APA recognises that climate change impacts the natural environment and community resilience, shifts domestic and export markets, and can impact our national reputation and policy settings. We recognise that a low carbon future may create new opportunities for our diversified business mix with investments in Australian pipelines, gas storage facilities, gas-fired and renewable energy generation.
The Australian Energy Market
Australia is undergoing an unprecedented transformation across its energy markets, with the rapid growth in renewable power generation and gas exportation. Natural gas plays an important role in providing secure and reliable electricity by supporting the integration of renewable energy with flexible, peaking power. This flexible gas supply was identified as playing an essential role in providing secure and reliable electricity in the 2017 Finkel review. As such, we see the growth in gas power as playing an important role in the evolution of Australia’s national energy market.
Natural gas is also recognised by the International Energy Agency for its potential to decarbonise the global energy mix by displacing more emissions intensive energy fuels, such as coal and oil. When used in power generation, natural gas can be 50% less carbon intensive than coal. Going forward, Australia’s export of liquefied natural gas can significantly contribute to replacing coal-fired power generation in Asian economies, which will be critical for the success of the Paris Agreement. By expanding the global access to gas, the global transition to a lower carbon economy can be both feasible and affordable and provide significant economic benefit to Australia.
As Australian and global communities move to de-carbonise their economies, APA is working to understand and anticipate the long-term implications for Australia’s energy industry and our business. Importantly, any transition to a lower carbon future should look to avoid unaffordable increases in energy costs and declining energy reliability. Our continued investment in natural gas assets plays an important role in providing secure and reliable electricity by supporting the integration of renewable energy with flexible, peaking power.
Over the past decade, APA has also supported and invested over $750 million in renewable energy projects around Australia, providing 490 megawatts of capacity. We are also currently evaluating emerging technologies in green natural gas, such as the development of renewable methane. In the future, the integration of renewable fuel supplies like renewable methane and hydrogen into existing pipeline distribution systems could make a significant contribution to reducing the carbon content of energy used to heat homes, buildings and fuel transportation.
APA’s adoption of TCFD
APA has adopted the recommendations of the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures (TCFD) to help customers, investors and other stakeholders understand APA’s approach to managing climate-related risks and opportunities.
The TCFD was created to “develop voluntary, consistent climate-related financial risk disclosures for providing information to investors, lenders, insurers, and other stakeholders” and is made up of four core elements:
Governance – disclose the organisation’s governance around climate-related risks and opportunities.
Strategy – disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s business, strategy and financial planning.
Risk management – disclose the processes used by the organisation to identify, assess, and manage climate related risks.
Metrics and targets – disclose metrics and targets used to assess and manage relevant climate related risks and opportunities.
APA has conducted risk assessments on each of its assets to understand better its exposure to climate risk. Significant work is currently underway to develop strategies and metrics to understand and manage those risks.
APA’s progress on TCFD’s four core elements
APA’s Board is responsible for reviewing and considering the potential impacts of climate-related risks and opportunities on APA’s strategy and business.
APA’s Executive team is responsible for the implementation of APA’s strategy, execution of strategies and plans to manage climate related risks and opportunities.
APA is currently developing a new enterprise-wide climate strategy and, to inform our future planning, we use three divergent, climate driven scenarios.
Our analysis was conducted using the IEA data under the following scenarios:
The Board’s Audit and Risk Management Committee has oversight of the climate change-related transition and physical risks as part of its oversight of APA’s risk management system. Climate change is also embedded in APA’s integrated risk management process, which is regularly reviewed by the Executive Risk Management Committee.
Metrics and Targets
APA reports on metrics that are relevant to our sustainability performance, including greenhouse gas emissions, fugitive emissions and investment in low carbon technologies. We have plans to improve our monitoring, measurement and management of these metrics, especially with respect to our emissions.
Climate Change Governance
APA recognises that as an owner and operator of energy infrastructure assets in Australia we have a responsibility to play a role in addressing the challenge of climate change. This is recognised in our Board Charter and complementing governance structures and has been incorporated into our enterprise risk management framework and processes. Continuing to grow our maturity through use of the TCFD recommendations will also assist our strategic management of this issue.
Responsibility for reviewing and considering the potential impacts of climate-related risks and opportunities on APA’s strategy and business lies with APA’s Board, which is supported by the Audit and Risk Management Committee and the Executive Risk Management Committee.
Identification, assessment and management of transition and physical risks driven by climate change is based on APA’s risk management practices and processes, which are aligned with the relevant International Standard and consistent with the ASX Corporate Governance Principles and Recommendations. APA’s Audit and Risk Management Committee Charter includes a specific responsibility to review and approve the risk management system, including reviewing and evaluating the adequacy of risk management strategies to manage material risks for APA Group (both financial and non-financial).
Strategic planning for climate impacts
The TCFD recommends the use of divergent climate-driven scenarios to assess both transition and physical risks of climate change that challenge and significantly alter the basis of business as usual assumptions. To support strategic discussions, during FY2019, APA engaged external experts to develop three climate related scenarios to identify climate related risks and opportunities in the next 10 years.
APA’s business is expected to be resilient to climate-related risks for at least the next 10 years
APA’s scenario analysis reaffirmed our view that as a diversified energy infrastructure company with a revenue weighted average contract tenor of in excess of 12 years, APA is expected to be resilient to climate related transition and physical impacts for at least the next 10 years. We continue to actively monitor and assess emerging risks and opportunities that are related to climate change.
For further details on these scenarios and the risks and impacts identified through this analysis please see APA’s 2019 Sustainability Report.
Key metrics and targets
TCFD recommends that organisations describe their key climate-related metrics and targets, such as those related to greenhouse gas emissions, water usage and energy usage.
APA is committed to providing investors the necessary metrics by which to assess our management of climate related impacts. In this report you will find:
- Reporting of greenhouse gas emissions under Australia’s comprehensive National Greenhouse and Energy Reporting scheme (NGERs).
- Capital and operational investment into renewable power generation
In the future, we will continue to gather and develop more reliable and insightful data, metrics and targets by developing a carbon management work plan that aligns with our corporate growth strategy.