Task Force on Climate-related Financial Disclosures

 

We believe that businesses should communicate the risks and opportunities that climate change brings and are committed to the aims of the Task Force on Climate-related Financial Disclosures (TCFD).

Since our initial consideration of the framework in our last Annual Report, we have developed our adoption of the TCFD’s recommendations in support of the transition to a lower-carbon economy and the benefit of investor decision making.

 

Governance

Board oversight and consideration of risk and opportunities

The Board are informed about climate-related issues that may affect the Group’s ability to deliver on its stated strategic objectives. The Board is responsible for reviewing and discussing emerging best practices trends and key issues related to ESG matters and overseeing the Group’s strategy and governance of ESG matters. The Board takes responsibility for overseeing the effectiveness of risk management and internal control systems and the principal and emerging risks facing the business.

Climate change considerations are embedded into the Group’s principal risks – market, legal and compliance, and access to capital – and therefore are assessed as such by the Audit and Risk Committee and the Board.

The Board consider climate-related issues in the reviewing of and guidance for the following areas:

While we have not yet set goals and targets, the Board has approved the activation of a number of workstreams including Net Zero strategy definition, embedding the recommendations of the TCFD into the Group’s risk management and reporting, and building internal capacity to manage and/or coordinate all climate risk and opportunity initiatives.

 

Management’s assessment and management of risks and opportunities

Ultimate responsibility for climate change considerations is ascribed to the CEO, while day-to-day management of these considerations sits with the executive committee. We are in the process of recruiting a Head of ESG to lead on all climate-related matters.

Management is informed of climate-related issues through a plethora of sources including market intelligence, legislative and regulatory reviews, trade association participation, investor engagement, customer engagement, supplier engagement, subject matter expertise, stakeholder feedback and consultant engagement. Management is able to monitor climate-related issues through the Group’s risk and governance frameworks as well as periodic reporting.

 

Strategy

Identified risk and opportunities

The Group is considering the short-, medium- and long-term time horizons for the impact of climate change, though as yet the Board and management of Redde Northgate have not defined these time horizons.

The Group has identified three key climate-related issues that have the potential to have a material financial impact on the business; legislative change, which could accelerate the EV transition timeline; access and provision of fit-for-purpose EVs to be able to deliver to our customers; and the access and provision of charging infrastructure to support the EV transition. These issues align with those identified by the British Vehicle Rental & Leasing Association (BVRLA); our Fleet Director chairs the Commercial Vehicle Committee of the BVRLA, ensuring we are up to date with industry developments.

To identify our key ESG risks and opportunities, we undertook a materiality assessment earlier this year. We conducted a quantitative assessment by surveying over 140 stakeholders, both internal and external to the business, to understand which issues they felt were most tangible to the business. Concurrently, we interviewed subject matter experts from across the Group to gain a qualitative insight. The results of this assessment reinforced the risks and opportunities most financially material to the business and focussed the future strategy and reporting.

We have engaged a third-party consultant to undertake a scenario analysis for the Group. This will assess the overall resilience of the Group under different possible scenarios. We will share more details once this analysis has been completed.

Risks and opportunities to the business are considered by both geography and business segment. The legislative and market variation between the UK&I and Spain are of key consideration for the EV transition, particularly legislative targets for Net Zero and the infrastructure to support EV charging. The greater solar potential in Spain is also a key consideration. The different business segments within the Group also influence the relevant risks and opportunities; fleet providers can support customers wanting to transition to EV, while our insurance and accident recovery offerings support customers impacted by the physical impacts of climate change.

 

Impact upon strategy and financial planning

Climate-related risks and opportunities impact upon the business and strategy in the following areas:

Scenario analysis

We have engaged a third-party to undertake a scenario analysis for the Group. We have considered the aforementioned material climate risks and a qualitative process has begun, as has the consideration for embedding this analysis on a periodic basis.

Risk Management

Climate-related risk considerations are embedded into the Group’s principal risks; market, legal and compliance, and access to capital. The Executive Committee thereby incorporates climate change risks into its assessment of the other principal risks to the business. These risks are form part of our Group Risk Register and are shared directly with the Board. Existing and emerging regulatory requirements related to climate change are considered a risk to the Group and are therefore monitored closely as part of the legal and compliance risk.

In conducting a materiality assessment at the start of 2022, the Group was able to determine the most material risks to the business. As well as surveying internal and external stakeholders, in-depth interviews were conducted with subject matter experts from across the Group to establish the most material risks and opportunities in their area of the business. This process provided understanding of the materiality of climate-related physical and transition risks upon the business. The Group is working with a third-party to understand how to best manage or mitigate opportunities or risks presented to the business.

The Board has responsibility for the Company’s overall approach to risk management and internal control which includes ensuring the design and implementation of appropriate risk management and internal control systems. This comprises assessing the effectiveness of these systems, which includes regular review to ensure that the Group is identifying, considering and as far as practicable mitigating the risks for the business.

Metrics and targets

As a Group we have not yet set goals and targets. However, there are several workstreams in train which will support the Group’s ability to define its objectives, including Net Zero strategy definition, embedding the recommendations of the TCFD more precisely into the Group’s risk management and reporting, and building internal capacity to manage and/or coordinate all climate risk and opportunity initiatives. We are planning to announce Net Zero strategy with the publication of our maiden sustainability report in July 2022.