Sustainability Report 2021

Scenario Analysis The pace and shape of global decarbonisation remains highly uncertain, which is why we consider a range of scenarios capturing potential transition pathways. In FY20, we furthered our risk and opportunity assessment by testing the resilience of our portfolio, strategies and financial planning approach under fit-for-purpose, forward-looking climate change scenarios. Publicly available scenarios, including those published by the IEA (International Energy Agency) and IPCC (Intergovernmental Panel on Climate Change), generally indicate transition related impacts diverging between scenarios from 2030 onwards, and physical impacts diverging from 2040 onwards. These are longer timeframes than the estimated remaining mine life for our Nova asset, notwithstanding the potential for additional regional discoveries. In light of these practical considerations, we focused our scenario analysis largely on planned strategic exploration and acquisition activities in the medium to long-term. Near-term impacts for our Nova Operation is considered in our base case risk and opportunity management activities as listed in the previous table, with the exception of carbon price impacts as detailed under the 2°C scenario discussion. The following sections describe the scenarios considered and key insights and outcomes. GLOBAL ENERGY TRANSFORMATION (2°C) SCENARIO Under this scenario, the world rapidly and collaboratively decarbonises to limit global temperature rises to well below 2°C and avoid the most extreme physical impacts of climate change. The global energy system is transformed through large-scale investment on both supply and demand- side infrastructure, including energy efficiency, electrification of transport and industrial sectors (both expected to substantially increase copper demand in wiring and motors), renewable power generation and battery storage. Higher uptake of electric vehicles also leads to increased demand for battery materials (including nickel and cobalt) more than doubling compared to current policy- based outlooks. Carbon pricing is widely applied, rising from A$100/t in 2030 to A$140/t from 2040 in advanced economies, while fossil fuel subsidies are gradually removed by 2050. Consumer preferences are strongly aligned with clean energy and low- carbon technologies. References: International Energy Agency – World Energy Outlook, Sustainable Development Scenario (November 2019); Energy Technology Perspectives Scenario (2017) and Global EV Outlook 2020; Nickel Institute – Energy Transition: Nickel helping to combat climate change (2018); Copper Alliance - Copper’s contribution to a low-carbon future (2014) IGO Insights and outcomes • Our active prioritisation of nickel and copper exploration and discovery is expected to drive upside performance for the business under this scenario, noting that the timing and scale of results of exploration activities are inherently uncertain. Recent commercial agreements finalised for our Nova Operation were on materially improved terms compared to the preceding contracts, indicating early benefits from this demand growth. • Our recent transaction with Tianqi is also aligned with the global energy system transformation and demand for lithium in electric vehicles and battery storage under this scenario. • Our growth strategy for the IGO portfolio is based on partnering, acquisition and divestment of advanced assets aligned with the Company strategy. This is supported by an internal process to evaluate and prioritise target commodities for the business in addition to nickel and copper. Our currently identified preferred target commodities were reviewed against the trends described by this scenario and found to be well-aligned for the timeframes under consideration. • Carbon pricing and other climate- related legislation will form a material consideration in our future development and acquisition decisions, noting that the location and scale of our operating portfolio will be subject to the outcomes of IGO’s active exploration activities and growth plans. We have implemented a carbon price forecast, including both high and low-side scenarios, to improve the resilience of our decision-making in this context. We will incorporate our internal carbon pricing mechanisms in FY22. • To stress test financial margins at Nova should a disruptive regulatory shift take place at the federal or state level in the near-term, the following quantitative analysis was completed: – current diesel fuel tax credits applicable to heavy vehicle use were removed from cash flow models; and – an effective carbon price of approximately A$16/t CO 2 -e was applied to Scope 1 emissions based on the most recent Australian Carbon Credit Unit (ACCU) auction price, applied to 100% of Nova Operation emissions. This analysis found that impacts on operating margins, though notable, would remain below 5% for the Nova Operation, even in extreme cases. EXTREME CLIMATE CHANGE (4°C) SCENARIO In this scenario, stalled policy development and reduced investment in renewable energy and low-carbon technologies result in extreme global temperature rises to 4°C by the end of the century and greatly increased physical impacts from climate change. This includes increased severity and frequency of extreme weather events as well as increases in surface temperature, sea level rise and other chronic impacts. Proactive action on climate change and coordination of policies, such as carbon pricing and investment in new low emission technologies, has fallen well short of stated ambitions and the energy transition unfolds at a slower pace. References: International Energy Agency – World Energy Outlook, Stated Policies Scenario (November 2019); Intergovernmental Panel on Climate Change Representative Concentration Pathway 6.0 and 8.5 scenarios IGO Insights and outcomes Resilience of our business under this scenario will depend on the specific locations of future operations, including local infrastructure and supply chains. As such, we are currently reviewing options to: • ensure stress testing against physical climate change risks is appropriately considered in our planning for potential expansions to existing operations; and • integrate physical climate change risks into our screening processes for potential new developments and acquisitions. We also note that our current focus on commodities critical to clean energy will not be aligned with this scenario, however, this is not a priority for resilience planning at this time. IGO SUSTAINABILITY REPORT 2021— 69