BHP Group Limited

BHP identifies four climate-related risks and one opportunity (Table 1, pp. 66–71), each with stated time horizons:

• Transition risk 1: Policy, legal and reputational (medium and long term)
• Transition risk 2: Availability and commercial viability of operational decarbonization technology (medium and long term)
• Transition risk 3: Accelerated decrease in steelmaking coal demand (long term)
• Transition opportunity 1: Copper demand (short, medium and long term)
• Physical risk 1: Physical climate-related risks (short, medium and long term)

Time horizons (p. 88). Short-term is up to 1 year, medium-term 1 to 5 years, and long-term 5 to 30 years (or longer to align with BHP's asset lives). They draw on the annual budget, five-year planning and life of asset plans, and on the timeframes in BHP's Risk Framework.

How they were identified (pp. 64–65). BHP applied judgment and says the list is not exhaustive: it covers those risks and opportunities that could reasonably be expected to affect cash flows, access to finance or cost of capital over the short, medium or long term. It started from the Risk Framework and strategic planning, grouped a long list thematically, and cross-checked against scenario analysis. Energy coal demand, uranium, potash demand and nickel demand were considered but not included. No risk or opportunity relevant only to a non-operated joint venture was identified.

Assets and business activities most vulnerable to each risk, or aligned with the opportunity, are set out in Table 1 (pp. 66–71) and, for physical risk, in Figure 4 (p. 70).

• Transition risk 1: operations in Australia, Chile and Canada, and other growth-focused jurisdictions, may be exposed. FY2026 carrying value of property, plant and equipment, intangible assets and goodwill in groups of cash generating units that include facilities covered by the Australian Safeguard Mechanism (SGM): US$51.4 billion, 63% of the Group total (p. 66).
• Transition risk 2: concentrated in assets with hard-to-abate emissions, mainly diesel and fugitive methane. FY2026 operational decarbonization capital expenditure was US$30 million, under 1% of Group capital expenditure (p. 67).
• Transition risk 3: BMA contributed US$0.7 billion (2%) of FY2026 Underlying EBITDA and US$6.4 billion (9%) of net operating assets (p. 68).
• Transition opportunity 1: copper contributed US$18.2 billion (54%) of Underlying EBITDA and US$43.5 billion (59%) of net operating assets (p. 69).
• Physical risk 1: Figure 4 maps hazards and potential impacts by asset, with each asset's share of FY2026 Group revenue: WAIO 40%, Escondida 29%, Copper South Australia 10%, BMA 7%, Pampa Norte 5%, NSWEC 3%. BMA and WAIO are in regions where adverse weather affects production more often. BHP says effects on its business model and value chain may be both direct and indirect (p. 70).

Targets and plan (pp. 58–59). Medium-term target: cut operational GHG emissions (Scopes 1 and 2, operated assets) by at least 30% by FY2030 from a FY2020 baseline; long-term goal: net zero by CY2050. BHP says it is on track for FY2030 and expects progress to be non-linear. Its second Climate Transition Action Plan (CTAP 2024) was published in August 2024, with some assumptions since updated.

Actions and dependencies (pp. 55–61).

• Renewable electricity through PPAs (80% of electricity at operated assets is renewable). A key dependency is whether contracted PPAs deliver renewable electricity in line with future consumption.
• Fugitive methane abatement at BMA.
• Electrification of mining equipment and locomotives through proof-of-concept trials, with deployment not expected until after FY2030.
• Structural abatement for net zero by CY2050 is described as uncertain (p. 61).

Value chain (pp. 62–63). Steelmaking (13 steelmakers), shipping and direct suppliers (top 500 by spend).

Resourcing and portfolio. Capital allocation is through the Capital Allocation Framework (p. 64); at least US$4 billion (incremental, nominal) of further operational decarbonization spend is anticipated in the 2030s (p. 57). BHP plans to cease mining at Mt Arthur Coal in June 2030 (p. 75).

Progress. The FY2026 social value scorecard milestone to complete the Escondida Boiler Diesel Displacement project was not met (construction delays, p. 58).

Current effects, FY2026 (pp. 66–71). No impairment recognized for transition risk 1 or BMA. Safeguard Mechanism (SGM) obligation US$23 million (BHP share); incremental operational emissions reduction spend US$65 million; copper capital expenditure US$4.6 billion. No material financial effects identified from weather events or climate litigation.

Anticipated effects.

• SGM liability under US$75 million a year (BHP share), FY2027 to FY2030.
• Operational emissions reduction capital expenditure and lease payments: about US$50 million in FY2027 and US$0.5 billion over FY2028 to FY2031.
• Copper growth capital expenditure: about US$1.4 billion in FY2027, US$1.9 billion in FY2028, US$3 billion a year on average (nominal) over FY2029 to FY2031.
• No material adjustment to carrying amounts expected within the next annual reporting period (p. 65).

Not quantified (pp. 66–71). BHP cites measurement uncertainty or lack of decision usefulness for not quantifying the SGM after FY2030, decarbonization spend from FY2032, long-term carbon credit use, longer-term copper expenditure and combined physical risk effects. It sees no reasonable basis to estimate litigation effects and says reputational effects cannot be reliably estimated.

Commercial sensitivity relief (pp. 69, 88). BHP says it applied the relief to certain copper demand opportunity information (p. 69), including the approval requirements, timing and quantum of potential further NOJV investment in copper.

Scenarios (pp. 72–73). Lower-warming: 2025 Wood Mackenzie Net Zero scenario (WM Net Zero), 1.5°C. Higher-warming: SSP2-4.5, best estimate 2.7°C (range 2.1–3.5°C), defined in the IPCC's Sixth Assessment Report. BHP's planning range, updated in FY2026, implies 2.2–2.5°C by 2100. SSP5-8.5 (about 4.4°C) was not selected for portfolio-level assessment; its physical risk results were used for supplementary purposes. Key inputs and assumptions are in Table 2.

Lower-warming result (pp. 73–74). A commodity and carbon price-only sensitivity for 2030 and 2050 found cash flows positive across all timeframes and enterprise NPV materially consistent with the BHP Base Case. A steelmaking coal price sensitivity gives an indicative illustrative impairment of about US$2.5 billion; BHP considers 1.5°C unlikely based on current indicators.

Higher-warming result (pp. 74–75). Asset-level (FY2022 to FY2026) and value chain (FY2023 and FY2024) physical risk studies, on 20-year horizons around CY2035, CY2055 and CY2075, generally found no material incremental impact under SSP2-4.5 or SSP5-8.5. The exception is inland rail flooding at WAIO under SSP5-8.5 if unmitigated.

Resilience (p. 75). BHP concludes its strategy, business model, portfolio and operations remain resilient, citing its balance sheet, net debt and gearing monitoring, and the Capital Allocation Framework. No additional investment or response was identified. Uncertainties and limitations are given for each scenario.