INDUS : Non-financial Report 2023

Non-financial Report

Sustainability at INDUS

INDUS stands for our promise to be a dependable and long-term partner to our portfolio

­companies. We believe that long-term entrepreneurial success can be accomplished only in compatibility with economically, socially and ecologically sustainable activities.

CONNECTION BETWEEN INDUS PRINCIPLES AND THE SUSTAINABILITY STRATEGY ACTION AREAS

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and effective sustainability initiatives in the context of an individual sustainability strategy geared to INDUS targets. INDUS' targets for the whole INDUS Group's emissions result from the Group-wide materiality analysis (top-down) and are individually defined in concrete terms and backed up with measures by the portfolio companies (bottom-­up). For reporting in the non-financial report, the focus is on opportunities and risks that arise from sustainability considerations (outside-in) and which are necessary for understanding INDUS Holding AG's business performance, results of operations, and situation, in addition to risks relating to these sustainability considerations caused by INDUS operating activities and business relations (inside-out).

Dialog with Stakeholders

The foundation for successful work on sustainability issues, and ultimately for long-term entrepreneurial success, is knowledge of the corresponding stakeholders and their inter- ests. External stakeholders as well as the managing directors of the portfolio companies were again actively involved during the update to the materiality analysis in 2022.

Theselectionofinterestedgroupsisregularlyreviewed, and the circle is widened where needed. A structured process is always applied when identifying the main stakeholders. In this process, potentially relevant groups are identified by the sustainability department, taking into account the value chain and following consultation with other departments. The stakeholders are then prioritized according to their influence on the INDUS Group, as well as the INDUS Group influence on the respective stakeholders. This suggestion is then coordinated with the INDUS Board of Management. As sustainability topics are now taking ­center-stage in society and are subject to widely varying perceptions, the group of stakeholders was significantly expanded and diversified in 2022 compared with the previous participants.

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Structured engagement with the needs of our stakeholders resulted in seven relevant groups in total in 2022, both internal and external. The detailed description can be found in the non-financial report for 2022.

Visit www.indus.de/en/nonfinancialreport/2022

INDUS Holding AG and the portfolio company are in regular dialog with key stakeholder groups, such as analysts and shareholders with the IR/PR department by means of video calls, emails and phone calls, or for example the portfolio companies with their customers and local authorities by means of phone calls and in-person conversations. The addition of regular stakeholder interviews using a standardized guideline in the framework of the update to the materiality analysis, as took place most recently in the 2022 financial year, serves the purpose of identifying key sustainability topics from the perspective of leading stakeholders; it also functions as a way of reflecting our internal assessment externally, and checking it for completeness. From there, stakeholders' interests, expectations and requirements are analyzed and results are integrated into the analysis on a ­continual basis. At the same time, the discussions provide new impetus and important stimuli for the INDUS Group.

Key Topics in the INDUS Group

Through the identification of key sustainability topics, INDUS creates a basis for the INDUS Group sustainability activities and the focal points of the sustainability strategy. In so far as specific objectives, measures and management approaches are defined for key sustainability topics, the detailed information is provided in the respective sections on the action areas.

The regular performance of materiality analyses helps identify and prioritize the sustainability topics that are most important for the company.

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have already calculated their complete corporate carbon footprint, with other companies in the process of determining quantity-based emissions in Scope 3.

Due to these points of focus, the value drivers of efficiency improvement, entrepreneurial vision, and optimized investment decisions are relevant to the action area (i) ­"Protecting the environment", and are used by the portfolio companies to identify opportunities. Corresponding innovation projects can also be supported by the sustainability development bank - a facility that increasing numbers of portfolio companies have made use of in recent years. Projects approved in the framework of the sustainability development bank in 2023 include photovoltaic systems, heating system replacement and a heated spiral conveyor.

This is relevant not only to a company's own energy use but also signals a clear alignment of the INDUS Group toward new technologies. For example, hydrogen is considered a promising energy source for a sustainable future, and one of the key technologies for the decarbonization of the energy system. As a clean and efficient fuel, it could contribute to the decarbonization of industry, transport and energy supply. With a clear view to the future, the INDUS ­Hydrogen Workgroup is researching hydrogen technology and in particular the subject of hydrogen storage systems. INDUS subsidiary ELTHERM from Burbach has already been working in this area for some time: This specialist in electrical heat tracing systems provides solutions which ensure undried hydrogen (hydrogen gas that has not been freed of moisture) is protected against the formation of condensate during the transport and storage process. As such it is making an important contribution to the safe handling of hydrogen. Another member of the workgroup is GSR Ventiltechnik: Among the valves it offers there are already special solutions for the transport and storage of hydrogen, because the substance often cannot be used with unadapted existing gas infrastructure due to the high volatility that results from its small molecule size.

Over 90%, and as such the majority, of waste that is accrued in INDUS Group operations is non-hazardous. All waste is correctly disposed of in compliance with the respectively valid legal specifications. Nevertheless, INDUS strives to keep recycling rates as high as possible for all waste, minimize the waste volume in relation to the Group's gross value added, and use local water resources sparingly. AURORA, manufacturer of cutting-edge heating and air-conditioning systems and components that are used in on- and off-road vehicle series, has reduced the amount of wastewater requiring disposal by 6,000 liters per month, by switching leak- tightness testing of certain vehicle components in tanks to a dry test procedure that uses helium. This also saves on power, as subsequent drying is not needed.

The portfolio companies of the INDUS Group are working on making a contribution to the circular economy through recyclability and the use of recycled materials in

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their products. There is also relevant potential to protect resources, avoid waste and minimize the carbon footprint in the supply chain in reducing packaging materials. INDUS subsidiary OBUK, a specialist in premium front door panels, has taken up the search for alternative packaging solutions in collaboration with the Institution for Food Packaging Technology at the University of Hanover, and developed a more sustainable alternative. In addition, in 2023 OBUK brought a new product line to the market called FAIR LINE, in which recycled PET bottles are used for the sealing core of front door panels.

(ii) Fair work

The following key topics were identified: Safety and health of employees, basic and advanced training, fair pay and contractual terms, and work/life balance.

This action area is of particular importance with regard to the value drivers of efficiency improvement and entrepreneurial vision. INDUS particularly emphasizes mutual respect, fairness, team spirit, professionalism, and openness. These values are therefore an integral part of the INDUS Code of Conduct, which covers all the action areas of the sustainability strategy.

Preventing all accidents at work, particularly fatal accidents at work, is the top priority. It is particularly important for well-functioning economic activities and a good relationship between employers and employees that the safety and health of all participants is guaranteed. This relates not only to physical integrity, but also the mental health and solid resilience of all people. INDUS is conscious of the importance of safety and health, and therefore pursues these as an essential topic with corresponding measures and objectives.

To counteract the current shortage of specialists, INDUS wishes to continue to promote up-and-coming

talents­ through training of new workers. This approach has several simultaneous advantages: Employees are supported with further training, their specialist knowledge is developed in line with the state of the art, and both employer attractiveness and financial competitiveness are main- tained. Connected to this, INDUS considers it essential that employee performance is appreciated in the form of fair pay and fair contractual terms (for example under labor agreements). INDUS wishes to nurture the previously mentioned resilience by means of working conditions that are ­compatible with family and private life, and create respectful relationships with its employees.

(iii) Social justice

For us, the key topics in this action area are: Social commitment at regional and cross-regional level as well as being a good neighbor.

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The integration of the portfolio companies in their local areas means they are an important part of the local social structure. Positive perception in the immediate vicinity is thus a significant value-driver and aids both the recruitment and the retention of employees. Avoiding damaging the environment through production, and as such an absence of legitimate complaints, is crucial for this action area. Further- more, the INDUS Group's holding companies and INDUS financially support social institutions at local and national level and collaborate with social institutions such as workshops for the disabled. As employees of the companies in the INDUS Group frequently live in the direct vicinity of the business locations, INDUS is keen to ensure a good neighborly relationship with the surrounding neighborhoods.

(iv) Human rights

From the INDUS Group's perspective, protection of human rights along the value chain as well as diversity and equal opportunities are the most relevant topics within this action area.

Respect for human rights is a material aspect of the Code of Conduct for the entire INDUS Group. In addition, the INDUS Board of Management has clarified and expanded the Code of Conduct in respect of human rights and good working conditions, by adopting the UN declaration of

principles­ on human rights. The INDUS Group's portfolio companies have their main sites in the German-speaking region and benefit from the standards in place within the value chain to protect employee rights and human rights.

Respect for human rights is seen not as a "value-driver" but as a basic requirement for our own economic activities and as a matter of course. The individual portfolio companies are responsible for compliance with human rights in their own company and in their supply chain. Overall responsibility for compliance with human rights in the INDUS Group lies with the Board of Management. One development step is the whistleblowing hotline that has now been established Group-wide. In the financial year 2023, preparations were implemented for the due diligence obligations that result from the German Supply Chain Due Diligence Act, in order to be able to create the first report on this in 2024.

1. Honest business

Compliance management and transparent communication were identified as key topics here.

Respecting the current laws and regulatory framework is at the heart of all the INDUS Group's business activities. It is accordingly important to avoid misconduct and resulting fines as well as non-monetary penalties. Global markets are increasingly being tapped as part of further interna- tionalization. As a rule, different regulations apply in these cases. For parts of the INDUS Group, this means

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following additional legislative procedures as well as updating of specifications, and ensuring compliance with specifications without exception. Gaps in knowledge are tackled through dialog within the Group and through support from local experts in order to avoid unintentional misconduct as far as possible. INDUS values full and transparent communication about successful compliance, but also about any breaches committed, in order to be seen as an honest, fair and open company.

(vi) Shareholder support

In its capacity as a financial holding company, INDUS takes care of financial consolidation and supports the portfolio companies in the development of their business with capital and advice within the available scope of

possibilities­ . INDUS regularly compares the success of the portfolio companies with its own expectations.

The key topics for us within this area of action are:

Portfolio optimization through acquisition activi-

ties as well as methodological and financial support for achieving objectives (for example a development bank, training, etc.).

Strategic sparring with the portfolio companies is part of daily business for INDUS. In this action area, the focus is on the holding company's support activities, which serve as enablers for implementing ESG initiatives and projects in the portfolio companies. The INDUS Code of Conduct, which serves as a basis for the portfolio -company-specific codes and can be expanded by the portfolio companies as required, is a point of reference for corresponding ESG initiatives. In addition, the portfolio­ companies are methodically and financially supported in achieving the objectives they have set. INDUS Holding AG created a development bank for this purpose in the 2022 financial year, and also offers special training. Another significant component of the holding company's activities is portfolio enhancement by means of acquisition activities. In the initial screening of possible acquisition targets, the economic activities of the acquisition targets are considered in terms of their compatibility with the INDUS Holding AG Code of Conduct as well as the employee protection provisions, and their greenhouse gas emissions and impact on the Group's greenhouse emissions are assessed. All the listed activities and described key topics in the action areas should also foster a partnership founded on trust between INDUS Holding AG and its portfolio companies. The objective of INDUS Holding AG is not buying and selling, but the long-term ­promotion and development of portfolio companies in line with the "buy, hold & develop" strategy.

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Calculation of Greenhouse Gas Emissions

and Scope of Consolidation in Sustainability

Reporting

Greenhouse gas emissions (GHG emissions) are calculated on the basis of the collection of the relevant activity data from all the portfolio companies in the scope of consolidation via the existing financial data reporting system at INDUS, which has been expanded for the purpose of specifically gathering activity data.

For the accounting of the INDUS Group's greenhouse gas footprint, INDUS uses the financial control approach in accordance with the Greenhouse Gas (GHG) Protocol Stan- dards. According to these, 100% of the emissions of all the companies in the scope of consolidation in which INDUS or a direct portfolio company of INDUS holds at least 50% are included in the INDUS Group's GHG footprint. This is the case for all the INDUS Group's portfolio companies in the scope of consolidation. All companies with relevant greenhouse gas emissions are taken into account in this scope of consolidation. These include the significant production facilities and larger office and sales units. Data is not collected for units with very low emissions, especially local sales offices. A new addition as of January 2023 is the company QUICK Bauprodukte, a subsidiary of BETOMAX systems. SCHÄFER and SELZER have no longer been part of the scope of consolidation of INDUS Group since Septem- ber and October 2023 respectively.

Overall, the scope of consolidation in the non-financial reporting consequently largely corresponds to the financial scope of consolidation less non-material units with very low emissions. The sustainability data, primarily consumption, takes into account six-month values for the deconsolidated portfolio companies SELZER and SCHÄFER, as at June 30, 2023. For all disclosures pursuant to the EU Taxonomy, the scope of consolidation is (necessarily) the same as for the financial reporting.

In addition to CO2, nitrous oxide (N2O), methane (CH4) and partly fluorinated hydrocarbons (HFCs) were also included in the calculation of greenhouse gas emis- sions. Perfluorocarbons (PFCs) and sulfur hexafluoride (SF6) are not individually recorded because they are not relevant in the INDUS portfolio companies' production processes. The greenhouse gases are translated into CO2 equivalents (CO2e) and used exclusively in this form for the calculation of greenhouse gas emissions. Greenhouse gas emissions are stated in accordance with both the market-based and the location-based calculation methodology.

Emissions are categorized into Scope 1 (direct emissions from mobile and stationary combustion), Scope 2 (emissions that arise from the generation of purchased

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­electricity) and Scope 3 (indirect emissions - for example, as a result of business trips and purchased goods and ser- vices) in line with the GHG Protocol Standards. The emissions in Scope 1 and Scope 2 are calculated based on the collected activity data with corresponding emissions fac- tors. In light of the complex diversity of the INDUS Group and its ­frequently assumed position in the middle of the value chain, we consider it disproportionate to take a similar approach for the emissions in Scope 3; as such, mainly financial data such as sales, purchased services or costs of materials, and other items are used for the purpose-orientedcalculation of these emissions. These financial data are offset with "spend-basedemissions factors", that relate expenses in € in relation to emissions. The value chain in Scope 3 is taken into account both upstream and downstream in accordance with all 15 categories of the GHG Protocol Standards. A detailed description of the approach and calculation method for each GHG category is available on the INDUS website.  Visit www.indus.de/app/uploads/sites/2/2023/03/

INDUS-Documentation-of-the-Scope-3-Methodology.pdf

Targets and Time Horizon of the ESG KPIs

In terms of the time horizon, INDUS differentiates between short-term targets with the 2025 target year, medium-term targets (2030) and long-term targets (2045). The long-term target was modified in view of stricter climate legislation in Germany, with the aim now to make the entire INDUS Group climate-neutral in the year 2045. INDUS monitors the performance indicators (PIs) but does not currently have concrete targets for them. Data relating to headcount is always expressed in full-time equivalents (FTEs) based on the last day of the financial year, and includes external personnel.

The reduction targets for greenhouse gas emissions always refer to greenhouse gases according to the market -based calculation because the INDUS Group's expenses

- for ­example, in the form of purchasing green electricity - are ­correspondingly represented in this way. The reduction targets are also net targets. The purchase of CO2 certificates must always be seen as a possible additional measure and not a substitute for the sustainability­ initiatives in the Group. The greenhouse gas emissions offset by emissions certificates are reported separately in the tables of key figures that can be found in the non-­financial report. The 2018 financial year is used as the base year for the reduction targets. The basis for the emissions reduction targets is the former sector target for the "Industry" sector of the ­German Climate Protection Act, which however became obsolete with the amendment to the Federal Climate Protection­ Act in June 2023 and the removal of the sector objectives.

The KPIs including the short-,medium-, and long-term targets are listed in the table below:

INDUS HOLDING AG'S SUSTAINABILITY TARGETS

Target year

• To clarify the starting point and the target progress regarding the greenhouse gas reduction target (PE01-GHG), the gross emissions intensity for the 2018 base year is given (before taking account of emissions offsetting; see non-financial report of INDUS Holding AG 2019). The other information on emissions intensity in the PE01-GHG KPI refers to net emissions intensity.

SPECIFICATIONS FOR PORTFOLIO COMPANY COMPATIBILITY WITH THE EMISSIONS TARGET