Ecopetrol S A : Task Force on Climate-Related Financial Disclosures (TCFD)

TCFD report

2020

2020

Ecopetrol's TCFD report

Felipe Bayón

CEO Ecopetrol

As part of our commitment to achieve net zero carbon emissions for scopes 1 and 2 by 2050 and to adapt to the energy transition, Ecopetrol1 analyzed the recommendations issued by

the Financial Stability Board's Task Force on Climate-Related Financial Disclosures (TCFD) and presents, for the first time, a report aimed at aligning the company´s disclosures with their guidelines. We acknowledge the impact of climate change and our commitment to the Paris Agreement, particularly on the sustainability of our operations, and the increasing interest of our investors and other stakeholders on this matter. This report seeks to provide transparency on how we are advancing in the understanding, governance and management of climate-related risks and opportunities.

Ecopetrol has a long-standing commitment to contribute to the economic, social, and environmental development of the regions where it operates. Our behavior and performance are underpinned by a solid corporate governance and a business conduct based on values and ethical principles, with transparency at its core. The company has strengthened the disclosure of environmental, social and governance

(ESG) issues following international standards including, the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), Dow Jones Sustainability Index (DJSI), World Economic Forum Stakeholder Capitalism Metrics (WEF's SCM) and CDP. We have also made specific commitments, such as joining the World Bank's initiative of Zero Routine Flaring by 2030 and the Oil and Gas Methane Partnership (OGMP), as part of the UN-led Climate and Clean Air Coalition (CCAC). In 2020 we advanced in our TESG strategy (Technology + ESG), to define how we currently do businesses, levered by technology to accelerate and escalate innovative solutions to current and future environmental, social, economic and governance challenges.

The unprecedented conditions experienced in 2020 tested the strength and resilience of Ecopetrol. Its Corporate Governance Model proved to be sufficiently robust and efficient to support the operation and the timely decision- making required during the crisis. To address the crisis resulting from the COVID-19 pandemic and the abrupt decline in oil prices, the Board of Directors and Senior Management of the company, following corporate governance best practices, made a series of decisions required to maintain resilience and competitiveness, strengthen the corporate culture, innovate in the company's operations, adopt the TESG strategy, and continue the path towards the energy transition, in the midst of the pandemic.

The Board of Directors continues to fulfill its role of guiding the corporate strategy so that Ecopetrol endures over time creating sustainable value for its stakeholders whilst securing a leading position in the energy transition. As part of our decarbonization plan in 2021 we announced our ambitious decarbonization targets, which contribute to the updated Colombia's Nationally Determined Contributions (NDC) to reduce 51% of greenhouse gas (GHG) emissions by 2030. The new targets imply that Ecopetrol will reduce

1 For the purpose of this report and unless the context otherwise requires, the terms "Ecopetrol", "we", "us", "our", "Ecopetrol Group", or the "Company" are used here to refer to Ecopetrol S.A. and its subsidiaries on a consolidated basis. The GHG emissions related data covers only Ecopetrol S.A, Refinería de Cartagena, and Cenit, however the 2019 baseline calculations include the emissions from all subsidiaries.

emissions by 25% in 2030 and will have net zero carbon emissions by 2050 for scopes 1 and 2. In terms of total emissions (scopes 1, 2 and 3), we plan a 50% reduction by 2050, compared to a 2019 baseline.

The implementation of the decarbonization roadmap has already yielded positive results. Ecopetrol has achieved a cumulative reduction of 8.4 million tons of CO2e from 2010 to 2020, by implementing programs to reduce fugitive emissions and venting, decrease gas flaring (52% since 2017), increase energy efficiency

in its operations and the development of renewable energy projects to meet its own energy consumption.

In the short and medium term (2020-2030), Ecopetrol will start to implement hydrogen and CCUS pilots. The expectation is to increase the company´s delivery in all of these fronts, including the incorporation of biomass initiatives and the development of solar, wind and geothermal energy projects. It also includes the implementation of a robust portfolio of Natural Climate Solutions (NCS) to compensate residual emissions. In the long term (2030-2050), Ecopetrol plans to gradually escalate initiatives related to hydrogen and carbon capture, utilization, and storage (CCUS)2, as well as to store renewable sources of energy in batteries at scale, among other emergent technologies, as they become competitive.

In this report we discuss the involvement and oversight of the Board of Directors on climate- related and other TESG issues, as well as the role of management in assessing and managing risks and opportunities. We describe Ecopetrol's TESG strategy and decarbonization roadmap to face the energy transition, the processes to identify risks and opportunities, the Integrated Risk

Management System and the metrics and targets used to measure performance and track progress over time.

We also summarize different elements required to respond to the disclosures in the Taskforce's recommendations, by referencing and extracting information from already published reports (2020 Integrated Sustainable Management Report, Form 20-F presented to the Securities and Exchange Commission (SEC), SASB metrics report, and other publicly available information on Ecopetrol's website) and by presenting the latest developments that have not been disclosed yet but will become the basis for the Corporate Strategy currently in review.

By adopting the TCFD recommendations and while preparing this report, we acknowledge that this is a multi-year journey and, to this end, we have conducted an internal gap analysis to improve our disclosure in the upcoming years, as our intention is to continue publishing

this report annually. We remain committed to increasing and aligning our disclosure to international standards and best practices; hence we maintain an ongoing dialogue with our stakeholders and we are open to receive feedback.

Felipe Bayón

CEO Ecopetrol

2 CCUS refers to a suite of technologies that involves the capture of CO2 from large point sources, including power generation or industrial facilities that use either fossil fuels or biomass for fuel. Source: The International Energy Agency (IEA)

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Governance	06 Strategy	15

1. Board's oversight of climate-related risks and opportunities ................................
2. Management's role in assessing and managing climate-related risks and opportunities .....................................................

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11

1. Climate-relatedrisks and opportunities .....................................................
2. Impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning ................................................................
3. Scenario analysis ............................................

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LBATE OF TNOCENTS

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Risk		Metrics
Management	27	and Targets	33
3.1 Integrated Risk Management	28		4.1 Ecopetrol's climate related	34
System ..................................................................		targets ...................................................
3.2 Inclusion of climate related risks in	29		4.2 Metrics to assess climate-related	36
the business risk map ...................................		risks and opportunities ............................

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TCFD

table of contents 39