To ensure the integration of ESG factors, Enel Group has established structured processes involving analysis of the sustainability context, identification of priorities for the Company and its stakeholders, sustainability planning, implementation of specific actions to meet sustainability objectives, reporting and management of ESG and sustainability indicators, as well as management of the main national and international indicators.
Environmental risks
Related to the impact of the Company's operations on the environment and ecosystems and to the exploitation of scarce natural resources (including raw materials and water). In some cases, the synergistic effects between these impacts, such as global warming and the increasing exploitation and degradation of water resources, increase the risk of environmental emergencies in the most sensitive areas of the planet, with the risk of competition for the different uses of water resources. As a fundamental and determining element behind each project, throughout its entire life cycle, Enel Chile has established the requirement of prevention and effective minimization of environmental impacts and risks, for example by identifying technological and nature-based solutions to optimize the use of resources, or by signing agreements with other users of water resources.
Physical risks: These are related to the occurrence of extreme weather conditions or gradual but structural changes in weather conditions. Extreme events could expose the Company to a relatively prolonged unavailability of assets and infrastructure, recovery costs and inconvenience to customers, among others. Recurring changes impact the resources needed for generation or electricity demand, such as drought and temperature increases. In December 2020, the Ministry of Environment of the Government of Chile published a Climate Risk Atlas, identifying, for each industrial segment, points of attention for potential impacts. This report organizes impact chains in 12 sectors and for each chain, it considers and opens maps of climate hazards (A), exposure (E) and sensitivity (S). The Atlas defines climate risk as a combination of these three variables and, for the electricity sector, it defines the following impacts:
- Decrease in water resources
- Temperature increases over transmission lines
- Decrease in wind resources
- Impact on solar radiation
Enel Chile has integrated these risks in its analysis and maintains an active monitoring system and predictive measurements to mitigate them. Likewise, it implements initiatives with local stakeholders, especially when it comes to the reduction of water resources, generating collective impact actions to mitigate these risks. The geographic and technological diversity that come into play for generation, and good predictive measurements of climate phenomena allow Enel to mitigate and manage changes associated with climate patterns. Likewise, investments made by the Company to have a distribution network that is resilient to these phenomena are part of the mitigation and adaptation measures that Enel Chile is taking in the perimeter of its assets. All areas of Enel Chile are subject to ISO 14001 certification, and, through the application of internationally recognized Environmental Management Systems (EMS), possible sources of risk are monitored to promptly detect any criticality.
Transition risks: The path towards a low-carbon economy may involve risks related to regulatory, political, legal, technological and market changes, among others, with a short-, medium- and long-term effect. Enel Chile's competitive advantage in the management of these risks is that it belongs to a group that operates in a more mature market, which can share good regulatory, technological and market practices, among others.
Social risks
Social conflicts with intensity that may jeopardize the continuity of operations. To face these potential impacts, Enel Chile has, on a territorial level, a strategy of continuous dialogue and the presence of personnel dedicated to community and stakeholder engagement, social investment focused on local development, and structured Complaints and Grievance Management systems, which are the tools for mitigating conflicts related to operations.
Enel Chile has plans and processes in place to manage situations in the event of national contingencies. Aware of the strategic role that electricity represents for the country, these plans prioritize uninterrupted delivery of electricity to the system, customer electricity supply, and employee safety.
Risks linked to health and safety, for example, risks caused by accidents with company personnel or contractors. Enel Chile prevents these risks by promoting a culture based on safety, which includes developing policies and including safety in processes and training, among others.
Related to employee diversity, attraction, and retention in the context of the energy transition,to meet these challenges, Enel Chile has a Diversity Policy, along with a Talent Management and Promotion Policy. The Company carries out different initiatives dedicated to work-life balance and promotes education and personal growth through scholarships and courses.
Governance risks
Enel Chile manages governance risks by identifying those originated by illicit conducts, including corruption, lobbying activities, or anti-competitive practices, among others, in which its own personnel or contractors could engage. To this end, it has an Internal Control and Risk Management System based on business rules and procedures. On the other hand, risks involving human rights violations are raised through due diligence processes that are developed annually throughout the entire Enel Chile value chain, including its subsidiaries, and transversally to all functions. Action plans derive from these processes, to address the detected areas of vulnerability or impacts.
Emerging risks
Due to the increasing digital transformation and greater dependence, Enel Chile faces risks associated to digitization and operational continuity and cybersecurity, as well as risks that emanate from the protection of personal data. Digitalization, Information Technology (IT) efficiency and service continuity have all been identified as emerging risky areas, as the Company undertakes a digital transformation of the management of its entire value chain, developing new business models, digitalizing its processes, integrating systems and adopting new technologies. The speed of technological development always generates new challenges, with a constant increase in the frequency and intensity of cyber-attacks, which by their nature seek to affect critical infrastructures and strategic industrial sectors, highlighting the potential risk that, in extreme cases, normal business operations could suffer a setback. Enel Chile has more than two million customers and directly employs around two thousand people. Its business model requires managing a relevant volume of personal data. This implies greater exposure to the risks associated with the processing of personal data and increasingly demanding privacy legislation worldwide. For this reason, the protection of personal data is of essential concern and is considered an emerging risk for the Company.