Overview Governance Strategy Risk Management Metrics and Targets Appendices 40 2023 CLIMATE REPORT ROYAL GOLD Risk drivers PHYSICAL RISK DRIVERS Physical risk drivers are changes in both weather and climate that impact economies or assets. These risk drivers can be categorized as acute (i.e., related to extreme weather events) or chronic (i.e., associated with gradual shifts in climate). These drivers may appear with a significant time lag, and the frequency and severity of each type of risk may also vary considerably and become increasingly difficult to predict. We chose to evaluate six physical risk drivers against our portfolio, after completing a screening analysis to test the potential relevance of the drivers. We do not view the listed risk drivers as exhaustive but feel they provide a good cross-section for the maturity level of our climate scenario analysis review. Physical risk drivers Description Acute risks Extreme  storms As GHG concentrations increase, the intensity and frequency of storms (e.g., rain, wind or lightning strikes) are expected to increase in certain geographic regions, with the potential to damage assets, impact production and harm human life. In a warmer world, the potential for air to carry moisture increases exponentially, and thus the potential for heavier precipitation also increases. This means that intense events may occur more frequently, which can exacerbate flooding risk. Flooding  (site  or  transport  infrastructure) Climate change is expected to subject different geographic regions to increased damage from flooding, which may lead to the temporary closure of mines, the temporary closure of supporting regional infrastructure (e.g., roadways, rail links, bridges and powerlines) and/or damage to assets. Wildfires Climate change can increase the exposure of land areas to wildfires, depending on a range of factors (e.g., temperature, soil moisture, and the presence of trees, shrubs and other potential fuel). An increase in wildfires could affect our stream and royalty deliveries by interrupting normal operations at our Operators’ sites. Chronic risks Water  stress  –  drought Climate change is expected to subject different geographic regions to water stress in the form of drought, which has the potential to impact production. Water  stress  –  precipitation  variability Climate change is expected to subject different geographic regions to water stress in the form of precipitation variability (both seasonal and interannual), which can impact operational access to both renewable surface and groundwater supplies. This risk is more pronounced for operating sites that rely on surface run-off and collection for their water supply. Heat  stress Climate change is increasing temperatures and can increase the impact of heat stress on labor productivity (i.e., the percentage decrease in efficiency during regular working hours under hot and humid climate conditions, due to the reduced capacity of the human body to perform physical labor). TRANSITION RISK DRIVERS Transition risk drivers are the societal changes arising from a transition to a low-carbon economy. They can arise through changes in public sector policies, innovation, and changes in the affordability of existing technologies (e.g., making renewable energies cheaper or allowing for the removal of atmospheric GHG emissions) or investor and consumer sentiment towards a greener environment. Transition risk drivers are global, although the specific nature of the risk drivers will vary by economy. We have chosen to evaluate three transition risks against our portfolio: carbon pricing, regulation and incentives, and technology. Transition risk drivers Description Carbon  pricing National and sub-national governments are introducing policy instruments that are designed to place a fixed or market-based price on emitted carbon. The expected coverage and price of emitted carbon is expected to increase as policymakers decide to align with more stringent global warming standards. Regulation  and  incentives In addition to carbon pricing, national and sub-national governments are introducing different policy instruments that regulate or incentivize the use of lower-carbon technologies. Such instruments can target building or industry energy efficiency, vehicle emissions intensity, the electrification of transportation and stationary fossil fuel technology, the renewable energy mix in grids or fuel emissions intensity. Technology Transitioning to a net zero economy would require investment flows to be geared towards the development and mass deployment of new technologies and infrastructure. This includes, but is not limited to, renewable energy technologies, carbon capture, low-carbon fuels and low-carbon industrial processes. SHADOW CARBON PRICING Acknowledging NGFS’s use of Shadow Carbon Pricing as a proxy for the cumulative impacts from the listed risk drivers, we used this same approach to represent the combined impacts of all three transition risk drivers.