Abridged Climate Report

Governance

During the financial year, the Board’s Strategic ESG Committee, which had the mandate to consider climate change and ESG topics, was merged with the Social and Ethics Committee, and as a result the Social and Ethics Committee now has climate change within its mandate. Additionally, the Audit and Risk Committee considers climate-related risks and opportunities and the Investment Committee is increasingly considering ESG factors in investment decisions. During the year, these committees received several presentations and inputs on climate-related matters.

To further Remgro’s commitment to exercising stewardship in its portfolio, it has developed disclosure guidelines for its portfolio companies, which include indicators on climate change, energy efficiency and the use of renewable energy, as well as on related ESG issues, such as water. A number of the companies in the portfolio participate in the Carbon Disclosure Project (CDP), and provide Remgro with CDP data.

During the second quarter of 2025, the Remgro investment managers, and directors who serve on the boards of companies in the portfolio were given training on the need for climate scenario analysis and what is expected of such an analysis. This enables them to increase their oversight and engagement on climate change related issues at those boards.

The maturity level of the investee companies on climate matters varies across the portfolio, with those that are listed, have international exposure or those that are already subject to carbon budgets, such as Mediclinic Group Limited, Heineken Beverages Holdings Limited (Heineken Beverages), OUTsurance Group Limited (OUTsurance Group) and PGSI Limited, being further along the journey than others.

Since 2021, Remgro has linked its ESG journey to its long-term remuneration incentives, and in 2023 encouraged the companies it invests in, to do the same (refer to the Remuneration Report). KPIs on energy baselines, emissions reductions, renewable energy and energy efficiency are also included. In 2025, a wider group of investee companies has been included in the systematic collation of data for the Remgro Scope 3 emissions profile. In this report, emissions collated from Remgro at the centre and 11 investee companies make up 82% of INAV. The Group has also focused on benchmarking and encouraging energy efficiency, the use of renewable energy (where appropriate) and the disclosure of climate-related performance.

Strategy

In 2025, Remgro advanced its climate strategy by engaging external experts to help identify climate-related risks and opportunities (CRRO) across its portfolio. This includes a process to develop more comprehensive scenario analyses and a review of key sectors for vulnerability. Input from investment managers and investee companies is informing the process, refining the assessment of governance, strategy, and top climate risks.

From the initial 2024 assessment, it was evident that there is a growing understanding of CRRO within the terms of reference of board committees such as risk, and social and ethics. The key investee companies within the portfolio are calculating and reporting their Scope 1 and 2 carbon emissions, although many are still challenged with calculating Scope 3 emissions, an issue common amongst many companies globally. Assessment of the impact of risks on business models will follow during the 2026 financial year.

In this year’s carbon footprint report, which is included on pages 15 and 16 of the full Climate Report, a few data restatements have been made. This is in line with expectations of maturing understanding and capability in managing and disclosing this data.

Risk and opportunities

Remgro’s exposure to climate-related risk is considered through potential impacts on its investee companies. They face both physical risks primarily linked to the South African environment which is heating at faster rates than the global average, the country’s inherent water challenges, as well as the transitional risk resulting from regulatory change, consumer and market pressures, rising costs of finance and insurance due to risk ratings. Companies with multinational operations and supply chains are also challenged with meeting the requirements in multiple jurisdictions.

In the past year, South Africa has experienced a continuation of the severe flooding experienced in previous years, with significant human impact in the affected areas as well as logistics disruptions.

One of the challenges that Remgro encountered during this financial year resulted in the restatement of some carbon emissions (refer to the Climate Report) as a result of the sale of renewable energy certificates (RECs) by vendors that provided rooftop solar capacity in some companies. This resulted in some double accounting. An external assessment was commissioned and the Group believes that there is now sufficient clarity to be able to restate the numbers and avoid further problems in the coming years.

Physical risk

Water in all its aspects is a key risk facing all Remgro investee companies and is part of the ESG risk register (refer to page 7 of the ESG and Sustainability Report). This risk is exacerbated by climate change and the increased likelihood of extreme weather events such as flooding and/or drought. The threat of insufficient water is aggravated by infrastructure failures in both water supply and distribution, as well as poorly functioning sanitation systems.

Extreme heat and the growing length of heatwaves have the potential for significant effects on several of the Remgro investments, particularly those in the food and beverage sectors, such as Heineken Beverages, and in the agricultural sector, such as RCL Foods Limited, Rainbow Chicken Limited and Siqalo Foods Proprietary Limited. Climate change has an impact on the successful growing of basic agricultural products, such as oil seeds, grapes and hops. Extreme heat is a factor that many other sectors must consider as it especially impacts outdoor workers. In the telecommunications field, for example the Maziv Proprietary Limited Group (a wholly owned subsidiary of Community Investment Ventures Holdings Proprietary Limited), extreme heat adds to the need for cooling and ventilation, which in turn can increase energy use, ultimately having a financial impact as well as resulting in increasing emissions. Energy emissions are also likely to rise in most companies with expanded digitisation and use of AI. To maintain or decrease emission levels there will need to be further investment in renewable energy and energy efficiency. Most investee companies are in the process of assessing energy efficiency measures or switching in part to renewable energy as a way of gaining the multiple benefits of managing GHG emissions, as well as mitigating the risks of energy supply in South Africa and managing operational energy costs.

The insurance sector is exposed to an increasing number of weatherrelated claims. Floods, fire and drought over recent years have led to record claims in South Africa and Australia, where OUTsurance Group has a significant presence. Parts of South Africa have experienced significant flooding in the past three years, with impacts on businesses, logistics and the displacement of people, many of whom were uninsured and require disaster relief to re-establish homes.

Transitional risk

Carbon taxes and the expected introduction of mandatory carbon budgets (the draft regulations were published for comment in the second quarter of 2024) and sectoral emissions targets mean that there is regulatory pressure for companies in the industrial and agricultural sectors to operate under declining emissions caps, supporting South Africa to meet its commitments to the Paris Agreement. Failure to meet the carbon budgets will be linked to punitive carbon taxes, as set out in the national budget delivered in February 2024.

Remgro has commenced an in-depth climate risk and opportunity assessment for its investees, tailored to Southern African conditions. This analysis will evaluate how climate risks, like carbon taxes and extreme weather, may affect the portfolio and the level of preparedness of investee companies assessed. Initial reviews have focused on wholly owned subsidiaries and investees operating in the fast-moving consumer goods (FMCG) sector, including water risk. The findings will guide the Group’s portfolio management and help identify companies requiring targeted mitigation or those with climate-related opportunities. The analysis will also inform financial impact calculations for potential risks and opportunities under various scenarios.

South African companies that export to other markets may also face further transitional risks through foreign climate-related policies or regulations, or where the company needs to source materials, products or parts (e.g. equipment) from other countries.

In addition, importation has increasing physical risks associated, such as logistics delays due to storms for example. The potential impact of the Carbon Border Adjustment Mechanism (CBAM) enacted by the EU has yet to be fully assessed by the Group and requires further study. With climate-related risks growing, the South African economy will be put under increasing pressure. Economic impact will further have an effect on consumer-linked sectors, such as food and beverages. The financial impact on them is also under closer evaluation given the intersecting pressures from climate change and economic conditions. Remgro is responding with scenario analysis training for its leadership and expanding ESG reporting to cover more companies in its portfolio.

South African companies face growing risks from both physical climate events, like flooding and extreme heat, and transitional changes, such as new regulations and carbon taxes. Remgro and its investee companies are navigating these challenges by increasing renewable energy adoption, improving energy efficiency, and conducting in-depth climate risk assessments.

New developments include the likely introduction of mandatory carbon budgets in South Africa, which will tie non-compliance to increased carbon taxes, and draft regulations released in the second quarter of 2024. The Group has also increased its baseline ESG reporting to include 12 companies, up from 10, and more than half of these have set decarbonisation targets.

As a response to transitional risks, many of the investee companies have explored or invested in renewable energy projects or are evaluating opportunities to do so. Significant investments are being made in solar photovoltaic systems, notably a 75 MW installation by Air Products South Africa Proprietary Limited. Remgro has also enhanced its energy trading capabilities through Energy Exchange of Southern Africa Proprietary Limited (Energy Exchange), enabling broader access to green energy.

Remgro’s Scope 3 emissions as a holding company, which may appear to increase as more investee companies supply emission data, should over the medium term stabilise and start declining. This year 12 (2024: nine) companies have been included in the carbon footprint.

Remgro has a licensed energy trading company, Energy Exchange, which plays a role in sourcing green energy from generators of renewable energy and supplying that energy on a contractual basis to companies which do not wish to invest in the technology, but wish to secure greener energy for their operations.

Targets and metrics

The Group is on a decarbonisation pathway and has for more than a decade participated in the CDP, but has not yet set quantifiable emissions reductions targets for its operations or its portfolio. It has a stated intent to decarbonise, but has not set a timeline as yet.

Although there is still much to do, there is progress with respect to climate action. Many of the companies in which Remgro invests have already set ESG targets regarding climate change and energy management. All 10 investee companies, representing just over 80% of INAV, that took part in ESG reporting to Remgro have either emission and/or energy reduction strategies in place, or quantitative emission reduction goals or targets. Remgro is continuing its work with its wholly owned subsidiaries and the companies in its portfolio to deliver ongoing improvements.

Scenario analysis

During the year Remgro’s investment managers and executives who serve on the boards of subsidiaries were given training in climate-related scenario analysis. This was delivered by an external climate change consultancy that engaged them on identification of CRRO within the Remgro portfolio, as well as the use of different climate change scenarios to inform our investment analysis.

As discussed under “Transitional risk” above, transitional risks from new climate regulations, such as South Africa’s carbon budgets and the EU’s CBAM, may significantly affect exporters and require further assessment. Remgro is addressing these through scenario analysis, increased ESG reporting, and investments in renewable energy and energy efficiency.

For more detail, please see the full Climate Report