Enterprise risk assessment
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 potential financial impacts.
Transition risks
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 with 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.
Physical risks
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 and 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.
For additional detail on our climate strategy, governance, risk management, and metrics and targets see the Climate section of the 2022 CR Report and the TCFD Index.