In 2020, we carried out a gap analysis to determine the extent to which our measures already conform to the TCFD  recommendations (see here). In various workshops with experts from the areas of technology, procurement, strategy and risk management, we defined the main climate-related opportunities and risks and began weighting them. In the process, we considered the consequences, for our business operations, that could result from the physical impacts of progressing climate change. In addition, we analyzed the potential impacts resulting from political, technological, and social developments tied to the transition toward a low-carbon economy that has been initiated. In 2022, the analysis was extended to include a financial quantification of transitory risks.

The important climate-related risks include possible network-infrastructure failures as a result of damage to secondary infrastructure (involving power failures, for example) or failures of cooling systems. Another risk consists of possible network damage or failure as a result of network-infrastructure damage due to climate events or changes in climate conditions.

The important climate-related opportunities we have identified include the increasing use of energy-efficient technologies (in network operations, for example), and growing demand for climate-friendly products and services.

In a next step, we analyzed – by way of example, to begin with – 500 of Deutsche Telekom’s locations in Germany with regard to their physical climate risks. This climate-risk analysis was carried out using the Climate Change Edition of the Location Risk Intelligence software of the reinsurance company Munich Re. The analysis covers eight indexes (see graphic). We considered the risks for the various locations in light of two climate scenarios of the Intergovernmental Panel on Climate Change (IPCC): a business-as-usual scenario (RCP 4.5), with a global temperature increase of more two degrees, and a four-degree scenario (RCP 8.5). In addition to studying the climate scenarios, we looked at risks in various time frames: currently, for the year 2050 and for 2100.

The following graphic shows a simplified excerpt of the results: the risks for the year 2050, in keeping with the four-degree scenario:

Tropical Cyclones
Maximum intensity of cyclones with a probability of exceedance of 10% in ten years (corresponds to a return period of 100 years).

Sea Level Rise**
Hazard zones derived from statistical data on sea level rise and altitude data for the respective projection year and scenario.

Fire Weather Stress Index
The Fire Stress Index describes current meteorological fire conditions based on fire hazard models. These combine inflammation probability, speed and spread probability, and fuel availability into a combined metric. The Fire Stress Index includes information on the length of the fire season and extreme fire danger days, for example.

Precipitation Stress Index
The Precipitation Stress Index describes the current meteorological threat of heavy precipitation. The threat is derived from information about e.g. one-day heavy precipitation events and long-lasting precipitation events.

Drought Stress Index
The Drought Stress Index describes the change in water balance derived from the modelled standardised precipitation evapotranspiration index (SPEI). This multi-scale drought index is based on climatic data and is used to determine the duration, intensity and severity of drought conditions compared to normal conditions (in reference periods).

Heat Stress Index
The Heat Stress Index describes the current meteorological threat from heat. The threat is derived from information on e.g. heat waves, annual maximum temperature and tropical nights.

River Flood (undefended)
Areas at risk of extreme floods with return periods of 100 or 500 years. Does not take into account dikes.

River Flood (defended)
Areas at risk of extreme floods with return periods of 100 or 500 years. Flood protection is taken into account.

The scenario analysis shows that only minor physical risks apply for the majority of the company’s locations in Germany. Nonetheless, we are prepared for the impacts of physical risks, such as changes in precipitation patterns and extreme weather variability. As shown by examples such as the storm “Friederike” in 2018, and the disastrous floods of July 2021, extreme weather events are already capable of causing local damage to our telecommunications infrastructure. Consequently, our risk management is based on multiple pillars – we structure Deutsche Telekom’s telecommunications networks with built-in resiliency. For example, we use ring structures to ensure that failures of individual network components do not affect the services we provide for our customers. For most of our critical locations, we use uninterruptible power supply (UPS) systems incorporating batteries and mobile and stationary diesel generators. Such systems can normally provide emergency power for several hours in the event of power failures. Our crisis management also helps with rapid recovery in the event of disruptions. The risks of damage to buildings and to Deutsche Telekom’s network infrastructure are covered by insurance policies. Further information is available in the chapters “Addressing climate risks” and “Risk and opportunity management”.

In 2022, we continued analyzing the most important opportunities and risks presented by the above-described climate scenarios. We now plan to extend our location analysis to additional countries – and we are already holding talks with further national companies to that end. 

The continuing refinement of our risk management, in keeping with the TCFD requirements, is also important from a regulatory perspective, especially in light of the EU Taxonomy guidelines. The criteria for the environmental goal “Climate change adaptation” require – as does the TCFD – companies to study physical climate risks and to be aware of the potential impacts on their business activities. With our TCFD process, we have laid the foundation for the climate risk analysis that is needed to fulfil the taxonomy criteria. More information on the implementation and the results of the taxonomy-aligned climate risk analysis can be found in the “EU taxonomy: compliance” section and the non-financial statement in the 2022 annual report.