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CEZ Group

Climate-related Risk Management and TCFD

GRI 3-3, 201-2; SASB IF-EU-110a.3 / SDG 13

CEZ Group recognizes that climate change poses severe risks to business and society. In general, climate risk exposure is medium to high in the energy industry. Our strategy centers around reducing our company’s risk exposure and strengthening our management processes.  We are working diligently to responsibly close gaps associated with climate-related risk.

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. To avoid any blind spots, we cooperated with an independent third-party consultancy – S&P Global. This cooperation ensured a robust assessment of both physical and transition risks.

We incorporate 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 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.

We have published a separate TCFD report. The report is based on the TCFD recommendations and follows the recommended structure. We disclose Governance, Strategy, Risk Management, and Metrics and Targets based on the TCFD guidelines. In line with best practice, we use scenario analysis and results of state-of-the-art climate modelling based on science and available scientific consensus about climate change. We review the latest scientific evidence and evaluate climate scenarios to build our strategic resilience in the short, middle, and long terms.

TCFD and Climate-related Milestones:

2004

  • CEZ Group introduces CO2 emissions reporting in the Annual Report.

2007

  • CEZ Group publishes the first Corporate Social Responsibility Report with a chapter dedicated to climate change.

2015

  • CEZ Group makes a commitment to generate electricity without CO2 emissions by 2050.

2017

  • CEZ Group integrates climate change assessment as part of the Environmental Impact Assessment (EIA) documentation for new large-scale projects.

2018

  • CEZ Group generates more than a half of electricity from zero-emission sources.

2020

  • Permanent phase-out of the Prunéřov I coal-fired power plant (440 MW).
  • CEZ Group reports all GHG emissions from Scopes 1, 2 and 3 in the Sustainability Report.

2021

  • CEZ Group adopts accelerated decarbonization strategy VISION 2030—Clean Energy of Tomorrow and makes ESG an integral part of everyday business.
  • CEZ Group sets ambitious targets to increase our renewable energy capacity.
  • CEZ Group joins the Business Ambition for 1.5°C campaign.
  • CEZ Group establishes a dedicated ESG Office run by the Chief Sustainability Officer in July and establishes ESG Strategic Steering Committee and ESG Executive Steering Committee.
  • CEZ Group launches a system of ESG education for all Members of the Board and selected top management and links ESG key performance indicators to remuneration.
  • CEZ Group assigns responsibility for climate-related risks at the Board and executive levels.
  • CEZ Group becomes an official TCFD supporter in November.
  • The coal site Energotrans III (500 MW) in Mělník closes its production.

2022

  • CEZ Group issues first sustainability-linked bonds with commitment to reach GHG emission intensity target 0.26 tCO2e/MWh in 2025 and 0.16 tCO2e/MWh in 2030.
  • The SBTi validates our near-term 2030 target in line with well below 2°C.
  • The Sustainability Report includes a dedicated chapter for climate-related disclosures aligned with the TCFD.
  • CEZ Group and the Ministry of the Environment sign a Memorandum on Cooperation in Climate Protection, the Energy Sector, and Certain Related Areas.
  • CEZ Group commits to net-zero climate neutrality by 2040 and submits this target for the SBTi validation. Validation date is set for June 2023.

2023

  • CEZ Group publishes a detailed stand-alone TCFD Report.
  • CEZ Group launches a ESG Climate-related Risk Management Initiative to develop this agenda further.
  • 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 CO2e emissions 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