Enabling systems change (continued) Advocating for net zero Future climate-related risks would be reduced by the upscaling and acceleration of far-reaching, multi- level, and cross-sectoral climate mitigation and by both incremental and transformational adaptation. Those efforts must be guided by policy that accelerates carbon reduction and removal opportunities. Over the past year Microsoft deepened its policy advocacy on carbon and sharpened its focus on net zero goals, energy grid decarbonization, measurement, and markets in the United States and European Union through direct lobbying, engagement, and groups such as the Climate Leadership Council, CERES BICEP Network, Advanced Energy Economy, Climate and Clean Energy Solutions, and the Renewable Energy Buyers Alliance. Microsoft initiatives include the following. Net zero policies Microsoft is encouraging countries to make net zero carbon-aligned national commitments and develop effective implementation plans. Microsoft advocated for the United States’ reentry to the Paris Climate Agreement which occurred in January 2021 and for a national US climate target to cut emissions by 50 percent by 2030. We also voiced Microsoft support of the European Commission’s ”Fit for 55” package , a set of legislative initiatives that will set the framework for the whole EU to achieve the binding target of reducing GHG emissions by at least 55 percent by 2030 (based on 1990 levels). Grid decarbonization Microsoft advocated for strong climate and clean energy provisions in the 2021 US budget reconciliation and infrastructure bills including new siting authority for transmission lines, support for innovative technologies and projects that remove carbon dioxide, modernizing the grid, accelerating clean energy, and strengthening resilience to the impacts of a changing climate. Microsoft actively engages in decarbonization and grid modernization policy efforts in Arizona, Texas, Illinois, and Virginia, and encouraged FERC to issue policy guidance on how to incorporate state- determined carbon prices in wholesale electricity markets. In Europe, Microsoft engages actively with the European institutions advocating for robust clean energy rules and sustainability metrics for datacenters and submitted comments in February to the European Commission Public Consultations on the revisions of the Renewable Energy Directive and Energy Efficiency Directive. Microsoft engaged with the UK government and energy regulator to inform the “Digitalising the UK energy system for net zero” strategy published in July and its implementation. Carbon measurement Microsoft is advocating for common accounting and public disclosure of carbon and climate-related information. In June, Microsoft submitted comments to the US Securities Exchange Commission in support of the development and adoption of disclosure rules that will provide material, decision-useful information for investors. In September, Microsoft filed an aligned response to the UK Financial Conduct Authority’s consultation on Carbon Measurement and provided information to the US Department of Defense on climate change disclosure practices to support implementation of the Executive Order on Climate Related Financial Disclosure. In March, Microsoft joined t he European Green Digital Coalition , supported by the Eu ropean Commission, with the goals of developing standardized, credible, and comparable methodologies for calculating the net impact of green digital solutions in different sectors, and accelerating the contribution of digital technology to our collective 2030 goals. Microsoft supported a new academic report by Cambridge Institute for Sustainability Leadership (CISL), exploring how trade and trade-related policies could be used to support de carbonization, focused on the EU Carbon Border Adjustment Mechanisms (CBAM), as part of advancing the conversation around common standards for carbon measurement and accounting. Carbon-related markets Microsoft is advocating a range of policies to help carbon-related markets mature, including carbon pricing and research and development (R&D). Microsoft supported the Washington State Climate Commitment Act, approved in May, which sets a cap on emissions and establishes a robust carbon pricing and investment program. Microsoft advocated for increased US R&D in key technologies such as energy storage and direct air capture, which was included in the 2020 Energy Act and the bipartisan infrastructure package. Microsoft is advancing the development of carbon removal markets and consistent, high-quality carbon removal standards through comments to the US Department of Agriculture and by joining the Carbon Capture Coalition. In August, Microsoft submitted a response to the European Commission Carbon Removal Certification Mechanism survey to advocate for common standards for carbon removal quality and to provide input into the design of a future legislative framework. Microsoft is advocating for common accounting and public disclosure of carbon and climate-related information. 40