Managing climate risk
Learn about how we are managing our climate risk by enhancing our understanding of the physical and transitional risks as well as emerging opportunities that may arise from a changing climate.
Qantas recognises human-induced climate change as a significant issue for the aviation industry. We support the world-wide priority of limiting global temperature rise to below two degrees above pre-industrial levels.
Aviation has been at the forefront of the global business response to climate change, becoming the first industry to voluntarily commit to emissions targets out as far as 2050. We're playing an active role in setting and meeting these ambitious targets and we’re guided by a simple philosophy to meet them: measure, reduce, offset and influence.
In line with this, the Qantas Group committed in 2017 to align our climate change-related disclosures to the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Since then, the Group has been working to implement these across the core elements of climate-related disclosures: governance, strategy, risk management, and metrics and targets (PDF).
Over this past year, the Group partnered with external consultants and climate change experts to further understand the physical and transition risks as well as emerging opportunities that may arise from a changing climate.
What is scenario analysis?
Climate scenario analysis allows the Qantas Group to estimate how we are positioned to withstand different climate futures, over the medium to long term. In doing so, we can ensure that our business is resilient in the transition to a low carbon economy.
In our analysis, we considered three climate scenarios informed by the International Energy Agency’s Energy Transition Pathways.
- Reference Technology Scenario (RTS): This scenario is broadly consistent with a 3-4 degree outcome, based on the efforts committed in individual country’s Nationally Determined Commitments under the Paris Agreement. Under this scenario, temperatures and emissions are unlikely to have stabilised and would continue to rise from the year 2100. (Corresponds to representative concentration pathway (RCP) RCP8.5).
- Two Degrees Scenario (2DS): This scenario targets at least a 50% chance of limiting average global temperatures by two degrees by the year 2100. This scenario requires a much stronger response to climate change compared with current efforts. (Corresponds to RCP4.5 and RCP6.0).
- Beyond Two Degrees Scenario (B2DS): This scenario targets a 1.75 degree outcome by the year 2100, achieving net-zero emissions by 2060 and remaining net zero or below thereafter. In this scenario emissions will decline rapidly prior to 2040. (Corresponds to RCP2.6)
Transition risk findings
Transition risks arise due to changes in policy, legal, technology, reputation and market changes in the transition to a low carbon economy.
Our scenario analysis revealed that aviation will continue to be a growth sector under all three climate futures, reinforcing the need for the Group to continue to invest in the transition to a low carbon economy.
We have committed to a broader industry effort of carbon neutral international growth from 2020 and to reduce emissions by 50 per cent by 2050 from 2005 levels. We are also committed to contribute to the global effort to reduce emissions and limit global warming by two degrees. In order to achieve this, a combination of technology and efficiency improvements, increased uptake of sustainable aviation fuels and carbon offsetting will be required.
Physical risk findings
Physical risks arise due to extreme weather events, such as heat waves, storms, floods, droughts and longer-term shifts in climate patterns. These can cause direct damage to assets and disruptions to business operations.
Drawing on the Group’s existing physical risk register the analysis aims to enhance our understanding of the impacts of changing temperature, wind, rainfall and thunderstorms on the Group’s domestic operations.
The findings reveal that the physical impacts of climate change are highly site specific and will have an increasingly greater impact over the long term. The severity of the impact of physical risks varies significantly by scenario, reinforcing the importance of ensuring at least a two-degree outcome is achieved.
Within Australia, the findings show that our regional operations are likely to be more exposed to the physical risks associated with rising temperatures. Meanwhile the physical risk impacts associated with increased rainfall are likely to be more significant for metropolitan ports in the eastern states.
Qantas takes the challenge of human-induced climate change seriously. We already operate the biggest carbon offsetting program of any airline in the world, we are investing in sustainable aviation fuels, and we are preparing to reduce our waste to landfill by 75 per cent by the end of 2021. We will continue to refine and expand the climate scenario analysis over time, but we are clear that it requires action. That action is already underway. In the next phase of this analysis, we will look to expand the physical risk analysis beyond our domestic boundaries and consider the financial implications of those risks to the three climate futures.