Upstream oil fields1Coal plants1Blast furnances1Heavy fuel vessels2Steam crackers3 Slow transition 0% 0% -3% 0% 0% Medium-paced transition-20% -2% -5% -5% -5% Rapid transition -35% -20% -15% -10% -10%Accelerating climate regulation would increase the risk of premature write-downs to fossil fuel assets Many companies underestimate the impact that faster climate transformation can have on long-lifetime assets. As restrictions on asset exploration, transportation or burning fossil fuels tighten, their useful lifespan shortens. In developed economies that seek to be Paris-aligned, many new investments in fossil fuel assets already carry significant risk of not reaching the end of their economic lifetime (which typically ranges from 20 to 25 years). Under a “well-below 2°C pathway”, this would increasingly be the case globally: world coal demand would have to drop by 90% by 2050,44 preventing any coal plant commissioned after 2010 from reaching the end of its lifetime. Thirty-five percent of the book value of upstream oil assets would have to be written down by 2030. Many industrial assets would also be affected (see Table 2).45 We are actively assessing the material financial implications arising from climate-related risks related to changes in the useful life of assets, residual values and changes in the fair valuation of assets as a result of our energy transition. Bronwyn Grieve, Director of Global Sustainability and External Affairs, Fortescue Companies face risk of write-downs of up to 30% on their grey assets46 Asset write-downs on grey assets by 2030 (% of 2030 stock value) TABLE 2 1. Decommissioning assumptions for coal plants, upstream oil fields and blast furnaces are based on IEA & Mission Possible Partnership consumption provision for STEPS, APS and NZE production forecasts. 2. Heavy fuel vessels are expected to be decommissioned by 2050 in a net-zero scenario and by 2053 in an announced-pledges scenario. 3. Steam crackers are expected to be decommissioned by 2045 in a net-zero scenario and by 2049 in an announced-pledges scenario. Notes: This analysis uses the following IEA scenarios: STEPS – Stated Policies Scenario (slow transition); APS – Announced Pledges Scenario (medium-paced transition); and NZE – Net Zero Emissions by 2050 Scenario (rapid transition); see Appendix for methodology and sources. Sources: IEA, GlobalData, S&P Global, European Commission Joint Research Centre (JRC), NexantEca, Rystad Energy, Ucube, Clarkson, Mission Possible Partnership, BCG analysis, BCG UDI database. The Cost of Inaction: A CEO Guide to Navigating Climate Risk 27

The Cost of Inaction 2024