The accelerating pace of environmental, technological, regulatory and social changes has reinforced the importance of business resilience. CLP recognises the strategic value of anticipating, withstanding and learning from disruptive events, especially in response to the growing threats posed by climate change and cybercrime.
Building resilience in the face of climate change and an evolving business environment
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To ensure a reliable, reasonably-priced and sustainable supply of energy, CLP must address the challenges that natural resource constraints and extreme weather conditions pose to its physical assets. While investment is needed to manage physical climate risks, adaptation practices which can better track and analyse ESG-related data also present opportunities to build a more climate-resilient energy grid system, bringing benefits for both CLP and local communities.
Building resilience against climate change is a prominent part of CLP's Climate Vision 2050. To prepare for and respond to future shocks, CLP has put in place a strong governance and risk management foundation that fully integrates climate and sustainability-related risks into its Group-wide risk management system, with the oversight of Board and senior management. To navigate uncertainties relating to climate change, CLP has conducted climate risk assessment based on three climate scenarios which were reviewed in 2023, including a high-emission scenario, low-emission scenario and a deferred transition scenario – based on which physical and transition climate risks have been evaluated. Furthermore, CLP completed a project with an external carbon consultancy firm to develop a methodology for assessing the 'Implied Temperature Rise (ITR)' of CLP’s decarbonisation target in 2023. This methodology allows electric utilities to better understand their transition risks by quantifying the level of alignment of their decarbonisation effort based on their sector’s “carbon budget” determined by the Science Based Target Initiative (SBTi).
As the nature and extent of threats to operations and supply reliability varies across geographies, CLP has conducted asset-level physical climate risk assessments and developed adaptation measures to enhance the resilience of individual assets in each region. In Hong Kong, CLP Power has developed the Asset Management Standard on Climate Change Adaptation for its generation and network assets based on the results of the physical climate change risk assessment and climate change adaptation study conducted in 2022. In the face of increasingly frequent extreme weather conditions, CLP Power has adopted various measures and technologies in recent years to enhance the resilience of its transmission networks and its emergency preparedness. For details, please refer to the Providing customers with reliable and reasonably priced energy section.
In Mainland China, CLP China conducted a comprehensive review of the risks faced by its renewable energy assets and its existing risk mitigation measures to ensure the effectiveness of its risk management practices. The equipment of the new assets is designed with an ability to withstand extreme weather conditions, while the existing assets have been upgraded to enhance their resilience level. Emergency preparedness plans, covering evacuation procedures, backup power sources and communication protocols, are in place for responding to various types of extreme weather events.
In India, Apraava Energy has conducted climate risk assessments for its current sites as well as for proposed sites using a Physical Climate Risk Screening tool which helps forecast weather patterns at certain geographic locations. It has also informed concerned stakeholders about the relevant climate-related risks for their supply chain planning. Insurance coverage has been arranged for all Apraava Energy sites to mitigate the adverse consequences of extreme weather events.
In Australia, an extensive, site-specific physical risk assessment was undertaken in 2023. Using a range of climate scenarios, risks to individual assets and staff safety and well-being were quantified out to 2050. This included factors such as wildfires, coastal flooding, extreme precipitation and inland flooding, extreme heat, extreme cold, landslides, water stress and drought. Findings were incorporated into EnergyAustralia’s broader Enterprise-level Risk Scenarios with additional site-specific measures developed to further mitigate the physical risks associated with extreme climate change.
CLP operates in an ever-evolving cyber security threat landscape. It is therefore important that the business has appropriate measures in place to address these threats. Cyber security risks to CLP, its investments and business interests are business risks, and they are therefore managed in line with CLP’s established Risk Management Framework.
In 2023, Group Security established a Cyber Security Governance and Risk Management function which is helping the wider Group take responsibility for cyber security risk management and decision-making. Additionally, Group Security, in general, supports CLP in securing its assets to a level commensurate with the individual business’s risk appetite, to ensure that any security breaches have a minimal impact.
Group Security refreshed its security standards during the year. These define individual and organisational obligations and guide the business in implementing good security practices. Where relevant, employees, subcontractors and third parties are required to comply with CLP’s policies and standards, and its philosophy of risk management is now integrated into these documents.
Now operating within CLP Digital, Group Security has taken the opportunity to upgrade its Security Operations Centre, enhance the cyber security monitoring service for Operational Technology, and improve external support with a new Managed Security Service Provider. These changes collectively represent a significant uplift in CLP’s cyber security posture.
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