Strategic risks and opportunities connected with climate change

The identification and management of risks connected with climate change

Climate change and the energy transition will impact Group activities in a variety of ways.
In order to identify the main types of risk and opportunity and their impact on the business associated with them in a structured manner consistent with the TCFD, we have adopted a framework that explicitly represents the main  relationships between scenario variables and types of risk and opportunity, specifying the strategic and operational approaches to managing them, comprising mitigation and adaptation measures. There are two main macro-categories of risks/opportunities: those connected with developments in physical variables and those linked to the evolution of the transition scenarios. Physical risks are divided in turn between acute (i.e. extreme events) and chronic, with the former linked to extremely intense meteorological conditions and the latter to more gradual but structural changes in climate conditions.
Extreme events expose the Group to the risk of prolonged unavailability of assets and infrastructure, the cost of restoring service, customer disruptions and so on. Chronic changes in climate conditions expose the Group to other risks or opportunities: for example, structural changes in temperature could cause changes in electricity demand and have an  impact on output, while alterations in rainfall or wind conditions could impact the Group’s business by increasing or decreasing potential electricity generation.
The energy transition towards a more sustainable model characterized by a gradual reduction of CO2 emissions has risks and opportunities connected both with changes in the regulatory and legal context and trends in technology development, electrification and the consequent market developments. Consistent with the climate and transition scenarios used by Enel to determine risks and opportunities, the main transition- related phenomena are beginning to emerge in relation to customer behavior, industrial strategies being adopted in all economic sectors and regulatory policies. Between 2020 and 2030, the transition trends will become visible in response to the evolution of the context: the Enel Group has decided to facilitate the transition, and is therefore ready to seize all the opportunities that may arise from an acceleration in that transition.  As discussed previously, our strategic choices, which are already strongly oriented towards the energy transition, to which we have dedicated more than 90% of investments, enable us to incorporate risk mitigation and opportunity maximization “by design”, adopting a positioning that takes account of the medium and long-term phenomena we have identified. The strategic choices are accompanied by the operating best practices adopted by the Group.

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