VECTOR’S 2021 TCFD REPORT

ESG28 September 2021VCTUtilities

Vector’s journey
to a new
energy future
TCFD REPORT 2021
Our climate risks and opportunities based on the recommendations
of the Task Force on Climate-related Financial Disclosures
September 2021
1

Task Force on
Climate-related
Financial Disclosures
Our position on climate change
Vector is well-positioned to enable decarbonisation within
New Zealand, the Asia-Pacific region, and globally. We are
guided by our vision, which is to create a new energy future.
Despite the challenges of today, our integrated Group strategy
we call Symphony is preparing us for the opportunities of a
decarbonised future.
Symphony aims to transform the traditional one-way energy
chain into an intelligent, multi-directional energy system that
gives the customer more choice and control. Fundamentally, it
is about creating a decentralised energy system that opens up
future possibilities, delivering decarbonisation consistent with
reliable and affordable energy solutions for customers.
Vector Lights on Auckland Harbour
Bridge, Lighting up the city with
solar-battery technology
VECTOR TCFD REPORT 2021 /
2

Vector acknowledges the climate change
science underpinning this need to act
and welcomes the large role we can play
in this transition. Vector is a founding
member of the Climate Leaders Coalition
1
,
a partner of the Sustainable Finance
Forum
2
, and member of the Sustainable
Business Council
3
, which has underpinned
our support for the Paris Agreement and
the establishment of the Climate Change
Commission. Our participation in these
coalitions also signals our commitment
to reducing our own carbon emissions to
help with New Zealand’s transition to a
low carbon economy.
Decarbonisation brings both risks
and opportunities
Vector is leading the transformation
of the energy sector to create a new
energy future, identifying and developing
options that will provide value, choice
and service for our customers while
delivering sustainable shareholder
returns. The primary challenge in leading
this transformation, however, is that
we cannot make or alter energy policy
unilaterally.
The impacts of climate change, and
more broadly, of global responses to
climate change, represent material risks
and opportunities for our business. We
are closely monitoring developments in
New Zealand and our other key markets
around climate action. For instance,
in January 2021, the Climate Change
Commission released its draft advice for
the New Zealand Government4, f raming
the nation’s energy transition. We
engaged in the public consultation
5
that
fed into the Commission’s final advice,
released in May 2021
6
. This process, even
ahead of the Government’s response
later in 2021, has already presented both
opportunities and challenges for our
business, as covered in this disclosure.
Why the Task Force on Climate-
related Financial Disclosure (TCFD)
matters to us
The TCFD f ramework provides a way for
companies to produce consistent climate-
related disclosures, demonstrating how
climate-related risks and opportunities
are incorporated into their risk
management and strategic planning
processes. Why is this so important? As
companies’ and investors’ understanding
of the financial implications associated
with climate change grows, markets will
be empowered to channel investment to
the solutions, opportunities, and business
models needed for a new energy future.
When it launched in 2017, the TCFD
recommended that companies make 11
disclosures to identify the possible climate
impacts on their business. New Zealand
is the first country to enshrine a TCFD
reporting obligation on major private
sector entities. While that reporting will
not become mandatory until 2023, we are
nonetheless embarking on this journey in
advance of that deadline. Our reasoning
is simple: it is in our interest as a company
to lead the transformation of the energy
sector and to provide our stakeholders
with the information that serves their
long-term interests.
Vector is
leading the
transformation of
the energy sector
to create a new
energy future.
1. https://www.climateleaderscoalition.org.nz/who
2. https://www.theaotearoacircle.nz/partner
3. https://www.sbc.org.nz/about/our-members/sbc-members
4. https://haveyoursay.climatecommission.govt.nz/our-advice-and-evidence/
5. https://blob-static.vector.co.nz/blob/vector/media/vector2021/vector_
submission_ccc_draft_advice.pdf
6. https://www.climatecommission.govt.nz/our-work/advice-to-government-
topic/inaia-tonu-nei-a-low-emissions-future-for-aotearoa/
3

See page 9 & 10 for more details
Inefficient
Costly
decarbonisation
VECTOR’S
DIVERSE
BUSINESSES
Electricity
network
Metering
Solar
photovoltaic
Home
air quality
Fibre
communications
Gas
Digital services
Efficient
Cost-effective
decarbonisation
TIME FRAME (YEARS)
Climate-related Opportunities
Climate-related Risks
Distributed
renewables
SHORT TERM
0 3
Distributed energy resources, such as photovoltaic solar, can
provide renewable energy resilience, especially during dry years.
Advanced
metering
MEDIUM TERM
3 10
Increase in advanced metering infrastructure and services as the
electricity sector scales.
Regulatory
misalignment
SHORT TERM
0 3
Regulatory misalignment with government policy limits Vector’s ability to
drive its decarbonisation strategy. Investment in demand-side
management and optimised utilisation must occur now to reduce future
customer costs.
Data-driven
energy
SHORT TERM
0 3
A decarbonised energy sector requires a redesign of how energy
is invested in, managed, delivered, and consumed. Vector is an
important enabler of a data-driven transition through the
development of new digitised platforms, products, and services.
Weather
disruption
SHORT TERM
0 3
Hours per year of wind speeds above 70km/h are projected to increase
significantly which may increase outages from vegetation and tree fall
due to severe storms. Damage to the network also imposes a health and
safety risk. Increase in extreme rainfall events and number of dry days.
SHORT TERM
0 3
Peak load
impact
Home charging of electric vehicles, distributed generation, and
transition from gas to electricity will have a large impact on the peak
loads of our network. Unmanaged transitions will result in significant
physical asset installation that will incur large costs to our customers.
Energy
unaffordability
MEDIUM TERM
3 10
The combination of misaligned regulatory and policy frameworks with
unmanaged electricity growth risks increasing electricity costs for
customers. This not only restrains decarbonisation strategies
but also exaggerates social inequities - both heightening the prospect of
significant government intervention across the energy sector.
Limitations
on gas
MEDIUM TERM
3 10
Potential policy and legislative changes to limit gas and gas
metering growth, changes in customer preferences, increasing
taxes or carbon costs.
Enabler of
electrification
SHORT TERM
0 3
As an electricity network manager, an opportunity for the utilisation
of distributed energy resource management systems to enable the
electrification of transportation, and low temperature heat, in line
with governmental ambitions and the variable nature of renewable
electricity generation.
Biomethane/
Green hydrogen
MEDIUM TERM
3 10
The New Zealand gas industry has set a decarbonisation plan that
focuses on green hydrogen and biomethane. Vector is working with
the gas industry to understand options for our existing gas customers
to access low carbon gas technologies.
Vector's climate-related opportunities and risks
Climate change brings both risks and opportunities for Vector, as detailed in this
report. With a diverse business portfolio of energy solutions, Vector is well-positioned
to lead the energy transition to our customers' advantage. Many of our climate-related
opportunities correspond with the role we can play in creating new solutions and
driving efficient, sector-wide decarbonisation. Many of our risks emerge from the
possibility that decarbonisation occurs in a way that is inefficient and costly, impacting
Vector and our customers. In identifying these risks and opportunities, our intentions
are more firmly resolved than ever. We are working to be a first-class energy company
globally, playing a leading role in enabling a bright future for our customers.
VECTOR TCFD REPORT 2021 /
4

1. Strategy
At the centre of the energy
transition
Vector is committed to working with its
stakeholders to transform the energy
system, as it is not only critical to our
daily lives, but also to our collective
future through its role in enabling the
decarbonisation of transport and industry.
Legacy energy systems across the whole
sector are increasingly unable to meet
these new challenges, and must become
vastly more sophisticated and adaptable.
Vector is well advanced globally in
developing and operating emerging
technologies with digital platforms to
manage these changing requirements.
As energy systems are transformed to
meet the needs of tomorrow, our view
is that many of our climate related
opportunities correspond with the role
we can play in creating new solutions and
driving efficient, cost effective, sector-wide
decarbonisation.
Our strategic resilience
While many aspects of New Zealand's –
and the world's – climate response remain
unknown, the diversity of Vector's business
portfolio provides us with valuable insights
over a range of energy related issues,
which enables us to develop actions
and plans towards societal and financial
resilience. We can also use our diverse
portfolio to test and integrate multiple
technologies, positioning us to create
new solutions, and drive sector-wide
decarbonisation. We also recognise the
challenge posed by our gas inf rastructure.
The ability to transform some, or all, of
our existing gas inf rastructure to support
alternative energy sources – such as
biomethane and green hydrogen – will
be important to ensuring our long-term
resilience in a decarbonising economy.
Opportunities
Our innovations will help
transform energy systems
Consumers are demanding cleaner, more
reliable, and more affordable energy.
We are taking critical steps to transform
how the energy industry operates to
support these changes. Our vision is to
transform the energy industry by using
data to redesign how energy is invested
in, managed, delivered and consumed.
We are actively underway in developing
solutions to enable this transformation,
partnering with other organisations where
we see opportunities to help achieve our
goals.
This data-led transformation can displace
legacy systems, leveraging a step-
change in processing power, flexibility,
and accuracy, addressing the rapidly
changing requirements of customers,
energy retailers, network operators, and
other energy market participants. We
see this as a critical building block for the
transformation of energy systems.
We have also established a new entity,
Vector Technology Services, to take to
market solutions developed as part
of our digital transformation journey.
We are exploring global opportunities
for key priority solutions including
distributed energy resources, data driven
energy solutions, advanced metering
technologies, the scaling of electrification,
and opportunities for renewable gases
such as green hydrogen and biomethane.
These are discussed in more detail in
Table 2, page 11.
TCFD recommends
that organisations:
• Describe the climate-related risks
and opportunities the organisation
has identified over the short,
medium, and long term.
•Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning.
•Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-
related scenarios, including a 2°C or
lower scenario.
New Zealand’s first
floating solar farm,
built by Vector
Powersmart for
Watercare, produces
the same amount of
electricity as would
be needed to power
approximately
10,000 homes
VECTOR TCFD REPORT 2021 /
6

Our carbon handprint
We aim to provide solutions that give our
customers the choice and opportunities
to help lower their emissions. This is our
carbon handprint; using our position as
a leading New Zealand energy solutions
business to help widen the scope for
decarbonisation beyond what is in our
own ability to control.
Our work to demonstrate the effectiveness of electric vehicle smart charging
technology supports efficient investment in the inf rastructure required to
support an affordable transition to electric vehicles. This helps keep the costs
of the transition down for our customers, and in turn helps their ability to
choose lower carbon technology.
We provide home heating solutions through our HRV business that enable
people to make energy efficient choices.
Our Vector Powersmart business provides a range of services relating to
commercial-scale solar photovoltaic installations and battery energy storage
systems, facilitating business and industry to decarbonise their energy use.
Global carbon challenge
To enable the decarbonisation
of 3/4 of global greenhouse
gas emissions
WHAT NEW ZEALAND IS TARGETING
4
Transportation
20%
Energy Industry
7%
Manufacturing
9%
Other
6%
Electricity &
Heat: 5%
‒Renewable
energy use
(50% by
2035)
‒Energy
efficiency
Food, Beverage,
Paper, and
Chemical: 7%
‒Switching
boilers to
biomass /
electricity
Refining
& solid
fuel
manufac-
ture: 2%
Light Vehicle: 16%
‒Reducing travel
demand
‒Mode shift from light
vehicles to public
transport, walking
and cycling
‒Vehicle fuel efficiency
‒Vehicle electrification
Aviation:
1%
Heavy
Duty:
2%
By trialling
solutions locally
Impacts can be
scaled globally
GLOBAL CO
2
e EMISSION BREAKDOWN
1
IndustryWaste
Agriculture Energy
75% of global greenhouse gas emissions
2
NEW ZEALAND CO
2
e EMISSION BREAKDOWN
3
Agriculture
48%
Energy
42%
IndustryWaste
Our local handprint
Supporting New Zealand to
decarbonise its energy sector
‒Low-carbon fuels
1. Climate Watch, 2018, https://www.climatewatchdata.org/ghg-emissions, accessed July 2021
2. International Energy Agency, Net Zero by 2050, published 2021
3. Ministry for the Environment, New Zealand’s Greenhouse Gas Inventory 1990 – 2019, published 2021
4. Ināia tonu nei: a low emission future for Aotearoa, Climate Change Commission 2021
7

1. Strategy
(continued)
TRANSITION RISKS
What we analysed
It is clear that electrification of transport
and industry, combined with enhanced
renewable generation, will form a key
approach to decarbonising New Zealand’s
economy. Through our internal modelling,
we assessed three scenarios of the future
network load on the electricity network, to
inform both our asset management plan
and broader business strategy.
What we found
These scenarios reveal the importance
of decarbonising the energy network in
the most efficient, resilient and cost-
effective manner7
,
8. An unmanaged
decarbonisation transition presents
potential risks for Vector and would result
in increased costs for our customers. As
a result, in our risk assessment for this
disclosure, regulatory misalignment was
identified as one of our top climate risks.
Informed by these scenarios, peak load
impact also emerged as one of our top
climate-related risks. This could occur, for
example, with a significant increase in the
uptake of electric vehicles and localised
charging clustered at peak hours.
From a network perspective, our key
challenge is ensuring we can meet peak
demand while maintaining a transition
to renewable energy generation, which
is variable by nature. Investing in assets
which do not reconcile these factors is
likely to result in inefficient allocation of
capital, which would ultimately lead to
higher costs for our customers. Inequality
is likely to be exacerbated as these costs
are inevitably spread across all customers.
Conversely, our diverse portfolio
represents a strong business advantage
for supporting a cost-effective, resilient
energy transition. Several of the products
and services developed by our businesses
can play a role in enabling this transition
directly, or by supporting it through data,
digital platforms and connectivity.
7. https://blob-static.vector.co.nz/blob/vector/media/vector-regulatory-disclosures/final-electricity-amp-update-2017.pdf
8. https://blob-static.vector.co.nz/blob/vector/media/vector-regulatory-disclosures/vec194-amp-2019-2029.pdf
9. https://blob-static.vector.co.nz/blob/vector/media/vector2021/vector_submission_ccc_draft_advice.pdf
10. https://blob-static.vector.co.nz/blob/vector/media/vector-regulatory-disclosures/annex-1-recosting-energy.pdf
Our approach to using climate
scenarios
Climate scenario analysis enables Vector
to explore the potential implications of
a range of future states, with divergent
policy settings, climate conditions,
available technologies and market
responses. As a network manager, Vector
has focused its initial scenario work on
modelling the consequences of different
future network loads on the electricity
network. In parallel, we commissioned EY
to help model the physical vulnerabilities
of the network under future climate
conditions. This modelling was completed
in 2017. In 2018, we also commissioned EY
to conduct economic modelling of New
Zealand’s transition to a decarbonised
future. Due to current policy and
regulatory uncertainty associated with
New Zealand’s Emission Reduction
Plan, we made the decision to delay the
further development of our scenario
analysis until next year. Revisiting or
expanding our existing scenarios for
the sake of immediate disclosure would
have quickly diminished in value as the
government moves to respond to the
Commission's advice over subsequent
months. The coming year may provide
improved certainty on many settings
in New Zealand’s climate response,
in turn allowing us to develop more
comprehensive scenarios and elaborate
on our climate risks and opportunities, for
our electricity and other key businesses.
How we are responding
A transition to a decarbonised society is
not only a climate imperative but also an
opportunity for significant optimisation
and digitalisation of our energy assets.
To this end, we are working closely with
policymakers and regulatory bodies, both
in New Zealand
9
and internationally
10
, to
advocate that decarbonisation cannot
merely focus on adding more large-scale
generation. In our view, it must give equal
importance to optimised demand side
management, energy efficiency, and
distributed low-carbon generation. All
of this is in the long-term interest of our
customers.
We are also working to scale the impact
of our response through partnerships and
collaborations with leading energy and
technology partners. Vector is developing
new products and services to allow
customers to use low-carbon energy
solutions and enable renewable energy
generation. Many of these products
and services appear as top climate-
related opportunities for Vector, and
are elaborated on in Table 1 on page 10.
Demand side
management,
energy efficiency,
and distributed
low-carbon
generation is in
the long term
interest of our
customers.
VECTOR TCFD REPORT 2021 /
8

OUR MATERIAL CLIMATE
OPPORTUNITIES AND
RISKS
Vector's top climate-related opportunities
and risks are detailed in Tables 1 and 2,
respectively. To produce these tables, a
full list of climate opportunities and risks
was first collated in close consultation
with Vector's diverse business units. These
were then assessed according to Vector's
Enterprise Risk Management Framework,
with entries flagged as 'High' or 'Very
High' consolidated to produce the top five
opportunities and top five risks for the
Vector Group.
These can be periodically reassessed
to present an updated picture of our
material climate risks and opportunities.
In future disclosures we intend to detail
our efforts to link these climate-related
risks and opportunities to other material
enterprise risks.
We categorise the time f rames for these
opportunities and risks as follows:
‒short term (0-3 years), to reflect our
typical business planning cycles;
‒medium term (3-10 years), to reflect
our asset management plans for gas
and electricity networks;
‒long term (10-30 years), to account
for the expected life of new residential
connections.
PHYSICAL RISKS
What we analysed
Vector commissioned EY to undertake a risk
assessment of Vector’s electricity network
assets in the Auckland region against the
potential future physical impacts f rom
climate change through to 2050. Changes
in wind, precipitation, and temperature
were modelled to two C02 scenarios set
out by the International Panel on Climate
Change (namely, RCP4.5 and RCP8.5). We
supplemented this analysis with the 2020
National Climate Change Risk Assessment,
commissioned by the Ministry for the
Environment.
What we found
Changes in the climate, including those
already locked-in for future decades, pose a
risk for Vector. Vector has a historical record
of unplanned outages during high wind
speeds, primarily caused by vegetation
falling on lines and assets. With a projected
extreme wind speed increase of more than
10 percent during the next 20 years10, the
risk to our overhead network is expected
to increase. This will not only disrupt our
operations, resulting in a financial impact,
but also presents risks to the health and
safety of our customers, employees and
contractors.
Any reduction in rainfall in the North
Island, which some models have predicted,
may also increase the prevalence of dry
years, presenting a supply risk for the New
Zealand energy network.
How we are responding
This assessment has informed Vector’s
asset management planning over
subsequent years. Details are publicly-
available in our most recent asset
management plan11. Vector has also
developed a network resilience plan
that includes vegetation management,
customer resilience technologies,
distribution automation, undergrounding,
micro-grids, and predictive weather
outage modelling.
10. National Climate Change Risk Assessment for New Zealand, Ministry for the Environment (2020).
https://environment.govt.nz/publications/national-climate-change-risk-assessment-for-new-zealand-main-report
11. https://blob-static.vector.co.nz/blob/vector/media/vector2021/vec224-amp-2021-3031_310321.pdf
Vector provides
f ree electric vehicle
charging stations
across Auckland
9

1. Strategy
(continued)
Table 1: Vector's climate-related opportunities
OPPORTUNITYTYPETIME
FRAME
EVALUATIONHOW WE ADDRESS THIS OPPORTUNITY
Data-driven
energy
distribution and
management
Products
and
Services
0 – 3 yearsA decarbonised energy sector
requires a redesign of how
energy is invested in, managed,
delivered, and consumed. Vector
is an important enabler of a
data-driven transition through
the development of new digitised
platforms, products, and services.
Strategic alliances with leading technology
partners to develop data-driven products
and services to optimise renewable energy
consumption, management and delivery
throughout New Zealand, Australia and
globally.
Enabler of
electrification
Products
and
Services
0 – 3 yearsAs an electricity network
manager, an opportunity for the
utilisation of distributed energy
resource management systems
to enable the electrification
of transportation, and low
temperature heat, in line with
governmental ambitions and
the variable nature of renewable
electricity generation.
First trials of smart electric vehicle charging
with close to 200 electric vehicles in Auckland
to reduce peak electricity loading and
understand user behaviour.
Vector is also a founding member of the
Battery Industry Group (B.I.G) aiming to tackle
end-of-life issues for electric vehicle batteries.
Integration of Vector’s business units allows
us to create new solutions, such as ‘grid edge’
technologies that involve synergies between
residential renewable generation, battery
storage and electric vehicle smart charging.
Distributed
renewable
generation
Products
and
Services
/ Energy
Sources
0 – 3 yearsDistributed energy resources,
such as photovoltaic solar, can
provide renewable energy
resilience, especially during dry
years.
Network strategy already enables the
connection of distributed energy resources.
Working with commercial customers to
accelerate solar generation adoption, and
operations such as micro-grids, to meet their
carbon targets.
Advanced
Metering
Products
and
Services
3 – 10 yearsIncrease in advanced metering
inf rastructure and services as the
electricity sector scales.
Working with governments to drive
importance of advanced meter uptake.
Partnerships with distributors, retailers, and
technology platforms for distributed energy
management services with a global impact.
Biomethane /
green hydrogen
Energy
Source
3 – 10 yearsThe New Zealand gas industry
has set a decarbonisation plan
that focuses on green hydrogen
and biomethane. Vector is
working with the gas industry
to understand options for our
existing gas customers to access
low carbon gas technologies.
Engaged with an alliance of gas producers
devising approaches to transition current gas
networks to low carbon alternatives.
VECTOR TCFD REPORT 2021 /
10

RISKSTYPETIME
FRAME
EVALUATIONHOW WE ADDRESS THIS RISK
Weather-
induced
disruption to
the network
Physical –
Acute
0 – 3 yearsHours per year of wind speeds
above 70km/h are projected to
increase significantly which may
increase outages f rom vegetation
and treefall due to severe storms.
Damage to the network also
imposes a health and safety risk.
Increase in extreme rainfall events
and number of dry days.
Pioneering a risk-based approach to vegetation
management with local council, and ongoing
undergrounding of electricity lines.
Asset management and operational
enhancements, such as data driven outage
modelling, to improve the resilience of the
network. Asset location plans developed with
flood levels and inundation zones.
Utilising weather data to inform network
configurations and equipment ratings (such
as disabling “risk of fire” assets during dry
weather), and predicting weather impact areas
in near real time.
Trialling microgrid solutions for ‘grid edge’
resilience such as Vector’s Vehicle-To-Home
trial, and automated generator in Piha.
Misaligned
regulatory
and policy
frameworks
Transition –
Policy
0 – 3 yearsRegulatory misalignment with
government policy limits Vector’s
ability to drive its decarbonisation
strategy. Investment in demand-
side management and optimised
utilisation must occur now to
reduce future customer costs.
Working with regulatory bodies (Electricity
Authority and Commerce Commission),
and the Ministry of Business Innovation and
Employment to unlock capital and capability
to drive system-wide decarbonisation that puts
the customers at the centre. Strong advocation
for coordinated, future focused, governance to
streamline a “whole systems” approach.
Peak load
impact of rapid,
unmanaged
decarbonisation
Transition –
Technology
0 – 3 yearsHome charging of electric
vehicles, distributed generation,
and transition f rom gas to
electricity will have a large impact
on the peak loads of our network.
Unmanaged transitions will
result in significant physical asset
installation that will incur large
costs to our customers.
Our Symphony strategy proactively enables
customer decarbonisation by enabling digital
platforms, and integration of customer
renewables within a low voltage network.
We have included energy system analytics to
identify trends and behaviours at the customer
level, as well as explore the possible energy
futures and impact it has on the network. A
smart charging trial with close to 200 electric
vehicles is ongoing.
Limitation in
gas businesses
Transition
– Policy,
Technology
3 – 10 yearsPotential policy and legislative
changes to limit gas and gas
metering growth, changes in
customer preferences, increasing
taxes or carbon costs.
Working with industrial partners to investigate
low carbon alternatives such as biomethane
and green hydrogen. Policy changes are
monitored to enable gas to be an enabler for
the overall decarbonisation strategy.
Energy
unaffordability
Transition –
Policy
3 – 10 yearsThe combination of misaligned
regulatory and policy f rameworks
with unmanaged electricity
growth risks increasing electricity
costs for customers. This not
only restrains decarbonisation
strategies but also exaggerates
social inequities – both
heightening the prospect of
significant government
intervention across the energy
sector.
Our Symphony strategy strives to give
customers more choices, with energy
affordability being one of its core objectives. We
strongly advocate that decarbonisation cannot
just work with more large-scale generation
and transmission. Rather, customers must
be actively informed through demand side
technologies and platforms. This is a cross
sector issue, and we are actively engaging
with customers and stakeholders including
regulatory bodies, and policy makers, to meet
future decarbonisation goals more efficiently.
Table 2: Vector's climate-related risks
11

2. Governance
Vector’s Board of Directors is responsible for oversight and
governance of its business objectives and strategies, including
climate-related risks and opportunities. The Risk and Assurance
Committee is a sub-committee of the Board which has been
delegated responsibility for ensuring Vector manages its risks
and compliance appropriately, including its climate-related risks.
The Chief Executive Officer is responsible for the day-to-day
leadership and management of Vector’s New Zealand and Australian
businesses to ensure the identification and development of business
objectives and strategies are delivered.
Protecting and
enhancing Vector’s
value, through the
establishment of a
sound framework
for recognising and
managing risks
and opportunities,
including those
related to climate
change.
Delegated
responsibility for
overseeing Vector’s
risk and assurance
practices, including
ensuring the
enterprise-wide and
business-specific
climate change
risks are identified
and managed
appropriately.
Executive leadership
and day-to-day
management for
ensuring delivery
and development
of the strategic
objectives.
The Chief Public
Policy and
Regulatory Officer
is the holder of
climate-change risks.
An executive Climate
Change Steering
Committee supports
key staff in
accelerating
climate change
related decisions.
Leading and
promoting the
desired risk culture
by driving the
implementation
of the Enterprise
Risk Management
Framework (which
covers climate-
related risk).
Receiving updates
on key climate
risks, Vector’s
sustainability
performance, and
progress on carbon
targets.
Monitoring,
analysing and
remaining abreast
of the physical/
transitional impacts
of climate change
and the potential
risk and
opportunities from
a transition to a
lower emissions
economy.
Staff members
focusing on climate
change risk and
opportunities are
coordinated
via the Senior Risk
Partner and Senior
Sustainability
Partner.
Vector’s staff
with climate
related risk
responsibilities
Executive Risk
and Assurance
Commitee (ERAC)
Board of
Directors
Risk and
Assurance
Commitee
CEO and
Executive
Management
Risk Management Policy
Outlines Vector’s risk management intent, objectives, and provides a framework for risk assessment and mitigation
Sustainability Policy
Outlines key objectives to lead our group decarbonisation efforts
Environmental Policy
Sets out Vector’s commitment for managing the environmental aspects of its businesses
TCFD recommends
that organisations:
•Describe the Board's oversight
of climate-related risks and
opportunities.
•Describe management’s role in
assessing and managing climate-
related risks and opportunities
VECTOR TCFD REPORT 2021 /
12

3. Risk Management
Vector’s approach to risk
management reflects the nature
of our business as an essential
service provider, supplier of critical
infrastructure and an operator of
high-hazard businesses.
We have a comprehensive enterprise
risk management (ERM) f ramework
consistent with the Risk Management
Standard ISO 31000:2018, which is
embedded in our business through our
risk governance, policies, guidelines and
risk partnership model that Group Risk
maintains with the different business
units to support their risk management
practice.
Our Board Risk and Assurance Committee
has responsibility for overseeing
and reviewing our enterprise risk
management f ramework policies and
processes and material risks to the
Vector Group.
Climate change has been identified on
our Group Risk Profile as a material risk
for a number of years, reinforcing our
ongoing work to understand and respond
to the evolving impact of climate change
on our business, as well as the opportunity
to enable our vision of creating a new
energy future.
To further identify and evaluate climate-
related risks and determine their
applicability to the business, Vector
has modelled scenarios of the impact
of decarbonisation on the electricity
network. Furthermore, Vector has
undertaken two significant studies at
Group level in conjunction with external
specialists. These studies cover (i) an
assessment of physical climate change
impacts on our Auckland electricity
network and (ii) the economic impacts
associated with a transition to a
decarbonised future (see TCFD – Section
1 – Strategy for more detail). More detailed
work is now being conducted into the
direct financial impacts f rom climate-
related transition risks across Vector’s
major business units to help inform and
shape our future direction and strategy.
Vector Group Risk and Sustainability
teams work in partnership with senior
management and operational business
units to identify, assess and manage our
climate-related risks and opportunities in
line with our enterprise risk management
f ramework.
For this disclosure, Group Risk and the
Sustainability team led a Vector-wide
programme to identify our climate-
related risks and opportunities. This
process was built upon existing work,
and involved close consultation with
Vector's diverse business units. As a result
of this consultation, we formulated a
consolidated list of risks for reporting
purposes at Vector Group level.
Risks and opportunities with a high
consequence in the short-to-medium
term were prioritised and refined for the
purposes of this disclosure. These were
reviewed at our Climate Change Steering
Committee, and approved by the Board.
The approach we have developed to
identify, assess and manage climate-
related risks and opportunities will allow
our TCFD reporting to continue to mature
over time. The approach is aligned to our
overarching risk management approach
to provide quarterly oversight and review
of climate risk across the Group. New
or amended climate-related risks and
opportunities will be examined by the
Climate Change Steering Committee and
Executive Risk and Assurance Committee,
elevated to the Board as required.
The approach we
have developed
will allow our
TCFD reporting
to continue to
mature over time.
TCFD recommends
that organisations:
•Describe the organisation’s
processes for identifying and
assessing climate-related risks
•Describe the organisation’s
processes for managing climate-
related risks
•Describe how processes for
identifying, assessing, and
managing climate-related risks are
integrated into the organisation’s
overall risk management.
13

4. Metrics and Targets
a. Greenhouse gas emission
targets
Vector measures its greenhouse gas
emissions in alignment with the
Greenhouse Gas Protocol. This splits
emissions into three categories:
‒Scope 1 – Emissions we directly control
such as vehicle fleet fuel combustion,
diesel back-up generators, methane
leaks, and SF6 leaks.
‒Scope 2 – Vector’s operational
electricity consumption, and losses
along the network.
‒Scope 3 – All indirect emissions, such
as customer energy consumption, and
supply chain emissions.
Vector has set an emissions reduction
target, aligned with methodology by the
Science Based Target initiative (SBTi),
of reducing Scope 1 and 2 emissions
(excluding electricity line losses) by 53.5%
by FY2030 f rom a FY2020 baseline.
We have already made a reduction of 18%
in FY2021 against the FY2020 baseline.
This is largely due to reductions in our
fugitive natural gas emissions, and fuel
combustion for diesel generation.
We have a target to achieve net carbon
zero operations for our Scope 1 and 2
emissions (excluding electricity losses) by
2030. Vector also aims to enable global
decarbonisation beyond our own carbon
footprint, for example through services
that can identify or enable the integration
of low carbon technologies. This is known
as our carbon handprint, as introduced in
page 7.
b. Electrical power outages
Two metrics to guide power line
outages are:
‒SAIDI (System Average Interruption
Duration Index) – Time of interruption
in the power supply per customer in
minutes.
‒SAIFI (System Average Interruption
Frequency Index) – Total number of
interruptions per customer.
Vector constantly monitors these two
metrics throughout the year to sit under
the regulatory limits which are currently
104.83 and 1.3366 for SAIDI and SAIFI
respectively.
Vector also tracks investments into
inf rastructure and operations to minimise
power outages.
c. Electric vehicle uptake
Vector is conducting a smart charging
trial with close to 200 electric vehicles.
The results to date demonstrate the
urgent need for policy support for
managing the transition to an effective
electric vehicle charging system. Vector
is working towards electric vehicle
registration on its network to optimise
electricity distribution.
Vector is transitioning our corporate light
vehicle passenger fleet to 100 percent
electric or plug-in hybrid, and is currently
trialling its first electric truck.
d. Solar and battery uptake
Vector registers photovoltaic solar and
battery uptake in the Auckland region,
as key metrics for optimal energy
distribution management.
e. Scope 3 emission reduction
Vector sees great potential in abating
Scope 3 emissions through the
distribution of low carbon alternatives
to standard fossil fuel derived gas. These
include biomethane and green hydrogen.
While we cannot directly control the
decarbonisation efforts and ambitions
of our customers, suppliers and field
service providers, Vector is nonetheless
committed to supporting these actors to
reduce their overall energy consumption
and transition to low carbon solutions.
This work is ongoing so that future Vector
TCFD disclosures can set out any relevant
metrics and strategies we develop to
support these Scope 3 reductions.
f. Performance goals
A yearly decarbonisation measure
makes up 5 percent of overall short-term
incentive payments to executive staff and
senior management.
TCFD recommends
that organisations:
• Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
•Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse
gas (GHG) emissions and the
related risks.
•Describe the targets used by the
organisation to manage climate-
related risks and opportunities and
performance against targets.
VECTOR TCFD REPORT 2021 /
14

SCOPE 1
SCOPE 2
SCOPE 2
TOTAL 34,520SCOPE 1 TOTAL 19,330
SCOPE 3 TOTAL 1,550,748
644,607
Distributed Gas
173,854
Sold OnGas
LPG (including
upstream)
12,813
Fuel used by Field
Service Providers
3,044
Investments
1,381
Upstream
Energy
155
Business Travel
667,891
Sold OnGas Natural Gas
(including upstream)
Financial Year 2021 Emissions profile, tonnes-CO
2
equivalent
Fugitive emissions can be decreased by increasing gas
survey frequency to discover gas leaks faster, and increased
public awareness to reduce third party damages. Gas flaring
and hydrogen blending opportunities are under investigation.
We are investigating
renewable generation
options for outages, and
intelligent outage
management solutions
such as Vehicle-To-Home
services.
Vector is gradually
increasing the size of
our electrical vehicle
fleet and is trialling our
first electric truck.
Vector is currently
replacing legacy gas
meters with advanced
gas meters that release
less natural gas during
pressure regulation.
Further solar
opportunities and
building efficiency
measures are under
investigation.
Electricity losses are likely to increase as the transportation and
industrial heat sectors electrify.
12,074
Natural Gas Distribution Fugitive Emissions
33,622
Electricity Line Losses
897
Electricity
Consumption
2,971
Fuel
Combustion
2,465
Vehicle Fleet
592
SF6
Leakage
1,082
Gas Metering
Fugitive Emissions
145
Refrigerant
Leakage
Figure 1 : Major Scope 1 & 2 emissions in tonnes of CO
2
equivalent
Figure 2 : Major Scope 1, 2, 3 emissions in tonnes of CO
2
equivalent
47,002
OnGas
Transported
Natural Gas
Emission trend in tonnes of CO
2
equivalent
YEAR ENDED 30 JUNEFY20
*
FY21
CHANGE FROM FY20
BASELINE
Scope 123,66919,330-18%
Scope 233,43934,520+3%
Scope 3**1,758,0421,550,748-12%
* Although only divested in March 2020, Kapuni emissions are excluded in the updated FY20 footprint calculation to
facilitate future comparisons to FY20 as our base year.
** Scope 3 includes all other indirect emissions that occur in Vector's value chain. This includes upstream well-to-tank
emissions for fossil-gas (Category 1) and fuel (Category 3), fuel consumed by field service providers (Category 1), T&D
losses for consumed electricity (Category 3), business travel (Category 6), combustion of sold and distributed fossil-
gas (Category 11), and investments with more than 10% share (Category 15, accounting for proportional Scope 1 and 2
emissions).
15

VECTOR.CO.NZ
VECTOR TCFD REPORT 2021 fi
16

D&O INITIAL DISLCOSURE – ANNE URLWIN CHAIR AND CEO – ANNUAL MEETING SPEECHES AND PRESENTATION

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