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, in line with the 2015 Paris Agreement.
Aviation has been at the forefront of the global business response to climate change, becoming the first industry to voluntarily commit to emission reduction targets as far out as 2050. We're playing an active role in setting and meeting these ambitious targets, and we’re guided by a simple philosophy: 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).
The Group has partnered with external consultants and climate change experts to further understand the physical and transitional 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 towards a low carbon economy.
In our analysis, we considered three climate scenarios informed by the International Energy Agency’s (IEA) Energy Transition Pathways.
- Reference Technology Scenario (RTS): This scenario is broadly consistent with an increase of 3-4 degrees Celsius by 2100, which is based on the efforts committed in individual country’s Nationally Determined Commitments (NDCs) under the Paris Agreement. Under this scenario, temperatures and emissions are unlikely to have stabilised and would continue to rise up to and beyond 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 temperature increase by two degrees Celsius 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 degrees Celsius 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).
Transitional risk findings
Transitional risks arise due to changes in policy, legal, technology, reputation and market changes as we transition towards a low carbon economy.
Our 2019 scenario analysis found 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 transitioning to a low carbon economy.
We have committed to a broader industry effort of carbon neutral international growth from 2019 and to reach net zero emissions by 2050. We are also committed to contribute to the global effort to reduce emissions and limit global warming to less than 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. In addition to this, the recent publication of the United Nation’s Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report has continued to inform our ongoing physical risk analysis.
Within Australia, 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. The severity of the impacts of physical risks varies significantly by scenario, reinforcing the importance of ensuring at least a two-degree outcome is achieved.
Qantas takes the challenge of human-induced climate change very seriously. We already operate one of the largest carbon offsetting programs of any airline in the world, we are investing in sustainable aviation fuels, and we are preparing to significantly reduce our waste to landfill. We will continue to refine and expand the climate scenario analysis over time, but we are clear that it requires action. 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.