Transition risks and opportunities

In 2022, to identify and assess relevant transition risks and opportunities, Nornickel – in collaboration with the Institute for Economic Forecasting of the Russian Academy of Sciences – developed three proprietary long‑term scenarios for global economic and climate development through 2050. The projected changes in global temperature under these scenarios are consistent with the three IPCC scenarios (SSP1‑2.6, SSP2‑4.5, and SSP5‑8.5), which the Company also uses for its assessment of physical climate risks.

In 2024, the scenarios were updated to reflect actual data for 2022–2023, the upward revision of projected global GHG emissions across all scenarios, and the extension of the projection period to 2060. The mix of vehicle fleets – one of the key areas of application for the Company’s metals – has also shifted: sales of battery electric vehicles and hybrid vehicles have increased, while sales of internal combustion engine vehicles and hydrogen fuel cell electric vehicles have declined.

The probability of the Rapid Transition scenario was lowered from 25% to 20%. This revision reflects a rise in global emissions of more than 2% over 2021–2023, which further complicates the already challenging task of global economic decarbonisation. The difficulty stems from: (a) the limited financial capacity of the global economy to absorb the specialised costs involved; and (b) the insufficient level of international collaboration and cooperation, which are critically important to tackling global challenges such as climate change. The probability of the Sustainable Palladium scenario was raised to 75% as it aligns most closely with current trends. The probability of the Global Growth scenario remains at a minimal level of 5%, as the high economic growth rates required for this pathway are currently considered unattainable.

Scenario	Rapid Transition SSP1‑2.6	Sustainable Palladium SSP2‑4.5	Global Growth SSP5‑8.5
Strategic focus	Low‑carbon development paradigm with the global community’s efforts focused on the reduction of GHG emissions	Maintaining current socioeconomic trends. Traditional industries remain centre stage along with the green economy	Abandoning efforts to curb climate change with further rapid economic growth fuelled by hydrocarbons
Inflation	High	Moderate	Low
Resource/Energy intensity	Low	Moderate reduction	High
Climate regulation	Strict	Moderate	Insignificant
Carbon price	Strong growth	Moderate growth	At 2021 levels
Temperature change by 2060	+1.9 °C	+2.2 °C	+3 °C
Probability	20 %	75 %	5 %

The underlying assumptions vary between climate scenarios, with these differences directly linked to the Company’s product portfolio. The Sustainable Palladium scenario is considered baseline; it provides for traditional industries to remain centre stage along with the growing green economy. For example, internal combustion engine (ICE) vehicles will retain a large market share, contributing to robust demand for palladium in the long run. The other two scenarios are used to stress‑test the Company’s financial performance.

Nornickel has identified potential transition risks and opportunities based on global economic and climate change scenarios, analysis of proposed carbon regulation initiatives, market trends, and stakeholder expectations.

TCFD Sa, IFRS S2 10a, IFRS S2 10b

Regulatory risks Compliance with carbon regulations in the Company’s export markets Compliance with national carbon regulations Regulation‑related opportunities Use of ESG financing tools Sale of carbon credits generated by climate projects

Technology risks Failure to achieve decarbonisation targets due to lack of access to advanced foreign low‑carbon technologies

Market risks Restrained demand for primary platinum group metals due to declining sales of internal combustion engine vehicles Restrained demand for primary nickel due to the development and mass production of new nickel‑free batteries Restrained demand for primary metals due to increased recycling Restrained demand for primary metals due to increased recyclingMarket opportunities Higher demand for primary nickel and copper, driven by transport electrification, the expanding hybrid vehicle market, and the growth of renewables Growing demand for primary platinum group metals due to the use of platinum and palladium in the hydrogen economy and of palladium in vehicle hybridisation

Reputational risks Increased protest activity by non‑profit organisations and local communities, including indigenous people s of the North

To mitigate risks arising from the need to comply with carbon regulations, the Company regularly monitors legislation both in Russia and in its export markets.

The introduction of the CBAM Carbon Border Adjustment Mechanism. in the European Union does not pose any risk to the Company in the short term, as non‑ferrous and platinum group metals are not currently covered by the cross‑border carbon tariff. The Company continues to monitor developments in carbon regulation and to forecast the potential associated costs going forward.

In the long term, Nornickel relies on its competitive advantage – one of the lowest product carbon footprints in the industry.

The Company is also exploring opportunities for trading carbon credits that may be generated through the implementation of climate projects.