Enterprise risk assessment
We incorporate climate-related risks and opportunities into our annual enterprise risk assessment (ERA) process, which is overseen by our chief risk officer and reviewed by the Board of Directors. Our ERA process focuses on identifying short- and medium-term risks within a five-year time horizon. We analyze these risks based on their potential financial or reputational impact on the organization. We undertake our ERA process annually, with a midyear check-in to determine if any significant changes identified during the annual ERA process need to be addressed.
Individuals responsible for the oversight of climate risk can bring any significant changes to the attention of the chief risk officer. The SVP of corporate development and strategy and SVP of PGPA are responsible for assessing climate-related risks as part of the overall ERA process.
Identifying and managing climate-related risks and opportunities
The TCFD defines potential climate-related risks and opportunities according to two categories: transition risks and physical risks. Transition risks are those that stem from regulatory, economic, market, technological and other societal changes associated with the transition to a lower-carbon economy. Physical risks are those associated with physical impacts from climate change, such as increases in severe weather events or changes in weather patterns. We consider these risks over the short, medium and long term, including their related potential financial impacts.
Our Climate Scenario Analysis allows us to better understand these potential impacts and assess the resilience of our business model under a range of scenarios. In turn, this helps inform our strategy and business planning. We have also conducted a series of engagements with key external stakeholders, including our largest investors and lenders, to better understand their perspectives on the most important risks and opportunities for our business.
To identify policy-related risks and opportunities, we review international and domestic climate policies and regulations and assess how they may affect our business. To manage these risks, we conduct ongoing engagements with policymakers and think tanks in the United States and key international markets.
To assess market risks, we actively engage our customers to understand changing market sentiment. Our efforts to enhance transparency around GHG emissions across the LNG supply chain can inform and support our suppliers’ and customers’ own decarbonization efforts, and thereby help to enhance the GHG footprint of our product and the broader industry.
We are addressing technology risks and opportunities by controlling the carbon footprint of our product.
We periodically analyze our climate-related physical risks. We have identified hurricanes, flooding and other extreme weather events as key physical risks for our business. Based on our analysis, we design our facilities to withstand a variety of extreme weather conditions and implement appropriate risk mitigation and management measures. We install redundant capacity for key equipment to help us maintain or quickly reinitiate operations if equipment is damaged, and we purchase property & casualty and business interruption insurance to protect ourselves from loss. In addition, we employ two full-time meteorologists to help us predict and plan for potential weather-related risks.
We develop hurricane preparedness plans based on Gulf Coast petrochemical industry best practices. We have a dedicated incident response program through which we plan and prepare for potential events, including extreme weather, that could impact operational continuity, our workforce or our communities. Our incident response capabilities and the design of our facilities have been tested in recent years by significant hurricane seasons. They have performed as planned, and we have been able to reinitiate LNG production safely and quickly.
Also, we have undertaken a detailed water risk analysis using the World Resources Institute’s Aqueduct Water Risk Atlas and have determined that we do not operate in any areas of high water stress.