7.1 Climate Change

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) T : Climate change T : Emissions

The increased likelihood of natural disasters caused by climate change is one of the warnings in the report ¨Managing the risks of extreme weather events and disasters to improve adaptation to climate change¨ of the Intergovernmental Panel on Climate Change -IPCC , “(…) There is evidence derived from observations made since 1950 of changes in some extreme climatic phenomena (…)” Heavy rains and floods, droughts, and forest fires can affect renewable energy generation plants, resulting in medium- and high-probability risks in Central American countries. CMI Capital is aware of these risks that are part of its operation and, for this reason, we make important investments focused on the mitigation or prevention of climate change, to ensure power generation for our stakeholders. With regard to emissions management, we seek their reduction and/or compensation in order to achieve carbon-neutral operations. Reducing greenhouse gas emissions - GHG - is important for mitigating the impact of climate change. As we only generate renewable energy, at CMI Capital we have an important role in mitigating climate change, especially in the Energy Business Unit. In this line and committed to the planet, we also make efforts to reduce emissions generated during some of the activities of the generation process, construction and any industrial activity. These emissions include GHGs, which are primarily responsible for climate change through “global warming,” so it is imperative to reduce the magnitude of this problem and we do our best to achieve it

Hydroelectric Renace II, Guatemala

7.1.1 ENERGY BUSINESS UNIT

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) Although by generating renewable energy we reduce the risks of climate change, we are not exempt from the fact that because of the different sources of renewable generation we use, the negative impacts of climate change can be more intense and recurrent. That is why we have already analyzed, and implemented some alternatives that reinforce the actions we have considered. We have invested in implementing drainage infrastructure in our photovoltaic solar plants, because of their location, they are prone to flooding, especially during the cyclone season.

7.1.1.1 Hydroelectric impacts

Both droughts and storms are the major risks we face in hydroelectric plants. If there is a drought, losses from low rains have a very high impact, considering that in the Renace hydroelectric complex, three of its plants feed on the water of the river Cahabón, and the fourth plant feeds from one of its effluents. Heavy rains can generate landslides, erosion of the basin and even road blockages. In either case, we have a USD$901-thousand equivalent, all-risk, business interruption insurance to cover material damage and loss of profits for up to 18 months. During 2019, climate change impacts exceeded estimates made in previous years, reaching financial losses of up to approximately USD$18 million. This situation came from the low generation caused by historically low rains. The Apollo project, along with other similar projects, detailed in chapter 2, works on generating efficiencies and risk mitigation.

Wind Plant PESRL, Costa Rica

7.1.1.2 Impacts on Wind Plants

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) The amount and speed of wind has to do with the optimal operation of wind power generation, not only because of the production itself, but also because of the possibility and risks of carrying out maintenance on wind turbines. The high wind and low wind seasons are a constant variable, these periods might be longer or shorter depending on the climate phenomena, El Niño or La Niña. We work on different mitigation measures, such as estimates of wind behavior, which work to a better extent, on this type of technology compared to hydroelectric plants. Maintenance, whether preventive or corrective, especially the latter, access to parks is limited to the hurricane season and, in some cases, the activity could be paralyzed. While this would not affect the operation of wind turbines, it would cause a limitation to taking care of any alarms that may occur, due to the lack of personnel. The estimates and risks are based on historical information, on the most conservative scenarios that occurred during the plant’s operating years. One impact that has been observed in the last year is the increase of forest fires due to droughts. It should be noted that although fires have occurred in areas near our wind power plants during 2019, we have not had any loss of resources. This is due to the fact that there are contingency plans and strategic partnerships with entities responsible for fighting fires in the areas in which we operate.

El Niño and La Niña in Central America

La Niña is a climate phenomenon that is part of a natural-global climate cycle known asEl Niño-Southern Oscillation-ENOS-,El Niño-Southern Oscillation, -ENSO-. This global cycle has two extremes: A warm phase known asEl Niñoand a cold phase, known as La Niña. When there arestrong trade windsfrom the west, equatorial temperaturesdecrease and the cold or La Niña phase begins. When the intensity of the trade winds (alisios) decreases, the surface temperatures of the sea increase and the warm phase of El Niño begins. Either of these conditions expands and persists overtropical regionsfor several months and cause significant changes in global temperatures, and especially in global rainfall. These changes occur alternately in periods that vary on average from five to seven years and there are records of their existence from pre-Hispanic times.

Solar Plant Choluteca, Honduras

7.1.1.3 Impacts on Solar Power Plants

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) T : Climate change T : Emissions High temperatures could cause a forest fire in solar panel parks, as would be the case in wind power plants. To avoid this, we avoid having fire sources in these areas. During 2019, we managed to control these episodes by working with the company’s security area. Contrary to what is generally accepted, solar parks are located in grasslands or areas that no longer have forest areas. There are cases in which wind towers are located in forest areas that are far away from construction areas or roads. Along this lines, it is important to note that by 2018, the Energy Business Unit has fulfilled its compensation commitment in a ratio of 10 to 1, according to the trees cut in its Choluteca plant. Likewise, at the Cerro de Hula plant, the goal of 54,920 trees was passed, fulfilling more than 100% of the reforestation commitment, by planting 66,489 trees.

7.1.1.4 Social impacts

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) T: Climate change T: Emissions For all cases, natural phenomena have a social implication in the area of influence of the plants we operate. In the case of droughts, the social impact that would be generated would be very high, due to the lack of water in the communities. Therefore this would entail an additional investment not only for the plants but also for social investment programs. If there are forest fires, the impact would be greater because both the communities and the wind towers could be affected by the fires.

7.1.1.5 Prevention tools

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) T: Climate change T: Emissions As tools to prevent the risks generated by climate change, we are prepared for hurricanes , floods and fires that can originate in neighborhoods and impact our facilities. We have forest brigades in order to address forest fires that can be generated as a result of high temperatures due to climate change.

El Pulté, Guatemala

7.1.2 REAL ESTATE DEVELOPMENT BUSINESS UNIT

(GRI 102-11, 201-2, 103-1, 103-2, 103-3) (GRI 305, 103-1, 103-2, 103-3) (SDG 13.1) T: Climate change T: Emissions Our real estate complexes require significant amounts of electricity and drinking water. We use electricity generated by hydropower plants, although the reduction of available water as an effect of climate change has a direct impact on our operations. Droughts could raise the cost of such a service, which would be a reason to look for another provider. On the other hand, floods from tropical storms can reduce traffic to our complexes, as well as possible damage to offices, shopping malls and homes. While they are covered by insurances, their destructive capacity should not be ignored. Climate change also brings opportunities for our businesses. If we incorporate environmental certifications for the complexes we build, this allows us not only to contribute to mitigate our impacts, but also to attract environmentally conscious customers. Another opportunity identified is solar power generation from solar panels installed at our shopping malls. This tool allows us to be more cost-efficient, as well as to reinforce our approach to sustainable construction and operations.

7.1.3 FINANCE BUSINESS UNIT

In a way, climate change is considered, a business opportunity because companies need to hire health insurance and insurance on all sorts of possible risks resulting from climate change.

Wind Plant Orosí, Costa Rica

7.1.4 EMISSIONS AVOIDED AT THE REGIONAL LEVEL IN THE REST OF THE COUNTRIES WHERE WE OPERATE

(GRI 305, 103-1, 103-2, 103-3) T: Climate change T: Emissions Since 2015, and with the assistance of a consulting firm, we estimate the emissions avoided by hydroelectric power plants, using the methodology ACM0002: This baseline methodology has been developed by the United Nations for the Clean Development Mechanism, for the generation of renewable electricity connected to the grid. In the case of the wind farm Cerro de Hula, these estimates began in 2014. For the rest of the wind and solar plants we perform an estimate according to the United Nations Climate Change Conference-UNFCCC. Also, in 2019, we helped mitigate climate change by avoiding emissions of more than 978 793.46 tons of CO2 equivalent. In this way, we strengthen our commitment to contribute to the diversification and decarbonization of the energy matrix.