The growing opportunities in renewable energy sector equally possess certain strategic, functional and operational risks. The elements of risk management are judiciously placed in Greenko’s organizational structure and are well to harness value pools. The board of directors and the audit committee are supported by the management to identify risks, assess enterprise-wide effects, and mitigate risks to create opportunities out of it. An exclusive department for risk management is created to establish a framework and catalyze the risk mitigation plan. Secretarial, Legal and ESG departments assist the Risk management department in vesting the ownership of the Risk Mitigation plan. This mechanism has proved effective for Greenko in driving risk management.
The Greenko Risk Management Framework (GRMF) is engineered to recognize and oversee future risks and protecting the interests of the organization’s business objectives. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) and some elements of Operationally Critical Threat, Asset, and Vulnerability Evaluation (OCTAVE) form the basis of GRMF. The internal risk control systems are periodically monitored by the Board and Audit Committee to identify, manage, and address the risks.
GRMF allows the Board and management to track and evaluate risks from an enterprise standpoint, empowering the organization to achieve the following business objectives:
Strategic- Aligned with VMV and Strategic Objectives
Operations- Effective and efficient use of resources.
Reporting- Credible and reliable disclosures.
Compliance- Comply with applicable laws, regulations, codes, and voluntary commitments.
Greenko’s top management plays a critical role in GRMF, while it is jointly handled by Risk, Legal and Compliance functions. GRMF is used to evaluate risks related to any alternative ways considered by the management to meet the group’s strategic objectives. In the instance of IRESP, prior to finalizing the size, scale, location, and timing, the management has determined that their strategy is within their overall risk appetite. Greenko’s business-level objectives are achieved by focusing on business strategy and objectives which are broken into sub-objectives for various activities such as GAM, Commercial, Projects, Procurement and other functions.
Internal and External Environment - Examining internal and external factors is considered the most important task. The Board sets a philosophy regarding risk and establishes a risk appetite.Further, it sets the basis for how risk and control are viewed and addressed.
Objective Setting - Objectives are aligned to support the Greenko’s Vision and Mission and are consistent with its risk appetite.
Event Identification - Identifying potential events from internal or external environment affecting, both positively and negatively, the achievement of objectives.
Risk Assessment - Identified risks, associated with hindrance or enhancer of objectives, are assessed on both inherent and residual basis, with the assessment considering both risk likelihood and impact.
Risk Response - Possible responses to risks, which include avoiding, accepting, reducing, and sharing risks. Management selects a set of actions to align risks with the entity’s risk tolerances and risk appetite.
Control Activities - Policies and procedures are established and executed to help ensure the risk responses.
Information and Communication - Relevant information is identified, captured, and communicated in a form and timeframe that enable people to carry out their responsibilities.
Monitoring - Then the entirety of ERM is monitored, and modifications made, as necessary.
Greenko is committed to ‘Climate Risk Assessment and Management’ as part of its Risk Management System, with the aim of making informed choices, building capacity, planning, prioritizing, mitigating, and adapting measures to reduce its vulnerability to climate change. This entails proactive and systematic identification and analysis of the potential climate-related hazards to Greenko’s operations, based on projections of climate change models.
The integration of climate risk assessment in the existing framework was carried out by identifying the physical and transition risks of climate change that have the potential to profoundly impact Greenko’s business. Presently, the climate risk assessment is conducted for its critical operating sites.
Mitigating climate risk is a continuous process and Greenko’s Risk Assessment and Management Framework enables the company to build resilience against variations in climate by taking account of all the potential climate risks in its operations and planning appropriate mitigation strategies.
As part of its climate risk management strategy, Greenko has over the short term identified the risk of extreme weather events and will implement actions targeted towards reducing its impacts on business. The company has identified the above events using the existing Early Warning System which has now incorporated the monitoring and warning of global warming induced extreme events (acute risks), whose frequency and severity are projected to increase, owing to climate change. This is crucial to proactively protect and minimize the impacts of climate change on the company’s assets and the surrounding community, it operates in. It is essential for the company to build a resilient infrastructure and network to mitigate climate related impacts.
The assessment of climate risk and mitigation of its impacts is the first priority for Greenko. To be able to do this, climate risk assessment was included in the GRMF as per suggestions of the Board. Further, the company’s Board of Directors reinforced Greenko’s commitment to the UN’s Sustainable Development Goals, especially numbers 7 — affordable and clean energy and 13 — climate action. The management undertook the climate risk assessment accordingly during 2020.
While preparing a company’s future strategy, the impacts of climate change are increasingly taking precedence. Greenko has a vision of decarbonizing the energy system through digitalization and decentralization which has already translated into strategic objectives and the organization is pursuant to achieve them. The group’s ability to capture and convert renewable sources into energy is always subjected to material uncertainties of climate change. Greenko continues to evaluate physical climate risk to its own assets along with the electric system in India to select a growth strategy, choice of location and use of technology.
Greenko has examined the various impacts of different climate scenarios in 2020, which included the policy scenario of acceleration of renewable energy adoption by the Government of India and the physical scenario of climate change as per Global Climate Change scenario RCP 4.5. This modelling confirmed that the group’s business model can tolerate the challenges that can arise from climate change. The analysis also put in place operational steps at each site, in addition to the risk assessment criteria, while evaluating new assets and technology choices.
In the case of physical impacts derived from the main climatic threats and the increase in the frequency and severity of extreme weather events, Greenko has plans and systems to improve the resilience of all assets and components. Also, it has begun discussions with the insurance institutions to cover climate risk resulting in extreme weather events.
Greenko does not foresee that these risks will have a catastrophic or permanent impact on the assets and revenues. The organization has a diversified portfolio of assets spread across different states and topographies. Although a slight increase in operational expenses is anticipated, there are also plenty of opportunities in the decarbonization of the energy system in India.
The climate change adaptation and mitigation strategies are integrated into Greenko’s Risk Management Framework. A climate change specific strategy has been devised and it monitors and measures relevant indicators such as its contribution to the decarbonization of electricity, under GRMF. Critical business indicators such as greenhouse gas emissions, emission intensity across the life cycle, water recharged and reused, the extent of digitalization, etc. assist the company to monitor and plan targets.
The GRMF considers and monitors the risks derived from climate change:
1(GRI 102-11, 102-15, 102-33) | 2(GRI 102-34)