Company disclosures (4)
Climate change AMP, its customers and its external suppliers may be adversely affected by physical and transition risks associated with climate change. These effects may directly affect AMP and its customers through a range of physical, financial and legal impacts to our business, the investments we manage on behalf of our customers and the wider community.
Initiatives to mitigate or respond to adverse impacts of climate change may in turn impact market and asset prices, economic activity, and customer behaviour, particularly in geographic locations and industry sectors adversely affected by these changes.
Climate-related risks and opportunities
This section provides information about the climate-related risks and opportunities that could reasonably be expected to affect the Group's prospects, including current and anticipated impacts over the short, medium and long term.
Climate-related physical risks
Climate-related physical risks arise from acute, weather-related events (such as more frequent and severe storms, floods, drought or heatwaves) and from chronic, longer-term shifts in climatic patterns (including changes in precipitation and temperature that may lead to sea level rise, reduced water availability, biodiversity loss and changes in soil productivity).
Increased frequency and severity of weather-related events, resulting in increased claims
Timeframe: Short, Medium, Long term
Impact on QBE's business model and value chain: Climate change is expected to increasingly impact the frequency and severity of weather-related natural catastrophes. These risks are continually assessed through catastrophe modelling and underwriting analysis, which inform the Group's underwriting and reinsurance strategy, as well as the calibration of the catastrophe allowance within the business plan. QBE considers business activities as vulnerable to climate-related physical risks where they are significantly exposed to catastrophic weather events and contribute materially to the Group's annual catastrophe claims cost within net insurance service expenses and net insurance contract liabilities. Classes most impacted include property and property-related product lines, with varying impacts across perils and regions. In property classes, QBE's peril exposures are most significantly driven by hurricanes, tropical cyclones, convective storms, windstorms and floods across North America, Europe and Australia. As an indicator of relative exposure within the claims profile, the modelled aggregate net annual average loss (AAL) for climate-related perils for 2026 is $654 million and represents approximately 5% of the Group's 2026 plan net claims, noting that modelled outcomes are subject to significant uncertainty as outlined on page 53. Following the exit of underperforming property portfolios and recalibration of retained property lines, QBE has experienced catastrophe losses at or below its established allowances in recent years. Consideration of the consequential impacts of these risks on reinsurance costs and premium pricing is disclosed in the 'Climate resilience' section on page 34.
Other product lines that may be exposed to physical climate risks were not considered to be vulnerable where structural features such as coverage design or regulatory protections exist to limit susceptibility to volatility from these events, or where historical claims experience indicates that such events are not a primary driver of financial performance. This includes North America Crop, where the predominant product structure provides revenue protection to farmers. Claims are primarily triggered by declines in revenue which may result from either lower crop yields or lower commodity prices, and market forces of supply and demand typically act as a stabilising mechanism between these two variables. The program is also subject to federal reinsurance arrangements that significantly limit QBE's net exposure to impacts from catastrophic weather events.
Top risks
QBE's top risk process is designed to ensure that the most significant threats to the Group's strategic objectives are identified, assessed, and managed proactively. Climate change is identified as one of QBE's top risks:
Climate change: The physical and transition risks associated with climate change, resulting in potential impacts on QBE's operating environment, underwriting or investment activities, or impacts associated with failing to meet regulatory requirements or our own commitments.
How we respond: QBE understands and monitors this risk through scenario analysis, development of a Climate Transition Plan, and uplifted sustainability governance to support mandatory reporting. The actions we are taking are outlined in QBE's Sustainability Report.
Climate-Related Risks and Opportunities Identified
Strategic Context: Santos' strategy leverages our diversified and extensive resource base while addressing climate-related risks and opportunities. Our approach includes:
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Backfill, sustain and decarbonise: Decarbonisation remains central to our business and has been embedded in the first horizon of our strategy. We are actively investing in carbon reduction initiatives across our operations, including CCS to provide large-scale emissions reduction services for Santos and, in the future, potentially third party customers.
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Build and grow: Santos aims to leverage existing infrastructure to grow profitable gas, LNG and liquids production for domestic and Asian markets and establish a commercially viable third-party carbon management services business.
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Low carbon fuels: Santos will seek to provide low carbon fuels by decarbonising our own operations, establishing a commercial third-party carbon management services business and developing new low carbon fuels as energy markets and customer demand evolve.
Market Context:
- LNG demand is forecast to grow across Asia-Pacific, led by China in the early 2030s and emerging economies in South and Southeast Asia into the 2040s
- Oil demand remains resilient through to the end of this decade, supported by aviation, petrochemicals and heavy transport
- Despite short-term uncertainty, structural demand for hydrocarbons continues unabated
Specific Opportunities:
- Carbon capture and storage (CCS) technology providing emissions reduction services
- Potential commercial third-party carbon management services business
- Development of low carbon fuels as energy markets evolve
- Nature-based carbon projects delivering environmental benefits
Through our assessment, we identified the following as material climate related risk and opportunities for our business:
Transition risk (policy / legal) • Exposure to climate related government regulations that impose an additional cost of carbon
Description: Increasingly Australian climate regulations and policy commitments, such as the Safeguard Mechanism (SGM), increase compliance requirements and costs, and may adversely impact our business. The SGM is currently the Australian Government's primary mechanism for meeting its international emission reduction obligations. As the Geelong Refinery is a high-emitting facility, the SGM poses a significant risk to unrecovered cost increases in our business in both the short and long term. Future regulations that mandate emissions reductions for the Group may be strengthened over time, increasing the cost of compliance and influence the Group's investment decisions.
Transition risk (market / technology) • A reduction in demand for hydrocarbon fuel products, driven by a combination of regulation, consumer preferences and technological advancements, could render part or all of our assets and infrastructure obsolete
Description: It is anticipated that a combination of Government policy, improved fuel efficiency of vehicles and access to new technologies will result in displacement of existing gasoline, diesel and jet fuel sales over the medium to long term. The rate of this displacement is expected to vary across segments. The pace and timing of the transition will have a direct impact on the investment returns for new fuel infrastructure, and our ability to align our strategy with this transition will determine how effectively we adapt our infrastructure and operations to address this risk.
Transition opportunities (market / technology) • Increased demand for low-carbon liquid fuels (LCLFs) such as biodiesel, renewable diesel (RD) and sustainable aviation fuel (SAF) present an opportunity for additional revenue sources
Description: LCLFs will play an important role in decarbonising the fuel pool by providing a drop-in replacement alternative for hard to abate sectors. This will be important for key sectors including mining, aviation and long haul transport where electrification will be difficult or expensive. Government policy (both demand‑side and supply‑side) will be a key driver of LCLF uptake in Australia. Public consultation on these measures commenced in late 2025 and continues into 2026. As LCLFs are a drop-in fuel replacement, they are highly compatible with existing terminal and supply chain infrastructure. To date, investment in establishing the supply of LCLFs has focused on small tank storage and reconditioning out-of-service tanks to provide new supply pathways. These investments help broaden how we utilise our existing assets and create opportunities to support their continued use into the future. The Group's opportunity in LCLFs relates to both the manufacture and the supply of these products. Our Geelong Refinery is central to our LCLF manufacturing opportunity, with existing refining assets and operational expertise in fuel production providing a strong platform for LCLF production. By investing in the manufacturing, distribution and sale of LCLFs, the Group has the opportunity to diversify its revenue base as market demand increases.
Physical climate risks Our risk assessment identified a range of other climate-related risks and opportunities which are currently not reasonably expected to affect the Group's prospects. This includes an assessment of the Group's direct exposure to physical climate risks, which at this stage are not assessed as posing a material risk to our business or assets under any scenario or time horizon. This assessment reflects the geographic dispersion of the Group's assets and infrastructure across Australia. While severe weather events such as floods or bushfires can significantly affect individual locations, only a small number of sites across our national network are typically impacted, and these localised disruptions are therefore not considered material to the overall business.