The Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) developed voluntary, consistent, climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.
The task force structured its recommendations around four themes that represent key aspects of how organizations operate: governance, strategy, risk management, and metrics and targets.
This section addresses the disclosures, with links to the relevant sections of the Annual Integrated Report, and provides a self-assessment of Solvay’s level of alignment with the TCFD recommendations.
- The Charter of Corporate Governance describes how the Board of Directors manages sustainability-related aspects and is available on the Solvay Website. The Board thus devotes at least one meeting per year to an update on trends in global sustainable development issues, including climate change risks and opportunities;
- A Climate Risks Officer has been appointed at the Executive Committee level. He is in charge of ensuring that climate-related aspects are adequately considered in the Group’s strategy and operations.
- Long-term horizon assumptions are presented in the description of megatrends. See in particular the description of the “Resource constraints and demand for sustainability” megatrend. Medium-term assumptions (in the coming five years) are explained in the description of Solvay’s main markets. Short-term assumptions (one year) are presented in the Group’s outlook;
- Climate related risks and opportunities were fully reviewed in 2019 and are described in the “Risk Management” chapter. Four main risk categories were analyzed:
- Product-related transition risks (using the Sustainable Portfolio Management methodology)
- Scenario analysis using as reference the International Energy Agency “Sustainable Development” scenario
- Acute physical risks linked to droughts, hurricanes and earthquakes,
- Chronic physical risks linked to water scarcity.
- A scenario analysis was made in 2019, using as reference the International Energy Agency “Sustainable Development” scenario. Impacts on energy and CO2 costs (including impact on raw material costs) and impacts on main markets have been assessed. Four Executive committee members were directly involved in the exercise. According to this exercise, the order of magnitude of favorable impacts on markets outweighs the negative impact on energy and CO2 costs.
- The presentation of the Group’s main risks does not include a differentiation between short-, medium-, and long-term horizons. Quantification of impacts is not disclosed.
- The risk management process, the main risks, and the process used to rank them are described in the "Risk Management" chapter;
- Analysis of sustainability-related risks and opportunities is done through the Sustainable Portfolio Management methodology, for each product in each application or market, including the climate change transition risk;
- “Greenhouse gas emissions” (GHG) have been identified as a priority aspect in the Group’s materiality analysis. “Climate transition risks” have been identified as part of the Group’s main risks. Links between main risks and high materiality issues are part of the materiality analysis process. "Climate-related physical risks" have been ranked up to now as “moderate materiality aspects”;
- The Sustainable Portfolio Management tool is a requirement in key Group processes and in particular in the assessment of capital expenditures projects, Research and Innovation projects, and acquisition and divestiture projects.
Metrics and targets
- The strategic objectives used to drive sustainable value creation are described in the Solvay scorecard;
- Greenhouse gas emissions, energy consumption, and Sustainable Portfolio Management metrics and targets are reported in the “Extra-financial statements” chapter. Solvay has pledged to reduce Scope 1 and 2 greenhouse gas emissions by 1 million tons by 2025, compared to 2017, by improving its energy efficiency and energy mix and by investing in clean technologies. The greenhouse gas emissions reduction target is used as a criteria in a “positive incentive loan” signed with a consortium of banks;
- Greenhouse gas Scope 1, Scope 2 and Scope 3 emissions are fully reported and audited. The scope of emissions reporting is consistent with financial reporting.