CHAPTER 3 We advance in sustainable performance

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3.1.3 Climate change risks and opportunities

Climate change brings a number of risks and opportunities for our company. We have a comprehensive risk management system in place that provides an effective response by analysing and understanding the nature of these risks so as to optimise management.

In 2021, Cepsa's Risk Control and Management system methodology was revised to include Task-Force on Climate-related Financial Disclosures (TCFD) recommendations on risks related to climate change, such as the inclusion of speed and vulnerability as new analysis parameters. Cepsa's risk map includes the main transition and physical risks faced by the company and classified in the categories proposed by this standard.

The map was consolidated prior to this exercise applying a bottom-up approach from the business units up to the Cepsa management level, combined with a top-down approach to include the executives global vision. In 2022, the Climate Change Risk map must include the changes made to Cepsa's global risk management in 2021, as well as future developments under climate scenarios.

Under the Risk Management model, once the causes, consequences and person responsible for risk identification and management have been determined, potential impacts are assessed. These effects may be financial, human, environmental or reputational. We consider existing risk management measures and actions so as to minimize the likelihood of risk occurrence or the potential impact. The assessment of residual risks, including climate change risks, is captured in an impact-probability matrix that allows new responses to be prioritised and agreed to minimize both probability and business impact.

This analysis is a first step along a path that will be developed further over the next year in order to complete the quantitative analysis of climate change risks and opportunities and assess medium- and long-term financial impacts under different climate scenarios across the company.

We have also identified climate change opportunities related to production and distribution process efficiency, the development and expansion of low-emission products and services, and the emergence of new products such as eco-fuels or sustainable fuels, and services, thanks to R&D and innovation.

Transition risks

Policies and Regulation Tightening of existing energy and climate regulations. New carbon pricing initiatives adopted by countries. Increase in or creation of new taxes linked to product carbon footprints.

Markets Shift from fossil energy to alternative energy with lower carbon content (LNG, electric mobility, etc.).

Technology Development and breakthrough of new low-carbon-emission technologies and products. New technology to reuse waste and replace fossil feedstock in petrochemical

units.

Reputation Negative perception of the company by its stakeholders.

Physical risks

Acute Increase in extreme weather events such as cyclones or floods. Climate pattern alterations due to rising temperatures.

Chronic Water scarcity due to extreme weather scenarios.

2.9.3. Risk Management

3.2.2.2. Water Management