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Climate Resilience

We recognise the complexity and urgency of climate change and consider the risks and opportunities that it presents to the global economy and the role transport and our business can play.


Risks and Opportunities

Dealing with climate change is one of our main challenges and a key factor in our business planning and decision making. We face physical challenges such as more severe rainfall and temperature extremes, as well as transition challenges such as shifts in policy, technology, customer and investor demands. Besides these challenges, we also see opportunities in changing customer tastes for low carbon options and strong government and regulatory backing for transport decarbonisation and modal shift, which can benefit our business, environment and society.

 


Policies

Our Group Environment Policy governs our approach to the environment, including climate, and is applicable to all FirstGroup operations. In addition, our various divisions also have their own environmental policies that are bespoke to their operations and we have introduced environmental commitments into other policies such as our Code of Ethics and Supplier Code of Conduct that outline our expectations for employees and suppliers respectively, with both groups required to sign annual attestations.

 

 

 

Group Environment Policy 


Reporting

We were the first UK transport operator to pledge our support towards the recommendations of the Task Force on Climate-Related Financial Disclosures reporting since 2021. We also report to Carbon Disclosure Project (CDP) annually. This year we are working on our first report to the Transition Plan Taskforce that will outline our transition plans in more detail.


Scenario mapping

In FY 2022, we collaborated with an expert consultancy to simulate potential physical and transition challenges and opportunities for our business in the short, medium, and long term, and to calculate cumulative Enterprise Value at Risk over a five year span (2022 2027). Using a digital replica of FirstGroup, we simulated impacts under five different climate scenarios, from a world where there is almost no climate action and global temperatures rise by a disastrous 4°C, to a world where there is quick transition to a low carbon economy and global temperature rise is kept to 1.5°C above pre industrial levels.

Since our 2022 evaluation, we provide annual updates in the TCFD section of our annual report to give updates what we are doing to keep lowering our carbon emissions and enhance our climate adaptability across our operations.


Transition Risks

Our analysis of transition risks considers potential impacts on our business from changes in policy (such as carbon pricing), technology (additional capital expenditure required to meet more stringent environmental standards), brand reputation (customer expectations and FirstGroup’s environmental credentials and ability to meet carbon reduction goals), and capital markets (investor expectations and impact on funding access/costs).

Considering our industry, we also anticipate increasing opportunities in the coming years to offset some of these risks, mainly related to a faster modal shift driven by customers’ growing climate awareness and stricter climate policy and market stimuli. We are collaborating with our Bus and Rail divisions to analyse how the speed at which we electrify our fleet and advance towards our net zero targets could impact our potential to seize these opportunities. Updates on these risks are published in our Annual Report.


Physical Risks

We evaluate physical risks by looking at how acute climate events, such as more frequent and more intense floods, storms, rainfall, heatwaves, and droughts, as well as more chronic and long term changes such as rising sea levels and a global increase in temperatures, could affect our business. These events could have financial impacts ranging from operational disruptions and asset damage to health and safety risks, insurance costs and revenue loss.

Our analysis identified flooding as one of our most immediate, material risks. It was found that the increased probability and magnitude of flooding could result in a higher risk of connective infrastructure damage, affecting electricity supply and digital connectivity. It could also cause more vehicle accidents and route closures, and pose health and safety risks to our staff and customers. It could also damage our depots and vehicles, leading to depreciation and stranded assets, as well as impacting insurance costs and insurability of assets.

Due to this increased risk we carried out a separate, in‑depth flood modelling exercise covering riverine, surface water and coastal flooding. The model considered the top 240 most critical assets owned, leased or managed by FirstGroup or our subsidiary companies and assessed the maximum metres of flooding expected at these locations over different timeframes. The purpose of this exercise was to identify assets at high risk of flooding, assess potential financial impact and strengthen mitigation measures going forward. The model showed that the majority of FirstGroup owned assets have limited/low exposure to flood risks in the short term.

Our assessments also focused on potential impacts to assets that we own, lease or manage, but our exposure to climate risks critically also depends on assets that are owned and managed by third parties, such as rail tracks owned and managed by Network Rail. We connect with key stakeholders across the rail industry, as part of a TCFD working group convened by Network Rail, to start sharing our approach to climate risks and facilitate closer collaboration on risk mitigation and climate adaptation.


Economy-wide Transition

Considering our business model and some of the critical interdependencies between us as a public transport provider and local authorities, DfT, Network Rail and our supply chain partners, a strong approach to decarbonisation, partnership and advocacy is key in building strategy resilience and future‑proofing our business. It enables us to inform policy developments, accelerate decarbonisation efforts, mitigate our exposure to climate‑related risks and capture business opportunities as they arise.

Our strong approach to partnership also facilitates collaboration across our industry for a more systemic and effective approach to climate change mitigation and adaptation. We work with national, devolved, and local governments, industry bodies, supply chain partners and other key stakeholders to enable the right conditions to drive the net‑zero transition.

We actively engage with DfT on its Transport Decarbonisation Plan, advocating for more measures to facilitate modal shift to public transport, while highlighting any financial and policy constraints to a rapid decarbonisation of our fleets and infrastructure. We are members of the rail industry Climate Change Adaptation Working Group, seeking to work with industry partners to make the rail network more resilient to climate change.


Governance

Climate considerations are integrated into a multidisciplinary, company-wide management processes throughout the group. We see management as active participants in the mitigation and management of climate-related risks and opportunities:

The Chief Executive Officer takes ultimate executive responsibility for all ESG issues including climate-related risks and opportunities.

The Executive Committee provides leadership and direction for the Group on sustainability matters, including climate change, with material issues presented by the Group Corporate Responsibility and Finance teams for discussion and decision‑making as they arise throughout the year. Executive responsibility for sustainability matters is held by the CEO. Executive responsibility for climate‑related financial risks and opportunities is held by the CFO, who represents these matters at Board level.

The Responsible Business Committee coordinate ESG efforts across geographies and businesses from both a strategy and policy perspective. The Committee specifically monitors the group’s performance in terms of social, environmental (including climate change and net-zero transitions) and governance (ESG) indicators. The Committee consists of directors with experience in sustainability and meet four times a year. At each meeting, the Committee receives a detailed performance update from Bus and Rail against specific commitments and targets, and discusses strategic priorities going forward. Over the last year, the Committee reviewed and guided for example FirstGroup’s plans for further embedding the TCFD recommendations across the business and our approach to Scope 3 emissions.

The Audit Committee supports the Board in the management of risk, including climate‑related risks, and is responsible for reviewing the effectiveness of risk management and internal control processes. The Audit Committee reviews climate‑related risks as relevant in relation to going concern, viability statement and the assessment of impairment.

The Group Director of Corporate Responsibility is a member of the Responsible Business Committee and collaborates with a range of senior leaders on ESG issues.

The various group sustainability teams report to the Group Director of Corporate Responsibility and are tasked with supporting the risk teams in identifying environmental and climate-related risks that may have an impact on the group. They are also responsible for defining sectoral policies aimed at limiting the ESG risks to which First Group may be exposed to and for implementing net-zero and other ESG strategies and projects.



 

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