Sustainability report

During 2020, we have completed climate risk assessment at all our sites and we will continue to align the risk with strategy and investment plans to safeguard the future. Evaluating climate risk Our climate impact assessments have been carried out with a third party that has extensive knowledge of AAK’s sites. The analysis is based on a short-term (1–5 years) perspective and a mid- and long-term perspective (10 years and beyond). The short-term perspective involves detailed information from local experts and authorities. The mid- and long-term perspectives are based on the insurance industry overview worldwide, involving mappings of natural hazard future exposures during a period of 10–500 years (climate changes, catastrophic events, and population density). Physical and transition risk The focus regarding physical risk has been on extreme storms, tornadoes, water-stressed areas, and unfore- seen temperature shifts, with an aim to continuously review any implemented actions to reduce the risk for property damage and business interruption. During 2020, we have also been working to embed transition risk into our climate assessments. The risk impact analysis and a risk-grading tool will include policy, legal, technology, market, and reputational risk going forward. Mapping of exposure and preventive actions The physical risk is today low to medium. There are two high-risk sites (Louisville in the US and Zhangji- agang in China), and four medium- to high-risk sites (Karlshamn in Sweden, Aarhus in Denmark, Richmond in the US, and Jundiaí in Brazil). They are all facing a risk of flooding long-term, but to date they have imple- mented preventive actions as far as presently feasible. Our site in Jundiaí in Brazil has for example been built on the top of a hill to avoid river flooding exposure. The site has also drilled its own wells and installed a cooling water tower and a water treatment plant. The transition risk will be further defined once the updated scoring system has been implemented, but so far, the level of risk is evaluated as low to medium, depending on development such as local actions taken by government and countries themselves. Metrics and tools for continuous progress AAK aims to align with the Task Force for climate- related financial disclosures (TCFD) framework and this represents our first strategic response to the financial implications of climate change. Short- and long-term scenarios will be evaluated once we have deployed our metrics and tools fully. Looking ahead, we also need to add our most exposed key raw materials to the scenario. Future-proofing our sites by assessing climate risk AAK Sustainability Report 2020 Better Operations | 43 Contributes to: