A view on how to tackle the challenge

By: Galp

This case study provides an example of “How to start the process for alignment with TCFD Recommendations”


What was the initial approach used?

As an integrated energy player, Galp has always been mindful of the need to prepare and mitigate the impacts of climate change.

In order to ensure the sustainability of the Company, we test the resilience of our strategy to different scenarios. We have built four contrasting scenarios, with different levels of technological and regulatory disruption, which we consider critical uncertainties for the energy sector.

Anticipating the risks and opportunities related to each scenario is critical for long-term value creation and risk mitigation.

Climate change has been embedded at the core of our strategy and operations. Particularly regarding our reporting and the relationship with the capital markets, we have noticed growing concerns on the institutional investors’ side on these matters, with some funds starting to incorporate ESG metrics into their analysis.

Taking this into account, and recognizing the importance of TCFD recommendations as a transparent, consistent and comparable way to provide the climate-related financial information in a transition to a lower carbon economy, we have decided to analyse this matter internally.

The process

Following the publication of the TCFD Recommendations in June 2017, these were communicated internally to all relevant stakeholders within the company.

An internal task force was then setup to analyse the recommendations, and analyse potential gaps and opportunities to improve not only our reporting, but also our internal governance of such matters.

The task force included people from different divisions, most notably from Strategy and Investor Relations, Risk Management, Legal and Governance, and Environment and Sustainability teams.

Not only did the task force analysed the TCFD recommendations, it conducted a sector benchmark whenever relevant, in order to make sure that Galp continues to distinguish itself for implementing best practices.

The task force met regularly to discuss findings and to define what the next steps would be regarding potential improvements to be implemented.

By the end of 2017, we had concluded that Galp already complied with most of the TCFD recommendations, particularly regarding public disclosure and reporting.

Our Commitment

Galp is committed to the challenges of Energy and Climate, and based upon the analysis performed Galp communicated its commitment to support the TFCD recommendations.

The Company announced the commitment for the first time at its Capital Markets Day 2018, where it announced its annual strategic update and financial outlook to institutional investors and sell side analysts.

Galp has also taken action on “Commit to implement the recommendations of the Task Force on Climate-related Financial Disclosures” through the “We Mean Business coalition”.


Galp started to publish an integrated Annual Report and Accounts in 2016, and we made sure that the “Annual Report and Accounts 2017” would include most of the improvements identified over the year. The main evolution following the TCFD recommendations was to increase disclosure regarding the scenario planning conducted in-house.

The Annual Report and Accounts 2017 is available to download in the link below.

Galp has also published in website a summary table containing the links to the relevant information published by Galp within the context of each recommendation issued by the TCFD.

In order to be aligned with the specific standards for climate change reporting, Galp used the CDP response as a guide. In 2018, the CDP Climate Change questionnaire has changed significantly in order to obtain responses from companies already in line with the TCFD recommendations.

Galp wants to continue to be part of the CDP A List, being recognized by sustainable and responsible practices regarding climate and environment.

Continuous Improvement

We recognize the growing importance of disclosure related with climate change, and we aim to continue to provide transparent and consistent information regarding our performance, facilitating the dialogue and understanding among our stakeholders.

We continue to work to improve our processes, governance and disclosure, and the internal stakeholders continue to meet regularly. Galp is also actively participating in public forums to discuss future potential developments related with TCFD, most notably the World Economic Forum.

Galp welcomes these initiatives and sees them as relevant contributors to a better understanding of the risks and opportunities, and the respective financial impacts arising from climate change.

The Company has identified the next steps to be implemented internally, with several initiatives ongoing, and converging to a full alignment with the recommendations according to the plan established.

What were the barriers, and how were they overcome?

Galp is aware of the main challenges of implementing the TCFD recommendations, namely:

One of the main obstacles during this initial assessments is related with the standardization of methodologies used by companies to quantify risks and opportunities, particularly within the Oil & Gas industry.

The market is requiring more comprehensive information, particularly on potential business impacts, and on doing so, companies may incur the risk of disclosing potentially price sensitive information.

In Galp’s case, climate change risks and opportunities have been identified and assessed, and are part of the Company’s strategic formulation process. Scenario planning and sensitivity analysis, which consider different climate change and environmental contexts, test potential effects and determine value at risk.

In this process, the top management is supported by the Sustainability Committee, the Risk Committee and the Strategy and Market Intelligence team.

Further insights

After implementing a scenario-planning process aimed at identifying long-term alternative outcomes for the energy sector, the Company’s strategy remains focused in the development of a resilient Exploration & Production portfolio, embedded with an efficient and competitive downstream business, supported by innovative and differentiating solutions that promote the transition into a lower carbon economy.

Galp aims to adapt its portfolio to future needs, gradually diversifying a small part of its capital allocation to new businesses/low carbon, with the corresponding risk reduction.

Financial incentives/KPI’s ensure that management goals’ are aligned with strategy execution, including (in some cases) making sure that the Company is successful in implementing innovative and differentiating solutions in a scenario of decarbonisation.

We support the development of policies that are technologically neutral and conducive to a long-term change in consumer behaviour (more efficient consumption/responsible use of energy resources). The main focus of climate policies should be the reduction of GHG emissions rather than defining specific goals for energy production and consumption.

We consider carbon pricing when evaluating medium and long term investment projects, in order to mitigate investment risks and maximise opportunities while contributing to constructively seeking to overcome the climate and energy challenges, promoting a lower carbon intensity in its portfolio, along the value chain.

Galp supports a global and effective agreement. We will continue to contribute to the development of appropriate measures to overcome the climate and energy challenges, seeking a sustainable commitment and supporting the adoption of a carbon-reduction strategy based on a single global emissions market, which is cost-effective and transparent.