2021 Owens Corning Sustainability Report | Appendices | 356 TCFD CLIMATE RISK & OPPORTUNITIES Appendix G ■ Direct Costs Owens Corning incorporates the impact of the identified risks into its direct operating costs for financial planning models based on a number of factors including the likelihood, timeframe, and magnitude of the financial impact of the risk or opportunity. For example, in the event of reduced production capacity due to climate-related increases in storm activity and severity, Owens Corning would potentially see increased (Direct) Operating Costs with substantial magnitude of impact in the affected regions. The increase would be due to cleanup costs, as well as alternate transportation costs, increased maintenance, increased sourcing costs due to supply chain strain, and likely increased production costs as the repaired line is brought back up to production. This estimated impact would be included in the financial planning process in various scenarios and analyses. When Hurricane Sandy damaged our roofing plant in New Jersey in 2012, we had a good example to use to adjust our planning estimates for future potential severe weather events and their impact on operating costs. ■ Indirect Costs Indirect costs like insurance have been influenced by climate-related risks, such as extreme weather events and their increased likelihood. In the years since the catastrophic flood impacted one of our facilities approximately 10 years ago, continuing to purchase flood insurance for this facility has become more challenging, and recently the insurance capacity available for purchase was reduced. This indirect cost not only became more difficult to purchase, the available protection capacity was altered entirely due to the increased likelihood of climate-related weather events like flooding. This example influences indirect cost financial planning in any Owens Corning site with similar natural disaster risk. ■ Capital Expenditures (CapEx) CapEx is influenced by climate risks and opportunities. One particular example is a regulatory transition risk regarding our blowing agent blend, which is being phased out in the immediate and short term as a component of climate/environmental regulation. A few years ago, we included in the planning process the new equipment required to use a foam blowing agent with a lower GWP, as the need for blowing agent changes was identified in our risk and opportunities analyses. The first such product with a lower GWP blowing agent, FOAMULAR ® NGX™, was announced in mid-2020 to coincide with regulations in Canada and in certain U.S. States in effect as of January 2021. Our response to identified climate related risks and opportunities like these has had a substantial impact on our financial planning of capital allocation. ■ Acquisitions & Divestments Identified climate risks and opportunities have had a moderate impact on our financial planning for acquisitions and divestments. Over the last several years acquisitions have been an important part of our growth strategy. We look for acquisition opportunities with businesses that meet specific criteria: They must provide stable and attractive margins and strong synergies, address our target growth areas, and meet our strategic objectives. We evaluate our acquisition candidates through multiple lenses, including sustainability, and we ask a critical question: Will this business be better with us as its owner? As sustainability guides our operations, we want to be confident that we can improve the environmental, health, and safety (EHS) performance, employee experience, customer experience, and community impact of the companies that join us. Can we bring a new perspective on safety and health? Can we improve energy efficiency and lower waste in operations? Owens Corning has purchased several companies in the last four to five years, including InterWrap, Pittsburgh Corning, Paroc, and vliepa. The acquired businesses successfully expand the capabilities and global reach of our three business segments (Composites, Insulation, and Roofing). Improving EHS performance and enhancing the employee experience are critical elements in our acquisition integration process. The identified climate change related opportunities, including more aggressive building codes, increased building materials demand due to potentially increased storm activity and severity, and improved demand for existing products due to our reputation for sustainable products were all factors in our acquisitions to expand our product line. These opportunities continue to be involved in our financial planning process as we continue to evaluate and analyze additional acquisition targets for the medium and long term. ■ Assets & Liabilities Climate risks and opportunities have had a moderate impact on our financial planning for assets and liabilities, primarily through our acquisitions. We consider the acquisition of the companies mentioned in the previous section in the long-term horizon. The identified opportunities regarding more aggressive building codes, increased building materials demand due to changes in weather patterns and storm activity, and improved demand for existing products due to our reputation for sustainable products were all factors in our acquisitions to expand our product line. These opportunities continue to be involved in our financial planning process as we continue to evaluate and analyze additional acquisition targets.