Building climate resilience is a challenge we must overcome to thrive in the long term. If our businesses are to survive the next 200 or more years, we need to look to the future and be ready to adapt to change.
We need to design buildings capable of withstanding extreme weather events. Seaports and airports where we have businesses must be prepared to deal with the consequences of rising sea levels.
Our operating companies are developing climate resilience strategies. By the end of this year, they expect to have identified the physical and transitional risks posed by climate change. They will then plan how best to mitigate the identified risks.
We aim to ensure that our operating companies are prepared for, and have the capacity to withstand, the negative impacts of climate change.
Why is climate resilience material to us?
Climate change affects us and our suppliers by its impact on water, weather, sea levels, carbon regulation and taxation and energy availability and affordability.
The World Economic Forum identified failure of climate change mitigation and adaptation, extreme weather events and natural disasters amongst the top five global risks in its 2019 Global Risk Registry.
The 2018 Intergovernmental Panel on Climate Change report states that the lower the emissions generated by 2030, the lower the challenge in limiting global warming to a 1.5°C increase in average global temperature above pre-industrial levels. It also states that global warming is likely to reach 1.5°C between 2030 and 2052, if it continues at the current rate.
These reports underline the urgency to act sooner rather than later in building climate resilience.
Stabilising the temperature increase at 1.5°C will require drastic action far beyond business as usual. Businesses will be expected to reduce emissions and to limit and adapt to climate change. Investors increasingly require climate related financial disclosures in order to understand an organisation’s risks.
We are committed to reducing emissions and our exposure to climate related risks. Increasing energy self-sufficiency saves money and increases energy security.
Climate resilience in practice
Our businesses need to identify and manage the physical risks of climate change to operations and supply chains. Regulatory risks also need to be considered, in particular those related to the transition to a low carbon economy.
Climate resilience is the ability of our businesses to prepare for, mitigate and recover from the costs and other effects of climate change. We have made climate change a core element of SwireTHRIVE because it is central to our ability to create long-term value for our shareholders.
We require our operating companies to consider climate change risks when compiling their risk registers, and to take appropriate precautionary measures. Some of our operating companies are already building climate resilience into their operations.
The Swire Climate Resilience Working Group includes members from across our operating companies and supports the implementation of our climate change policy. The policy covers climate change mitigation, adaptation and building the adaptive capacity of our businesses, our employees and the communities in which we operate. The policy requires that we:
Reduce our carbon footprint through the establishment and implementation of long-term carbon emissions reduction targets
Adopt industry best practices to improve energy efficiency in our operations
Increase the use of renewable energy in our buildings through on-site energy generation, purchase of renewable energy and other methods where applicable
Assess climate change and any associated financial and other risks and opportunities, in order to enhance our understanding of the impact of climate change on our operations
Put in place appropriate processes and measures intended to prevent or minimise the damage that climate change may cause, and to take advantage of the opportunities that may arise
Consider climate change in the location and design of new projects and facilities
Address climate change risks as part of our corporate risk management
Incorporate climate change and extreme weather events into our business continuity plans
In 2019, we reviewed available online climate risk assessment platforms. In 2020, we are starting to assess the chronic and acute physical risks posed to our assets by climate change.
Our climate change mitigation efforts
Under the Paris Agreement, national emission reduction targets are set. Businesses must do the same and so reducing our greenhouse gas emissions is a priority under SwireTHRIVE. We plan to reduce our carbon emissions, in line with long-term targets, and to achieve international decarbonisation objectives.
In 2018, Swire Properties committed to the Science Based Targets initiative, which was developed by the United Nations Global Compact, the World Resources Institute, the CDP and the WWF. The Science Based Targets initiative encourages corporations to play a substantial role in reducing global greenhouse gas emissions and aims to make science-based target setting a standard business practice by the end of this year.
In 2019, Swire Properties’ science-based targets were officially approved. Swire Properties is the first real estate developer in Hong Kong and Mainland China to establish long-term decarbonisation goals in-line with the Paris Agreement.
Swire Coca-Cola will be submitting science-based targets for approval this year. Please see the Carbon section of this report and Swire Coca-Cola’s own sustainability report for details. Swire Coca-Cola has committed to use 100% renewable electricity in its core operations by 2026.
Shipping and aviation were not included in the Paris climate accord because operations cross borders. However, the industries themselves have agreed emission reduction targets. Our shipping and aviation businesses are preparing for this by becoming more efficient in their use of carbon, by investing in the development of sustainable biofuels and by purchasing carbon offsets.
From 2021, international aviation emissions will be covered by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which was agreed in 2016 to address carbon neutral growth for aviation. Hong Kong and Mainland China do not yet participate.
Cathay Pacific is ready to fulfill the CORSIA reporting requirements and is assessing and preparing for the impact of CORSIA when Hong Kong and Mainland China join. Accurate data is a key requirement. All necessary infrastructure and flight operation systems have been assessed to support data collection on metrics such as fuel use. In 2019, monitoring, reporting and verification of 2019 baseline emissions data began. Emissions reports were submitted to authorities in April 2020.
The International Maritime Organisation aims to reduce annual greenhouse gas emissions from international shipping by at least 50% by 2050, compared to 2008, and to try to phase them out entirely.
With Nanyang Technological University, Swire Pacific Offshore is working on Project Hafnium to assess the viability of alternative fuels for the marine sector and the feasibility of hydrogen-powered support vessels.
We are gaining experience in green technologies. We are investing in biofuels through equity interests in Fulcrum BioEnergy, Inc., Avantium N.V. and NanoSpun Technologies Limited. Swire Blue Ocean installs, maintains and decommissions offshore wind turbines. Its vessels have contributed to the installation of 2.97 GW of offshore wind energy in European waters. This figure is expected to increase to 3-3.5 GW on completion of work on the Beatrice Offshore Wind Farm off Scotland’s northeast coast. More information on Swire Blue Ocean can be found on their website.
These newer investments are in addition to our efforts to reduce our emissions in our established business portfolio, which stretches across Property, Aviation, Beverages, Marine Services and Trading & Industrial.
We want to reduce our overall emissions in line with international carbon reduction goals. Decarbonisation is a key challenge. Please see the Carbon section of this report for more information.
Case study
Swire Coca-Cola – Accelerated write-off of cold drinks equipment containing CFCs and HFCs
In May 2019, Swire Coca-Cola USA had 177,000 units of cold drinks equipment (CDE). 125,000 of them used chlorofluorocarbon (CFC) or hydrofluorocarbon (HFC) refrigerants. These refrigerants have high global warming potential (GWP) and high ozone depletion potential (ODP).
Refrigerant name
GWP
ODP
Total number of units
Proportion of US CDE units
R12 (CFC)
High
High
9,592
5%
R134a (HFC)
Moderate to High
Negligible
115,428
65%
Swire Coca-Cola USA intends to eliminate the R12 units within two years and to phase out the R134a units. Hydrocarbon coolers have been purchased as replacements.
In Hong Kong, Swire Coca-Cola stopped buying CDE units using HFC at the end of 2019. It intends to retire all CDE units using CFC and HFC by the end of 2025. New CDE units will use natural refrigerants approved by The Coca-Cola Company. We currently have models of vending machine, post-mix dispenser, carboy dispenser and water station that use natural refrigerants.
Climate adaptation strategies
Including climate adaptation in our business decisions will make us more resilient. Our operating companies consider climate change risks when they compile their risk registers and take appropriate measures in response.
HAECO is incorporating climate considerations into the design of new facilities. At the new facility in Xiamen there will be solar panels on buildings with flat roofs. Solar films on hangar roofs are being evaluated. Combined, this could generate up to 30% of the power required by the facility. The facility will have intelligent lighting control, a chilled-water air conditioning system and onsite treatment of wastewater, gas and volatile organic compounds. The facility aims to attain Gold Leadership in Energy and Environmental Design certification.
Climate change threatens access to water and its availability and quality. At Swire Coca-Cola, selecting the right location for new bottling plants is critical to water stewardship. For all new bottling plants, Swire Coca-Cola assesses water access, quality and quantity risks. The risks, to its own bottling operations, the environment and local communities, are assessed by independent third parties who make source vulnerability assessments. The findings are reflected in source water protection plans.
Swire Properties has assessed water risks to its properties in Hong Kong, Mainland China and the USA. Please see the Water section of this report for more information.
Case study
Swire Properties – Climate risk assessment
Swire Properties is assessing the key risks posed by climate change to its business operations and the business opportunities arising from new climatic conditions. Asset-level modelling of acute and chronic physical risks, associated with the four Representative Concentration Pathways (RCP 2.6, 4.5, 6 & 8.5) used by the Intergovernmental Panel on Climate Change, is being conducted.
The vulnerability of individual assets to flooding, heat stress, water stress and extreme wind is being considered. Global and local government policies and regulatory, technological and market trends are being reviewed on the basis of different climate scenarios, such as the International Energy Agency 2-Degree Celsius Scenario (IEA 2DS), and in consideration of the expected transition to a low carbon economy. Swire Properties intends to identify the financial impact on its business of climate change risks and opportunities. The findings will be used to mitigate climate change risks and to build climate resilience. Swire Properties’ acquisition due diligence covers climate adaptation and resilience.
Building adaptive capacity
We want to improve the capacity of our businesses, our employees and the communities in which we operate to adapt to climate change. This involves having, and helping to provide access to, information, skills and physical resources. Swire Properties supports the Business Environment Council’s Low Carbon Charter for the property and construction sector in Hong Kong.
Swire Coca-Cola provides bottled water to citizens affected by natural disasters as part of The Coca-Cola Company’s Clean Water 24 emergency plan. Within 24 hours of a natural disaster, Swire Coca-Cola will identify the nearest warehouse and arrange delivery, in collaboration with local governments, supporting organisations and NGOs. During its five year involvement, Swire Coca-Cola has delivered 6.5 million bottles of water to more than 1.7 million people, with an average response time of 10.5 hours. In 2019, Swire Coca-Cola delivered 1.15 million bottles of water to 90,000 people.
Case study
Swire Pacific Offshore – Winds of change
Three Swire Pacific Offshore vessels are assisting with the installation of foundations for 20 wind turbines off the coast of Western Taiwan, where construction of a 120-megawatt offshore wind farm kicked off in May 2019 and has been completed by the end of that year. Pacific Warlock and Pacific Valkyrie have been chartered by Seaway 7 to carry out anchor handling duties for the heavy-lift vessel, Seaway Yudin. Pacific Liberty deployed a bubble curtain at the construction site to mitigate underwater noises induced by the construction activities. Special consideration has been given to the noise abatement in lieu of the presence of species such as the Chinese White Dolphins.
Looking ahead
We are assessing the acute and chronic physical risks posed by climate change to our key assets and business operations under different climate change scenarios. We will also start looking at a number of drivers of change, including trend and emerging issues, which can be incorporated alongside the climate risk mapping data into our future scenario modelling. We are considering how to further incorporate climate change and sustainability more generally into our enterprise risk management and reporting, and how best to address climate change as part of our business continuity planning.
