Responsible Capital Allocation Community Contributions Good Governance & Shareholder Alignment Diversity, Inclusion & Well-Being Climate Action Transparency & Guiding Principles Appendices 62 Socio-Political, Regulatory and Legal Risks Potential Financial Impact for: Description of Socio-Political, Regulatory and Legal Risks Our Operators Our Company Summary Policy, regulatory and legal changes in a jurisdiction that seek to promote These regulatory and legal changes may require extensive capital expenditures by • Potential delay (deferral) of Revenues if mandatory adaptation results in delays adaptation to climate change and/or constrain the activities of operators operators to accommodate or conform to such changes, which may lead to projects or cessation of operations and operations that contribute to adverse effects of climate change. being abandoned or placed on care and maintenance if such mandatory • Potential impact to valuation of Assets on balance sheet (e.g. impairment expenditures erode anticipated profitability. or write-off of assets) By Commodity Increased pricing of GHG emissions: Commodities at highest risk: All commodities Regulation of emissions, such as through carbon taxation or cap-and-trade These regulatory and legal changes may require extensive capital expenditures by • Potential delay (deferral) of Revenues if mandatory adaptation results in delays schemes, can significantly increase costs for businesses. As more countries set operators to accommodate or conform to such changes, which may lead to projects or cessation of operations net-zero emissions goals and increasingly ambitious 2030 targets, it is possible being abandoned or placed on care and maintenance if such mandatory • Potential impact to valuation of Assets on balance sheet (e.g. impairment that carbon pricing regulations could become more widely implemented and/or expenditures erode anticipated profitability. or write-off of assets) made more stringent globally. The impact of these regulations will differ depending on the location of the assets and the carbon intensity of production, which varies significantly both within and between commodities. Mandates on and regulation of existing products and services: Commodities at highest risk: Energy (oil, gas, NGLs) If carbon-intensive industries are stigmatised for their contributions to climate Given the contribution of fossil fuels to climate change, regulation and mandates • Potential reduction of Revenues if demand for carbon-intensive commodities change, the use of products and services from these industries could be curbed on the use of these products, including derivatives such as gasoline and plastics, is restricted due to widespread regulation of products by new regulations. may be subject to regulation from policy makers (e.g. ban on gas-powered cars in city centers, increased focus on reducing single-use plastics), which could impact demand for products. Enhanced emissions reporting obligations: Commodities at highest risk: All commodities As governments seek to improve emissions data and meet their respective Companies may face growing pressure to report their emissions in compliance • Potential increase to Operating Expenditures with growing demand to collect long-term emissions goals, there may be increased obligations to report on with mandatory disclosure regimes, which will increase costs. Such companies data, produce emissions reports, obtain external assurance, etc. energy usage and emissions and/or to obtain independent external assurance could also encounter financial losses as a result of fines if they are unwilling for such data. Companies may be required to comply with detailed mandatory or unable to comply with new regulations. TCFD or other reporting legislation as a result. Exposure to litigation: Commodities at highest risk: Energy (oil, gas, NGLs) The expansion of climate-related legislation creates litigation risks for those Legal actions against Energy producers could increase operating costs (e.g. through • Corresponding direct impact to Revenues upon reduction of demand for companies that are unable to keep up with the pace of developments. Companies payment of legal fees, fines, settlements, or insurance fees), reduce demand for commodities due to reputational damage to entire sectors or industries in heavy industries, such as mining and oil and gas, could also face legal action products, and cause reputational damage. Energy producers in North America and • Potential impact to valuation of Assets on balance sheet (e.g. impairment due to their relatively higher levels of emissions/emissions intensities, with some Europe have already faced legal challenges on various grounds, with accusations or write-off of assets) if increased operating costs cause uneconomic assets claimants also seeking to link climate change to other sustainability concerns, ranging from misleading investors to infringing on the rights of nature and the right to become stranded such as human rights. of life of future generations.