Novartis : ESG Update - April 28, 2021 (PDF 0.3 MB)

Q1 2021 ESG Update for investors and analysts

April 28, 2021

Dear investors and analysts,

I hope you and your families continue to stay healthy.

In our Q1 ESG update, we summarize our progress on environmental sustainability and include our recent commitments addressing climate change risk, in the run-up to COP 26 later this year. This quarter Sustainalytics, Bloomberg and the influential access-related rating, the Access to Medicine Index have recognised our progress on ESG matters.

We are grateful for your continued engagement on ESG-related topics. We include your 'Top 10 ESG Questions' from the quarter with our corresponding responses.

We hope this update is of interest and we value your feedback. Thank you.

Novartis commitment to environmental sustainability

Our approach to climate risk and impact

Environmental sustainability is fully aligned with our purpose to reimagine medicine to improve and extend people's lives. Our goals include full carbon, plastic and water neutrality by 2030 and we are committed to disclosing our progress in line with TCFD (Taskforce on Climate- related Financial Disclosures).

Environment targets

• Become carbon neutral in our own operations (Scope 1 and 2) and include environmental criteria in all supplier contracts by 2025.
• Achieve full carbon neutrality across the value chain (Scope 1, 2, and 3) by 2030
• Reduce water consumption in our operations by half by 2025 (vs. 2016), with no water quality impacts from the manufacturing of our products
• Be water neutral in all areas of our operations by 2030 while enhancing water quality wherever we operate
• Eliminate polyvinyl chloride in packaging (secondary and tertiary packaging; primary packaging when feasible) by 2025
• Reduce the amount of waste sent for disposal by half by 2025 (vs. 2016)
• Be plastic neutral by 2030, with all new products meeting sustainable design principles

While the pharma sector is not primarily responsible for high carbon emissions, our ambition is to ensure that Novartis is energy and climate resilient for the future and to lower our global environmental footprint. We believe that this is the right thing to do.

We consider that our environmental responsibility does not simply end with setting ambitious targets and achieving them. Our challenge is to tackle scope 1, 2 emissions with scope 3 posing the biggest long-term hurdle, as it accounts for over 80% of our total emissions (as with most pharma companies).

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To tackle our scope 1, 2 emissions, our first priority is to reduce the demand for energy in our operations by implementing new technologies and processes. For the remaining demand which can't be further reduced, we are implementing solutions that guarantee green energy and shifting to clean energy sources, where available.

To actively manage our scope 3 emissions, we have defined contractual requirements for third parties and collaboration with preferred suppliers. We are working with our manufacturing suppliers in transmitting our experience and expertise, where we have similar products and processes and implementing the same improvement principles.

We report on the current status of our environmental efforts versus targets. Our performance indicators can be found here.

While providing access to healthcare globally is where we can have the most impact, we also recognize the role that we play in tackling climate change.

As a leading healthcare company, Novartis is acutely aware of the impact that climate change will have on human health and changing disease patterns. These include vector-borne diseases such as Dengue, Malaria and Chagas which have experienced a global increase

due to warming weather patterns.

We have a broader responsibility to respond to the increasing risks of climate change on global healthcare and to ensure that we can serve the shifting unmet needs in medicine. For further details, please see our Novartis in Society 2020 report.

Novartis Q1 climate commitments

Novartis has joined the Climate Group EV 100, in line with our ambition to achieving carbon neutrality by 2030. As we continue our journey on environmental sustainability, we aim to accelerate the adoption of electric vehicles by 2025, transitioning away from internal combustion engines.

We have also joined the RE 100 Initiative, to help accelerate our shift to renewable energy solutions for a zero-carbon future. The RE 100 Initiative is made up of 300 of the world's leading businesses committed to 100% renewable electricity and delivering market change. Novartis' path to carbon neutrality includes a strong commitment to energy efficiency and renewable energy solutions.

Update on AGM 2021

March 2021

AGM

Our 2021 Annual General Meeting (AGM) was held on 2 March 2021.

Shareholders agreed to the Board's recommendations for all proposed resolutions. Shareholders had the opportunity to send their questions to the Board electronically

in advance via our 'Virtual Speakers Desk', with all questions addressed by the Chairman and the CEO during the AGM.

Shareholders re-elected Dr. Joerg Reinhardt as Chairman of the Board, and all members of the Board who stood for re-election, for one year. Shareholders approved the 24th consecutive dividend since the creation of Novartis in 1996, with an increase of 1.7% to CHF 3.00 per share.

Shareholders approved the proposed amendment for 12-yearlimits for future re-electionsof Board Members, which replaces the age limit of 70 years. For a detailed listing of all resolutions at the 2021 AGM, please see here.

Audit Tender Process: Following a fair, transparent and balanced tender process, the ACC plans to propose to the shareholders at the 2022 AGM the election of KPMG AG as the new external auditor commencing for the 2022 financial year.

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Additionally, Novartis introduced a new Lead Independent Director role in January 2021 to support adequate control mechanisms from a board perspective and ensure clarity when needed.

Reflections on Q1

ESG Ratings upgrade for Novartis

ESG momentum continues, following our recent Access to Medicines Index No.2 ranking (details here).

Sustainalytics, a leading ESG Ratings provider, ranked Novartis 1st in the Pharmaceuticals sub-industrycategory and amongst peers with a similar market cap. Sustainalytics has assessed Novartis to be the only company amongst peers to be 'Low Risk' in 2021, improving from 'Medium Risk' in 2020 and upgraded our overall score to 16.9 from 20.5 in 2020. Additionally, our negative controversy score has been downgraded to 'level 3' with neutral or positive outlook. Novartis was recognized for its significant improvement on metrics related to scope of social supplier standards, renewable energy use and our clinical trial program, amongst others.

Novartis	In January 2021, Novartis was included again in the 2021 Bloomberg Gender-EqualityIndex.
recognized	380 companies are recognised, and Novartis is one out of four large pharma companies. This
for its gender	index recognizes companies that achieve the highest standards in the measurement of
inclusion	inclusion, such as female empowerment and gender pay parity across 44 countries and regions.
efforts	Novartis was also recently ranked #36 on the Equileap top 100 list for gender equality and
	achieved 3rd rank among the largest pharma companies. Equileap's criteria included policies on
	gender balance, pay gap, parental leave and workplace harassment.

Novartis expands on its commitment to sickle cell disease

Novartis announced its collaboration with the Bill & Melinda Gates Foundation to address disparity in access to treatments and prioritize low-resource populations that bear the greatest burden of sickle cell disease (SCD). The partnership brings together Novartis drug discovery and gene therapy expertise and funding support from the Gates Foundation to develop a single-administrationin vivo gene therapy to cure SCD.

SCD is a hereditary blood disease, which disproportionately affects people of African descent and Sub-Saharan Africa bears roughly 80% of the disease burden. It is also common among people with ancestry from South and Central America, India and several Mediterranean countries.

ESG Integration

One of the top questions asked by our stakeholders is how Novartis integrates ESG across its operations. We have incorporated our ESG objectives fully across our business and functions. Below are some select initiatives that form our ESG targets and long-term objectives. Further on, please see how we integrate our water ambition into the overall life cycle management.

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ESG Integrated across Novartis structure and entire spectrum

World Water Day

In recognition of World Water Day on 22 March, Novartis inaugurated an integrated watershed development project to help address water scarcity in the Telangana region of India, one of the world's most water-stressed countries. The project was managed jointly with India's National Agro Foundation and supports the Novartis 2030 water neutrality target through water conservation and efficient water utilization. The project is expected to generate 50,000 cubic meters of 'harvested' rainwater, which is the equivalent of the volume of water used in 1.4 million showers.

In addition to the watershed project, Novartis is supporting the State of Telangana's efforts to revitalize the Musi river, a vital water source to the Hyderabad area, which has been impacted by poor water management practices.

More information on our water management programs can be found here.

Novartis aims to be water neutral in all areas of our operations by 2030. Our efforts on water stewardship have been recognized by the CDP Water A list for the past two consecutive years. We have a comprehensive water strategy in place, which integrates 'responsible use' in our operations.

Water stewardship at every stage of the product life cycle

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Looking ahead: Q2 ESG Events, US Diversity & Inclusion and Materiality Survey

Materiality	The Novartis Materiality Assessment (MA) is still ongoing and you can contribute to our ESG
Assessment	journey. Our MA takes place every four years to gather views from a range of external and
	internal stakeholders. Your inputs will help guide our strategic priorities and establish meaningful
	metrics for the long-term, to meet the expectations of all our stakeholders and society at large.
	Click here to fill in our online survey. The survey takes approximately 20 minutes to complete
	and is available in seven languages. Please note that the survey closes on 3 May 2021.

US Diversity

• Inclusion disclosure

We have recently published our Novartis in Society US Report, which can be found here.

As part of our ongoing commitment to Diversity & Inclusion and in the interest of transparency, we aim to publicly disclose our consolidated US EEO-1 information following its submission to the US Equal Employment Opportunity Commission in April 2021. This is a government- required submission filed by all companies with 50 or more employees in the US, that provides demographic information related to gender, race and ethnicity of a company's US population.

Novartis in Society Report physical copies

Novartis published its annual ESG report on 26 January, which reflects our disclosure against GRI, SASB and SDGS and shares our progress on ESG priorities over the past year.

The report can be found here. If you would like to receive a physical copy of the report, please email [e-mail].

Upcoming	Our Investor Relations team is planning our virtual 2021 ESG Roadshows, planned for May
ESG Events	2021. The ESG roadshows will cover relevant topics for our stakeholders in Europe, North
	America and Asia. If you would like to participate, please email [e-mail]

COVID-19 Manufacturing efforts

The COVID-19 situation continues to evolve and is taking differing courses across the multitude of geographies in which Novartis operates with ongoing lockdowns and disruptions. We continue to take strong actions to help address the pandemic.

Novartis joined several industry-wide efforts to meet global demand for COVID-19 vaccines and therapeutics. An initial agreement was signed to leverage Novartis manufacturing capacity to support the production of the Pfizer-BioNTech vaccine (Comirnaty), with production expected to commence in Q2 2021.

We have also signed an initial agreement to manufacture the mRNA and bulk drug product for the vaccine candidate CVnCoV from CureVac, with plans to produce up to 50 million doses in 2021, and up to a further 200 million doses in 2022.

Novartis is collaborating with Molecular Partners to develop, manufacture and commercialise two antiviral DARPin candidates, ensovibep and MP0423. These are designed to target multiple different sites on the SARS-CoV-2 virus for enhanced antiviral effects and potential use as treatments.

Most recently, we have signed an initial agreement with Roche to reserve capacity and implement the technology transfer for the production of the active pharmaceutical ingredient (API) for Roche's Actemra/ RoActemra (tocilizumab), a treatment for rheumatoid arthritis which is being tested in various clinical trials investigating

the safety and efficacy in COVID-19 associated pneumonia.

We continue to value your feedback and look forward to engaging with you on our ESG efforts.

Samir Shah

Global Head of Investor Relations, Novartis

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