Coronation Fund Managers : 2021 CARBON FOOTPRINT ASSESSMENT

Carbon Footprint Assessment

01

Contents

1. Global context
2. The role of a carbon footprint

1. General procedure
2. Assessment boundaries
3. Data collection, sources, quality and calculation approach

1. Scope 1
2. Scope 2
3. Scope 3

1. Future greenhouse gas footprint assessments
2. Greenhouse gas emissions reduction

1. Introduction

Coronation Fund Managers (Coronation or the Company) is a leading South African investment manager, with billions of rand in assets under management on behalf of our clients. Headquartered in Cape Town, we have offices in major South African metros, as well as the Republic of Ireland and the United Kingdom (UK). One of our key strategic focus areas is being an active corporate citizen and therefore we are committed to building an equitable and inclusive society and reducing our operational impact on the natural environment. Understanding and addressing our contribution to climate change is a key part of this commitment. For insight into how we integrate environmental, social and governance factors into our investment process, please refer to our Stewardship Report, which is available on our website. Environmental issues, including climate change, water scarcity and plastic pollution, are among the most significant challenges of our time, with knock-on effects on society and the global economy. As a company which focuses on the long term, we understand the materiality of climate-related risks and the need for transparent reporting. With this in mind, during March 2020, Coronation became a signatory to the Task Force on Climate- related Financial Disclosures (TCFD). As a TCFD supporter, the Board of Directors (Board) has undertaken to provide more oversight over climate-related risks and opportunities.

The 2021 financial year saw the introduction of climate-related risks and opportunities as discussion topics at the Board and at the Audit and Risk Committees. In support of this, management has been mandated to identify and report on climate-related risks and Board members have undergone training on climate-related matters, to ensure that they are equipped to assess climate-related issues.

As a first step in climate change risk reporting, the Board mandated management to conduct a company-level carbon footprint. This was first undertaken for the 2020 financial year and the Board further resolved that the Company should use the findings to reduce its operational carbon footprint and, potentially, invest in projects to offset its current emissions. These steps were the first towards formally reporting in terms of the TCFD, as included in this year's reporting. It is important to note that our standard operating activities were interrupted by Covid-19 for the entire 2021 reporting period. Impacted operations include the number of employees working in our offices and the associated commuting, on-site electricity, water and waste quantities, as well as business travel (flights, accommodation, car rental). Overall, this means that resource consumption and travel emissions are significantly lower than would be expected in a standard operating year. It is therefore expected that our carbon footprint metrics will differ once normal operations recommence.

Notwithstanding the material impact of lockdown restrictions on business-as-usual activities, we are confident in our abilities to track our carbon footprint impact. We will continue to deepen our approach to monitoring and improving our operational sustainability.

2 TRUST IS EARNED™

1.1 GLOBAL CONTEXT

Scientists have reached consensus that rising atmospheric concentrations of greenhouse gases (GHGs), particularly carbon dioxide (CO2), threaten to have severe impacts on natural ecosystems, food production and human health. Industrialised and rapidly industrialising countries are the main sources of GHGs. However, the greatest impacts will be experienced by people and ecosystems in developing countries, particularly those in low-lying coastal regions and those dependent on marginal agricultural areas for livelihoods.

Global consensus on a plan of action was best articulated in the 2016 Paris Agreement, which aims to limit global temperature increases to well below 2°C and strives to achieve limiting temperature increases to 1.5°C above pre-industrial levels. As signatories to the Paris Agreement, and in acknowledgement of the significant risks to humanity, national governments are taking a variety of steps to reduce GHG emissions, including the introduction of national targets, regulations and standards on GHG emissions, renewable energy and energy efficiency; carbon and fossil fuel taxes; emissions trading schemes; and mandatory emissions reporting programmes. A variety of voluntary disclosure frameworks and emissions offset programmes have also emerged around the world.

South Africa is a signatory to the Paris Agreement and has submitted its updated Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC). The NDC includes proposed actions for both adapting to the impacts of climate change and making its contribution to global efforts on mitigating emissions, as well as the finance and investment requirements for both. South Africa's NDC is underpinned by the environmental rights set out in section 24 of the Constitution, and the National Development Plan (NDP), which provides a 2030 vision to guide the country's sustainable development trajectory.

1.2 THE ROLE OF A CARBON FOOTPRINT

The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, published by the World Business Council for Sustainable Development and the World Resources Institute (WBCSD/WRI Protocol), has become the global standard for voluntary disclosure reporting. The Protocol highlights the need for companies to understand and manage their GHG risks in order to maintain their licence to operate; to ensure long-term success in a competitive business environment; and to comply with national or regional policies aimed at reducing corporate GHG emissions. Understanding a carbon footprint is the first step in identifying exposure to transition risks. These are the risks associated with exposure to national and global actions taken to address climate change (such as carbon taxes and penalties) and changing markets.

This GHG emissions assessment has thus been undertaken to provide an estimate of the overall magnitude of and key contributors to our corporate carbon footprint. It provides the basis for further initiatives, such as public reporting, target setting and implementation of mitigation activities.

2. Assessment methodology

2.1 GENERAL PROCEDURE

The assessment methodology follows the reporting principles and guidelines provided by the WBCSD/WRI's Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (Revised Edition), which provides requirements and guidance for companies and other organisations preparing a GHG emissions inventory.

In line with the GHG Protocol, the following procedure was employed to perform the GHG emissions assessment for Coronation:

1. Establishment of the assessment boundaries (including the selection of GHGs and operational boundaries);
2. Data collection;
3. Evaluation of data quality and sources;
4. Calculation of emissions using appropriate conversion factors; and
5. Making of recommendations for future action.

2.2 ASSESSMENT BOUNDARIES

GREENHOUSE GASES

A GHG emissions assessment can include all seven GHGs covered by the Kyoto Protocol, namely: carbon dioxide (CO2 ), methane (CH4 ), nitrous oxide (N2O), sulphur hexafluoride (SF6 ), nitrogen trifluoride (NF3 ), perfluorocarbons (PFCs) and hydrofluorocarbons (HFCs). However, the emissions factors used in compiling the inventory presented in this report only include the first three gases. Emissions of refrigerants used in refrigerators are also included.

These gases are typically converted to a consistent unit, namely carbon dioxide equivalents, using the applicable global warming potential (GWP). The GWP of a gas is its relative potential contribution to climate change over a 100-year period, in comparison with carbon dioxide (see glossary for a full definition). In this report, GWPs are based on the Intergovernmental Panel on Climate Change's fourth assessment report (AR4).

REPORTING BOUNDARIES

The GHG Protocol defines GHG emissions according to three scopes:

Scope 1: Direct GHG emissions from sources owned or controlled by the company;

Scope 2: Indirect emissions from generation of purchased electricity, steam or cooling consumed by the company, but not generated in house (emissions occur at the power station and/or heating/cooling source); and

Scope 3: Other indirect GHG emissions that occur as "a consequence of activities of the company, but occur from sources not owned or controlled by the company" (upstream/downstream of the business). These include production of purchased materials, transport of materials, emissions from business travel and employee commuting and investment activities, among others.

The GHG Protocol mandates that scopes 1 and 2 emissions are reported as a minimum. Scope 3 emissions reporting is optional, but is particularly significant for the asset management industry.