Adaptation to Climate Change

Governance

a) Governing Council’s oversight of risks and opportunities related to climate change

At Metlen, the body responsible for the oversight of material sustainability issues is the Sustainability Committee of the Board of Directors (BoD). In particular, the responsibilities of the Sustainability Committee include monitoring the progress made in achieving the CO2 emissions reduction targets and the implementation of relevant initiatives. The Committee is kept fully informed on the progress of these initiatives by the Corporate Governance and Sustainable Development General Division, informs the Board of Directors and proposes improvement measures where necessary. Furthermore, the Committee monitors the Company’s progress on actions or other major climate initiatives that the Company is participating in or voluntarily undertaking, such as: i. participation in the international CDP Climate Change initiative, ii. Alignment with TCFD recommendations, iii. Recording and disclosure of indirect CO2 emissions (Scope 3).

b) The role of Management in assessing and managing risks and opportunities related to climate change

The Corporate Governance and Sustainable Development General Division, through its critical and coordinating role, works closely with all Business Units (BU) to identify strategic priorities in terms of managing climate-related issues. . It informs the Company's Executive Committee and provides information to the Board through the Sustainability Committee, regarding the management of carbon reduction initiatives, progress towards achieving the relevant targets and potential risks and opportunities associated with climate change. At the same time, it supports the work of the Sustainability Committee in overseeing corporate initiatives focused on adaptation and response to climate change.

Strategy

α) Climate-related risks and opportunities that the Company has identified in the short, medium and long term

In 2021, Metlen launched a thorough analysis and prioritization of climate-related risks and opportunities that may affect its activities, analyzed in relation to all  Business Units. The categories of climate change-related risks and opportunities for Metlen include Transition risks and Physical risks.

β) Impact of climate risks and opportunities on the company's activities, strategy and financial planning

Impact of climate risks and opportunities on the company's activities, strategy and financial planning

The climate-related risk analysis for Metlen has highlighted 3 major transition risks and 1 major physical risk, which may, to a greater or lesser extent, have a significant impact on the company's revenues and/or operating costs, mainly in the Power & Gas BU as well as in the Metallurgy BU.

These risks include:

  • Increased cost due to increased carbon emissions allowance prices.
  • Reduced revenues due to increased electricity and natural gas sale prices in the short and medium term, because of climate change mitigation policies.
  • Increased cost from reduced efficiency of gas-fired power plants due to rising temperatures.
  • Increased cost of raw materials due to increased transportation costs.

Main business impact of climate-related opportunities

  • Increased sales share of low-carbon products or products necessary for the green transition.
  • Major increase in electricity demand.
  • Increased demand for aluminium as the main energy transition ingredient.
  • Development of new technologies.
  • The Company’s financial planning incorporates tools related to climate risks and opportunities.

c) Resilience of the corporate strategy, taking into account different climate scenarios, including a scenario of an increase in the global average temperature of 2°C or less

In line with the TCFD's recommendations, Metlen relies on climate “scenarios” to comprehend the impact of relevant risks on its activities. In particular, it has analysed climate-related risks in three different scenarios, each describing a different climate future in terms of greenhouse gas (GHG) emission volumes and concentrations in the air, and ultimately the severity and intensity of climate change as a function of climate change mitigation policies. These scenarios are based on the scenarios of the Network for Greening the Financial System (NGFS) and their key assumptions, incorporating both transition and physical risk variables.

Risk Management

a) Company procedures for identifying and evaluating risks related to climate change

In 2021, Metlen launched a thorough analysis to identify climate-related risks and opportunities in its Business Units. The identification of these risks and opportunities was achieved after systematic substantive testing of Metlen' activities, data analysis, and consultations with relevant stakeholders. As a result of this analysis, a list of 57 risks and 27 opportunities related to climate change was compiled and found to affect the various activities of Metlen.

b) Description of the company's processes for managing climate-related risks

In order to adapt to climate change and reduce the potential impacts of climate-related risks, the Company follows the following steps:

  1. examining different climate scenarios on site to identify potential risks,
  2. analyzing and evaluating these risks in order to understand their significance and potential economic impact on the Company,
  3. integrating the issue of adaptation (to climate change) into its corporate decision-making process in order to avoid or mitigate climate-related damage and, where possible, to take advantage of opportunities to adapt to changing conditions; and
  4. implementing appropriate measures as a result of the above processes

c) Integration of climate risk identification, assessment and management processes into the Company's central risk management system

The Company has developed an Enterprise Risk Management System (ERM) for the identification, analysis, evaluation, monitoring and disclosure of risks, which incorporates elements and principles from ISO 31000 and COSO ERM. The ERM system is an intrinsic element of Metlen' Internal Control System. The results of the risk assessment are communicated by the Risk Management Division to the Executive Committee and the Audit Committee of the Board of Directors of Metlen.

Metrics & Targets

a) Indicators used by the Company to assess risks and opportunities related to climate change, in line with its strategy and risk management process

Metlen has set specific targets in order to adapt to climate change and reduce the impact of the relevant potential risks, through the selection of an appropriate set of indicators. There are measurable indicators used by the Company to assess risks and opportunities related to climate change, in line with its strategy and risk management process. In particular, the measurable indicators most relevant to the risks and opportunities identified are presented below in order to facilitate the analysis of trends and the emergence of the results of actions taken in response to risks, in order to allow an understanding of the potential economic impact of the risks and opportunities involved.

b) Disclosure of direct (Scope 1), indirect (Scope 2) and other indirect (Scope 3) greenhouse gas emissions, and the associated risks

Metlen also discloses all direct (Scope 1), indirect (Scope 2) and other indirect (Scope 3) greenhouse gas emissions, as well as the associated risks.

c) Targets set by the company to manage climate-related risks and opportunities and performance against the targets

Metlen has set absolute and specific emission reduction targets in both the medium and long term, covering all its business activities. Overall, the Company is committed to achieving: a 30% reduction in direct (scope 1) and indirect (scope 2) emissions by 2030 compared to 2019, and Net Zero by 2050.