Risks and Opportunities
Climate-related risks are embedded across key areas of our Enterprise Risk Management; these include operations, HSE and security, and strategic considerations. This ensures comprehensive assessment, adaptation and mitigation strategies are integrated into all aspects of our business activities. Climate considerations are further embedded into our Corporate Business, Financial Plan as well as Asset Management, ensuring these risks and opportunities are addressed throughout our decision-making processes.
Transition Risksand Opportunities
PhysicalRisks
MedcoEnergi has initiated the Climate Change Risk Assessment (CCRA) in 2021 and has since expanded and refined. In 2024, we developed comprehensive guidelines to standardize the process and provide a structured methodology to assess and manage climate-related risks and opportunities, including both physical and transition risks.
Physical Risk
In line with our Enterprise Risk Management Policy, the Company considers both acute and chronic physical risks in our climate-related risk assessments. Building upon the qualitative analysis conducted in 2023, MedcoEnergi undertook a more in-depth climate scenario analysis, incorporating a quantitative approach. This analysis focused on Block A and the non-operated asset JOB Tomori, selected to enhance our alignment with the requirements mandated by Equator Principle 4 (EP4). In 2024, we assessed the qualitative physical risks of an additional 25 assets and enhanced the details of the quantitative business impact assessments for Corridor Block and Riau IPP. The assessment provided detailed insights into potential physical climate risks.
The projected increase in the severity and frequency of extreme weather events associated with climate change could impact for MedcoEnergi's asset infrastructure. Furthermore, we have established climate adaptation and mitigation initiatives to strengthen its resilience.
Transition Risk
We have completed quantitative assessments of business impacts from transition risks in 2024 using standard science-based scenario analyses from IEA (APS and STEPS). These initiatives enable us to better understand the potential financial impact of carbon pricing.
MedcoEnergi established internal carbon pricing to respond to climate transition risks. We also used internal carbon pricing as business model to determine business impacts and stress-test potential investments by assuming a cost for carbon emissions, which helps us better understand the potential effects of carbon pricing on a project's profitability.
Further reading on the approach, methodology, findings, and mitigation measures for our 2021, 2023 and 2024 climate change risk assessment can be found in our TCFD report and MedcoEnergi's Sustainability Reports.