Lendlease Annual Report 2022

Risk & climate-related resilience 55 Emerging Climate-related Impacts With the full business strategy resilience assessment now complete across the three scenarios, we will continue to monitor the identified climate-related risks and opportunities for signs of the Climate-related Impacts (CRIs) emerging. The value of this strategic resilience planning is evident with a few key CRIs beginning to materialise. CRI: Industry Leadership in Decarbonisation valued (All scenarios) Lendlease identified that industry leadership in decarbonisation would be valued under all three scenarios. This has been seen in the rise of sustainable format financing strategies. We are a leader in sustainable financing in Australia with approximately $3.1b or 60 per cent of the Group’s total facilities sourced in sustainable formats. Accessing the sustainable financing market has supported execution of the Group’s strategy, improved lender engagement and is expected to result in lower borrowing costs for the Group. It is our intention to pursue, where appropriate, sustainable format financings in the future for new facilities and refinancing of maturing facilities. CRI: Increased Cost of Carbon (Paris Alignment scenario) Since identifying the cost of carbon as a potential CRI under the Paris Alignment scenario in FY20, there has been a substantial increase in the number of net zero commitments made by corporations and governments globally and a corresponding increase in the demand for quality carbon offsets. This has been reflected in carbon offset markets, with an expectation that pricing will likely increase as the net zero deadlines declared by these entities approach 1 . This is to be expected given some organisations are planning to solely rely on the purchase of carbon offsets to achieve their net zero targets. Our 2040 Absolute Zero target, which seeks to eliminate emissions from our business altogether without reliance on offsets, helps to mitigate the carbon offset price risk exposure. It is also intrinsic to our near-term Net Zero by 2025 target to reduce our carbon emissions as much as possible and therefore minimise the residual position requiring offset. To help achieve our ambitious targets, long term decarbonisation plans (Mission Zero Roadmaps) and short-term carbon mandates have been developed for each business and region. The mandates seek to reduce our scope 1 and 2 emissions, which will support not being caught by a rising cost of carbon. The mandate actions include shifting to renewable electricity, utilising Power Purchase Agreements, and shifting to renewable diesel or biodiesel alternatives, where these options are available. Carbon offsets will be centrally managed and procured to achieve net zero emissions starting in FY25 for any remaining unavoidable emissions. For illustrative purposes only, based on our estimated net scope 1 and 2 emissions in FY22, and the current estimated cost of carbon offsets, the potential cost range to achieve net zero in FY22 would have been between $1.2m and $2.4m 2 . 1. Taskforce on Scaling Voluntary Carbon Markets (TSVCM) Final Report, January 2021. 2. Based on our estimated net scope 1 and 2 emissions in FY22 and the current estimated cost of carbon offsets.