7.4 Task Force on Climate­Related Financial Disclosures (TCFD) We also apply different climate scenarios to assess physical Climate change is not treated as a separate category in the climate-related risks and opportunities (see paragraph ERM approach; it is considered within the four topic areas of “Management of climate risks in our own operations”). strategic, operational, financial, and compliance-related risks. Risk processes have been implemented upstream Our risk management approach to climate- throughout the company to assess potential climate-related related opportunities and risks net risks for ERM reporting. Climate-related risks and opportunities are embedded in the Siemens-wide ERM approach. All identified climate risks are Material opportunities and risks are disclosed on an aggre- assessed and measures for risk prevention, transfer, or miti- gated basis within the abovementioned four topic areas in gation are devised for all relevant risks. the Siemens annual report. SIEMENS FINANCIAL REPORT FOR FISCAL 2023, COMBINED MANAGEMENT Risk management at Siemens builds on a comprehensive, REPORT, CHAPTER 8, CDP 2023 C2.1 AND C2.2 interactive and management-oriented Enterprise Risk Man- agement (ERM) approach that is integrated into the organi- Management of climate risks in our own operations zation and that addresses both risks and opportunities. Our Climate change mitigation ERM process aims for early identification and evaluation of, We have set ambitious decarbonization targets that apply to and response regarding, risks and opportunities that could Siemens’ own operations and to our upstream and down- materially affect the achievement of our strategic, opera- stream value chain (see paragraph “Metrics and targets”). tional, financial, and compliance objectives. The time horizon is typically three years, and we take a net risk approach, The reduction of GHG emissions in our own operations is addressing risks and opportunities remaining after the integrated into Long-term Incentive (LTI) compensation as execution of existing and effective measures and controls. A part of an internal Siemens ESG/Sustainability Index that is detailed description of our enterprise risk management basic applicable to members of the Managing Board and senior principles and process can be found in our combined management (Siemens without SHS). Anchoring the reduc- management report, chapter 8.2 Risk management. tion of GHG emissions in this system and the responsibility SIEMENS FINANCIAL REPORT FOR FISCAL 2023, COMBINED MANAGEMENT of each of our businesses for reducing its prorated emissions REPORT, CHAPTER 8, CDP 2023 C2 are key elements of our management approach and require regular monitoring. Climate risks in the risk management system SUSTAINABILITY GOVERNANCE AND ORGANIZATION The consideration of sustainability and climate-related risks and opportunities is an integral part of our regular top-down Climate change adaptation process that communicates material issues and trends at risk We continuously evaluate the vulnerability of all Siemens workshops to the relevant company units so they can identify locations regarding acute physical risks based on assess- risks and opportunities. As a result, issue-related recommen- ments provided by external suppliers and data collected dations are available to all businesses at their quarterly internally. Through recurrent analyses conducted by Global reviews. In fiscal 2023, several climate-related topics were Risk Consultants on behalf of TÜV Süd, it is evident that the on the agenda of the top-down process, which then provided Siemens locations significantly surpass industry standards in input to the annual ERM process on topics that included terms of risk protection as per the respective insurer ratings physical climate risks, increasing regulation, and the trans- (industry average: approximately 70, Siemens: approxi- parency of environmental product data. mately 80). Consequently, Siemens locations are consistently characterized by notably low risk levels. We continuously In conjunction with the bottom-up approach, these measures conduct local risk assessments and collaborate closely with enable a comprehensive overview of our business activities various stakeholders to ensure an adequate protection level. and the related risks and opportunities. SIEMENS SUSTAINABILITY REPORT 2023 140