Climate-related risk disclosures

A.P. Moller - Maersk (Maersk) recognises that climate change, and government and market actions to mitigate such change will have an impact on our operations and the consumer demand of our products and services. Our understanding of the challenges related to climate change is evolving and we continuously update our plans and actions accordingly, while being conscious of the uncertainties around tipping points that lead to large and irreversible changes in the climate system, once exceeded⁶.

Climate change site assessment: Rotterdam

In August 2022, an onsite assessment was performed to assess and develop climate change impact scenarios on operations at our terminal in Rotterdam. Based on this, a climate risk analysis was completed to assess how the terminal is influenced by climate change, including in relation to exposures and climate hazards. The results of this assessment are summarised in the matrix below.

In 2022, we have taken further steps building on the extensive physical risk analysis we conducted in 2021. We have initiated onsite risk and mitigation assessments on our most vulnerable land-based assets, and we further studied the disruptions that climate-related physical risks may have on global trade flows. We continuously do our utmost to abate transition risks by aspiring best-in-class decarbonisation strategies, proactively aligning with national and international regulations, and supporting our leading customers by transitioning our business in a responsible manner.

We use the recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD) to categorise, manage and report on climate-related risks⁷. The risk categories are:

1. Physical risks a. Acute (extreme weather events) b. Chronic (changing weather patterns and rising mean temperature and sea level)

2. Transition risks a. Policy and legal b. Technology c. Market d. Reputation

Maersk uses a range of climate change scenarios, SSP1-2.6 and RCP2.6 to SSP5-8.5 and RCP8.5⁸, which are aligned with the IPCC 6th Assessment Report from 2021. These are used to identify financial and operational risks and opportunities linked to climate change that impact the company in both the short and long term. The purpose is to ensure that our assets and operations are prepared and capable of both mitigating climate-related risks and capturing the opportunities.

Adapting our land-based assets to physical climate risks

Rotterdam, Netherlands; Port Said on the Suez Canal in Egypt; Aqaba, Jordan; Port Elizabeth, New Jersey; and Los Angeles, California.

As a reaction to these findings, in 2022, Maersk employed Zurich Resilience Solutions (ZRS) to undertake onsite climate assessments at these five port terminals to assess physical and operational site-level risks. Applying climate science, data and modelling techniques, mitigation solutions tailored to each port will be developed. See box in lower left for details on our ongoing assessment in Rotterdam, Netherlands.

Assessing climate impact on global trade flows

In 2022, Maersk commissioned a complementary study with the purpose to help us understand how climate change, under various transition scenarios, could have broader impact by influencing patterns of global economic activity and trade flows. This study modelled three key scenarios, each reflecting different emission and temperature paths, to assess the economic impacts of climate change and the low-emission transition from 2020 up to 2070:

• Hot House World (HHW) (>3 degrees): The world continues to increase emissions and does little to avert the physical risks

• Orderly Transition (below 2 degrees): Early and coordinated policy changes are coupled with technological improvements to meet climate goals

The climate risk analysis shows that the highest physical risks at this location are related to storm surge and windstorm. Subsequently, financial loss estimates were elaborated for these physical risks. Risk mitigation solutions were identified as an outcome of the analysis. These solutions will be the basis for further investments to increase the climate resilience of the site.

Our land-based assets around the world and the third-party infrastructure that we depend on are already impacted by extreme weather events such as typhoons and hurricanes, wildfires, droughts and flooding. The high vulnerability to physical climate risks led us to initiate a study in 2021 in which we assessed the impact of physical climate disruption on 107 of our key land-based assets. The study concluded that terminals are the land-based assets most at risk for physical impact of climate change, whereas the following five terminals were identified as having the highest risk of disruption:

• Disorderly Transition (below 2 degrees): Unanticipated regulatory responses are disruptive, but early enough to reach climate goals The result from the study shows, amongst other things, that climate inaction (HHW) over time will impact trade flows with significant impacts in the next 50 years. If the transition happens early and in a coordinated fashion (Orderly Transition), the benefit of transition will start to outweigh the cost in the mid-2050s. If the transition is late and uncoordinated (Disorderly Transition), the benefit of transition will not start outweighing the cost until a decade later.

Given the large scale of Maersk’s global networks and activities across a multitude of customer verticals, and the inherent uncertainties of working with climate impact scenarios at a macroeconomic level, we cannot draw definitive conclusions. Rather, we will use the study as a foundation for continuing to explore how these global changes will affect our business model and global trade, and how we best can adapt and respond to these changes.

We have a responsibility to minimise negative environmental impacts from our operations, in compliance with regulations, and to live up to the requirements and expectations of our customers and other key stakeholders.