Governance, incentives and risk management

Governance at all levels

Our governance on climate change and energy transition risk management is structured to address these issues at all company levels. We count on the active oversight of the Board of Directors’ Health, Safety and Environment (HSE) committee, on an executive committee that advises the Executive Board, and on committees at the tactical level in all segments. The integration of the theme between the different levels is carried out by the Executive Management of Climate Change, which is dedicated to emissions, climate and energy performance, and reports to the Institutional Relations and Sustainability Department.

Robust incentives

The top metrics provide more explicit guidance on the company’s key short-term targets. In SP 2023-2027, three metrics linked to variable remuneration were maintained, two environmental and one financial:

> Compliance with greenhouse gas targets index (IAGEE),

> Volume of oil and oil products spilled (VAZO) and

> Economic Value Added (Delta EVA®).

The variable compensation of each employee and executive is calculated based on individual goals and on the percentage of achievement of these top three metrics. We reinforced the incentives and, in 2023, the percentage of compliance with the GHG targets index affects between 7% and 20% of the variable compensation amount (decreasing percentage from the CEO to employees without a managing role). Executive officers related to the E&P and Refining segments have an additional impact relative to the emissions in their respective segments.

Integrated and quantified risk management

Petrobras has a history of managing and quantifying climate-change related risks. Our risk management process is integrated, which allows for the standardization of the analysis and the effective management of all identified risks. The set of climate change and energy transition related risks was assessed with a very high degree of severity, being monitored by senior management. Regarding the theme, Transition Risks and Physical Risks of Climate Change were identified, and are monitored and reviewed annually: Market Risk, Technological Risk, Regulatory Risk, Legal and Reputational Risk, and Physical Risks, such as water scarcity for onshore assets and meteoceanographic changes for offshore assets.

We highlight our quantification of the risk of carbon pricing on the portfolio value, considering the possibility of implementing a carbon market in Brazil. The simulations considered the gradual implementation of the instrument and ranges of values that vary over time from US$ 0/tCO2 up to US$ 130/tCO2 depending on the scenario. Currently, more than 97% of our operational emissions occur in Brazil, so our analysis consider country-specific perspectives. We also highlight the advances in our studies to improve the predictability of physical climate changes.

We also see opportunities in new businesses, such as biorefining, which uses our skills in refining technologies and operations. Additionally, we identify the development of an opportunity to place pre-salt oil streams, produced with lower GHG intensity, in markets that value products with this characteristic.

In 2022, we contracted a new line of credit associated with corporate sustainability goals (Sustainability-Linked Loan) in the amount of US$ 1.25 billion and maturity in July 2027. This operation was signed with three banks, expands our liability management strategy by diversifying financing models and reinforces our commitment to decarbonizing operations.