Risks and Opportunities Derived from Climate Change
As part of our work throughout 2020 and given our understandin of the importance of climate change, the identification and evaluation of risks and the opportunities arising from future situations, we wish to disclose our information in this area as part of the Carbon Disclosure Project (CDP). We are complementing this exercise with the elements of a Task Force on Climate- related Financial Disclosures (TCFD).
We have made a first attempt to elucidate the Company’s risks and opportunities, and will stren gthen this process over the course of 2021.
• Our products contribute to solutions for today’s world and that of the future. As such, as part of our efforts to limit the lobal temperature increase to 1.5°, it is paramount that we promote electromobility, solar energy with storage, water efficiency and other changes. All of these processes require the use of our lithium, solar salts and bischofita fertilizer products, which contribute to these lobal challenges.
• The opportunity to adapt to new conditions and to be more efficient in the use of our resources will allow us to cut costs.
• Collaborative efforts to address new challenges. Interaction with other stakeholders eared towards meeting the same challenge is fundamental to rowing as a company and leading in sustainability and climate change. This in turn generates positive benefits in the industry, our customers, suppliers and our own workers by stren thening the Company’s purpose and enerating internal tools to be better workers.
• Mechanism for setting the price carbon in the countries where we operate. For example: The limits on facilities subject to this tax in Chile are less than 50 thermal megawatts (MWt). As such, the risk is that a large number of operations become subject to it or that the current tax is levied on other industrial sectors (tax indexed to the price of fuels). Another risk is a considerable increase in the carbon tax, which is currently US$5/tCO2.
• There is a risk of hydric stress increasin in the areas where we operate, leading to a prioritization of human consumption that impose restrictions on our water use. This could have implications such as unanticipated costs to purchase this resource in order to meet our operation’s needs.
• International regulations associated with climate change that generate a barrier to entry for our products in destination markets. For example: Carbon taxes at the border.
• Increases in obligations or increases in mitigation tar gets set in the countries where we operate. For example: Chile committed to becoming carbon neutral by 2050.
• Failing to deliver on our promises in the area of sustainability, such as greenhouse gas reduction, not earning certifications or receiving low environmental, social or governance scores, could put our reputation at risk and impact the markets.
• Failing to control our exposure and vulnerability to climate change risks. For example: Lacking information on our assets’ exposure to climate change and the absence of a strategy to adapt.
• The Company failing to adapt to a low-carbon economy, which would have an unanticipated cost for meeting tar gets. For example: The transition to more sustainable transportation, replacing fossil fuel boilers with electric ones or other shifts that involve technological changes.
• Increased severity and frequency of extreme weather phenomena such as cyclones and floods could impact our production sites.
• Extreme amounts of rain, evaporation loss, inventory loss resulting in a failure to meet demand, increased insurance premiums.
• Risks of mudslides that would cut off roadways, physical risks to people and equipment. Heat waves could threaten worker safety and put equipment at risk.
• At the port, tidal waves, floods, increased costs due to port changes. Heat waves could threaten worker safety. Strong winds could cause product loss.
• Issues transporting products to Chile and other parts of the world due to port closures.
• On going physical risks such as higher sea levels that cause problems in ports like Tocopilla, preventing products from being loaded and delivered to our customers on time.
• Changes in precipitation patterns and extreme variability in weather patterns: If it is due to an increase in rain, the cost rises. A rise in average temperatures could cause changes in process efficiency if equipment is impacted by hi her temperatures.
• At the port, changes in biodiversity on the coast could pose a risk of arrival of new protected species of flora and fauna, adding new environmental impacts to the operation that had not been considered.