Climate‑related risks and opportunities

Guided by the TCFD recommendations, COSO standards, and the 2031 Environmental and Climate Change Strategy, Nornickel is building procedures for managing climate‑related risks and opportunities. The Company follows the TCFD classification, which identifies two key categories of risks and opportunities:

• Physical risks, whose impacts may manifest through extreme weather events (acute risks) or lasting changes in weather patterns (chronic risks)
• Transition risks and opportunities, associated with evolving market, regulatory, technological, and political environment as the economy transitions to a low‑carbon model

In 2024, the Company continued to refine its approaches to assessing physical risks and transition risks and opportunities. The relevant risk assessment framework was reviewed by the Sustainable Development and Climate Change Committee of the Board of Directors of MMC Norilsk Nickel.

Physical risks

The analysis of historical climate data since the 1960s confirmed a trend indicating shifts in several climate factors. For example, in Norilsk, average temperature has increased by 0.6 °C every decade, suggesting that temperatures in the Arctic are rising faster than the global average.

In addition to evaluating the long-term climate trends identified in Nornickel’s regions of operation since the mid-20th century, the Institute of Atmospheric Physics of the Russian Academy of Sciences (IAP RAS) developed climate projections up to 2050. The regional forecasts are based on three IPCC global scenarios (SSP1-2.6, SSP2-4.5, and SSP5-8.5) and the CMIP6 ensemble of climate models.

To prevent risks associated with permafrost degradation in the Norilsk Industrial District, theCompany conducts ongoing monitoring of the technical condition of assets through expert examinations, surveys, and monitoring of the condition of permafrost soils and building foundations.

For the description of the IPCC scenarios and modelling results for projected changes in climate factors until 2050, please see Nornickel’s 2024 Climate Change Report.

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 and the extension of the forecast horizon to 2060. The probability of the Rapid Transition scenario was lowered from 25% to 20% due to a more than 2% increase in global emissions over 2021–2023, which hampers the decarbonisation of the global economy. The probability of the Sustainable Palladium scenario was raised to 75% as it aligns most closely with current trends.

The underlying assumptions of each scenario differ significantly, 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 by the Company to stress‑test climate‑related risks.

Key transition risks identified by the Company include:

• the need to comply with carbon regulations in Russia and in the jurisdictions to which the Company exports its products
• restrained demand for primary platinum group metals due to declining sales of internal combustion engine vehicles
• restrained demand for primary nickel due to a decline in overall vehicle production and the development and mass production of new nickel‑free batteries

The Company sees the following transition 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
• Sale of carbon credits generated by climate projects

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 CBAMCarbon 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.

Sustainability assessment of Nornickel’s product portfolio

One of the key drivers of Nornickel’s long‑term strategy is the growing demand for the Company’s metals to support the development of a low‑carbon economy. By supplying green metals to the market, the Company is already actively contributing to the global transition to cleaner modes of transport and renewable energy.

Scenario analysis of the consolidated financial and economic model until 2040

Based on the updated scenarios, Nornickel has conducted a scenario analysis of the consolidated financial and economic model until 2040.

The analysis has shown that the EBITDA forecast is most favourable for the Company in the Global Growth scenario and least favourable in the Rapid Transition scenario. The key growth drivers behind the highest EBITDA figures in the Global Growth scenario include the highest GDP and population growth rates, which will fuel the strongest demand for palladium and copper vs the other two scenarios. However, the Company estimates the probability of the Global Growth scenario at 5%.

Although the Rapid Transition scenario is based on the most aggressive decarbonisation rates, which is impossible without green metals – nickel and copper, – the scenario projects the global economy to slow down, with the lowest GDP and population growth rates. On top of that, the total car fleet, along with the fleet of passenger EVs, hydrogen cars, and plug‑in hybrids, in the Rapid Transition scenario will be lower than that in the Sustainable Palladium scenario as a result of the general trend towards reduction in car ownership and use as well as ride‑sharing development. The probability of the Rapid Transition scenario is estimated at 20%.

After 2034, the stress scenarios are closer to the Sustainable Palladium baseline scenario due to their different metal price growth rates, which are higher in Rapid Transition and, in contrast, lower in Global Growth vs Sustainable Palladium.

Nornickel’s climate change adaptation efforts

Permafrost monitoring

To ensure ongoing control over the risk factor of permafrost degradation, Nornickel has deployed a monitoring system that covers two key areas:

• Geotechnical monitoring – conducted in the Norilsk Industrial District since 2020. Its main objective is to monitor the technical condition of foundations and load‑bearing structures of buildings and structures built on permafrost and promptly identify threats during operation
• Background monitoring – conducted by the Company since 2023 in partnership with Fedorovsky Polar State University. This monitoring programme focuses on applying scientific methods to assess the state of permafrost and forecast its condition over the medium and longer term in the natural landscapes of the Norilsk Industrial District

These activities are carried out by the Buildings and Structures Monitoring Centre in Norilsk and the Department for Scientific and Technical Support for Building and Structure Operation in the Far North.

All information is stored and processed in a unified information and diagnostic system deployed at the Norilsk production site, enabling the Company’s managers to use consolidated data for management decision making.

Nornickel’s permafrost monitoring systemBS – buildings and structures, GTM – geotechnical monitoring.

Product portfolio diversification

Nornickel has also established the Palladium Centre, which develops, tests, and brings to market new palladium‑based materials that support the accelerated transition to green technologies and help reduce carbon footprints. New products are being developed for hydrogen and solar power as well as for aviation fuels.

For more details on the development of palladium-based technologies, please see the Research and Development section.

To meet the growing demand for battery materials, in 2024, the Company inaugurated a Battery Technology Centre in Saint Petersburg, which focuses on building technological capabilities in nickel‑bearing cathode active materials (CAMs) – a key component in modern batteries.

For more details on efforts in this area, please see the Research and Development section.

In addition, Nornickel, together with a partner, plans to develop Russia’s most promising lithium deposit, located in the Murmansk Region. The project provides for the production of 45 kt of lithium carbonate and hydroxide per year.