Strategic report Governance Financial statements Other information RESPONSIBLE BUSINESS TOWARDS HIGHER STANDARDS CONTINUED Governance Strategy 4. How we participate in the transition to a lower Our Board of Directors oversee the long-term We have undertaken a scenario analysis, looking carbon economy could affect our reputation. strategy. This includes ESG, climate change at two scenarios for global warming, over two 5. We have considered the chronic physical risks and sustainability. different timeframes. This helped to form the of coastal flooding from rising sea levels or They analyse progress with bi-annual board foundations of our climate changestategyhr tat riverine flooding risks, as well as temperature papers, regular focused presentations and will ensure HL is a financially resilient business. rise implications. deep-dive sessions. In our first scenario, climate action has been Predicting socioeconomic development is We think it’s best for the whole Board to take prioritised and emissions significantly reduced. arguably more difficult than predicting the responsibility for this area, rather than allocating As a result, global temperature increases have long-term physical impacts of climate change. it to just one member. This encourages been limited to 2°C or less. To make sure our analysis was broad enough, collaboration and strategic thinking. In turn this In the second, no climate action has been we applied a range of existing models to these1 will help drive change, and a more sustainable taken and global temperatures have risen five key risks. We also looked at third-party future for our business and our clients. We ensure by 4°C or more. research, expert judgement and internal this responsibility is met through focused regular The timeframes considered were to 2030 stakeholder focus groups. presentations and deep dive sessions on this and to 2050. Risks and opportunities increasingly important area. We undertook an internal risk assessment of our The Task Force on Please see page 71 for a deeper understanding For our first TCFD disclosure we will be limiting scenario analysis. It found the 2030 scenarios Climate-related Financial of the business’ governance functions. our scope to five key risks, in line with TCFD were low risk and 2050 scenarios were medium Disclosures (TCFD) recommendations. risk. The main risks were transitional, market, We’ve created a framework led by David James, 1. Climate change and resource scarcity are regulatory and reputational risk. The Task Force on Climate-related Financial the Executive Committee member responsible linked. As a digital business, there’s a risk Disclosures (TCFD) seeks to improve and for the ESG strategy. Day to day activities are the technology we use doesn’t use scarce Whilst we recognise the significance of global increase the reporting of climate-related coordinated and driven through our ESG working energy efficiently. warming, the analysis shows climate change financial information. group. This is made up of representatives across doesn’t pose an immediate risk to our business. the three strategy areas. This means colleagues 2. With the transition to a lower carbon economy, Opportunities include: Our first disclosure is a limited scope from across the business are working together policies such as carbon-pricing mechanisms Increasing availability of energy efficient analysis of our HL plc UK operations. to optimise climate-related opportunities and and taxes could pose a risk to our business. • We plan to extend this operational minimising risks. technologies, for example, cloud hosted boundary for our next disclosure. 3. These disruptive policies could influence services could significantly reduce our The HL Environment, Sustainability and Climate financial markets. We have considered carbon footprint. Change Group is an employee-led network this market risk having policy and legal focusing on sustainability. The group works to repercussions. In particular, the impact help us understand, measure and reduce our of a shift away from fossil fuel investment. direct and indirect environmental impact. 1 Examples of models used; WRI Aqueduct Floods; Climate Central Surging Seas; IAMC 1.5°C Scenario Explorer, IIASA; PRI IPR and IEA. 45 Hargreaves Lansdown Report and Financial Statements 2021