Climate Strategy | RATCH Group PCL. (RATCH)

Climate change is an integral part of RATCH’s Sustainability Strategy in environmental dimension, as it is a pressing issue in the energy and electricity sector. Stakeholders expect market players to reduce greenhouse gas emissions, so as to limit an increase in global temperature and mitigate climate impacts. RATCH thus prepared the Climate Change Strategy to achieve carbon neutrality in 2050. Approving the strategy, the Board of Directors demanded studies in feasible carbon emission approaches and methods for the formation of Decarbonization Roadmap and setting of achievable targets in alignment with Thailand’s target.

The Climate Change Strategy will also shape operational guidelines in support of SDG 12: Responsible Consumption & Production and SDG 13: Climate Action.

Governance on Climate Change

Organizational body	Role and responsibility concerning climate change
Board of Directors	Extend its supervisory role to cover climate change, by integrating it with the corporate risk management system, the internal control system, business strategies and targets Define vision, missions, business direction and strategies that ensures the company’s readiness for the energy transition and the journey towards low-carbon businesses Supervise and give guidance on sustainability strategy, climate change strategy, action plans and targets as well as monitor the implementation of strategies and action plans Endorse climate strategy and action plans including related indicators and targets, ensuring the compatibility with the company’s condition and business context Monitor progress of climate actions, with supports from Risk Management Committee and Audit Committee
Risk Management Committee	Integrate climate risks and opportunities with the enterprise risk management and risk assessment processes Supervise and monitor the efficiency of the risk management system and the internal control system as well as the alignment between the Company’s business strategy/ targets and the Climate Change Strategy
Corporate Governance and Sustainability Committee	Supervise and monitor the progress of Sustainability Strategy and Climate Change Strategy as well as the management of enterprise risks and opportunities Approve and give guidance on Climate Change Strategy, related policies, action plans and targets under the strategy and submit the guidance for the Board of Directors’ approval
Audit Committee	Follow the implementation of Climate Change Strategy and give advice
Investment Committee	Supervise the investment decision-making process concerning climate risk assessment as well as risk management and likelihood in the enterprise and project levels
Chief Executive Officer	Cascade the Board of Directors’ guidelines through the preparation of an action plan in alignment with Climate Change Strategy Follow up on the operational efficiency and progress against the plan compared with the Board of Directors-endorsed targets
Chief Business Development Officer	Integrate climate risks and likelihood with project feasibility studies and due diligence in support of the investment decision-making process
Chief Project Development Officer	Monitor the operations and compliance with laws, regulations, EIA measures and other relevant conditions during the construction stage Consider climate risks and relevant regulations a part of the assessment of new projects’ suitability
Chief Asset Management Officer	Control the efficiency of risk management and ESG operations of the Company, subsidiaries and joint ventures Monitor asset operations, greenhouse gas emissions and climate risks of power plants/projects Execute carbon emission reduction projects and manage related climate risks at power plants/assets
Chief Financial Officer	Source funds for the Company Group’s development/investment in green or eco-friendly projects Monitor and ensure the conformity of responses to climate risks with creditors’ conditions, accounting standards and action-report reporting to relevant authorities
Executive Vice President -Corporate Administration	Execute actions under the Sustainability Strategy and the Climate Change Strategy and compliance with the roadmap and targets of the Company and controlled entities Monitor the execution and progress of action plans and targets and report the performance to the Board of Directors and relevant external authorities

Assessment of climate-related risks and opportunities

In 2022, the 22 entities in which has operation in Thailand, Australia, Indonesia and Vietnam conducted the assessment on climate risks accordingly to the Recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). They are categorized as physical risks that cover acute risks and chronic risks; and transition risks, based on a change in stakeholder mindset, technology as well as relevant policies, legislation and rules.

Physical Risk assessment and managing the impacts of climate change

Identification of physical risks
Acute physical risks	Chronic physical risks
Extreme climate events like storms and flooding Flooding leads to sedimentation in the dams that may cause harm or damage to turbines. Water stress or drought leads to water shortage for power generation activities. Lightning may force a stop on power plants and disturb the electricity generation system.	Long-term shifts in climate patterns like higher temperatures that cause sea level rise or heat waves Heat waves may affect or reduce job operators’ ability to work and power generation efficiency

Physical risk analysis

RATCH based the assessment of physical risks of the company and operational controlled entities in Thailand, Australia, Indonesia and Vietnam on 2 scenarios:

Scenario RCP2.6: Average global temperature could be 1.6 degree Celsius warmer in 2050
Scenario RCP8.5: Average global temperature could be 4.3 degree Celsius warmer in 2050

The risk assessment took into consideration significant impacts on the company’s strategies in 6 aspects:

Finance
Health, safety and the environment
Partners/customers
Regulatory landscape
Reputation, image and society
Target/achievements.

The impacts may be witnessed in 3 impact periods: short term (within 2 years), medium term (3-5 years) and long term (6-10 years). The assessment result is as follows:

Physical risk factor: Drought

Impact forecast	Water shortage and limited volume of usable water Insufficient volume of usable water, affecting production and revenue
Impact period	Short and medium terms
Assessment result	Australia’s drought timescale tends to lengthen the most under Scenario RCP2.6 (8%) in 2030 and 2050. A similar result is established under Scenario RCP 8.5.
Examples of financial impacts	Small power plants’ THB 0.6 million investment in reservoir construction Small power plants’ THB 12 million investment in water quality improvement system
Change in maximum drought period (versus the base period 1995-2014)
Response measure	More investment to secure supplementary water sources

Physical risk factor: Flooding

Impact forecast	Damage to high-value assets and machinery, pushing financial damages beyond the maintenance cost In case of severe flooding, damage to the transmission grid which is an integral part of the electricity system as well as suppliers’ major parts
Impact period	Short and medium terms
Assessment result	The maximum number of days with heavy rainfall in Thailand, Vietnam and Indonesia tend to increase the most under Scenario RCP 8.5 in 2050.
Examples of financial impacts	Small power plants’ THB 50 million investment in flood preventing foundation
Change in maximum heavy rainfall period (versus the base period 1995-2014)
Response measure	Connection with water-level monitoring networks Construction of rain reservoirs and water-retention system to deal with heavy rainfall or flooding (usable during shortage periods)

Physical risk factor: Extreme weather conditions

Impact forecast	Damage to infrastructure, machinery and equipment Injuries of job operators due to falling objects Damage to the transmission grid from lightning and damage to infrastructure from hail storms Assessment result, however, shows these risks have not yet imposed significant impacts on the company.
Impact period	Long term
Assessment result	The wind speed in Thailand, Vietnam and Indonesia tends to increase the most under Scenario RCP8.5 in 2050.
Examples of financial impacts	No impact on the company
Change in wind speed (compared to the base period 1995-2014)
Response measure	No impact on the Company Group

Transition Risk assessment and managing the impacts of climate change

Analysis of transition risks

RATCH applies the scenario analysis to analyze transition risks that may cause significant impacts on the strategies in 6 aspects:

Finance
Health, safety and the environment
Partners / customers
Regulatory landscape
Reputation and image
Target / achievements

The impacts may be witnessed in the short term (within 2 years), medium term (3-5 years) and long term (6-10 years).

Scenarios for analysis of transition risks

Scenario	Explanation	Target years towards Net Zero Emission	Change in global temperature in 2100
State Policy Scenario	State policies and NDC targets under Paris Agreement Thailand’s 2015 policies announced after COP21	Short-term: Reduce GHG emissions by 20% in 2030 from the base year 2020 (0.8% per annum) Long-term: No policy on net zero emissions	Above 2°C
Sustainable Development Scenario	Commitment to achieve net zero greenhouse gas emissions and attempts to achieve reduction in the near future: developed nations target to achieve that in 2050, China in 2060 and other countries by 2070 at the latest Thailand’s declared commitment on emission reduction in 2021 after COP26	Short-term: Reduce GHG emissions by 36.9% in 2030 from the base year 2020 Long term: Declaration of commitment towards NZE in 2065 Referring to SBTi to maintain global temperature increase between 1.5-2.0°C	1.5-1.7°C
Net Zero Emissions (NZE)	SDG’s net zero emissions by 2050 for the energy sector, chiefly concerning access to modern energy by 2030 and energy efficiency to reduce impacts on air quality	Short term: Reduce GHG emissions by 42% in 2030 from the base year 2020 Long term: Declaration of commitment towards NZE in 2050 Referring SBTi to maintain global temperature increase at no more than 1.5°C	Maintained at 1.5°C

Summary of analysis on transition risks

Risk	Impact period	Risk and impact on finance	Response measure
Imposition of carbon tax	Medium term (3-5 years)	Stricter policy and legislation on carbon emissions control leading to the imposition of carbon tax An increase in operating expenses in relation to emission volume	Invest in low-carbon/carbon storage technology for existing power plants with high emission volume, to limit production-related emissions Acquire new renewable energy assets or fossil fuel power plants with installed carbon storage technology Avoid/abolish investment in coal-fired power plants

Analysis of climate-related opportunities

RATCH had analyzed transition opportunities in the marketing, technology and regulatory landscape aspects. The result revealed opportunities to diversify to non-power businesses like hydrogen; renewable energy; and the installation, production and maintenance services for renewable power projects

Opportunity	Type of opportunity	Period	Opportunity and impact on finance	Management approach
Diversification to non-power businesses	Marketing	Medium term	RATCH plans for hydrogen use and study technology development in aboard	Invest in green hydrogen production and provide utility and infrastructure services Invest and collaborate with business partners in researches
Shift to renewable energy	Energy source	Medium term	RATCH’s plans to raise renewable energy generation in support of national and global carbon emission targets, setting to achieve the 25% and 40% ratios of 10,000 MW capacity in 2025 and 2035, respectively	Emphasize the generation from all forms of solar power (solar panel, solar rooftop and solar floating) and businesses involving with solar and wind power as well as installation, production and maintenance services

Climate Change Strategy

The above assessment results shaped the Climate Change Strategy, formulated as operational guidelines on the company’s climate mitigation and adaptation. The strategy consists of 2 components.

1) Greenhouse gas reduction, focusing on 3 key areas:

2) Internal and external collaboration:

Climate-Related Targets

Strategy	2025 Targets	2035 Targets
1. Setting of percentage shares of energy sources in electricity generation	Total capacity: 10,000 MW Fossil fuel - 75% Renewable energy - 25%	Total capacity: 10,000 MW Fossil fuel - 60% Renewable energy - 40%
2. Emission reduction	6 MtCO₂e of emissions reduced or 70% of emissions in the base year 2015 Emissions per kilowatt-hour slashed by 12% from the base year 2015	10 MtCO₂e of emissions reduced or 100% of emissions in the base year 2015 Emissions per kilowatt-hour slashed by 25% from the base year 2015
3. Enhancement of carbon capture	Amount of captured carbon: 83,000 tCO₂e	Amount of sequestered carbon: 280,000 tCO₂e
4. Knowledge and awareness building	Employees’ training attendance: 80% Community engagement in energy conservation, aimed 80% of the target group	Employees’ training attendance: 90% Community engagement in energy conservation, aimed 90% of the target group
5. Information disclosure	Sustainability Report under GRI Standard 56-1 One Report Carbon Disclosure Project (CDP) Participation in domestic and international organizations’ sustainability assessment	Sustainability Report under GRI or relevant standards 56-1 One Report Carbon Disclosure Project (CDP) Participation in domestic and international organizations’ sustainability assessment

Scope 3 GHG Emissions

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Disclosure in the Alignment with TCFD

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