Climate Risk Management and TCFD
Risks related to climate change are the risks of any negative impact resulting from climate change. The assessment of these risks includes:
- assessment and management of physical climate-related risks (acute and chronic),
- assessment and management of transition risks (legislative, market, reputational, and operational).
When constructing new sources, climate-related risks are individually assessed within the framework of the environmental impact assessment (EIA), which is set out in Directive 2011/92/EU (as amended by 2014/52/EU); (Act No. 100/2001 Coll., on Environmental Impact Assessment).
The suitability and resilience of nuclear power plants to environmental and climate-related risks are regularly assessed as part of updating operational safety reports. Assessments follow the requirements set out in Decree 378/2016 Coll., IAEA SSR-1, WENRA Safety Reference Levels.
The analyses were prepared according to different climate scenarios as defined in the 2017 International Energy Agency (IEA) report. The analyses were performed in two time horizons:
- according to the service life of existing facilities (outlook to 2040 and 2050), covering activities in all segments of CEZ Group, and
- for key locations with long-term potential for use until 2100.
The overall assumptions regarding climate scenarios are consistent with the current scientific models and procedures. For the purposes of climate and exposure modeling at individual locations, a third-party solution has been used, utilizing a high level of scale and granularity.
An analysis of physical risks assessment and management was conducted to assess the level of exposure and sensitivity of our assets and business activities to these threats. Physical risks arise from specific hazards such as storms, floods, fires, or heat waves. Chronic physical risks result from longer-term climate changes, such as temperature changes and their impacts on rising sea levels or reduced availability of water or other resources.
In 2022, CEZ Group analyzed its most important energy facilities, covering 98% of Scope 1 and 2 emissions, in three climate change scenarios RCP2.6, RCP4.5, and RCP8.5 on the main types of physical risks. In 2023 to 2025, the portfolio of assessed locations was expanded to more than 1,600 locations, and an assessment was carried out according to the RCP4.5 scenario for the 2040 horizon and according to the RCP4.5 and RCP8.5 scenarios for the 2050 horizon. The assessment was conducted using a regional climate-related risk model and scoring of all risks defined in Appendix A of Commission Delegated Regulation (EU) 2021/2139 against the above scenarios. In addition, CEZ Group assessed the impact of climate change in variant scenarios on the generation of photovoltaic and wind power plants in existing locations and at installation companies within CEZ Group. This effect on the average reduction in generation in the assessed horizon of 2023–2050 is considered negligible or low.
The climate-related risks were reviewed not only from the perspective of assessing the exposure of locations, but also validated with data providers in order to verify the sensitivity of technologies and implement adaptation measures based on the results of data collection for CEZ Group companies. Conclusions and findings from the climate-related risk assessment are forwarded to the Risk Management Department, Business Continuity Management Department, and other departments according to internal guidelines.
When analyzing the results of the RCP4.5 and RCP8.5 scenarios for the horizons 2040 and 2050, it was found that the difference between the results of the RCP4.5 and RCP8.5 scenarios for CEZ Group locations was minor. This confirmed the 2022 findings, on the basis of which subsequent analyses were only carried out for selected scenarios. The differences between the RCP4.5 and RCP8.5 scenarios are present in the parameters “Changing precipitation and its types”, whose values increase significantly in the RCP8.5 scenario, and “Cold waves/frost”, where the values were lower in comparison. None of these risks identified a material impact on the functioning of the locations. The regional representation of the locations with identified increased risk and the scope of risk management follows the locations of operation of CEZ Group, i.e., primarily in the Czech Republic, and the activities carried out with a high level of risk management associated with distribution activities.
The assessment result is the identification of the following material climate-related risks:
- cold waves,
- changing temperatures,
- changing precipitation.
There are appropriate adaptation measures for the risks of cold waves, changing temperatures, and changing precipitation. Flood risk is one of the risks that are more difficult to adapt to.
| Representation of Location with Identified Material Climate-Related Risks (number of locations) | 2040 | 2050 |
|---|---|---|
| Locations without risk or with low risk | 1 317 | 1 086 |
| Locations with identified and managed risk | 273 | 497 |
| Locations with identified but unmanaged risk | 15 | 22 |
Based on the parameters of the material risks in the DMA process, physical climate-related risks are not assessed as material risks for CEZ Group. However, the risks will continue to be monitored, assessed, and periodically reviewed.
CEZ Group‘s strategy systematically considers transition risks. In response to these risks, actions and strategic steps are continuously implemented with the aim of minimizing their negative impacts on the value of CEZ Group and at the same time making the most of the new opportunities that these trends bring. The impacts and risks of climate change, as well as a number of other factors, are evaluated using various estimates and accounting assumptions, as required under applicable legislation or adopted accounting standards.
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 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.
CEZ Group issues first sustainability–linked bonds with commitment to reach GHG emission intensity target 0.26 tCO2e/MWh in 2025.
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 issues a statement of eligibility of its activities according to the EU taxonomy.
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.
CEZ Group publishes a detailed stand–alone TCFD Report and has assessed the risks of the most important power plants according to alternative emission scenarios.
CEZ Group launches an ESG Climate–related Risk Management Initiative to develop this agenda further.
CEZ Group issues a statement of compliance of its activities according to the EU taxonomy.
In autumn 2023, CEZ Group received validation of the decarbonization targets for 2033 and 2040 (achieving climate neutrality) from SBTi.
CEZ Group completed the demolition of the Prunéřov coal site.
CEZ Group assessed a portfolio of more than 1,000 locations under the RCP4.5 scenario and the 2040 horizon.
CEZ Group assessed a portfolio of more than 1,500 sites (both operational and projected) across sectors and economic activities under the RCP4.5 and RCP8.5 scenarios for 2050 using the methodologies and procedures used in previous assessments to ensure comparability of results.