Lendlease Annual Report 2021

Climate Related Strategic Resilience In FY20 the business identified risks and opportunities that might arise over the next 30 years for each of our climate scenarios and identified which of the risks and opportunities were likely to appear in the next 10 years. These risks and opportunities were then synthesised into 10 Climate Related Impacts (CRI) per scenario and disclosed in our FY20 annual report. Our focus in FY21 has been to leverage this work to further enhance the climate related strategic resilience of our business. To do this, over 100 senior leaders across the global business participated in a series of TCFD Business Impact workshops. The workshops used the five CRIs that were identified as most likely to appear in the next 10 years from each scenario as the basis of review. Participants were asked to: • Identify positive and negative sensitivities to each CRI relative to other sectors • Identify what actions could be taken to reduce sensitivity and either absorb, adapt or transform to the CRIs • Determine what the residual sensitivities would be if those actions were taken. Building strategic resilience In FY19 we disclosed our three climate scenarios that we would use to build business strategic resilience. The scenarios were Polarisation (a >3ºC scenario), Paris Alignment (a 2–3ºC scenario) and Transformation (a well below 2ºC scenario). The assessment of the five CRIs per scenario most likely to appear in the medium term has indicated a greater resilience (higher residual positive sensitivity) in our business strategy to our Paris Aligned scenario, a world that sees continued global commitment to the Paris Agreement. Our recent commitment to being a 1.5ºC aligned business has created positive sensitivities to our Transformation scenario. As with all real estate companies, we have negative sensitivities to the physical impact of climate change in a more than 3ºC warmed world, our Polarisation scenario. The integration of climate risk assessments into our investment decision making processes has seen reduced residual sensitivities to climate impacts. Sydney: Daramu House, Barangaroo South on Gadigal Country Our strategic resilience to climate related impacts Scenario Climate Related Impact Residual Sensitivity Development Construction Investment Polarisation scenario (>3ºC) Our Polarisation Scenario sees a world where climate action is delayed by the polarisation of climate action. This delay results in a world where physical climate change risks are the greatest across our three scenarios. The integration of ‘Leadership in Sustainability’ as a strategic priority and our Net and Absolute Zero Carbon targets sees high levels of positive sensitivity in both leadership in decarbonisation and a shift in consumer preference to secure and create resilient communities. Continued integration of physical climate risk assessments into our investment and business processes is essential to reducing negative sensitivities and building resilience to physical climate change risk. Impact of climate change on assets and communities Impact of climate change on the way we work Shift in consumer preference toward secure and resilient communities Industry leadership in decarbonisation valued Impact of climate change on cities Paris Alignment scenario (2–3ºC) Our Paris Alignment Scenario sees a market led transition to a lower carbon future through global government commitments to the Paris Agreement, resulting in higher regulation to climate action and with lower physical impacts of climate change compared to our Polarisation scenario. There are many ‘difficult to decarbonise’ products and materials in our supply chain, including cement, steel and aluminium. The cost of decarbonisation in our supply chain creates negative sensitivities for future development opportunities. Our commitment to Absolute Zero Scope 3 emissions will drive action in our supply chain, creating resilience in our strategy. Our leadership in sustainability and carbon targets creates similar positive sensitivities to decarbonisation as per our Polarisation scenario. Increase speed of change in climate related impacts Increase cost of carbon Demand for decarbonisation of supply chain Increased scrutiny over actions versus branding Industry leadership in decarbonisation valued Transformation scenario (<2ºC) Our Transformation Scenario sees a rapid decarbonisation pathway, where global emissions peak in 2020 and are close to zero in 2040. The speed of change that is needed to limit global warming to 1.5ºC is likely to create negative sensitivities in our supply chain as suppliers try to keep pace with decarbonisation demands and shifting preferences towards localisation. Our leadership in sustainability and carbon targets create similar positive sensitivities to decarbonisation, as per our Polarisation and Paris Alignment scenarios. Increase speed of change in climate related impacts Local companies preferenced over global ones Shifting social licence to operate expectations Industry leadership in decarbonisation valued Shifting consumer preferences towards lower impact living Higher positive sensitivity Higher negative sensitivity 53 A sense of place 52 Lendlease Annual Report 2021 Risk and Climate Related Resilience