Sustainability Report 2021

Internal Carbon Price Our climate change aspirations and targets, to achieve carbon neutrality across our operations and activities by 2035, is consistent with the goals of the Paris Agreement and our Company strategy. However, we recognise that mechanisms can be adopted to increase the pace of decarbonisation. During FY21, we completed a program of work to implement an Internal Carbon Price (ICP) to better understand the actual cost of emissions, price operational emissions, charge an internal carbon fee, and drive our decision making on low carbon investments. The ICP allows us to target decarbonisation projects where the most cost-effective impact can be achieved first. By dynamically pricing carbon with forward projections, we can incentivise change and investment in low emissions options. The ICP also allows for appropriate risk mitigation of rapid and unexpected regulatory change and policy, although this risk perspective was not the main purpose or driver of the implementation of an ICP. We have differentiated between a shadow carbon price and an internal carbon price. Our ICP will price our Scope 1 and 2 emissions, creating a centralised decarbonisation fund that will be used to fund projects that will reduce our total carbon footprint. The shadow carbon price is a mechanism used for merger and acquisition investments or major capital projects, ensuring investment decisions reflect all costs, including the costs of emissions. The two mechanisms are priced differently, reflecting their different purposes. Internal carbon price A$60/t CO 2 -e in FY22 Price Scope 1 and 2 emissions and establish a centralised decarbonisation fund to help finance emission reduction projects and execute our carbon neutral strategy Shadow carbon price Market spot price Inform strategic decisions showing carbon price implications and climate- related risks for M&A and major capital projects SETTING AN APPROPRIATE INTERNAL CARBON PRICE Understanding the right ICP is complex and unique for each Company. The carbon price should reflect current and future national and international climate change policies, the Company’s strategy, and risk appetite. There is not a universal carbon price fit for every company, rather a unique best-price for each business, at a given point in time, to achieve particular purposes. For IGO, our purpose is to incentivise emission reduction opportunities and decarbonise our business. At its core, IGO’s carbon price represents our ambition to address climate change. It is not a risk mitigation exercise, rather an opportunity to accelerate decarbonisation across our total carbon footprint and demonstrate leadership in this space. Three pricing principles were developed to set an appropriate ICP. We set a price that is: • materially impactful to IGO’s investment decisions and high enough to accelerate decarbonisation • comparable with international peers and leaders, ensuring our carbon price meets stakeholder expectations; and • anticipating changes in carbon policy, both nationally and internationally, to ensure we are prepared for rapid, unexpected regulatory changes. For FY22, IGO’s ICP is A$60/t CO 2 -e. The price will be reviewed every financial year. IGO’s shadow carbon price is based on the market and spot carbon price. ESTABLISHING A CENTRALISED DECARBONISATION FUND Through our internal carbon pricing mechanism, we will establish a central decarbonisation fund. The decarbonisation fund is expected to allocate approximately A$2-4M of funds during FY22. Funds allocated by the IGO ICP will be used to: • implement strategic decarbonisation projects at our Nova Operation, as described on page 61 • invest in carbon removal and offset projects • accelerate our understanding of supply chain and Scope 3 emissions • invest in research and development; and • trial emerging technology and pilot projects. The introduction of an ICP and establishing a centralised decarbonisation fund demonstrates IGO’s commitment to accelerate our response on climate change. We feel that this approach will be pivotal to our success. Our Response to Climate Change 62 —IGO SUSTAINABILITY REPORT 2021