Some of the key risks and opportunities that were highlighted through our climate-related risk assessment process are outlined below.

Carbon pricing risk in certain locations: We used different emission-reduction scenarios to determine which business locations are at the highest risk of increasing carbon prices. As a result, we have identified an opportunity to prioritize clean energy investments across all of our sites.

Exposure to physical climate risk: Across our global facilities portfolio, we developed a hotspot ranking for our sites that shows the overall exposure to physical climate risk (such as rising sea levels, water and heat stress, exposure to cyclones, and extreme rainfall).

Technological changes: Ongoing operational efficiencies in our data centers have helped to reduce our climate change-related technological risks. We recognize the opportunity to extend these efforts by tapping into renewable energy sources. Water availability will be an increasingly relevant risk for our data centers; we plan to continue investigating further efficiency opportunities, especially in water-scarce regions such as India.

Reputational opportunities: We are actively seeking new and innovative ways to drive awareness about the impacts of climate change across the industries we support. We are committed to providing insights into consumers’ sustainability preferences to help our clients evolve their products to meet changing consumer needs and ultimately use sustainability as a way to expand the pie for all product categories and consumer environments. 

See also: 

• 2019 10-K (pp. 25-26)
• Climate risk assessment

The findings from our climate risk assessment have implications for all aspects of our business, including Global Responsibility & Sustainability, Real Estate, Business Resiliency, Risk & Insurance, Global Procurement, and Technology. While we build on these results and integrate the findings into our ongoing operational strategy, we continue to focus on relevant improvement opportunities across key areas of our business:

Integrating sustainability into Enterprise Risk Management (ERM): Climate Change is a standalone risk category in our ERM process, so it is a fundamental part of the annual business-level risk assessments conducted by our global operational leads. This speaks to our commitment to continue to address the environmental risks and impacts that affect our stakeholders, the communities in which we operate and our overall business strategy. 

Incorporating physical risk findings into real estate plans: We are using the hotspot ranking from our assessment to inform our understanding of relevant risks associated with our current facilities, as well as potential risks with any new real estate plans or moves. This review is vital to ensuring responsible business growth and continuity, as well as our associates’ continued safety.

Identifying synergies with business resiliency plans and impact on insurance: We have also integrated the hotspot site ranking into our ongoing business resiliency plans, which focus on risk mitigation across sites, prioritized based on criteria such as property value, size, employee safety and client impact. This alignment further protects us against any potential increase in insurance costs associated with high-risk facilities.

Investigating carbon risk-adjusted pricing: We are looking into carbon risk-adjusted pricing for potential investments, in order to project a more accurate return on investment given both present and potential future climate-related risks.

Using our platform to share climate-related insights: We continue to leverage our unique expertise to provide relevant sustainability insights to the industries we support. Sustainability can have wide-ranging meaning to consumers today, and these insights are valuable as our clients adapt their current and future business plans to changing environments and consumer preferences.

Ongoing efforts for a responsible footprint: In our continuous work to reduce our global emissions, we have extended our current Scope 1 (direct emissions) and Scope 2 (indirect emissions) measurement to include a comprehensive corporate value chain assessment to evaluate the relevance and impact for Nielsen of each of the 15 emissions categories within Scope 3. We have developed energy, waste, and travel-related goals to help drive this effort, covered in the Metrics and Targets section below.

We plan to continue these activities as we also integrate ideas from the assessment into our operational strategy and implement relevant resiliency measures that will help secure our business and our associates’ safety in the face of potential exposure to risk.

We also include the findings from our scenario analyses and related efforts in our strategic and financial planning processes. See the row below for more detail.

See also Nielsen’s Global Environmental Policy & Guidelines Across Functions and the Climate Change, Energy and Emissions section of this report for more on how we manage climate change-related issues.

Nielsen understands the impact of climate change on our business and the communities where we live and operate, and we remain committed to identifying and delivering solutions that will address this global issue.

To that end, over the years we have invested our resources to create an accurate and complete picture of our baseline greenhouse gas (GHG) emissions and resource usage, so we could focus our efforts on initiatives that would be most effective. For example, we started a global utility data collection expansion plan in 2015, and completed it in 2018, so that we could have clearer control over our Scope 1 (direct) and Scope 2 (indirect) emissions. Our 2019 methodology change in how we calculate our utility-based emissions and resource usage—adding estimates to bridge any gaps in available data—now ensures that our reported data represent 100% of Nielsen’s global square footage for the first time in 2019. 

Also, in 2019, we expanded our Scope 3 emission calculations beyond our business travel footprint, a material indicator for us, by conducting our first GHG value chain assessment. This effort has given us a more comprehensive understanding of our global supply chain footprint and helped us assess the relevance and emissions for each of the 15 Scope 3 categories. 

With our Scope 1, Scope 2 and Scope 3 baselines more formalized, we are now working to enhance our climate change mitigation commitment by investigating absolute emission reduction goals. We are referencing the Science Based Target model to assess possible targets in line with the latest climate science, aligning with the goals of the Paris Agreement—to limit global warming to well below 2 degrees Celsius, and further pursue efforts to limit warming to 1.5 degrees Celsius. Nielsen will share updates on our development of new emission targets as we complete our due diligence through 2020.

In addition to our GHG emission scoping and goal setting, in 2018 we contracted with third-party consultants to conduct scenario analyses, as part of a climate risk assessment, to assess how different timelines and goal completion scenarios might affect our business. This assessment included transition and physical risk analyses. 

For the transition risk-related analysis, our third-party consultant used modeling and analysis that incorporates the most recent information available on an array of factors, including energy markets, prices and technology costs, using the International Energy Agency’s (IEA’s) World Energy Model. The analysis is based on energy supply and demand outlooks, emissions abatement and investment needs in the energy supply, power generation and end use sectors (industry, transport and buildings) from the IEA’s Sustainable Development Scenario, which holds temperature rise to less than 2 degrees Celsius with 66% probability. It also examines the co-benefits for local pollution, energy access and energy security in a transition to a low-carbon energy system, and its implications for the energy industry. 

Three scenarios were tested: 

All scenarios are specifically based on our public target to reduce our global energy use per square foot of facility space by 5% by the end of 2020, compared with 2015, and are consistent with a 2 degrees Celsius future. 

• Scenario 1: Nielsen continues emission reductions at our current pace to 2050 (i.e., reduce global energy use per square foot of facility space by up to 5% by 2020—or 1.25% per year from a 2015 baseline).
• Scenario 2: Nielsen meets the goal to reduce emissions by 5% by 2020 and then makes no further emission reductions through 2050.
• Scenario 3: Nielsen meets the goal to reduce emissions by 5% by 2020, followed by a 1% year-on-year increase in emissions out to 2050.

The transition risk analysis gave us insight into the financial implications associated with regulatory pressures related to climate change and potential reputational risks. The analysis used a compound annual growth rate (CAGR) of 4%, a discount rate of 2% and financials for fiscal year 2016. It also used our disclosed 2017 Scope 1 GHG emissions data and our Scope 2 GHG emissions data; where needed, data gaps were resolved by closing any gaps in actual data with estimates based on square footage intensity. It also included our disclosed Scope 3 GHG emissions data related to business travel. 

The transition risk analysis dug deeper into the carbon pricing risk focused on the additional financial cost paid (minus current carbon prices) on emissions due to increasing carbon pricing regulations in the future, as well as an assessment of our carbon pricing risk intensity (i.e., the cost of carbon pricing risk per million dollars of revenue over time). 

The result of the carbon pricing risk intensity assessment showed the cost per $1 million in revenue based on our emissions reduction scenarios (described above) in a 2 degrees Celsius future at three different points in time (2020, 2030 and 2040). The results* were as follows:

• In Scenario 1, we found that at year 2020, the carbon pricing risk intensity would be $97.89; in year 2030, it would be $588.77; and in year 2040, it would be $639.53.
• In Scenario 2, we found that at year 2020, the carbon pricing risk intensity would be $99.26; in year 2030, it would be $677.59; and in year 2040, it would be $834.76.
• In Scenario 3, we found that at year 2020, the carbon pricing risk intensity would be $100.36; in year 2030, it would be $757.27; and in year 2040, it would be $1,030.61.

As mentioned, this reflects the projected cost of carbon pricing risk per $1 million of company revenue. In other words, the results represent the expected increase in costs to Nielsen should carbon prices rise as forecasted in each scenario. For example, for every $1 million of revenue, Nielsen should expect a carbon pricing cost of $589 in 2030, under Scenario 1.

*Note: These projections were made in 2018. The third party’s carbon pricing risk forecasts are updated annually.

As part of the transition risk analysis, we also conducted a business model stress test (i.e., the change in operating margin, relative to business as usual, associated with increased operating expenditure under a future carbon pricing scenario). The methodology for this business model stress test is the same as what is described above for our transition risk analysis.

The business model stress test results were as follows:

• In the case of Scenario 1, the forecasted decrease in operating margin due to carbon pricing risk in year 2020 was 0.012%; in year 2030, it would be 0.072%; and in year 2040, it would be 0.078%.
• In Scenario 2, the forecasted decrease in operating margin due to carbon pricing risk in year 2020 would be 0.012%; in year 2030, it would be 0.083%; and in year 2040, it would be 0.102%.
• In Scenario 3, the forecasted decrease in operating margin due to carbon pricing risk in year 2020 would be 0.012%; in year 2030, it would be 0.092%; and in year 2040, it would be 0.126%.

For our physical risk analysis, the third-party expert developed a baseline climatology model, based on a mix of Coupled Model Intercomparison Project Phase 5 models from 1975 to 2005. They then ran future simulations out to 2030, sampled at five-year intervals. This method of evaluation allows a capturing of the departure from “normal” conditions evident between 1975-2005 and 2030. The results are averaged over five-year intervals to identify directional trends and reduce the noise associated with yearly oscillations reproduced by the models. To reduce individual model uncertainty, the analysis utilized a mix of global climate models (GCMs). For indicators that were not generated through GCMs, such as sea-level rise, the least mitigation effort scenario (RCP 8.5) was selected and coupled with topographic, economic and/or historical observation data. RCP 8.5 is an above-average warming scenario that represents the least global mitigation effort and greatest increase in warming; on a 25-year timescale, however, the discrepancies between Intergovernmental Panel on Climate Change scenarios (RCP 2.6, 4.5, 6, and 8.5) are minimal. A level of uncertainty exists in both the climate model projections and the assumptions we take about nonlinear business impacts. Strict statistical validation methods were applied by the third party to account for model uncertainties and to ensure a practicable level of directional accuracy in these estimates. 

Based on this, the physical risk analysis developed a hotspot ranking for our global sites that showed the overall exposure to physical climate risk (such as rising sea levels, water and heat stress, exposure to cyclones, and extreme rainfall) across our entire facilities’ portfolio. Nielsen is using this hotspot ranking to guide us on any risks associated with our current facilities and potential risks with any new real estate plans or moves. This review of the hotspots is vital to ensuring both responsible business growth and our associates’ continued safety.

As Nielsen continues to build on complete and accurate emission measurements, and works to establish absolute emission-reduction goals, these findings provide direction for exploring additional areas of relevant opportunities, as well as the risks associated with any potential investments and options we choose to move forward with. 

See also our Global Environmental Policy & Guidelines Across Functions for all historical data.

Nielsen recognizes both the imperative reality of climate change and the opportunities for increased efficiency and effectiveness that it presents. We are working with teams and leaders across our organization to continue to ensure that climate change risks and opportunities are integrated into our business strategy and that we are taking meaningful action to drive continuous improvements where needed. 

The process of identifying, assessing and managing climate-related issues is integrated into our overall, companywide Enterprise Risk Management (ERM) process. Climate Change was added as a standalone ERM risk in early 2018; climate change-related issues were previously addressed under another ERM risk, Disaster Recovery & Business Continuity. The new Climate Change category includes adverse financial, strategic or operational impacts as a result of—among other risks—an inability to provide climate-focused solutions to address the unique needs of businesses in a world impacted by environmental changes.

Throughout the year, we use our ERM framework to bring in a range of different perspectives across Nielsen to help identify, evaluate and manage financial and nonfinancial risks related to climate change and our other ERM risks. 

We consider a range of climate-related risks, including but not limited to: current and emerging regulations; technological, legal, market-based and reputational risks; acute and chronic physical risks; and both downstream and upstream impacts. Climate-related risks are monitored on an ongoing basis by teams, and risks and opportunities are considered more than six years into the future.

As mentioned, in 2018 we conducted a global climate risk assessment, looking into both the physical and transition-related risks of climate change on our business and operations through 2050. While the above row describes the results of this assessment, here we describe more about the process used.

To understand transition risks (i.e., changes to policies, laws, technology and markets due to climate change; the financial implications associated with regulatory pressures related to climate change; and potential reputational risks), we used a variety of key inputs: a database of all current carbon and fuel taxes; potential future carbon price trajectories; revenue; operating expenditure and GHG emission projections; and modeling of the pass-through pricing risks from our supply chain.  

To understand physical risks (i.e., how extreme weather events and changing climate patterns can affect a business’s physical assets), we looked at multiple temperature and precipitation indices that measured changes in both average and extreme conditions today and then projected them out to the year 2030. 

The findings of this assessment have implications for all aspects of our business. As a result, we have engaged teams across areas including Global Responsibility & Sustainability, Real Estate/Facilities, Security, Business Resiliency, Risk & Insurance, Technology, Global Procurement, Architecture and Infrastructure to embed the relevant findings into our processes and practices and to identify new improvement opportunities accordingly.

In 2019 we conducted our first Scope 3 emissions assessment to understand the climate-related risks and impacts in our supply chain.

Understanding the climate-related risks to our people and business—and ensuring we have the proper governance channels and tactical systems in place—are integral to our climate change strategy. By being prepared to respond to, mitigate and prevent business risks from climate change, we aim to address on an ongoing basis the vulnerabilities unique to every company’s business and operating models resulting from the gap between present realities and future success in an increasingly resource-constrained world. We will continue to leverage the findings from our first climate risk assessment to take concrete actions to further mitigate climate-related risks, while we remain open and attuned to how current risks are evolving and where new risks may be emerging. 

For more information on how we assess climate-related risks, risks identified and management approaches, please refer to our 2018 10-K, 2019 10-K, 2019 Proxy Statement, 2020 Proxy Statement and Nielsen’s nonfinancial materiality assessment. 

We manage climate-related risks in our own operations through our Enterprise Risk Management process and through operational and environmental management systems, which is described in detail in our Global Environmental Policy & Guidelines Across Functions. Specific management efforts are described in the climate-related strategy section above and in the Environment Disclosure section of this report. These efforts include preparing for, and adapting to, climate-related physical risks, including extreme weather, and reducing our own environmental footprint. 

We are working with our suppliers to manage climate-related risks in our supply chain. And, we use our unique data insights and client relationships to address climate change. For example, we conduct research for our clients about perceptions, issues and concerns relating to environmental sustainability and corporate responsibility. This information helps clients more efficiently develop products, services, partnerships and internal actions that consider ESG impacts. We also share key insights on these topics with the broader public via Nielsen Insights. 

Climate Change is considered a standalone risk in our formal Enterprise Risk Management (ERM) process, which is overseen by our Chief Legal & Corporate Affairs Officer, who reports regularly to our CEO and Board. The Board’s Audit Committee is updated at each regular meeting on enterprise risk issues at Nielsen. Once a year, Nielsen’s management team formally updates the Audit Committee on the company’s ERM process and the top risks that emerge from meetings with business leaders throughout the company.

In 2019, we reported on additional climate-related risks in our 10-K filing (pp. 25-26), adding to what we had previously reported in our 2018 10-K (pp. 23-24).

Energy and Waste

• Goal: Reduce global energy use per square foot of facility space by up to 5% by the end of 2020.
  • Status: On track. As we go into 2021 with the Scope 1, Scope 2 and Scope 3 baselines, we will investigate setting absolute emission reduction targets, referencing the Science Based Targets model.
• Goal: By the end of 2019, upgrade our live data storage in our data centers to all-flash for energy reduction and enhanced efficiency.
  • Status: At the end of 2019, this effort was 64% complete; in 2020, the goal is to achieve 95% completion. 
• Goal: Send 0% of our global electronic waste (e-waste) to landfills by the end of 2020.
  • Status: On track.

Travel

• Goal: Include sustainability criteria in 100% of our major, centrally managed, global travel requests for proposals (RFPs).
  • Status: For 2018 and 2019, we met our goal of 100% of travel RFPs addressing multiple questions on sustainability and corporate social responsibility.
• Goal: Engage 100% of our travel suppliers on overall sustainability practices. Also, formally assess 80% of our major, centrally managed travel suppliers on environmental, social and governance practices through our third-party sustainability scorecard process.
  • Status: For 2018 and 2019, we requested complete corporate social responsibility and sustainability assessments from 100% of our major travel suppliers, covering all three major categories of Nielsen’s travel spend (air travel, auto travel and hotels/accommodations); 86% of those suppliers completed assessments, exceeding our goal of 80%.

Our travel suppliers as a whole ranked high on their scorecards. Our major airline suppliers are engaged in reducing their impacts on climate change, with public goals for reducing emissions, focusing on fleet efficiency and research on more sustainable fuels. Our major suppliers in the hotel industry are actively engaged in reducing emissions, water and waste, with public goals and reporting. All of our major hotel suppliers participated in the Hotel Carbon Measurement Initiative Working Group, which developed a standard methodology for calculating and communicating carbon emissions associated with hotel stays based on the GHG Protocol Standards.