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Climate-related Risk Management and TCFD

GRI 103, 201-2; SASB IF-EU-110a.3 / SDG13

CEZ Group recognizes that climate change poses severe risks to business and society. We are committed to both climate change mitigation and adaptation. To operate sustainably, ethically, and transparently, we must address climate-related risks and opportunities within our strategy.

We aim to disclose governance, strategy, risk management, and metrics and targets in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We review the latest scientific evidence and evaluate climate scenarios to build our strategic resilience in the short, middle, and long terms. To address any blind spots, we cooperate with an independent third-party consultancy - S&P Global. This cooperation ensures a robust assessment of both physical and transition risks.

Climate risk analysis has a high priority. It will be completed and published in a separate TCFD report in the second half of 2022.

  • We established the ESG Office in July 2021.
  • We appointed Chief Sustainability Officer.
  • We established ESG Strategic Steering Committee and ESG Executive Steering Committee.
  • We assigned responsibility for climate-related and environmental risks at the board and executive levels.
  • We started an initiative to implement climate-related policies at the group level.
  • We became an official TCFD supporter in November 2021 and implemented projects to adhere to their recommendations.
  • We accelerated our strategy in May 2021 as VISION 2030— Clean Energy of Tomorrow. It defines a clear path for the next decade with measurable and public targets for decarbonization and other ESG areas.
  • We set ambitious targets to increase our renewable energy capacity.
  • We joined the Business Ambition for 1.5°C campaign of the Science Based Targets initiative (SBTi) and committed to net-zero science-based emissions reduction targets as follows: – Short- and mid-term targets (by 2030) are set in line with well below 2°C scenario. This target was approved and validated by SBTi in May 2022. – Long-term targets are aligned with 1.5°C scenario. We reevaluated our commitment to reaching carbon neutrality and moved the target date forward to 2040.
  • We are working on detailed scenario analyses with an independent third-party consultancy S&P Global.
  • We incorporated double materiality: The risk management department monitors (1) the impact of climate-related physical risks (i.e., floods, fires, earthquakes, landslides, lightning strikes, storms, and tornados) on our facilities; and (2) the effects of our business on the environment and the climate. The effects are categorized as follows: – Critical: material and irreversible impact on the environment and climate – High: material impact with a long-term return to the original state – Medium: impact with a mid-term return to the original state – Low: immaterial impact with a low-cost short-term return to the original state.
  • We implemented Environmental Management Systems (EMS) in selected facilities to minimize the risks and their effects. We continue to expand the list.
  • We recognize that climate-related risks are overarching, as they can trigger other types of risks (reputational, operational, financial). They can also jeopardize stakeholder relationships.
  • We monitor regulations related to climate at the national and EU level to adapt to transition risks.
  • We monitor non-governmental organizations and initiatives, as they tend to be ahead of regulation. This helps to predict trends and minimize transition risks.

Carbon emissions targets

  • We will reduce CO2emissions in line with the Paris Agreement well below 2°C by 2030
  • We will reduce the emission intensity from 0.38 t CO2e/MWh in 2019 to 0.26 t CO2e/MWh in 2025 and to 0.16 t CO2e/MWh in 2030
  • We will reduce the share of coal-fired electricity generation from 39% in 2019 to 25% by 2025 and to 12.5% by 2030
  • We will reach climate neutrality by 2040 in line with 1.5°C

Air pollution emissions targets

  • We will reduce NOx from 23 kt in 2019 to 13 kt in 2025 and 7 kt in 2030
  • We will reduce SO2 from 21 kt in 2019 to 6.5 kt in 2025 and 3 kt in 2030