ESG Report - Report - Page 9
STRATEGY
LOW-CARBON
ENVIRONMENT
Integration of Climate-Related
Risks and Opportunities in
Our Businesses and Strategy
As part of Valero’s annual strategic planning cycle, risks
to our businesses and operations, including climaterelated, legal, policy and regulatory developments, are
identified and assessed by the executive management
team. Climate-related risks may adversely affect our
business and financial performance. Regulations and
incentives to encourage innovation and actions to
mitigate these impacts also present climate-related
opportunities. The management team takes into
consideration analysis and scenarios from internal and
external subject matter experts, levels of certainty and
time horizons spanning short-, medium- and long-term
in its assessment and development of strategies for risk
mitigation and capturing opportunities.
In addition to the annual cycle, risks and opportunities
are monitored and reviewed frequently at many levels of
the company. Reporting directly to the CEO, the Senior
Vice President, General Counsel and Secretary has
oversight of Health, Safety and Environmental, Legal,
ESG, Compliance, Risk Management and Government
Affairs functions. Further details on our risk management
and oversight structure are provided in the Governance
section beginning on page 65.
Today, Valero is the leader in the
production of low-carbon liquid
transportation fuels because of
strategic actions taken more than
a decade ago.
Since 2009, we have been deploying capital to grow our
low-carbon fuels businesses.
Our ethanol plants are located near abundant raw
material, have some of the lowest operating costs in the
industry and have the ability to export to meet world
demand. Our participation in Navigator's proposed
large-scale carbon capture and sequestration pipeline
system in the U.S. Mid-Continent region is expected
to reduce CO2 emissions from eight of our ethanol
plants, lowering the carbon intensity (CI) of the ethanol
product and enabling the generation of 45Q tax credits
under the U.S. Inflation Reduction Act of 2022 (IRA).
SAFETY
COMMUNITY
PEOPLE
GOVERNANCE
The reduced carbon intensity improves ethanol value
in low-carbon markets and could create a pathway for
producing SAF through an alcohol-to-jet process.
Our two renewable diesel plants are located adjacent
to our refineries and produce a low-carbon, high-margin
product that represents an affordable and immediate
solution to reduce transportation GHG emissions.
Valero has grown market share as regulations, policies
and standards issued by state and federal governments
in the U.S., Canada, EU and the U.K. have targets to
reduce GHG emissions using low-carbon fuels.
Growth in terms of volume and lower carbon
intensity fuels offerings have a direct impact on
global GHG emissions reductions, as these lowcarbon fuels substitute for and displace higher
carbon-emitting petroleum fuels.
Showing our commitment to responding to the requests
of certain stakeholders regarding an independent
assessment of the resilience of our strategy under
hypothetical oil and biofuel demand scenarios5 in
low-carbon marketplaces, we have issued three TCFD
reports under multiple demand scenarios.
Our first TCFD report, the Review of Climate-related
Risks and Opportunities, was published in September
2018. At that time, we engaged Solomon to conduct an
independent scenario analysis under multiple demand
scenarios, including the potential transition to a lowercarbon economy consistent with the International
Energy Agency's (IEA) 2°C scenario. In the 2021 TCFD
Report and Scenario Analysis, Solomon examined our
refining business and reviewed the resilience of our
strategy under the IEA’s Sustainable Development
Scenario (SDS), referred to as a well-below 2°C scenario.
And in the 2022 TCFD Report, Solomon conducted an
independent scenario analysis based on the assumptions
developed by the IEA in the Net Zero by 2050 Scenario.
Solomon concluded that our overall refinery
portfolio would be resilient in the low-carbon
marketplaces envisioned by the scenarios in
such reports.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT •
9
