Mercedes Benz : TCFD Report 2022

TASK FORCE ON

CLIMATE-RELATED

FINANCIAL DISCLOSURE

(TCFD) REPORT 2022

Mercedes-Benz Group AG

Task Force on Climate-related Financial Disclosure (TCFD) Report 2022

MERCEDES-BENZ GROUP AG TCFD REFERENCE INDEX

Mercedes-Benz Group AG is one of the world's most successful automotive companies. With Mercedes-Benz AG, the Group is one of the leading global suppliers of premium and luxury cars and vans. Mercedes-Benz Mobility AG offers financing, leasing, car subscription and car rental, fleet management, digital services for charging and payment, insurance brokerage, as well as innovative mobility services.

The company is listed on the Frankfurt and Stuttgart stock exchanges (ticker symbol MBG). In 2022, the Group had a workforce of around 170,000 and sold

2.5 million vehicles. Group revenues amounted to €150.0 billion and Group EBIT to €20.5 billion.

TCFD Recommendations

Key element

Recommendation

Page

Governance	a) Describe the board's oversight of climate-related risks and opportunities
Disclose the organization's
­governance around climate-related	b) Describe management's role in assessing and managing climate-related risks and opportunities.
risks and opportunities.
Strategy	a) Describe the climate-related risks and opportunities the organization has identified over the
short, medium, and long term.
Disclose the actual and ­potential
impacts of climate-related	b) Describe the impact of climate-related risks and opportunities on the organization's businesses,
risks and opportunities on the
strategy, and financial planning.
­organization's businesses, strategy,
and financial planning where such	c) Describe the resilience of the organization's strategy, taking into consideration different
information is material.
climate­	-related scenarios, including a 2°C or lower scenario.

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Risk Management	a) Describe the organization's processes for identifying and assessing climate-related risks.	11

Disclose how the organization	b) Describe the organization's processes for managing climate-related risks.
identifies, assesses, and manages
climate-related risks.	c) Describe how processes for identifying, assessing, and managing climate-related risks are
	integrated­	into the organization's overall risk management.
Metrics & Targets	a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in
Disclose the metrics and ­targets	line with its strategy and risk management process.
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the
used to assess and manage
­relevant climate-related risks	related risks.
and opportunities where such	c) Describe the targets used by the organization to manage climate-related risks and opportunities
­information is material.	and performance against targets.

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All data in this TCFD report is as of, or for the year-ended December 31, 2022 unless otherwise noted. References to the CDP Climate Change Questionnaire are related to the 2022's version.

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Mercedes-Benz Group AG

Task Force on Climate-related Financial Disclosure (TCFD) Report 2022

Governance

Disclose the organization's governance­ around climate-related risks and opportunities.

1. Describe the board's oversight of climate-related risks and opportunities
   The Group's own governance structure consists of the Board of Management and the Supervisory Board and corresponds to the dual management structure required for a joint stock company under German law. The Board of Management manages the Mercedes-Benz Group, while the Supervisory Board monitors and advises the Board of Management. The two bodies work together very closely in the interests of the well-being of the Group.

The Supervisory Board's monitoring and advisory activities relate in particular to sustainability issues associated with the ESG dimensions (environmental, social and governance factors). At regular intervals, the Supervisory Board obtains reports from the Board of Management on the status of implementation of the integrated sustainable corporate strategy and also examines the risks and opportunities for the Company that result from social and environmental factors and, increasingly, the ecological and social effects of the Group's business activities.

It is therefore important that the Supervisory Board and its committees are adequately informed about the sustainability issues related to the environment, society or corporate governance (ESG). To ensure this, ESG topics are regularly addressed at the Supervisory Board meetings. ESG experts from different departments are consulted for this purpose. ESG-related topics were also discussed during the strategy meeting of the Supervisory Board. In addition, the members of the management and supervisory bodies regularly discuss the progress made in implementing the sustainable business strategy with the Advisory Board for Integrity and Sustainability. On the Supervisory Board, Dame Polly Courtice in particular contributes her extensive expertise in the area of sustainability at various points. Dr Martin Brudermüller, Ben van Beurden and Timotheus Höttges in particular contribute to the Supervisory Board their knowledge of and experience with environmental (E) issues. All

of them deal extensively with sustainability issues (in particular those relating to climate protection and

decarbonization)­at the companies in which they serve as chairman of the board of management.

The Supervisory Board also addresses sustainability reporting in the form of the Non-Financial Declaration in the Combined Management Report.

In the reporting year the Supervisory Board also dealt in detail with the ESG and sustainability issues relevant to Mercedes-Benz and their embedding in the compa- ny. The Board of Management reported on the ongoing integration of internal reporting, risk management and decision-making processes, compliance and integrity, and remuneration, among other things.

In its meeting in June 2022, the Audit Committee of the Supervisory Board discussed aspects of the risk management system and particularly addressed the further integration of ESG topics and the accompanying training measures to increase ESG awareness. Methods, processes and adjustments to the internal control system were also discussed. With regard to the compliance management system, methods for more extensive integration of social compliance aspects were presented, among other things. The meeting also focused on the report on ESG and sustainability reporting activities, including the requirements of the EU taxonomy and the measures taken to ensure these requirements are met.

References:

CDP Climate Change Questionnaire: C1.1b Annual Report 2022 p. 15, 165, 175, 186ff (qualification matrix of the Supervisory Board) Sustainability Report 2022 p. 25f

1. Describe management's role in assessing and
   managing­ climate-related risks and opportunities. The Group Sustainability Board (GSB) is the central management body for all sustainability topics and re- ports to the Board of Management.

The GSB is chaired jointly by Renata Jungo Brüngger (the Board of Management member responsible for Integrity and Legal Affairs) and Markus Schäfer (the Board of Management member responsible for Development and Procurement, who is also the Chief Technology Officer). The Chairman of the Board of Management and all other Board of Management members, as well as the managers of all relevant functions and departments, are

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Mercedes-Benz Group AG

Task Force on Climate-related Financial Disclosure (TCFD) Report 2022

members of the GSB - for example Finance, Investor Relations, External Affairs, Marketing & Communications and Human Resources.

The management processes with cross-divisional and functional relevance in relation to sustainability are covered by this governance structure in order to regularly review and improve the Mercedes-Benz Group's performance.

The GSB decides on relevant sustainability issues and assigns tasks to the respective areas of responsibility. The GSB regularly submits progress reports and proposals for decisions to the Board of Management regarding the action fields included in the Group's sustainable business strategy.

The Board of Management of the Mercedes-Benz Group AG is responsible for setting strategic goals, including targets for reducing the CO2 emissions, and for monitoring the progress made in achieving these goals.

The Product Steering Board (PSB) is responsible for monitoring the development of the CO2 emissions of the car fleet in markets in which such emissions are regulated. It is also responsible for providing forecasts. In its evaluations, the PSB takes into account a variety of factors, including the increasing degree of vehicle electrification and the changes that have been made to legal requirements, for example those related to the introduction of the WLTP certification procedure. The PSB is assigned to the Committee for Model Policy and Product Planning (AMP).

The Product Strategy unit ensures compliance with the CO2 fleet emission limits for vans and reports on this regularly to the Van Executive Committee.

The Committee for Model Policy and Product Planning and the Van Executive Committee both inform the Board of Management of Mercedes-Benz Group AG.

The Board of Management then decides which measures need to be implemented. On the market side of the equa- tion, price and volume control measures can also affect our ability to achieve our CO2 targets over the short term. For this reason, such measures are also discussed with the Board of Management within the framework of regular reporting on the current state of CO2 fleet compliance.

The responsibility for ensuring that the climate protection targets are implemented is distributed across several corporate units and Board of Management mem- bers: the development units of the vehicle divisions are responsible at the vehicle level.

For cars and vans, these are the "Drive Systems Product Group" development unit, the product groups of the vehicles and Mercedes-Benz Vans Development.

In each current year, the sales unit manages the achievement of the CO2 target.

At the level of the production plants and the company's own-retail outlets, the respective Board of Management member for Mercedes-Benz Cars and Mercedes-Benz Vans is responsible.

Mercedes-Benz Group AG monitors the implementation at Group management level.

References:

CDP Climate Change Questionnaire: C1.2 / C1.2a

Annual Report 2022 p. 86, 90

Sustainability Report 2022 p. 26, 94

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Mercedes-Benz Group AG

Task Force on Climate-related Financial Disclosure (TCFD) Report 2022

Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning where such information is material.

1. Describe the climate-related risks and
   opportunities­the organization has identified over the short, medium, and long term.
   The Mercedes-Benz Group is exposed to a large number of risks that are directly linked with the business activi- ties of Mercedes-Benz Group AG and its subsidiaries or that result from external influences. The Group under- stands a risk as the danger that events, developments or actions will prevent the Group or one of its segments from achieving its targets. This includes monetary and non-monetary risks. At the same time, it is important to identify opportunities in order to safeguard and enhance the competitiveness of the Mercedes-Benz Group. The Group defines an opportunity as the possi- bility, due to events, developments or actions, of safe- guarding or surpassing the planned targets of the Group or of a segment.

In order to identify business risks and opportunities at an early stage and to assess and manage them actively, the Board of Management applies appropriate and effective management and control systems, which have been brought together in an overall risk and opportunity management system. Risks and opportunities are not offset.

In identifying sustainability-related risks and opportu- nities, Mercedes-Benz Group AG is guided by the topics identified by the materiality analysis and thus includes the areas of action of the sustainable business strategy, for which concrete goals have been assigned. Sustainability-related risks and opportunities are understood to be conditions, events or developments involving environmental, social or governance factors (ESG), the occurrence of which may have an actual or potential impact on the Mercedes-Benz Group's profitability, cash flows and financial position, as well as on its reputation. ESG-related risks associated with business activities, business relationships and products and services, and which are very likely to have a serious negative impact on non-financial ­aspects in

accordance with Section 289c of the German Commercial Code (HGB), are not currently apparent.

Sustainability aspects - as they relate to the environment - include, among other things, the effects of climate conditions and changes, as well as the impact of the Group's transformation process as a result of changed political conditions, technological developments and changing markets.

Climate-related risks and opportunities in connection with the recommendations of the Task Force on Climate -related Financial Disclosures (TCFD) are part of the environment area and are thus also identified and assessed as part of the risk management process.

General market risks and opportunities

A lower-than-expected market acceptance of electric vehicles can lead to risks in the development of unit sales and have a negative impact on earnings. This could also endanger the achievement of specific CO2 targets.

The discontinuation or reduction of government subsidies for electric vehicles can also negatively affect their pricing and cut profit margins.

Risks and opportunities relating to the legal and political framework

Legal limits on the fuel consumption and/or CO2 emissions of car fleets exist in many markets, although the target values differ from market to market. Non-compliance with regulations applicable in the various markets might result in significant penalties and reputational harm, and might even mean that vehicles with conventional drive systems could not or could no longer be registered in the relevant markets. The Mercedes-Benz Group counteracts these risks through the transformation towards electric mobility and the associated realignment of its products.

Mercedes-Benz Cars and Mercedes-Benz Vans face the described risks with respect to regulations concerning mandatory targets for the average fleet fuel consumption and CO2 emissions of new vehicles especially in the markets of China, Europe and the United States. The Mercedes-Benz Group gives these targets due consideration in its product and sales planning. We assume that the ambitious statutory targets can be met. In some

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