Climate Change Risk Management

The ERG Group has launched a structured analysis on the impacts of  climate change on its business since 2019, following the guidelines  of the Task Force on Climate-Related Financial Disclosure (TCFD).  ERG has progressively updated its analysis, moving from a qualitative  approach to a quantitative one, expanding the geographic perimeter  to include the new countries that have progressively entered the  scope of consolidation, including Spain and the USA, and focusing  only on the production of electricity from renewable sources (wind  and solar), after exiting from the hydroelectric and thermoelectric  sectors. The Group has adopted emissions scenarios developed by the  Intergovernmental Panel on Climate Change (IPCC), one of the most  accredited in the literature, considering five emissions scenarios (RCP: 8.5; 7.0; 4.5; 2.9; 1.9 and two transition scenarios: Below 2 Degree Scenario - B2DS - IEA and Sustainable Development Scenario - SDS).  ERG then identified the variables with potential impacts on its  business, classifying them into physical (acute and chronic) and  transitory (regulatory, market, reputational and technological) events.  The analysis highlighted both risks and opportunities, including the  development of Renewable Energy Sources (RES).       

Climate Governance and Net Zero Strategy

• Governance for Climate Change Management

ERG has a solid governance system for managing climate risks, integrated into the corporate strategy and outlined and monitored by the company’s top management (Board of Directors; Control, Risk & Sustainability Committee; ESG Committee).

• Strategy

ERG operates in the renewable energy sector and has aligned its business model with the goals of the energy transition. To combat climate change and to adapt to physical risks, ERG has integrated its climate strategy into its ESG Plan and Business Strategy (less than five years’ time horizons) by adopting the following actions:

• Selective and Flexible Growth ("Value over Volume" strategy): ERG focuses investments in assets and geographies that are resilient to physical risks. The Group prioritises projects under construction and those in repowering or hybridised form, which offer better adaptation to weather volatility and climate uncertainty.
• Strategic plan that envisages a strategy for the development of RES that are 100% aligned with the EU Taxonomy.
• Asset modernisation and efficiency programs (Repowering/Revamping) that make it possible to extract greater value from renewable sources (Wind & Solar).
• Geographical and technological diversification to offset the negative impacts of climate change: With assets in Italy, France, Germany, UK, Poland, Romania, Bulgaria, Sweden, Spain, and the US, ERG spreads its physical climate risk exposure across multiple climatic zones. This portfolio approach reduces localised vulnerability to droughts, wind shortfalls, and extreme weather.
• Digitalisation of Wind and Solar Assets: ERG is enhancing its monitoring and control capabilities across its renewable fleet through digitalisation. This allows real-time data collection, predictive maintenance, and early response to climate-related disruptions (e.g., storms, temperature extremes, irradiance shifts).
• Use of PPAs and CfDs to Manage Climate-Induced Volatility: Long-term contracts (e.g., 20-year PPA with Google, 15-year CfD in the UK) are used to financially secure revenue against climate-related production fluctuations. These tools directly support adaptation by reducing financial exposure to variable generation.
• Establishment of effective and lasting relationships with stakeholders.

ERG has an ESG Plan with the goal of becoming Net Zero by 2040.

Specifically, ERG has structured its decarbonization path into the following main phases:

• Production and sale of 100% renewable energy (in place).
• Exclusive consumption of 100% renewable energy by company plants and facilities (LTI target by 2026).
• Decarbonization of the supply chain, supporting main suppliers on a path to emissions reduction, certified by the Science Based Targets initiative (SBTi) (in place).

• Risk Management

ERG’s climate adaptation measures are embedded within its Enterprise Risk Management (ERM) framework and ESG planning. These are specifically designed to address the physical risks posed by climate change—such as extreme weather events and changing wind and solar patterns—which are highly relevant to ERG's geographically diversified renewable energy asset base.

Climate change represents a risk that can have economic and financial impacts on ERG’s business in the short, medium, and long term. Some of the main effects include:

• Reduction in the availability of renewable resources, namely wind and solar.
• Limitations or impediments to plant operations.
• Increase in operating and maintenance (O&M) costs.
• Increase in insurance and regulatory compliance costs.

ERG has therefore adopted a series of solutions both at structural level and in plant management.

• Metrics and Targets

ERG uses key metrics to monitor progress on climate issues, including:

• Reduction of CO₂ emissions, with Net Zero targets defined in line with international standards.
• Share of renewable energy produced, with a target for growth in installed capacity.
• Asset resilience to climate change, evaluated through scenario analyses in compliance with the Paris Agreement objectives.

• Net Zero Target by 2040

The ERG Group is committed to achieving net-zero greenhouse gas emissions (Net Zero) by 2040.

Climate Change: Potential Impact table

Anticipated financial effects from material  physical and transition risks and potential climaterelated  opportunities 

ERG established an internal working group to assess the quantitative impact of  climate change on the annual production of the Group’s assets,  with a medium (2020-2039), medium-long (2040-2059) and long-term (2080-2099) projection.

The analysis showed that, on the wind assets, the risks of a decrease in  average wind speed in the medium term (2020-2039) are limited.  Historical and statistical analyses of the percentage change in wind  speed indicate limited annual fluctuations in energy production.  These fluctuations are also already integrated in the historical series  underlying the production estimates contained in the Business Plan.   

With reference to solar assets, the analysis foreshadowed a gradual increase in irradiation at all  latitudes, directly related to the increase in average temperature and  the reduction in rainy days caused by climate change. The increase  in irradiation in the medium term is comparable and consistent with  historical fluctuations. Therefore, a very positive impact is expected  for the solar resource. Although having a negative effect on the  output of the photovoltaic modules, the temperature increase can  be considered negligible, since their loss of efficiency is much lower  than the increase in irradiation and will be further mitigated by the  technological development of new photovoltaic panels.    ERG’s working group will continue to monitor long-term climate  scenarios to ensure that the estimates are always up-to-date and  realistic.