South32 (S32) ESG Update summary

Climate strategy and portfolio evolution

• Portfolio repositioned toward critical minerals and metals for the energy transition, with 90% of revenue now from aluminum and base metals, up from less than 50% in 2015.

• 100% of capital expenditure is now directed to transition metals and high-returning businesses in structurally attractive markets.

• Major divestments and acquisitions, including the sale of Illawarra Metallurgical Coal and acquisition of interests in Hermosa and Sierra Gorda, support transition risk reduction and growth in base metals.

• Capital management prioritizes safe operations, investment-grade credit rating, and minimum 40% earnings distribution as dividends, while supporting decarbonisation investments.

• Scenario analysis stress-tested portfolio resilience under 1.5°C and 2.8°C scenarios, showing demand growth for all commodities except lead.

Emissions reduction and decarbonization efforts

• Committed to halving net operational emissions (Scope 1 and 2) by FY35 from FY21 levels and achieving net zero by 2050, including Scope 3 emissions.

• Over 90% of operational emissions come from the aluminum value chain, with Hillside accounting for nearly 60% due to reliance on carbon-intensive Eskom grid electricity.

• Achieving FY35 emissions target depends on securing large-scale, affordable low-carbon electricity for Hillside and continued fuel switching at Worsley.

• Worsley has reduced emissions by 12% since FY21 through boiler conversions and is studying steam electrification with government support.

• Scope 3 emissions reduced by 80% since FY19, mainly due to portfolio changes and improved tracking.

Climate resilience, adaptation, and just transition

• Physical climate risks are integrated into business risk management, insurance, and asset valuations.

• Three-year adaptation plan underway to improve operational resilience and upskill staff for climate risk management.

• Community-focused investments and just transition principles support climate resilience, workforce evolution, and a just transition, especially at Hillside and Worsley.

• Infrastructure upgrades target tailings storage, flood resilience, power supply, and raw material supply chain risks.

• Ongoing participation in regional just transition groups and proactive engagement with governments and industry to secure low-carbon solutions.