climate scenarios for improved strategic and financial risk · pdf fileclimate scenarios for...

CLIMATE SCENARIOS FOR IMPROVED STRATEGIC AND

FINANCIAL RISK ANALYSIS

– HOW NOT TO BE A BOILING FROGNovember 1st, 2017 – THE CARBON OPPORTUNITY FIRM

CONFIDENTIAL

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 696004. The text reflects only the author’s view. The Agency (EASME) under the power delegated by the European Commission is not responsible for any use that may be made of the information it contains.

1

SCENARIO ANALYSIS FOR STRATEGIC DECISION MAKING – WHAT ARE WE TALKING

ABOUT?

Source: The CO-Firm

2

Company impactScenario

…

FinancialsCurrent position

Product portfolio

Production technologies

Geographic exposure

Margins

Earnings

Capex


ABOUT?

Source: The CO-Firm

3

Sector dynamics

Company impactSector impacts

• Product demand

• Product portfolio change

• Production technology change

• Relative change of input-/ output prices

• Relative competitive position

Scenario

…

Financials StrategyCurrent position

Product portfolio


Geographic exposure

Adaptive capacity

?+

Margins

Earnings

Capex

Businessmodels

Business segments

Assets


ABOUT?

Source: The CO-Firm

4

So what?

Sector dynamics


• Product demand





Scenario

…


Product portfolio


Geographic exposure

Adaptive capacity

?+

Margins

Earnings

Capex

Businessmodels

Business segments

Assets


ABOUT?

Source: The CO-Firm

5

So what?

Sector dynamics


• Product demand





Drivers of change

Regulation

Technology change

Marketchange

Litigation

Reputation

Scenario

…


Product portfolio


Geographic exposure

Adaptive capacity

?+

Margins

Earnings

Capex

Businessmodels

Business segments

Assets

WHY WOULD I CARE?

Source: The CO-Firm

6

Materiality after risk management

Early warning indicators

Proactive communication

HOW ARE SCENARIOS MEANINGFUL FOR COMPANIES?

Source: The CO-Firm, BMUB (2015) Klimaschutzszenario 2050, Greenpeace (2015) energy [R]evolution, IEA (2017) Energy Technology Perspectives 2017

7

EXAMPLES FOR SCENARIO END POINTS, 2050

KS 80 KS 95

Car stock -4% -21%

Technology mix

IEA – Beyond 2 °C Greenpeace [R]evolution

Oil demand -54% -80%

IEA – 2 °C IEA – Beyond 2 °C

Installed capacity 13.7 TW 16.1 TW

Direct CO2-emissions 1.6 Gt CO2 -0.4 Gt CO2

26%

51%

23%

57%24%

19%

ICEHYBBEV

Tech. mix Geographic exposure

EBITDA

-20%

0%

20%

40%

60%

20502045204020352030202520202016

Tech. mix Geographic exposure

EBITDA

-20%

0%

20%

40%

60%

2016 2050204520402035203020252020

IS THE FINANIAL IMPACT MATERIAL?

Source: The CO-Firm

8

0%

2%

3%5%

6%

21%

63%

Wind

Steam Coal

Other

Oil

Gas

Water

Nuclear6%

10%

11%

28%

43%

0%

1%

Oil

Wind

Other

Steam Coal

Water

Gas

Photovoltaic

ELECTRIC UTILITIESINDICATIVE

Installed capacity Installed capacity

ACT PCTLCTACT PCTLCT

CAN CLIMATE SCENARIOS HAVE A STRATEGIC IMPACT?

Source: The CO-Firm

9

• Loss of revenue, due to changes in overall demand and product portfolio mix

• Value chain configuration critical, esp. ownership of battery packaging, also for aftersales revenues.

• Volume loss in Germany is overcompensated by global growth – growth strategy to be defined

Automotive

Refineries

Utilities

• Substantial loss of revenue and assets, due to loss in volume

• Refinery configuration can indicate „winners“

• Additional stress on revenue base, as oil revenues are also likely to decrease; alternative business models to be analyzed

• Future profitability of assets depends on scenario, location and technology

• Renewables are not necessarily winners: In a 2 °C scenario, these benefit strongly in carbon-intensive and emerging markets; however, in low carbon markets, they depend on supplemental financing mechanisms

• Grid management options can substantially impact all players’ revenues

WHAT CAN HELP ME PERFORM MY OWN SCENARIO ANALYSES?

Source: The CO-Firm

10

So what?

Sector dynamics


• Product demand





Scenario

…


Product portfolio


Geographic exposure

Adaptive capacity

?+

Margins

Earnings

Capex

Businessmodels

Business segments

Assets

Current

position

Product

portfolio

Production

technologies

Geographic

exposure

WP3-rep.

CLIMATEXCELLENCE INTEGRATES THE CO-FIRM‘S JOINT MODELLING WITH PRACTITIONERS

Source: The CO-Firm; www.unepfi.org/fileadmin/documents/carbon_asset_risk.pdf; http://et-risk.eu/publications/; https://www.cisl.cam.ac.uk/publications/publication-pdfs/carbon-report.pdf/view

11

1

2

3• Energy-efficiency

expertise

• Risk management

experience

• Strategic

consultancy

background

DO YOU WANT TO GIVE IT A TRY?

Source: The CO-Firm

12

First round focus sectors are

• Utilities

• Automotive

• Steel

• Cement

Contact us!

Jean-Christian Brunke

Further information is available on:

www.climateXcellence.com

[email protected]

roadtest

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No. 696004. The text reflects only the author’s view. The Agency (EASME) under the power delegated by the European Commission is not responsible for any use that may be made of the information it contains.

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