SK D&D has established and operates the 'ESG Committee' under its highest decision-making body, the Board of Directors. The ESG Committee regularly conducts reporting and approval procedures at least once a year regarding major issues and activity plans related to climate change, response plans and performance for each risk and opportunity factor, thereby managing and overseeing the company's climate change response performance on a group-wide level.

SK D&D analyzes climate change-related risks and opportunities in its business and investment activities through the 'Space Strategy Committee', an organization directly under the CEO, and establishes response strategies to incorporate into decision-making. Additionally, as the final responsible party of environmental management, the CEO contributes to establishing and implementing a robust climate change response system by overseeing and supporting the company's environmental management system. This includes expressing commitment to environmental management, approving environmental policies, and supervising environmental management performance. Furthermore, we incorporate climate change response performance as a key performance indicator (KPIs) for the CEO and general directors of each business division, linking these to compensation to encourage the management to actively achieve their goals.

SK D&D has identified a pool of climate change-related risks and opportunities through industry analysis and literature review, and assessed their materiality based on financial impact and likelihood over short, medium, and long-term timeframes to identify key risks and opportunities.

▶ Short-term: The application of eco-friendly raw materials and high-efficiency equipment for the development of green buildings may increase costs. Additionally, if climate change performance management and information disclosure fail to meet stakeholder expectations, it could negatively impact brand reputation and corporate competitiveness. On the other hand, green buildings designed to address climate change can contribute to expanding new business opportunities and creating innovative space services.

▶ Medium-term: As climate-related policies and regulations for buildings and real estate become stricter, and consumer and investor demand for green buildings increases, the transition risks associated with climate change may rise. At the same time, the operation of energy-efficient and eco-friendly buildings can lead to cost savings during the usage phase and enhance asset value due to increased consumer and market preference.

▶ Long-term: The increased frequency of extreme weather events due to the climate crisis could result in physical damage to assets, leading to a decline in the value of the portfolio's assets and investments. Conversely, developing and operating green buildings can reduce environmental impact throughout the building's lifecycle and help meet market demands, thereby enhancing brand value and solidifying SK D&D's position as a leading developer in the real estate industry.

As external regulations related to climate change for real estate products become more stringent and market demands increase, SK D&D aims to achieve 100% green building certification for residential and work spaces. To this end, we are strengthening our eco-friendly portfolio through efforts such as applying environmentally friendly designs and technologies, using renewable energy, and providing ESG ecosystem solutions to residents. Additionally, to minimize the risk of stranded assets in our portfolio due to climate change, we review the inclusion of the relevant industry in the EU and Korean green taxonomy when selecting investment projects, and promote green investments by evaluating climate change risks in our decision-making process.

Moreover, in line with the national goal of achieving carbon neutrality by 2050, SK D&D is actively responding to climate change by establishing short- and medium-term strategies for achieving Net Zero emissions in Scope 1 and 2, as well as a long-term strategy towards Scope 3 Net Zero. We implemented RE100 in 2023 and plans to achieve Net Zero at our business sites by introducing electric vehicles to reduce emissions from mobile combustion and expanding carbon offset projects. Furthermore, we will strengthen greenhouse gas emission management across the entire value chain, including investor assets and supply chains, and implement activities to reduce environmental impact, thereby reducing Scope 3 emissions.

SK D&D is analyzing the IEA's 1.5℃ scenario (NZE2050) global milestone to review its mid- to long-term business strategy. According to the 1.5℃ scenario (NZE2050), carbon emission regulations related to buildings are expected to be strengthened. In response, we aim to promote the acquisition of green building certifications and improvement in the energy self-sufficiency rate of buildings. Additionally, we strive to reduce environmental impacts during the use stage by developing and expanding services that help customers reduce greenhouse gas emissions when operating spaces. Through these initiatives, we will to effectively comply with government policies and regulations on buildings, thereby minimizing mid- to long-term business risks and achieving substantial reductions in greenhouse gas emissions.

SK D&D identifies climate-related risk factors that may arise in new investment or development projects and its value chain. For this purpose, the ESG department and business-related departments analyze domestic and international climate change-related regulations and disclosure standards (CDP, TCFD, SASB, etc.) and benchmark excellent companies to build a pool of climate risk factors. To select and manage key climate-related risk factors, we assess physical risks based on the results from external analysis tools like S&P Climanomics®, and transition risks for likelihood and severity through interviews with internal and external stakeholders.

SK D&D operates an ESG risk review process at the investment deliberation stage for investments or new projects to manage key climate-related risks. We evaluate whether the projects under review align with environmentally sustainable economic activities defined by domestic and international green taxonomies. If deemed to pose high climate-related risks, mitigation and improvement plans should be developed and incorporated into decision-making. Furthermore, to minimize climate change risks during real estate operations and post-management phases, the ESG department regularly monitors environmental performance of buildings, formulates mid- to long-term response strategies, and reports to the Board of Directors. Through the ESG Committee, the Board assesses the overall exposure to climate-related risks across the organization, reviews progress against metrics and targets, and makes decisions to establish and implement improvement initiatives.

SK D&D systematically manages organizational financial and non-financial risks by establishing departmental oversight and decision-making structures for each area, ensuring continuous monitoring. Specifically, climate change-related risks are managed by working-level departments responsible for corporate strategy, compliance, and ESG risk management. The results of identifying climate-related risks and proposed mitigation measures from each department are integrated at the group-wide level through regular reports to the Board of Directors (BOD). The BOD reviews these risk management outcomes and makes decisions on how to respond to them. The ESG Committee under the BOD identifies and analyzes risks that may arise from corporate management activities and ESG perspectives, overseeing the performance of climate change response initiatives.

SK D&D manages greenhouse gas emissions (Scope 1, 2, and 3), energy consumption, water consumption, and waste emissions to measure and evaluate climate change-related risks and opportunities. Additionally, recognizing the importance of climate change response, achievements in reaching Net Zero and implementing RE100 are integrated into CEO KPIs, linked to compensation, thereby establishing and operating a systematic performance management system.

To understand the impact of our real estate business on climate change and to participate in global efforts to reduce GHG emissions, we are managing GHG emissions and energy usage on a group-wide level. Although we are not subject to domestic GHG-related regulations (GHG energy target management system, Korea emissions trading scheme, etc.), we are proactively establishing and operating a group-wide GHG and energy management system in accordance with domestic GHG emission calculation and certification guidelines. Total GHG emissions by category (including our subsidiaries) in 2023 were as follows:

Scope 1: 261.233 tCO2eq.

Scope 2: 58.824 tCO2eq.

Scope 3: 37,505.283 tCO2eq.

SK D&D has developed a mid- to long-term roadmap aiming to achieve Net Zero for Scope 1 and 2 emissions by 2030. To achieve this goal, we have established targets including RE100 by 2023, expanding electric vehicle adoption by 2030, and advancing carbon offset projects. In 2023, we implemented RE100 completely by issuing renewable energy certificates for 100% of our electricity consumption at the headquarters and subsidiaries. Moving forward, we are committed to fulfilling our targets for carbon reduction and Net Zero. Additionally, in the long term, we aim to contribute to carbon reduction across the entire value chain by expanding Zero Energy Building (ZEB) development and investment, building an ESG ecosystem, and promoting sustainable space solutions, ultimately striving for 100% green building certification for residential and work spaces.