Page 67 - Annual Report 2020

1.7.8 Climate change 1

This year, we produced the BHP Climate Change
Report 2020, aligned with the Task Force on
Climate-related Financial Disclosures (TCFD) Strategic Report
recommendations. The Report provides a more
detailed discussion of our approach to identifying
and managing climate-related risks (both threats
and opportunities) and our progress on our public
commitments in response to climate change.
More information is available at bhp.com/climate.

Warming of the climate is unequivocal, the human influence is clear and physical impacts are unavoidable. Governance at BHP
We believe the world must pursue the Paris Agreement goals, mid-planning case (Central Energy View). The modelling also
with increased levels of national and global ambition, to limit the showed strong cumulative demand for iron ore, metallurgical coal
impacts of climate change. Access to affordable and clean energy and natural gas and more modest demand for oil in the transition
and the availability of natural resources for manufacturing are to a low carbon future over the next 30 years.
essential to meet sustainable development goals. At BHP, we Opportunities to invest in commodities such as potash, nickel and
advocate for actions in line with the Paris Agreement goals while copper, and our rigorous approach to capital allocation, provide
recognising the challenge of achieving these goals is of global scale a strong foundation for our business as the world takes the action
and historic complexity. to decarbonise, even for a 1.5°C world.
Portfolio analysis Transitioning the global economy over the next 30 years on a
The BHP Climate Change Report 2020 describes our latest portfolio trajectory consistent with the Paris Agreement goals would limit Remuneration Report
analysis, including four scenarios: Central Energy View and Lower potential global climate-related impacts, including physical climate
Carbon View which we use as inputs to our planning cases; a change risks at our assets, and potentially generate opportunities
non-linear, higher temperature Climate Crisis scenario, and a 1.5°C to add significant value to our portfolio. The need to adapt would
Paris-aligned scenario. also grow as the global average temperature rises, suggesting that
There are inherent limitations with scenario analysis and it is transitioning to a 1.5°C world could limit the costs associated with
difficult to predict which, if any, of the scenarios might eventuate. adaptation in many regions, compared to higher temperature
Scenarios do not constitute definitive outcomes for us. Scenario trajectories. The 1.5°C scenario is an attractive scenario for BHP,
analysis relies on assumptions that may or may not be, or prove our shareholders and the global community.
to be, correct and may or may not eventuate, and scenarios may However, today’s signposts do not indicate that the appropriate Directors’ Report
be impacted by additional factors to the assumptions disclosed. measures are in place to drive decarbonisation at the pace nor scale
To stay within a carbon budget that keeps global warming to no required for the 1.5°C scenario. If we see the necessary changes in
more than 1.5°C, the 1.5°C scenario requires steep global annual our signposts, we will adjust our planning cases accordingly. Given
emissions reductions, sustained for decades. This pathway to the long lead times for new investments, we will continue to stress
2050 represents a major departure from today’s global trajectory. test our decision making with updated strategic themes and
scenarios to better understand emerging opportunities. We will also
Our updated portfolio analysis demonstrates that our business can continue to advocate for actions in line with the Paris Agreement
continue to thrive over the next 30 years, as the global community goals and seek partnerships to leverage our own investments in low
takes action to decarbonise, even under a Paris-aligned 1.5°C emissions and negative emissions technologies and natural climate
trajectory. This modelling indicated that cumulative demand for solutions, because we believe it is the right thing to do for our
copper, nickel and potash over the next 30 years in the 1.5°C shareholders and our global community.
scenario could not only exceed the last 30 years, but also our Financial Statements
Operational GHG emissions and energy consumption
BHP’s commitments to reduce operational GHG emissions
(1)
Short-term By FY2022, maintain emissions at or below FY2017 levels, while we continue to grow
target: our business
Medium-term Reduce emissions by at least 30 per cent from FY2020 levels by FY2030
(1)
target:
(2)
Long-term Net zero emissions by 2050 Additional information
goal:
Reducing our operational emissions is a key performance indicator for our business. Our performance against our targets is reflected
in senior executive and leadership remuneration.
We have set public GHG emissions reduction targets since the 1990s and regularly review them as our strategy and circumstances
change. Our current short-term target for FY2022 is to maintain our total operational emissions at or below FY2017 levels while we
(1)
continue to grow our business. We have also set the long-term goal of achieving net-zero operational emissions by 2050 and our new
medium-term target is to reduce operational GHG emissions by at least 30 per cent from FY2020 levels by FY2030. Building on our
(1)
short-term target for FY2022, the FY2030 target sets the trajectory towards achieving our long-term goal.
BHP has disclosed Scope 1 and Scope 2 emissions totals based on an operational control approach to boundaries for many years. Shareholder information
In FY2020, BHP has for the first time also disclosed total emissions under a financial control approach and an equity share approach,
providing more detail on emissions associated with our investments. Refer to section 6.6.4 for our equity share and financial control
emissions. BHP’s operational emissions targets continue to be measured against our GHG emissions based on an operational control,
market-based methodology.

(1) FY2017 and FY2020 baseline will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will
be used as required. FY2017 baseline is on a Continuing operations basis and has been adjusted for divestments.
(2) Carbon offsets will be used as required.

BHP Annual Report 2020 65