|
|Risk of extension of obligations to calculate greenhouse gas emissions||The threat of having to calculate and report the carbon footprint of buildings||Medium||Budimex Group monitors Scope 1 and 2 greenhouse gas emissions calculated in accordance with the GHG Protocol methodology.|
|Risk of extension of obligations to calculate greenhouse gas emissions||Opportunity to prepare for carbon footprint reporting obligations more efficiently than competitors||Short – medium||The Budimex Group plans to expand the calculation of GHG emissions to include Scope 3 elements.|
|Risks associated with a circular economy||Opportunity to offer waste management services in a manner consistent with the principles of the circular economy||Medium – long||Opportunities may include management through research and development (in-house and in cooperation with a strategic investor) to research, implement and apply components and technologies in line with the principles of the circular economy.|
|Risk of emissions of energy sources||Threat of rising energy prices as a result of a high-carbon electricity mix in Poland or in other countries||Short – medium||The threat is managed by increasing the share of energy from emission-free sources in the mix of energy purchased by Budimex Group entities.|
|Risk of increase in prices of raw materials, consumables and services||Risk of increased costs of raw materials, supplies and services due to other climate risks||Medium||The answer to the threat is to plan access to materials with low environmental cost or to develop them independently.|
|Risk of making access to finance contingent on addressing the climate crisis||Opportunity for facilitated access to or cheaper financing for meeting climate crisis criteria||Long||The Budimex Group plans to intensify its efforts to maintain and improve its ESG ratings.|
|Risks of cooperation with suppliers||Opportunity for knowledge and competence transfer with the support of a strategic investor||Short – Medium||Budimex Group actively uses the good practices and strategic approach developed by the Ferrovial Group. The Budimex Group actively cooperates with its suppliers and subcontractors, sharing best practices with them in ESG areas.|
1. Intergovernmental Panel on Climate Change, Climate Change 2021The Physical Science Basis Summary for Policymakers, Szwajcaria, 2021, s.10