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 We are continuing to enhance our processes for identifying, assessing, and managing environmental risks and integrating them into our ERM framework. This will ensure that they are assessed in a manner consistent with our common approach to risk taking and risk management activities. We also monitor environmental risks through our emerging risk framework and regularly engage with senior leadership to discuss the prioritization and feasibility of contingency planning actions associated with various emerging risks, including environmental risks. In 2022, we made the following enhancements to our approach: • Expanded the Environmental Risk Policy to articulate Manulife’s risk appetite related to environmental risks and will continue to pursue approaches to further integrate into our enterprise-wide risk appetite framework. • Developed an initial climate risk inventory, including risk statements categorized by principal risk type as well as being aligned to the TCFD framework. The inventory will provide a basis to perform risk assessments across the organization and to facilitate our understanding of the impact climate-related risks may have within different lines of business and any associated risk mitigation activities. • Performed operational risk assessments on the processes and controls related to data collection, aggregation, and reporting of ESG performance metrics and identified action plans to enhance the internal control framework. • Included climate risk considerations in planning and testing in our business continuity management program. • Enhanced emerging risk framework with more frequent touchpoints with senior leadership to review and recalibrate our emerging risk inventory, which includes climate-related risks. In our path to continuous enhancement, we also take various approaches to embed climate risk considerations across our business segments. Manulife’s General Account invests capital to achieve returns to support the operations of our business and to ensure we meet the promises we make by efficiently managing the underlying liabilities of our insurance services. Importantly, we operate in a highly regulated environment, which can impact our risk appetite for certain investments and strategies. Considering these constraints, Manulife’s transition plan remains in progress and will involve iterative and incremental improvements. We expect to employ a variety of methods to manage the transition of our portfolio alongside evolving trends and requirements. Transition Mechanisms for Manulife’s General Account Investment Portfolio include: Proactive investment in sectors driving decarbonization • We seek to enhance the exposure of our portfolio to new opportunities presented by the transition to a low carbon economy with our well-diversified investment program. Given the large and growing pool of such potential investments, these opportunities can often be at varying stages in terms of scale, scope, and risk. • While we have investment expertise in technologies such as renewable energy, battery storage, and lower carbon alternative fuels (such as natural gas), other technologies (such as hydrogen or carbon capture and storage projects) are at earlier stages of implementation and may have significant associated investment risks. We seek to focus our time and attention on scalable opportunities with attractive risk-adjusted returns that ultimately provide an appropriate match to our liabilities. Portfolio re-balancing • We recognize the underlying risks of issuer inaction on decarbonization. Setting short-term emissions reduction targets is a step towards management of these risks and can inform how we consider providing capital to sectors, companies, or projects that support decarbonization efforts and potentially limiting capital to those with unfavourable emissions profiles. To this end, we evaluate our investment approach toward higher-emitting sectors such as power generation and oil and gas on an ongoing basis, and, where deemed appropriate, recommend changes to investment limits and/or the investment duration of certain sub-sectors. • In addition to maintaining our investment performance, we seek to appropriately balance and account for our investees' decarbonization efforts, as well as associated societal impacts. It is our firm view that these efforts will only be successful in helping to achieve global decarbonization goals when complemented with other enabling conditions, such as the implementation of costs on externalities or creation of incentives by policymakers. Issuer, peer, and sector engagement • As a primarily fixed income-oriented investor, our engagement with management teams and opportunities may differ from that which is typical for public equity holders who have direct ownership stakes in a company. • For emission-intensive sectors, our analysts question management teams on several ESG factors, including emissions policies and decarbonization efforts, when provided the opportunity at industry conferences and on calls or meetings with management. • We continue to explore additional avenues through which to better engage with issuer companies, such as the use of standard ESG questionnaires in private placement transactions, to support more efficient, and ultimately more effective, communication with issuers. 38