Market overview and competitive environment

Climate agenda and carbon management

With climate change climbing higher on the global agenda, environmental, social and governance (ESG) criteria are becoming a key factor in determining the Company's investment appeal. Investors have come to rely on ESG ratings from international agencies when making allocation decisions, and companies' climate change initiatives are starting to represent a major competitive advantage.

Rosneft fully recognises the importance of the climate agenda and makes sure to assess the systemic, environmental, infrastructural and economic risks associated with climate change. We keep working to reduce our GHG emissions. In 2006, we launched and have since been expanding our Gas Investment Programme aimed at increasing the level of APG utilisation. During 2006–2012, Rosneft combined forces with the World Bank and a number of European state funds to carry out three joint projects under the Kyoto Protocol. Aimed to reduce APG flaring, the projects resulted in a 2 mmt decrease in annual CO2 emissions. Rosneft’s Energy Efficiency Programme was approved in 2009 and is regularly updated with direct input from the Board of Directors. In 2013, Rosneft started a systemic assessment and monitoring of its GHG emissions. In 2017, we launched a programme to regularly monitor and optimise production losses, and to ensure sustainable use of energy by our facilities.

This ongoing initiative will enable us to achieve lower GHG intensity compared to peers. Following the comparison of CO2 equivalent intensity in 2019, Rosneft ranked in the first quartile of international oil and gas majors in terms of direct emission intensity in upstream (alongside CNOOC and Equinor) and downstream.

We are introducing and expanding the principles of low-carbon development as part of our corporate governance framework. In 2019, Rosneft set up the Carbon

Management Subcommittee to assess the results of its GHG initiatives. The subcommittee comprises heads of operations, energy, economic and environmental functions.

As carbon management increases in importance, in 2020 the Company decided to transform the subcommittee into the Carbon Management Committee that directly reports to the Rosneft’s Chief Executive Officer. The Committee started its work in 2021.

In April 2020, the Board of Directors voted to assign more responsibilities to the Strategic Planning Committee, renaming it the Strategy and Sustainable Development Committee. The committee assists the Board of Directors in defining strategic goals and growth targets, including ESG goals and Rosneft’s contribution towards the UN Sustainable Development Goals.

In June 2019, we joined the Methane Guiding Principles initiative.

On 20 December 2018, the Board of Directors approved the Company's ESG initiatives and announced Rosneft's commitment to the 17 UN Sustainable Development Goals. In June 2020, we released an updated public statement regarding the Company's contribution towards the UN Sustainable Development Goals. The statement confirms our commitment to becoming the leader in minimising the environmental footprint and promoting eco-friendly production. In July 2020, we released a public statement regarding the Company’s stance on human rights and the Declaration on Respecting Human Rights to be used when interacting with suppliers of goods, works and services.

In December 2020, the Board of Directors discussed the long-term Carbon Management Plan for the period until 2035, which takes into account the views of the Company’s key shareholders and lays the foundation for Rosneft’s environmental agenda on developing a low-carbon economy, including climate risk management and defining opportunities and competitive advantages associated with future demand for clean energy.

Environmental responsibility