2022 ESG Report Introduction ESG at Manulife Environmental Climate Action Plan Our Operations Our Investments Our Products and Services Climate-related Risks and Opportunities Nature and Biodiversity Social Governance Performance Data Abbreviations and Acronyms Our Group Capital Management function performs stress testing analysis to assess the potential impact of climate transition risks. The analysis to date has focused exclusively on near-term transition risks and has not tested physical risk. The conclusion of this analysis is that the market risks from transitioning to a low carbon economy are not expected to threaten Manulife’s solvency. For our General Account our scenario analysis has been conducted specific to capital maintenance requirements, supported by our Climate Action Plan commitments. Our General Account identifies and assesses climate-related risk in alignment with its ESG Investment Guidelines for the General Account, specifically for General Account assets, backing in-force liabilities. ESG risks are also considered during rating and annual review process by credit analysts. We continue to engage with our regulators on climate- related scenario analysis in our General Account. In 2020 and 2021, we participated in a Bank of Canada and OSFI pilot project using climate-change scenarios to better understand the risks to the financial system related to a transition to a low carbon economy. We continue to engage with OSFI to understand activities underway to identify and assess climate risk in Canada’s financial sector. Conducting scenario analyses on biological assets is challenging due to the significant uncertainties around the ability of these assets to adapt to changing climate conditions. During 2022, Manulife Investment Management Timberland and Agriculture invested in a third-party analytical platform that will enable us to systematically evaluate climate risks under various scenarios (RCP 2.6, 4.5, and 8.5) across all our major investment regions. We also began analyzing these risks across space and time and concluded that the types of climate impacts that could affect assets we manage are fairly constant, that the number of key risks is small, and that the relationships between different risks are not linear but interacting. 2020 Manulife Investment Management Timberland and Agriculture conducted pilot scenario analyses of our New Zealand timberland and our California farmland. 2021 We built upon those pilots and extended the analyses across our entire platform, engaging our forest and farm operations professionals from the U.S., Chile, Brazil, Australia, and New Zealand in workshops to better gauge our ability to prepare for the realities of climate change. 2022 We reviewed the risks identified from the 2020–2021 pilot to develop a systematic understanding of them, which confirmed we needed a climate risk tool to conduct systematic quantitative analysis. For example, extreme temperatures could lead to drought, which could lead to wildfire or increase the chance of pest outbreaks, both of which would result in financial loss. However, extreme temperatures could also add urgency to the global policy agenda for implementation of carbon prices, which could lead to financial gains. While changing climate patterns may make farming or forestry more challenging in some areas, it could create possibilities in others; for example, as the number of frost-free days might increase in higher latitudes or as crop researchers develop plant varieties more adaptive to changing climatic conditions. Manulife Investment Management’s Real Estate platform has built a risk management approach and framework, which lays out how we identify and manage the climate-related risks and opportunities to which we are exposed. Our three-step approach as outlined in the Manulife Investment Management Real Estate TCFD report 54 (pages 10–15) involves raising awareness, evaluating risk and opportunities, and integrating best practice. We evaluate our portfolio to understand how climate risks will affect our assets and regions. In 2022, we partnered with an ESG data platform provider to allow for a centralized location for monitoring portfolio-wide ESG monitoring. This platform leverages the same third-party climate risk data that was used in 2020 as part of our initial physical climate risk exposure. The ESG platform updates the risk exposure ratings annually based on the latest available climate data to the third-party. As a result, the portfolio risk is continuously updated with the latest available data, assessing climate and geographic hazards, including wildfires, floods, heat stress, hurricanes, typhoons, and sea level rise. For acquisitions, investment teams also use a third-party climate risk data to assess physical and transition risks. Climate risk data metrics include risk exposure to wildfires, heat stress, water stress, seal level rise, hurricanes and typhoons, and floods and are ranked from ‘no risk’ to ‘high-risk’ and ‘red flag’. As part of the initial ESG analysis, any risks identified as ‘high-risk’ or ‘red flag’ are included in the investment memo to provide additional context to the investment steering committee. Physical resilience measures are built into real estate developments, where appropriate, based on specific risks present at the asset. In 2022, we enhanced our approach by including climate risk criteria to our minimum design requirements for new development projects. We also updated our process for new developments to ensure that nature and biodiversity are actively taken into consideration. In 2022, we also rolled out our new Climate Change Resilience Standard, which uses forward-looking, third-party climate risk data to evaluate our global asset management portfolio’s exposure to climate and extreme weather risks. Manulife Investment Management Infrastructure developed climate risk assessment guidelines and piloted a climate risk tool for some infrastructure assets to support investment teams with screening of physical climate risks for potential investments. 54 For additional information regarding Manulife Investment Management’s ESG investment capabilities for institutional investors only, please visit www.manulifeim.institutional/sustainability . 41