Lufthansa : TCFD Report 2023

Report 2023

TCFD

lufthansagroup.com

lufthansagroup.com/en/responsibility

Lufthansa Group is determined in its commitment to addressing the challenges posed by climate change. We firmly believe that governments, companies and investors share a collective responsibility to mitigate the impacts of a changing climate and foster a transition to a resilient, sustainable economy.

To operationalize this commitment, Lufthansa Group has pledged to align with the recommendations set forth by the Taskforce on Climate-related Financial Disclosures (TCFD). This strategic alignment enables us to gain a comprehensive understanding of the implications of climate change on our business model. The TCFD framework serves as a vital tool, enhancing the disclosure of consistent, reliable, and transparent climate-related financial information. By adhering to these recommendations, we empower investors to make well-informed capital allocation decisions that actively support the transition to a low-carbon economy.

Our 2023 TCFD disclosure represents a continued effort, building upon the groundwork laid in previous years, which is comprehensively detailed in our corresponding sustainability and non-financial reports. This disclosure underscores Lufthansa Group's pivotal role as a globally operating air transport company, particularly as a market leader in European markets.

For the fiscal year 2023, we present a concise table summarizing how Lufthansa Group aligns with the TCFD recommendations. This proactive stance reflects our unwavering belief in the shared responsibility of governments, companies, and investors to mitigate the impacts of climate change and facilitate a transition to a climate-resilient economy.

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation	Lufthansa Group Approach	Further Disclosure

GOVERNANCE	A.	Supervisory Board
	Describe the	The highest supervisory body around sustainable management is the
	board's oversight of	Supervisory Board, which also approves important climate-related
	climate-related	decisions, including the proposed fleet order, considering the fuel and CO2
	risks and	efficiency of the decision to be made. In the 2023 financial year, the
	opportunities	Supervisory Board formed five committees whose activities were each
		reported on at the beginning of the following Supervisory Board meeting.
		The Supervisory Board elected the members and the Chairman of the
		Committees.

Effective from the 1st of January 2023, the Supervisory Board established an ESG Committee to advise the Supervisory Board, its committees and the Executive Board on environmental, social and governance issues that are essential to the sustainable economic development of Lufthansa Group. The ESG Committee met twice in 2023. Focus topics in the reporting year were the steps taken by flight operations to reduce emissions, the current situation and outlook with regard to sustainable aviation fuel (SAF) (e.g. regulation, demand and supply, strategy) and the changing requirements for sustainability reporting. In addition, the Supervisory Board receives a quarterly update on ESG topics from the Chief Sustainability Officer (CSO) as member of the Executive Board.

The Supervisory Board's Audit Committee monitors the existence and effectiveness of the Lufthansa Group's risk management, which also includes climate related risks. It met five times in 2023 and is informed at least once a year about the risk management.

Lufthansa Group Annual Report 2023, Report of the Supervisory Board (p.9-13, p.125/126)

Annual Report 2023 (Combined non- financial declaration), -Organizational foundations and responsibilities (p.76-81)

CDP Report 2023

C1.1 - C1.1b

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation	Lufthansa Group Approach		Further Disclosure
		The Supervisory Board also oversees and guides employee incentives.
		Emission reduction targets are an element of long-term variable
		remuneration for the Executive Board of Deutsche Lufthansa AG further
		described in METRICS AND TARGETS C.
		Executive Board and Group Executive Committee
		Lufthansa Group Executive Board meetings take place every two weeks.
		Climate-related issues were scheduled in 2023 at the agenda of the Group
		Executive Committee (GEC) at some meetings with relevance on strategy
		or political decisions, risk management or major capital expenditures like
		investments in aircraft or Sustainable Aviation Fuel. Therefore, climate
		related considerations were integrated in board decisions on strategy,
		business plans or major capital expenditures.
		The Group Executive Board meetings determined the focus and further
		development of sustainability-related activities within the Lufthansa Group
		in the reporting year. These meetings are prepared in part by the Group
		Executive Committee, which is chaired by the Chairman of the Executive
		Board. The Group Executive Committee is a committee at senior
		management level and consists of the Executive Board of Deutsche
		Lufthansa AG, the CEOs of the segment parent companies and the main
		Passenger Airlines and the heads of the Lufthansa Group's strategy and
		communications departments.
		Furthermore, the ESG strategy is reviewed annually and discussed with the
		Executive Board as part of the Strategic Roadmap Discussions (SRD). The
		SRD is an established format in which relevant strategic topics	are

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation Lufthansa Group ApproachFurther Disclosure

discussed on a yearly basis with the Executive Board of Lufthansa Group. In the reporting year, the focus was on the Lufthansa Group's carbon transition pathway and supporting measures, such as its Sustainable Aviation Fuel strategy and in-flight, as well as ground-based, efficiency measures.

In addition, the Executive Board has final oversight of the combined non- financial declaration that includes the climate / environmental strategy, organization, management, measures and targets. The Supervisory Board commissioned a limited audit review of the combined non-financial declaration.

Executive Board member Brand & Sustainability

The Executive Board member in charge of the Lufthansa Group's Brand & Sustainability function - the Chief Sustainability Officer (CSO) - is responsible for the Company's environmental, climate and social impact at Executive Board level.

Group Policy Committee

The Group Policy Committee (GPC), chaired by the Chairman of the Executive Board, discusses politically significant issues, including those relevant to sustainability, and prepares Lufthansa Group's strategy for mitigating policy risk. Individual managers within the committees are responsible for implementing planned activities and projects.

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation	Lufthansa Group Approach	Further Disclosure

GOVERNANCE B.

Describe management's rolein assessing and managing climate- related risks and opportunities

The Executive Board has the overall responsibility for:

• managing annual budgets for climate mitigation activities or capital and/or operational expenditures related to low-carbon products or services (including Research and Development)
• the integration of climate-related issues into the strategy and the setting of climate-related corporate targets
• monitoring progress against climate-related corporate targets and
• managing climate-related risks and opportunities

The Head of the Corporate Responsibility department - who reports directly to the Chief Sustainability Officer (Executive Board member) - is primarily responsible for identifying and assessing climate-related risks and opportunities as well as overseeing the climate protection strategy. The Corporate Responsibility department is developing appropriate measures, while working closely with the various departments and business units of the Lufthansa Group.

To better assess the potential materiality of the identified climate risks and opportunities, the Lufthansa Group undertook a more detailed climate scenario analysis in 2023. This qualitative scenario analysis identified both transitory and physical climate risks and opportunities and assessed their relevance to the Lufthansa Group. Relevant specialist departments were involved in the preparation process under the coordination of the Corporate Responsibility department. The analysis was completed at the beginning of 2024 (see STRATEGY and RISK MANAGEMENT). The results of this analysis were discussed with the departments and business units involved

Annual Report 2023 (Combined non- financial declaration), Environmental Concerns(p.76ff.)

CDP Report 2023,

C1.2, C1.2a

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation Lufthansa Group ApproachFurther Disclosure

and will be brought to the attention of management through established governance processes.

Each identified climate risk has a risk owner within Lufthansa Group. Each owner is responsible for ensuring that the given risk is continuously monitored and assessed, and that measures are introduced in good time to help mitigate this risk. For example, the Head of Corporate International Relations and Government Affairs has been delegated climate-related risks resulting from regulatory aspects, and the risk owner of identified flight related physical climate risks and opportunities is the central flight operations department. Climate-related risks are identified, assessed, and monitored within Lufthansa Group's Risk Management System which is coordinated by the Risk Management department as described in RISK MANAGEMENT B. The risk assessment is conducted quarterly. The top risks are reported to the Executive Board on a quarterly basis and discussed annually in the Audit Committee of the Supervisory Board.

To tackle the increasing significance of carbon accounting and environmental legislation, the Corporate Responsibility and Group Controlling departments have formed the Emissions Management Committee to deliver regulatory information and interpretations to relevant departments and employees. This committee regularly discusses current developments in national and supranational emissions legislation and estimates their financial impacts.

Furthermore, the Sustainability Circle, led by the Corporate Responsibility department, promotes a Group-wide dialogue on sustainability topics. The members of this circle are the Corporate Responsibility Officers of the

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation Lufthansa Group ApproachFurther Disclosure

Group companies and relevant Group functions. The Sustainability Circle holds monthly meetings with an objective to promote a Group-wide exchange on sustainability topics, this also includes climate-related strategies, risks, and opportunities.

In 2023, the Corporate Responsibility department proactively initiated the formation of the SAF Circle - an interdisciplinary, cross-company committee. This committee convenes bi-weekly, serving as a round table for bringing together all relevant stakeholders in the SAF domain. Its primary objective is to comprehensively tackle a diverse array of SAF- related matters, ranging from sourcing, sales, and certification of emissions reduction to policy. By adopting a holistic approach that extends beyond CO2 emissions, the SAF Circle aims to address the broader climate impact of aviation.

STRATEGY		A.		Climate change can influence Lufthansa Group´s business strategy in two
		Describe the		distinct ways. First, by causing climate-related business risks, whether
			physical, political, market or reputational. Second, by creating business
		climate-related		opportunities that could arise from the transition to a low-carbon future.
		risks and
		opportunities the		It is therefore imperative to identify climate-related risks and opportunities
		organization has		and take them into account when defining the strategic direction and
		identified over the		monitoring and assessing them in the Group-wide risk management
		short, medium, and		system. Since 2020, the Lufthansa Group has been acting on the
		long term		recommendations of the TCFD and is continuously developing its reporting
				on the management of climate-related risks and opportunities,
				incorporating climate scenario analysis.

Lufthansa Group Annual Report 2023, -Opportunities and risk report (p.125-139)

Annual Report 2023 (Combined non- financial declaration), -(p.74-77)

CDP Report 2023, C2.1

• C3.1f

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation	Lufthansa Group Approach	Further Disclosure

Within the Lufthansa Group risks are reviewed quarterly and developed as part of the corporate risk management framework, which ensures a unified and collaborative risk management approach and best practice across the Lufthansa Group. In the reporting year Lufthansa Group defines the time horizons for climate risks and opportunities as follows:

Short-term:

0-1 years

(aligned with the financial time horizons)

Medium-term:

1-3 years

(aligned with the financial time horizons)

Long-term:

3-10 years

(aligned with corporate strategy and our SBTi climate target 2030 - as well as specific impacts of climate-related risks are discussed in special committees like for example the finance committee, that is responsible for identify, assess, monitor, and control major financial risks. In this committee the aspects of CORSIA, EU ETS and further regulations from the EU Green Deal / Fit for 55 such as ReFuel EU have been discussed for a 10 years' time horizon)

The transition to a low-carbon future poses fundamental strategic challenges for the aviation sector. This transition could affect Lufthansa Group´s financial outlook, whether directly e.g., through changes in taxation and regulation, or indirectly through changes in customer behavior. Physical risks due to climate change can have a potential impact on direct

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023

TCFD Recommendation Lufthansa Group ApproachFurther Disclosure

and indirect flight operations and Lufthansa Technik's maintenance operations.

In alignment to the TCFD categories, the following risks and opportunities have been identified over the short-, medium- and long-term time horizons:

Transition Risks

The Lufthansa Group is exposed to a number of transitional climate risks in the periods under review. Relevant climate-related transition risks to the company could be policy and legal, market and technology as well as reputation related.

Policy and Legal

A high policy and legal risk impact may come from increased carbon pricing by mandatory cap and trade schemes, from carbon/fuel taxes, SAF blending quotas and upcoming "non-CO2"-regulations. The associated cost risks could increase significantly with heterogeneous carbon prices and increasing sustainability regulations in the individual countries and regions. Furthermore, there is the potential of a significant distortion of competition to the network airlines in intercontinental traffic, especially if costs are not fully passed on to passengers, because most of the regulations have only an impact on intra-EU flights, so airlines from outside the European Union with transfer stops near the European Union have a competitive advantage.

Lufthansa Group´s Risk Management System ranks "Regulatory risks in connection with climate change" as a top risk for Lufthansa Group. It is

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LUFTHANSA GROUP Taskforce on Climate-related Financial Disclosures (TCFD) Report 2023