CLIMATE SCENARIOS FOR IMPROVED STRATEGIC AND FINANCIAL RISK · PDF fileCLIMATE SCENARIOS FOR...
Transcript of 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.
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SCENARIO ANALYSIS FOR STRATEGIC DECISION MAKING – WHAT ARE WE TALKING
ABOUT?
Source: The CO-Firm
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Company impactScenario
…
FinancialsCurrent position
Product portfolio
Production technologies
Geographic exposure
Margins
Earnings
Capex
SCENARIO ANALYSIS FOR STRATEGIC DECISION MAKING – WHAT ARE WE TALKING
ABOUT?
Source: The CO-Firm
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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
Production technologies
Geographic exposure
Adaptive capacity
?+
Margins
Earnings
Capex
Businessmodels
Business segments
Assets
SCENARIO ANALYSIS FOR STRATEGIC DECISION MAKING – WHAT ARE WE TALKING
ABOUT?
Source: The CO-Firm
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So what?
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
Production technologies
Geographic exposure
Adaptive capacity
?+
Margins
Earnings
Capex
Businessmodels
Business segments
Assets
SCENARIO ANALYSIS FOR STRATEGIC DECISION MAKING – WHAT ARE WE TALKING
ABOUT?
Source: The CO-Firm
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So what?
Sector dynamics
Company impactSector impacts
• Product demand
• Product portfolio change
• Production technology change
• Relative change of input-/ output prices
• Relative competitive position
Drivers of change
Regulation
Technology change
Marketchange
Litigation
Reputation
Scenario
…
Financials StrategyCurrent position
Product portfolio
Production technologies
Geographic exposure
Adaptive capacity
?+
Margins
Earnings
Capex
Businessmodels
Business segments
Assets
WHY WOULD I CARE?
Source: The CO-Firm
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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
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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
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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
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• 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
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So what?
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
Production technologies
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
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1
2
3• Energy-efficiency
expertise
• Risk management
experience
• Strategic
consultancy
background
DO YOU WANT TO GIVE IT A TRY?
Source: The CO-Firm
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First round focus sectors are
• Utilities
• Automotive
• Steel
• Cement
Contact us!
Jean-Christian Brunke
Further information is available on:
www.climateXcellence.com
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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