ERG S p A : 30 Mar 2021 ERG S.p.A. - Consolidated Non-Financial Statement drawn up pursuant to Italian Legislative Decree 254/2016 at 31 December 2020 - Courtesy Translation

Consolidated Non-Financial Statement

2020

drawn up pursuant to Italian Leg. Decree 254/2016

We are #SDGsContributors

Courtesy translation

Contents

Letter to stakeholders 4

Our history: 1938-2020 6

ERG in 2020 7

I principali indicatori economici e di sostenibilità 10

ERG's responses to the health emergency 12

The governance of sustainability 14

2018- 2022 ESG Plan 16

Methodological note 21

1

Planet

Context 24

Gradual decarbonisation of our production portfolio 25

Energy efficiency 28

Building while respecting the environment 32

Towards increasingly circular waste management 33

Managing and minimising water use 34

2

Engagement

Context 36

Dialogue with our stakeholders 37

ERG and its institutional stakeholders 37

ERG and international relations 40

Strengthening our engagement with Local Communities 42

Investor relations and financial communication 44

Communication activities to boost ERG's reputation 45

3

People

Context 47

People governance 47

Human capital management and development performance & 48

rewarding 50

The search for new talent 53

Diversity & inclusion 56

Internal communications 56

Industrial relations 58

Leadership in safety 59

Health and safety for our communities 61

4

Governance

ERG's context and values Governance

Anti-corruption: the group's commitment to ethical integrity Privacy: development and training

Cybersecurity

Internal control and risk management system Enterprise risk management

Climate change risk management

Risk management activities during the scope of the nfs topics The tax control framework for formalising a tax approach Supplier management

63

63

69

71

71

72

73

75

76

78

79

The Edoardo Garrone Foundation

82

DATA AND INDICATORS

AUDIT REPORT

GRI CONTENT INDEX

85 104 109

4

LETTER TO SHAREHOLDERS AND STAKEHOLDERS

Dear shareholders, dear stakeholders,

2020 marks a watershed for humanity. The pandemic and the ensuing economic crisis have confronted us with unprecedented challenges, forcing us to rethink our way of life and reinforcing the urgency of issues such as the planet's social and economic development, human well-being and environmental protection. These are all issues whose importance was already addressed by the 17 Sustainable Development Goals established by the United Nations in 2015.

The past year was also characterised by an ongoing and intensifying focus on Environmental, Social, and Governance (ESG) issues. Businesses play a primary role in this context. In addition to pursuing concrete objectives in terms of sustainability, they must comply with increasingly stringent and challenging standards in terms of transparency of and access to information, aspects that currently determine their competitiveness and their appeal to the financial markets, which are increasingly focused on how and to what extent ESG factors are included in corporate development plans. Meeting such objectives is an even more demanding undertaking for businesses in the energy sector for which the spread of power generation from renewable sources has become the driving force in the fight against climate change.

ERG is a leader in this energy transition, through the development of its renewable energy portfolio, and has based its business model on the concept of social responsibility, on the relationship of trust built over time with all stakeholders and on the ability to create shared value, focusing on environmental, social, and governance issues.

Even during the most critical phases of the pandemic crisis, by carefully and effectively managing our operations and logistics, while complying with the highest occupational health and safety standards, we were able to maintain the continuity of an essential service such as the supply of electricity. Our investments over the past few years in digital technology have enabled us to resort to remote working extensively both in Italy and abroad. In reaffirming ERG's Investment Grade rating, the Fitch rating agency highlighted our ability to manage the impact of the Covid-19 pandemic as a distinctive factor.

ERG allocated EUR 2 million to support local communities where its production sites are located that have been affected by the health emergency and, on a proposal from our internal SocialPartners, the Group's employees donated a total of 2,300 hours of their work. San Quirico S.p.A., the Company's controlling shareholder, allocated also EUR 1 million to Genoa's front-line hospitals engaged in the healthcare emergency.

In 2020, the pandemic led to a significant overall drop in demand for electricity in all reference markets, and prices fell significantly in all the countries in which we operate. This negative backdrop was further worsened by wind and water conditions in Italy that were well below historical averages. Although expected, the year's results were also affected by the gradual withdrawal from the cogeneration regime of our CCGT plant in Priolo.

The Company was able to react with great determination and effectiveness, implementing the appropriate countermeasures: scenario risk hedging operations, a significant reduction in the cost of debt by issuing a new Green Bond and concurrent liability management operations, as well as substantial cost-cutting actions.

Despite the obstacles caused by excessively long and complex authorisation procedures, intensified by the health emergency, in 2020 our growth path in renewable energy continued, albeit with some delays compared to Plan forecasts. We reached 336 MW of wind capacity under construction or ready to build across the UK, France and Poland. In Germany, we entered into a co-development agreement for 600 MW in photovoltaic sector: another major step forward in our portfolio's technological and geographical diversification. The acquisition of 3 wind farms in France increased our installed capacity in the country to around 400 MW. The Framework Agreements signed with Vestas and Enercon for the supply of wind turbines for repowering and greenfield projects in France and UK ensured the coverage of our development plan at competitive conditions and with latest generation technologies.

2020 net income rose to EUR 106 million (EUR 104 million in 2019) while EBITDA declined slightly to EUR 481 million (EUR 504 million in 2019), within the guidance range. We invested EUR 156 million in 2020 (EUR 432 million in 2019).

The adjusted net financial indebtedness as at 31 December 2020 was EUR 1,439 million, down compared to the EUR 1,476 million as at 31 December 2019. The change mainly reflects the investments in the year (EUR 156 million), the distribution of dividends (EUR 115 million) and the payment of taxes (EUR 25 million), more than offset by the positive cash flows (EUR 392 million). The Board of Directors will propose to the Shareholders'