Of the risks that we monitor, Owens Corning has established three levels for value impact. The lowest level risks are those where the company can absorb the financial impact, and the reputational impact is relatively non-existent. The next level is moderate financial impact, with a potential to be known by the public or to damage our reputation. The highest level is significant financial impact and or reputational damage, with the potential to be catastrophic to the organization. All three levels of risks have been determined important to monitor, but those in the moderate and significant levels are defined as having substantive financial impact. Risk horizons are defined as follows: ■ Short-term (1-3 years) ■ Medium-term (3-6 years) ■ Long-term (over 6 years) Owens Corning has recognized numerous risks specifically related to climate change, and we have strategies in place to mitigate them. These risks include the following: Risk: Increased Severity and Frequency of Extreme Weather Events Many of Owens Corning’s business activities involve substantial investments in manufacturing facilities, and many products are produced at a limited number of locations. These facilities could be materially damaged by natural disasters such as floods, tornadoes, hurricanes, and earthquakes, or by sabotage. We have experienced flooding at plants in New Jersey, Texas, and India. Owens Corning could incur uninsured losses and liabilities, as well as disruptions in production capacity. In addition, natural disasters pose a significant threat to the safety of our employees, contractors, and customers. We engage with our third-party loss prevention engineering firm to equip our locations to have minimal losses and best survive weather-related incidents. As climate change occurs, events related to these risks could become more likely and also make insuring against these risks less feasible. For example, Owens Corning experienced a catastrophic flood at one facility, resulting from a named storm approximately 10 years ago. The ~190,000 square foot building, located in the Northeast of the United States, is flood-prone due to its proximity to a river system and the Atlantic Ocean. As such, continuing to purchase flood insurance for this facility has become more challenging, and recently the insurance capacity available for purchase was reduced. Combined with a potential increase in the likelihood of this risk due to the impact of climate change, this situation is even more important to mitigate appropriately. Other natural disasters could also impact Owens Corning locations in a similar manner. Owens Corning mitigates this risk through the purchase of insurance, loss prevention engineering, and strategic location evaluation among other processes such as strategic sourcing and supply chain planning. Risk: Increased Cost of Raw Materials Owens Corning is at risk of significant impact to our reported financial results as a result of volatile energy costs or supply disruptions. We operate in environments where the flow of energy supply has regulations that can impact our performance (e.g., China). In order to mitigate this risk, we have a commodities risk management committee that oversees financial risk related to our energy supply pricing. We deploy location-specific energy sourcing strategies and have an ongoing review of energy markets. We monitor and assess energy storage and distributed energy generation technology advancements. As part of a larger total productive maintenance initiative, we ensure energy transmission reliability for key manufacturing processes. One example of this is battery storage at one of our insulation plants to mitigate volatile energy costs. Risk: Enhanced Emissions-Reporting Obligations Owens Corning is subject to or has chosen to voluntarily participate in Emissions Trading Schemes (ETS) around the world, such as the Alberta Technology Innovation and Emissions Reduction, EU Emissions Trading System, California’s Cap-and-Trade system, the Canadian Federal Output-Based Pricing System, the Québec Cap-and-Trade system, and South Korea’s Emissions Trading Scheme. Expansions to these schemes could impact us by reducing our carbon allowances, thus increasing our operating costs in those countries. With the further reductions in allowances through Phase 4 of the European Union ETS, for example, we forecast that our allowances will be depleted after 2021, which will require us to begin purchasing credits. Phase 4 applies to the period 2021-2030. Volatility in carbon market pricing creates additional risk. Our course of action in managing these risks involves: interacting with the commission regarding the implementation of the EU Green Deal and Fit-for-55 package; pursuit of R&D initiatives involving a change in material composition or in manufacturing processes to enable emissions reductions; and implementation of energy and GHG reduction projects. We also anticipate transitional risks as climate-change legislation and other environmental mandates lead to increases in energy prices. This can have an adverse effect on our operations, as it can represent a cost increase that we may not be able to pass along to the customer. 2021 Owens Corning Sustainability Report | Appendices | 351 TCFD CLIMATE RISK & OPPORTUNITIES Appendix G