Climate Risks and Opportunities

In keeping with our commitment to limiting climate change and aware of the importance of clear and open communication on how this phenomenon may affect our company, El Puerto de Liverpool works to align reporting and internal practices with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Our report was created on the basis of prior efforts, including exercises in greenhouse gas (GHG) emission accounting and responses to CDP questionnaires. This report is intended as a complement to our Group’s annual reporting efforts. Its central aim is to indicate (i) the areas reported information aligned with TCFD recommendations and (ii) which additional information must be included to reinforce disclosures following TCFD guidelines. In reporting this information, El Puerto de Liverpool (EPL) became one of the first Mexican retail companies to publish a report aligned with TCFD recommendations. Selection and prioritization of main risks and opportunities To identify the main physical and transition risks and opportunities to which our company may be exposed, we reviewed the most pressing issues facing the retail industry, particularly in the Mexican context. As a first step, we identified 21 risks and opportunities, which were discussed in workshops held in various sessions with 12 key EPL departments. Meeting participants received an overview of the potential impact of the risks identified in EPL’s business strategy, with 10 salient risks and opportunities highlighted for further qualitative evaluation.

Summary of impacts of selected climate risk and opportunities To analyze our climate risks and opportunities, we used the following climate scenarios: For physical risks: • Representative Concentration Pathway (RCP) 8.5: RCP8.5 is aligned with a very significant increase in the global mean temperature by the end of the century (1.6 - 4.8°C) and is the highest-impact scenario. Bearing in mind that physical climate risks are evident only in patterns that emerge gradually over time, we analyzed climate projections through the year 2050, and to gain a clearer view of the possible change in risks, we also selected the year 2030 as a medium-term horizon. To examine our transition risks and opportunities, since many countries have set ambitious climate targets for 2030 and some have set net-zero targets for 2050, we chose these two periods as the medium and longterm horizons, respectively. • RCP 4.5: The RCP4.5 scenario assumes a moderate level of mitigation and is aligned with an increase of approximately 1.1 - 2.6°C in the global mean temperature by the end of the century. For transition risks and opportunities: • Business as Usual (BAU) Scenario: This scenario takes into account projections from the International Energy Agency (IEA) for the Stated Policy Scenario (STEPS) and from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) for the current policy scenario. • Below 2°C: The scenario we used aligns with the IEA’s Stated Policy Scenario (APS) and the NGFS Below 2°C scenario.

Physical risks

Category	Risk	Impact	Risk rating
			RCP 4.5		RCP 8.5
			2030	2050	2030	2050
Acute	Increase in intensity and frequency of tropical storms	Impact on product arrival (supply chain) at stores and households Shutdown or interruption of store or distribution center operations Inventory damage losses Difficulty for customers to get to stores Higher cost of insurance	Uncertain	Uncertain	Moderate	Moderate
	Increase in the frequency, intensity and duration of extreme precipitation events		Moderate	Moderate	Moderate	High
	Increase in the frequency and intensity of river floods		High	High	Moderate	Moderate
Chronic	Rising sea levels and coastal flooding	Possible impact on distribution routes in coastal areas Possible partial loss of property values in those areas Development of new infrastructure less viable	Low	Low	Low	Low
Chronic	Increase in frequency, intensity and duration of droughts	Low availability of raw materials Possible increase in product prices and impact on availability Impact on coverage of department stores if population emigrates due to lack of water Impact on operations and increase in utility bills because of higher water stress	Moderate	High	Moderate	High

Transition risks

Category	Risk	Impact	Risk rating
			RCP 4.5		RCP 8.5
			2030	2050	2030	2050
Political	New carbon pricing mechanisms such as carbon taxes or emission trading system	Increase in operating costs due to increase in national carbon tax, subnational taxes and introduction of a national emission trading system	Low	Low	High	Low
Political	Execution of circular economy policies	Increase in the price of plastic containers due to changes in supplier raw materials Creation of public policies that involve consumers in economic requirements or regulations on use of plastic containers	Moderate	Low	High	Moderate
Market	Reduced demand for products due to higher prices and production costs	Increase in value chain production costs due to: Expansion and increase in carbon tax Higher cost of fuel in the short and medium term Development of policies aimed at reducing emissions in the building industry	Moderate	Moderate	High	Moderate
Technology	Use of technologies to improve energy efficiency and resource consumption in sustainable buildings	Increasing incorporation of devices that use less energy Reduction of operating costs Increased creation of energy efficiency standards in equipment and building codes Short-term investment opportunities in installation of efficient equipment Reduced operating costs in the medium and long term due to energy efficiency savings	Moderate	Low	High	Moderate
Technology	Technological advances in transportation and distribution toward efficient, low-carbon, non-polluting vehicles	Possibility of replacing company’s internal combustion vehicle fleet with hybrid and/or electric vehicles, which reduce emissions Gradual reduction in acquisition cost of hybrid and/or electric vehicles as technology becomes standardized	Moderate	Low	High	Moderate

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