IGO SUSTAINABILITY REPORT 2022— 67 66 —IGO SUSTAINABILITY REPORT 2022 Our Response to Climate Change Internal Carbon Price Internal carbon pricing (ICP) is a mechanism adopted by IGO to increase the pace of decarbonisation across our total carbon footprint. We have introduced an internal carbon price of $60/t CO2-e to provide the incentive to accelerate the delivery of capital investment in abatement projects and energy-efficiency improvements. The ICP allows us to price operational emissions, charge an internal carbon fee (allocated to a decarbonisation fund), and drive our decision making on low carbon investments. The ICP ensures we target decarbonisation projects where the most costeffective impact can be achieved first. By dynamically pricing carbon with forward projections, we can incentivise change and investment in low emissions options. The ICP also allows for appropriate risk mitigation of rapid and unexpected regulatory change and policy, although this risk perspective was not the main purpose or driver of the implementation of an ICP. We have differentiated between a shadow carbon price and an internal carbon price. Our ICP will price our Scope 1 and 2 emissions, creating a centralised decarbonisation fund that will be used to fund projects that will reduce our total carbon footprint. The shadow carbon price is a mechanism used for merger and acquisition investments or major capital projects, ensuring investment decisions reflect all costs, including the costs of emissions. The two mechanisms are priced differently, reflecting their different purposes. Decarbonisation Fund Through our ICP mechanism, we will establish a centralised decarbonisation fund. The decarbonisation fund is expected to allocate approximately $7M-10M of funds during FY23. This fund amount is determined from the ICP and forecast emissions for the financial year. The decarbonisation fund will be used to: • accelerate our understanding of the IGO emissions profile following the acquisition of the Forrestania Operation and Cosmos Project • implement strategic decarbonisation projects at the Nova Operation, including continued solar farm expansion and pilot projects described on page 65 • update scenario analysis and TCFD disclosure to align with our rapidly changing business • invest in carbon removal and offset projects • accelerate our understanding of supply chain and Scope 3 emissions; and • invest in research and development and trial emerging technology to reduce our emissions. Carbon Removal and Offset Strategy Our strategy surrounding carbon removal and offsets does not substitute the decarbonisation and GHG emissions reduction of our operations. Instead, it will be used in parallel while we are challenged by technology readiness and commercial availability. We recognise that investment in carbon removal must occur in tandem with strong emissions reduction efforts for our own operations. We recognise the importance of linking our total carbon footprint reduction strategy with our carbon removal strategy. While we are at a point where our business is carbon intensive and low emissions technologies are yet to be economic or fully developed, we will have a greater reliance on offsets and carbon removal in the future. During the financial year, we developed an offset procurement framework to inform the types of projects we will look to develop or invest in, ensuring we target highly credible Australian Carbon Credit Units (ACCUs) with strong secondary benefits. We understand that not all carbon credits are of equal value or credibility, and therefore our framework ensures IGO targets ACCUs that are aligned with our values and purpose of Making a Difference. Internal carbon price $60/t CO2-e in FY22 Price Scope 1 and 2 emissions and allocate to a centralised decarbonisation fund to help finance emission reduction projects and execute our carbon neutral strategy Shadow carbon price Market spot price Inform strategic decisions showing carbon price implications and climaterelated risks for M&A and major capital projects The offsets we purchase must be seen, both today and in the future, as real and credible by our people, and by capital and customer markets. We will exclude project types and offsets that we consider to constitute: • unacceptable risk in terms of sensible stakeholder views on the additionality of the carbon abatement, or which carry eligibility or additionality risk in the medium-term (including landfill gas and avoided deforestation projects, as well as units released from Fixed Carbon Abatement Contracts) • unacceptable risk of abatement overestimation or impermanence • unacceptable project proponent risk (including beneficial owners other activities, and the risk of exposing IGO to association with exploitation, unethical or unsafe actions, or parties that lack credibility) • a cause of social, economic, environmental or political harm or reasonable opposition; and • a possible cause of social disadvantage or inequitable outcomes for local communities or workers. ASPIRATION TO CARBON NEUTRALITY Importance of linking our carbon neutral strategy with carbon removal and offsets High Low Carbon Intensity High carbon intensive business, where carbon reduction technologies are yet to be economic or fully developed Greater importance on offsets and carbon removal as part of our business decarbonisation strategy Low carbon intensive business, where carbon reduction technologies are economic and commercially available Carbon removal will not be as important in the development and implementation of our decarbonisation strategy Importance of Carbon Removal High Low IGO’s Offset Procurement Framework Our carbon removal strategy is built on some key principles, and alongside our evaluation framework, inform the types of projects we will look to develop. The carbon removal principles include: Mitigation hierarchy: as a first step, we will prioritise emission reduction of our operations and activities, following the mitigation hierachy of avoid, minimise, and finally offset. Secondary benefits: while we recognise the interim solution offsets provide for hard to abate emissions, they provide an opportunity for significant co-benefits. We will avoid harm, investing in projects that have real and positive secondary benefits. Scientific verification: all IGO offsets will have sound and verified carbon measurement and accounting methodologies, ensuring high environmental integrity of offset credits. Local consideration: we will invest in Australian offset projects, with an initial focus on areas within our operational boundaries or host communities.
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