SK Square

Climate Change Response

SK Square discusses climate change response strategies with the Board of Directors and management. We manage the impact on overall management through risk and opportunity identification and response processes.

Climate Change Governance

Board of Directors

SK Square recognizes climate change as both a critical risk and a strategic opportunity, and has established a governance structure to facilitate effective decision-making in response. The ESG Committee, a sub-committee of the Board composed entirely of independent directors, regularly deliberates on climate-related agenda items. The Committee convenes at least once annually to review SK Square’s climate strategy, and assesses climate change response strategies, implementation plans, and materiality assessment results to deliberate on the identification and response strategies as well as execution methods regarding company-wide ESG risks. In 2024, the Committee reviewed SK Square’s detailed climate action plan and materiality assessment results to discuss forward-looking strategies, with the outcomes reflected in management decisions through Board-level deliberation.

Management

Executive leadership, centered on the ESG Working-Level Council, is responsible for formulating and executing SK Square’s climate strategy, while regularly identifying and assessing related risks and opportunities. The ESG working-level council and the working teams of each department organically work together as a team and regularly monitor information and issues related to climate change and reflect the insight into the management decisions, which ultimately contributes to strengthening the company’s climate change response capabilities. SK Square has also developed a Net-Zero implementation roadmap, actively monitors and manages environmental performance, and establishes concrete action plans in areas identified for improvement to drive meaningful outcomes. To further strengthen climate change response effectiveness, climate-related KPIs are incorporated into executive performance evaluations, enhancing leadership accountability and execution capability.

Governance

ESG Committee
- Discussion and decision-making on the 2040 net zero implementation plan
- Decision-making on climate change risks and opportunities
- Monitor environmental performance and develop improvement measures
Management(executives in charge) | Working-level ESG council
- Identify climate change-related risks and opportunities
- Develop strategies and detailed plans to address climate change risks and opportunities
- Monitor activities and discuss issues related to climate change response
Working-level staff
- Manage climate change and environmental performance
- Support the operation of the ESG Committees and the working-level ESG council

Key Discussions and Roles in the Climate Change Response Governance

SK Square reviews and approves company-wide climate change countermeasures and strategic directions through the ESG Committee under the BOD.
The ESG Committee manages and oversees the performance of the company’s response to environmental issues, which includes its climate change strategies.
The ESG committee is held regularly. It has an efficient climate change response process, including deliberation of climate change-related agendas that have been proposed through discussions with the management and the working-level consultative body.
In order to respond to climate change in a practical and effective way, SK Square evaluates the management's performance by environmental factors, including climate change strategy.

Climate Change Response Strategy

SK Square analyzes the expected financial impacts of identified material climate-related factors and reviews strategic response plans with an emphasis on corporate sustainability. To mitigate the business effects of climate change, the company carefully assesses related financial risks and opportunities, gradually integrating them across its business operations. Furthermore, SK Square is committed to establishing an enterprise-wide climate risk management frame-work to systematically implement response measures. It also comprehensively considers external factors—including market conditions, policy and regulatory developments, and technological progress—to proactively manage risks and pursue strategies that maximize opportunities. By transparently disclosing related information, SK Square strives to strengthen stakeholder trust. At the same time, the company continuously enhances its disclosure practices by analyzing strategic climate responses and their potential financial impacts. Additionally, SK Square actively examines the effects on individual financial statement accounts and explores effective management approaches to address them.

Analysis of Risks and Opportunities

Risks

Transition Risks
		Policy & Regulation	Market
Risk/ Opportunity Factor		Strengthened global climate policies, certifications, and regulations Rising prices of GHGs and renewable energy Increase in legal actions by customers and investors	Change in customers’ behavior
Impact on SK Square		Increased financial burden due to policy shifts in regards to climate change response and higher renewable energy costs Decline in corporate and brand value due to litigation	Expanded pressure to transition of portfolio due to higher demand for eco-friendliness and sustainability
Potential Financial Impact		Increased operating costs from higher purchase cost of renewable energy Higher costs for regulatory compliance and environmental certification Increased legal costs for litigation response Financial losses from fines or compensation for damages	Increased cost in portfolio adjustment to respond to change in customers’ needs Reduced investment returns resulting from lower investor interest and corporate valuation decline due to non-compliance with environmental requirements
Time Horizon	Short -term	O
	Medium -term	O	O
	Long -term	O	O
Response Plan		Establish GHG reduction targets and implement 2040 Net-Zero roadmap Support ESG management system development for portfolio companies	Establish investment strategies centered on eco-friendliness and sustainability which reflects customers’ needs Assessment and support for improvement of subsidiaries' ESG management systems

Physical
		Acute	Chronic
Risk/ Opportunity Factor		Increasing frequency and intensity of extreme weather events (e.g., floods, droughts)	Long-term shifts in climate patterns(e.g., sea level rise, temperature changes)
Impact on SK Square		Disruption to business continuity due to damage to business sites caused by natural disasters Decline in asset value of portfolio companies located in areas vulnerable to extreme weather events	Decline in operational efficiency and asset damage due to climate change Increased threat to the supply of raw materials and decreased productivity at portfolio companies due to rising sea levels and temperature fluctuations
Potential Financial Impact		Increased recovery costs for facilities damaged by floods, storms, and droughts Reduced productivity and profitability due to business site and supply chain disruption, and deterioration of employee health	Increase in fixed costs due to the continued rise in facility operating expenses for cooling, insulation, etc
Time Horizon	Short -term	O
	Medium -term	O
	Long -term	O	O
Response Plan		Establish an environmental performance monitoring System Form and operate ESG implementation councils within subsidiaries Operate emergency response systems and conduct crisis response training Support damage mitigation measures	Review company-wide climate response strategies and strategic direction based on climate governance frameworks Establish an environmental performance monitoring System Strengthen communication through the establishment of ESG implementation councils at subsidiaries

		Transition Risks		Physical
		Policy & Regulation	Market	Acute	Chronic
Risk/ Opportunity Factor		Strengthened global climate policies, certifications, and regulations Rising prices of GHGs and renewable energy Increase in legal actions by customers and investors	Change in customers’ behavior	Increasing frequency and intensity of extreme weather events (e.g., floods, droughts)	Long-term shifts in climate patterns(e.g., sea level rise, temperature changes)
Impact on SK Square		Increased financial burden due to policy shifts in regards to climate change response and higher renewable energy costs Decline in corporate and brand value due to litigation	Expanded pressure to transition of portfolio due to higher demand for eco-friendliness and sustainability	Disruption to business continuity due to damage to business sites caused by natural disasters Decline in asset value of portfolio companies located in areas vulnerable to extreme weather events	Decline in operational efficiency and asset damage due to climate change Increased threat to the supply of raw materials and decreased productivity at portfolio companies due to rising sea levels and temperature fluctuations
Potential Financial Impact		Increased operating costs from higher purchase cost of renewable energy Higher costs for regulatory compliance and environmental certification Increased legal costs for litigation response Financial losses from fines or compensation for damages	Increased cost in portfolio adjustment to respond to change in customers’ needs Reduced investment returns resulting from lower investor interest and corporate valuation decline due to non-compliance with environmental requirements	Increased recovery costs for facilities damaged by floods, storms, and droughts Reduced productivity and profitability due to business site and supply chain disruption, and deterioration of employee health	Increase in fixed costs due to the continued rise in facility operating expenses for cooling, insulation, etc
Time Horizon	Short -term	O		O
	Medium -term	O	O	O
	Long -term	O	O	O	O
Response Plan		Establish GHG reduction targets and implement 2040 Net-Zero roadmap Support ESG management system development for portfolio companies	Establish investment strategies centered on eco-friendliness and sustainability which reflects customers’ needs Assessment and support for improvement of subsidiaries' ESG management systems	Establish an environmental performance monitoring System Form and operate ESG implementation councils within subsidiaries Operate emergency response systems and conduct crisis response training Support damage mitigation measures	Review company-wide climate response strategies and strategic direction based on climate governance frameworks Establish an environmental performance monitoring System Strengthen communication through the establishment of ESG implementation councils at subsidiaries

Opportunities

		Resource Efficiency	Products/Services
Risk/ Opportunity Factor		Operational optimization through improved energy and resource efficiency	Expansion of low-carbon products and services
Impact on SK Square		Enhancement of resource efficiency and long-term profitability of portfolio companies	Revenue growth among portfolio companies with low-carbon technologies
Potential Financial Impact		Reduction in operating costs such as fuel and maintenance expenses Improved energy and resource efficiency at portfolio companies, contributing to long-term investment returns	Profitability improvement through proactive investment and capability building in low-carbon technologies
Time Horizon	Short -term	O
	Medium -term	O	O
	Long -term	O	O
Response Plan		Implement direct reduction strategies through the transition to eco-friendly transportation (e.g., EVs)	Expand investment in eco-friendly business sectors, including K-Taxonomy-compliant areas Support portfolio companies in establishing and executing eco-friendly product and technology development strategies

		Resource Efficiency	Products/Services
Risk/ Opportunity Factor		Operational optimization through improved energy and resource efficiency	Expansion of low-carbon products and services
Impact on SK Square		Enhancement of resource efficiency and long-term profitability of portfolio companies	Revenue growth among portfolio companies with low-carbon technologies
Potential Financial Impact		Reduction in operating costs such as fuel and maintenance expenses Improved energy and resource efficiency at portfolio companies, contributing to long-term investment returns	Profitability improvement through proactive investment and capability building in low-carbon technologies
Time Horizon	Short -term	O
	Medium -term	O	O
	Long -term	O	O
Response Plan		Implement direct reduction strategies through the transition to eco-friendly transportation (e.g., EVs)	Expand investment in eco-friendly business sectors, including K-Taxonomy-compliant areas Support portfolio companies in establishing and executing eco-friendly product and technology development strategies

Implementation Roadmap

SK Square recognizes that Climate Change has a material impact on the long-term value of its portfolio and, as an investment-driven company, is pursuing dedicated response strategies. In the short term, the company will solidify the foundation for ESG management across its portfolio companies. In the medium to long term, it will systematically manage climate risks and explore new investment opportunities by linking data-driven performance management with investments in low-carbon technologies. These initiatives will strengthen the climate change response capabilities of its portfolio companies and further contribute to establishing SK Square’s sustainable investment ecosystem.

Business Impact
Short -term	Internalization of ESG risk management capabilities across portfolio companies Strengthening response to market and stakeholder demands related to Climate Change
Medium -term	Response to environmental regulations, including the carbon emissions trading system (ETS) Identification and management of carbon emissions across the investment portfolio
Long -term	Minimizing investment risk driven by the transition to a low-carbon economy Securing new growth engines based on eco-friendly technologies and increasing corporate value

Action plans
Short -term	Establishment and operation of an ESG management system across portfolio companies, including climate change response Supporting the Establishment and promotion of ESG management systems across major portfolio companies
Medium -term	Establishment of a monitoring system for environmental performance, such as GHG emissions, across portfolio companies Supporting the Calculation and verification of Scope 1, 2 GHG emissions for major portfolio companies
Long -term	Expansion of the eco-friendly portfolio, considering climate change factors

Category	Business Impact	Action plans
Short -term	Internalization of ESG risk management capabilities across portfolio companies Strengthening response to market and stakeholder demands related to Climate Change	Establishment and operation of an ESG management system across portfolio companies, including climate change response Supporting the Establishment and promotion of ESG management systems across major portfolio companies
Medium -term	Response to environmental regulations, including the carbon emissions trading system (ETS) Identification and management of carbon emissions across the investment portfolio	Establishment of a monitoring system for environmental performance, such as GHG emissions, across portfolio companies Supporting the Calculation and verification of Scope 1, 2 GHG emissions for major portfolio companies
Long -term	Minimizing investment risk driven by the transition to a low-carbon economy Securing new growth engines based on eco-friendly technologies and increasing corporate value	Expansion of the eco-friendly portfolio, considering climate change factors

Climate-related Risk
Management

SK Square classifies climate change as a key non-financial risk in the environmental domain and has established a top-level governance structure and dedicated support bodies for proactive response. Climate-related risks alongside other risk factors are incorporated into SK Square’s annual materiality assessment process, where priority risks are identified and subject to focused management. The Risk Management Council, led by a chief coordinator, shares climate-related risk issues across relevant departments and formulates appropriate response strategies. The Council also supports the ESG Committee in monitoring and managing climate risks. In addition, the Audit Committee under the Board of Directors regularly reviews key climate-related agenda items and implements risk monitoring activities to ensure enterprise-wide oversight.

Risk Management Process

Identify and assess climate change risks and opportunities
- Analyze climate change scenarios
- Identify climate change risks and opportunities
- Analyze their short/medium/long-term business and financial impacts
Assess climate change risks and opportunities
- Analyze short/medium/long-term business and financial impacts of risks and opportunities
- Evaluate the impact of managing risks and opportunities,
Respond to climate change risks and opportunities
- Develop strategies to respond to climate change risks and opportunities
- Develop and implement climate change response plans
- Monitor risks

Company-wide Climate Risk Management

SK Square has established a company-wide risk management and an execution system to systematically respond to the risks posed by climate change, enabling the impact of climate change to be managed in an integrated manner in its business activities. SK Square also actively communicates with internal and external stakeholders about potential risks and opportunities arising from climate change, and reflects various opinions in its management decisions. Recognizing the potential impact of climate change on its investment portfolio, SK Square plans to continue monitoring its impact and comprehensively managing climate-related risks and opportunities.

Sustainability