Our latest disclosures 

Our most recent disclosures can be found in our Annual Report 2023, Operating and Financial Review 6.12 - Climate change.

Our approach  

BHP’s operations are exposed to physical climate-related risks and these risks may be exacerbated by climate change. Our adaptation strategy outlines the proactive and collaborative approach we intend to progressively take to enhance the safety, productivity and climate resilience of our operated assets, investments, portfolio, supply chain, communities and ecosystems by adapting to physical climate-related risks.  

Our approach to further evaluate and progressively seek to quantify our operational physical climate-related risks and ultimately embed management of these risks deeper into business processes, including capital allocation, is shown below. 

Our approach considers the inherent uncertainty in climate scenario projections, including by seeking to establish a knowledge base, using a globally consistent climate dataset and undertaking asset-level risk evaluations to identify the range of potential climate hazards projected by different models under different climate scenarios. For physical climate-related risks, we use Shared Socioeconomic Pathways (SSP) scenarios used by the IPCC, incorporating an ensemble of latest generation (CMIP6) climate models in order to explore the potential changes to climate-related hazards that drive physical risks, adopting the widely accepted practice of using SSPs, paired with greenhouse gas and aerosol concentration pathways that align to different climate outcomes to explore a range of plausible climate futures. This includes in a high GHG emissions future (SSP5-8.5) with around a 4.4°C increase in global average temperature above pre-industrial levels by the end of the century, where greater risk would be expected, and a medium GHG emissions future (SSP2- 4.5), representing an increase of around 2.7°C above pre-industrial levels (IPCC, 2021, Climate Change 2021. The Physical Science Basis: Summary for Policymakers, Table SPM.1). These scenarios that we use as part of our ongoing work to consider physical climate-related risks in more detail through our climate hazard evaluations are different to those we use to assess the risk in the transition to a low-carbon economy.

Climate-related data  

We have obtained a bespoke dataset of latest-generation climate projections from WTW, an insurance advisor to BHP, which covers all of our operated assets, the current climate and three future time horizons (2035, 2055 and 2070) and three climate scenarios: SSP1- 2.6, SSP2-4.5 and SSP5-8.5. The data was developed for BHP by WTW’s Climate and Resilience Hub. This dataset provides a globally consistent basis to underpin our ongoing assessment of physical climate-related risks and design of appropriate adaptation measures. The dataset covers more than 20 climate-related hazards relevant to our global operations, with data downscaled from General Circulation Models, to focus in on our operated assets. Hazards related to physical climate-related risks identified as having the highest potential impact (which we have started to evaluate further) include extreme high temperature, extreme precipitation, flood, tropical cyclones, sea level rise and storm surge. Risks were assessed in accordance with BHP’s Risk Framework. Hazards with the highest potential impact were determined through the Maximum Foreseeable Loss severity rating for the associated risks, which may relate to a range of impacts including financial, health and safety, environmental, community or reputational.

Evaluation of priority risks 

We have progressed asset-level impact evaluations of physical climate-related risks to better understand and work towards quantifying the potential impacts to site operations, safety, productivity, and cost for our operated assets (excluding for acquired OZ Minerals assets).  

This has built upon the initial risk identification and assessment processes conducted in previous years. Risks evaluated have focused on those with among the highest potential impact at our operated assets (excluding acquired OZ Minerals assets), including:  

• flooding of mine and/ or key production infrastructure (e.g. plants, conveyor belts) due to extreme precipitation – applicable to all operated assets  
• disruption and/or damage to port and coastal infrastructure and operations due to higher sea levels, cyclones, storm surge and changes in marine ecosystems – applicable to WAIO, BMA and Escondida  
• disruption and/or damage to electrical infrastructure (e.g. motors, cooling and control systems) due to extreme temperatures – applicable to all Minerals Australia assets 
• disruption and/or damage to water supply infrastructure due to extreme precipitation or flooding – applicable to Escondida, Pampa Norte and Olympic Dam 
• workforce health and safety incidents due to extreme events (e.g. extreme temperature causing heat stress) – pilot study conducted at Olympic Dam 

As part of the impact evaluation work, we developed risk transmission channels to seek to understand the direct and indirect potential impacts of an extreme climate hazard occurring and how these could translate into financial impacts. For example, extreme precipitation may flood mine pits and other critical infrastructure, leading to disruptions in production and additional costs for pumping and repairs. Similarly, extreme heat or precipitation may cause safety risks triggering response plans, which may include operational stoppages.  

The recently acquired OZ Minerals assets face many of the same physical climate-related risks as our other operated assets, while some risks are specific to their locations such as reduced annual rainfall in Brazil potentially increasing power costs and creating supply disruptions due to reduced hydroelectric power generation. The materiality of physical climate-related risks previously identified by OZ Minerals will be assessed in accordance with BHP’s Risk Framework and where deemed material, we intend to further evaluate them using the risk evaluation and quantification approach outlined above.  

We intend to continue our work on the impact assessments being conducted with respect to site operations, safety, productivity and costs at our operated assets, as well as our work on the subsequent steps of calculating potential financial impacts to feed into a future value-at-risk assessment and prioritisation of additional adaptation measures. 

Value chain risk assessment  

We have conducted an assessment to understand how physical climate-related risks may exacerbate selected existing risks within our value chain, such as for the delivery and storage of critical production inputs and supplies and ability to get our products to market.  

Our assessment used a climate data mapping exercise to understand which key roads, railways, warehouses and load and discharge ports used for our supplies and products are most at risk of exposure to climate-related hazards. We have applied natural catastrophe models to quantify the projected annual downtime for certain flood-related risks along our value chain under SSP2-4.5 and SSP5- 8.5 climate scenarios and three future time horizons consistent with the climate dataset referred to above for our operated assets. This assessment suggested the aggregated changes in risk profile compared to the current climate baseline were either modest or not significant. The results of these assessments are being incorporated into routine annual risk evaluations, which will assess if additional risk controls are needed. 

Ecosystems and communities  

We recognise climate change has a vast range of intersecting potential impacts and similarly the adaptation measures we take can bring broader social value benefits, including in the areas of biodiversity, nature and community resilience. We are building our understanding of the ecosystem-based adaptation options available to our business and continuing our investment in nature-based solutions and other innovative adaptation measures, including through our social investment commitment aligned with our social value framework. For example, we have launched a pilot program for parametric insurance for a coral reef ecosystem in Fiji, to enable quick response in the event of a cyclone and greater long-term resilience. For more information and case studies on work with ecosystems and communities refer to the Environment and Communities webpages.   

We are building our capability to take a proactive and collaborative approach to engaging with the communities in which we operate (including communities surrounding our legacy assets) on the topic of climate resilience, recognising climate vulnerability and resilience intersects with many other matters of importance to communities. This includes targeted analysis of the factors that may influence the level of vulnerability or adaptive capacity within each community. We acknowledge the importance of an inclusive and equitable approach to community adaptation that involves Indigenous and local knowledge.