TCFD Summary KPMG - JSW Cement

At JSW Cement, climate-related risks and opportunities are well integrated with our overall risk management process. A multi-disciplinary company-wide risk management process helps in the identification, assessment, and management of several aspects of climate change in terms of fuels availability & cost, energy optimisation, emerging regulations etc. However, a separate exercise of Climate risk/opportunity assessment was undertaken in 2023 aligning with the recommendations of the Task force on Climate-related Financial Disclosures (TCFD) for which we had engaged a third party ‘AXA Climate’. A scenario-based climate change risk assessment exercise was undertaken to determine potential implications of climate risks on our business and operations in short term, medium term and long term. We have identified physical climate risks and transition risks and for each we have considered two scenarios – Business-as-usual and Optimistic.

This note summarizes the outcome of this analysis and how we will build our strategy to mitigate and adapt to the risks identified and leverage on opportunities. This will also help us making our business more resilient towards emerging risks by preparing ourselves in advance.

Physical Risk Assessment

All our operational sites (seven sites), four value chain assets (including two raw material suppliers, one key market) were covered for the risk assessment (for acute and chronic physical climate-related risks).

Shared Socioeconomic Pathways (SSPs) are climate change scenarios of projected socioeconomic global changes up to 2100 as defined in the IPCC Sixth Assessment Report on climate change in 2021. They are used to derive greenhouse gas emissions scenarios with different climate policies. There are five scenarios as depicted in the figure. Out of these five, we have considered two future scenarios - SSP2-4.5 and SSP5-8.5.

Physical Risks	SSP2-4.5	SSP5-8.5
Acute climate risks refer to hazards that are eventdriven, including extreme weather events, such as cyclones, droughts, earthquakes, or floods. Chronic climate risks refer to long-term shifts in climate patterns that may cause the continuous evolution in climate variable like sea level rise, water stress etc.	This is a “middle of the road” scenario. CO2 emissions hover around current levels before starting to fall mid-century, but do not reach net-zero by 2100. Socioeconomic factors follow their historic trends, with no notable shifts. Progress toward sustainability is slow, with development and income growing unevenly. In this scenario, temperatures rise 2.7C by the end of the century. This is equivalent to RCP4.5 scenario.	This is a future to avoid at all costs. Current CO2 emissions levels roughly double by 2050. The global economy grows quickly, but this growth is fueled by exploiting fossil fuels and energyintensive lifestyles. By 2100, the average global temperature is a scorching 4.4C higher. This is equivalent to RCP 8.5 Scenario.

Physical Risks

SSP2-4.5

SSP5-8.5

Acute climate risks
refer to hazards that are eventdriven, including extreme weather events, such as cyclones, droughts, earthquakes, or floods.

Chronic climate risks
refer to long-term shifts in climate patterns that may cause the continuous evolution in climate variable like sea level rise, water stress etc.

This is a “middle of the road” scenario. CO2 emissions hover around current levels before starting to fall mid-century, but do not reach net-zero by 2100. Socioeconomic factors follow their historic trends, with no notable shifts. Progress toward sustainability is slow, with development and income growing unevenly. In this scenario, temperatures rise 2.7C by the end of the century. This is equivalent to RCP4.5 scenario.

This is a future to avoid at all costs. Current CO2 emissions levels roughly double by 2050. The global economy grows quickly, but this growth is fueled by exploiting fossil fuels and energyintensive lifestyles. By 2100, the average global temperature is a scorching 4.4C higher. This is equivalent to RCP 8.5 Scenario.

Seven climate perils (as per IPCC classifications) were primarily considered for the risk assessment. Multiperil risk score was calculated for each asset based on its exposition to perils and on the vulnerability depending on the type of building and industry.

Below is the summarised analysis of physical risk assessment

Transition Risk Assessment

For assessing climate related transition risks and opportunities, we used Network for Greening the Financial System (NGFS) scenarios. The NGFS scenarios framework explores a set of possible transition pathways, depending on different levels of ambition and coordination in terms of climate policies.

We considered Net Zero (NZ 2050) Scenario (Optimistic) and Nationally Determined Contributions Scenario (NDC) by NGFS.

Transition Risks	NGFS NZ 2050 Scenario	NGFS NDCs Scenario
	This scenario assume climate policies are introduced early and become gradually more stringent. Both physical and transition risks are relatively subdued.	These scenarios assume that some climate policies are implemented in some jurisdictions, but global efforts are insufficient to halt significant global warming. Critical temperature thresholds are exceeded, leading to severe physical risks and irreversible impacts like sea-level rise.

1 - Governance	Key Findings/ Current Status
a) Governance of risks and opportunities related to climate change by the Board of Directors	Governance at JSW Cement is structured across 3 levels - Board of Directors, Board level Management Committees & Executive Management Climate related aspects including risks and opportunities are reviewed at Risk Management Committee and Sustainability Committee at board level, twice in a year. Topic related to ESG and Climate are covered in Climate Change Policy, Corporate Environment Policy, Energy Management Policy, Raw Materials Conservation Policy, Water Resource Management Policy and Biodiversity Policy.
b) Management’s role in assessing and managing risks and opportunities related to climate change	Chief Sustainability and Innovation officer is responsible for setting up the climate strategy, ambitions, Metrics, and targets for the business. This is carried out in consultation with the Chief Manufacturing Officer who also is also accountable for execution and implementation of the initiatives. Climate related risks and opportunities are assessed at unit level and functional level and then get reviewed and validated before consolidation at corporate level. Mitigation actions are also prepared and reviewed periodically. The management decided to undertake a separate climate risk and opportunities’ assessment for the business aligned with TCFD recommendations in FY 2022-23.
2 - Strategy	Key Findings/ Current Status
a) Risks and opportunities associated with climate change identified	The business undertook a climate risk and opportunities assessment aligned with TCFD recommendations and industry best practices in March 2023. In the assessment, key physical and transition risks to the business have been identified under different scenarios over different timeframes.
b) Impacts of risks and opportunities identified for the organization	The business has identified the potential impacts of climate change on its own assets, supply chain and key markets. It has also undertaken a detailed assessment of impact of top climate risk on the business until 2030-2035 timeframes for transition risks. The business has identified the potential relative financial impact of climate related physical risks across its own asset and key supplier portfolios.
c) Resilience strategy of the organization, taking into consideration different climaterelated scenarios	The business has identified key development areas based on the risk and opportunities identified. As part of the current assessment, a resilience strategy has been developed based on scenario analysis, with the most aggressive scenarios taking precedence (e.g. SSP5-8.5 scenario for physical climate risks and Net Zero scenario for transition risks). However, this is yet to be integrated into existing framework and implemented

3 - Risk Management	Key Findings/ Current Status
a) Processes in place within the Company to assess risks and opportunities associated with climate change	The business adheres to the internationally recognized 'COSO' model for Enterprise Risk Management (ERM). JSW Cement have a dedicated risk management function at the group level. The risk management framework involves a 3-step process viz identification or risks, assessment of risks and responding to these risks. Climate related risks and opportunities are assessed at unit level and functional level and then get reviewed and validated before consolidation at corporate level. Mitigation actions are also prepared and reviewed in a timely bound manner. With the present climate assessment aligned with the TCFD recommendations, the business will be integrating climate risks and opportunities into its ERM.
b) Processes in place to manage these risks and opportunities
c) Integrating these processes into the Company’s risk management processes

4 - Metrics and Targets	Key Findings/ Current Status
a) Indicators used to assess risks and opportunities related to climate change	The business currently uses key metrics such as emissions intensity per tonne of cementitious materials produced to assess its performance towards climate mitigation. Apart from this, it has also used metrics such as energy intensity, Fresh water intensity, water positive index, Thermal Substitution Rate (TSR), green and clean energy portfolio, waste derived resources etc. We have set targets as well for all these indicators against which we continuous monitor our progress.
b) Publication of Scope 1, Scope 2, and, if applicable, Scope 3 greenhouse gas (GHG) emissions	The business has been reporting and disclosing its Scope 1 and Scope 2 emissions and partial Scope 3 emissions since 2019 in its CDP Climate and Integrated/Sustainability reports.
c) Targets used to assess the risks and opportunities linked to climate change	The company primarily use carbon emissions related to absolute emissions and emissions intensity per tonne of cementitious materials for Scope 1 and Scope 2 produced as the key target for evaluation of its performance. Apart from this, the company has set targets in the areas of electric vehicles, renewable energy, energy efficiency and AFR.

Basis the assessment conducted; we have also developed a context specific physical climate risk adaptation plan. The plan covers 100% of our existing operations s well as a few of the upcoming operations. We have identified relevant adaptation measures based on severity of each identified risks. The adaptation measures are to be implemented within a timeline of 5-10 years.

For each of the identified risks and opportunities, financial implications on business were also identified using assumption and estimation. This also helped in identifying the time frame to materialise these risks as well as the cost of actions required to mitigate the risks/materialise the opportunity which subsequently help us to make an informed decision.

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Climate Risk and Opportunity Assessment Report - Aligning with TCFD recommendation