Climate Change and Mining

Driving sustainability through strategic partnerships Graham Winkelman

About BHP • We are a leading global resources company.

• Our purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources.

• Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market.

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Diverse portfolio Petroleum

Iron ore

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Copper

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Coal

Our Charter Our Values •

Sustainability – Putting health and safety first, being environmentally responsible and supporting our communities.

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Integrity – Doing what is right and doing what we say we will do.

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Respect – Embracing openness, trust, teamwork, diversity and relationships that are mutually beneficial.

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Performance – Achieving superior business results by stretching our capabilities.

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Simplicity – Focusing our efforts on the things that matter most.

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Accountability – Defining and accepting responsibility and delivering on our commitments.

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Our approach to climate change At BHP • Climate change is a critical, Board-level, governance and strategic issue.

• We accept the IPCC’s assessment of climate change science.

• We believe the world must pursue the twin objectives to limit climate change and provide access to reliable and affordable energy.

• We don’t prioritise one of these objectives over the other – both are essential to sustainable development.

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Our actions We are committed to taking action on climate change by: • Reducing our emissions.

• Working in partnership to accelerate the development and deployment of low emissions and renewable technologies.

• Adapting to the physical impacts of climate change.

• Testing and building the resilience of our portfolio.

• Working with others to enhance the global response.

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Mitigation Greenhouse gas emissions1

Reducing our operational GHG emissions • Previous target performance has been driven by emissions reduction projects and improved productivity. • Our current target is to keep total operational emissions below FY2017 baseline in FY2022. • In addition to our five-year target, we have set the longer-term goal of achieving net-zero operational GHG emissions in the latter half of this century, consistent with the Paris Agreement.

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1. Scope 1 and 2 emissions have been calculated on an operational control basis in accordance with the GHG Protocol Corporate Accounting and Reporting Standard. Includes data for Continuing and Discontinued operations for the financial years being reported. Comparisons of data over the period shown should note the demerger of South32 during FY2015 (data from FY2015 onwards excludes emissions from assets that were demerged with South32 from the date of completion of the demerger (25 May 2015)).

2. Scope 1 refers to direct GHG emissions from operated assets.

3. Scope 2 refers to indirect GHG emissions from the generation of purchased electricity and steam that is consumed by operated assets (calculated using the market-based method).

4. FY2017 is the base year for our current five-year GHG emissions reduction target, which took effect from FY2018. The FY2017 baseline will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction; carbon offsets will be used as required. Note that FY2017 was also the final year of our previous five-year target (which we achieved), which was to keep our absolute emissions below an FY2006 baseline (adjusted for material acquisitions and divestments).

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Investing in Low Emissions Technology Our approach • Defining a pathway to net-zero emissions for our long-life assets requires planning for the long term and a deep understanding of the development pathway for low emissions technologies. • Our strategy is to develop emerging and deploy existing technologies that make step-change reductions in GHG emissions, both from our own operations and from the downstream processing and use of our products. • We have a suite of initiatives currently underway aimed at achieving reductions across our major operational emissions sources of electricity, material movement and fugitive emissions.

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Investing in Low Emissions Technology Zero-carbon electricity supply •

Emissions from electricity use make up 46* per cent of our operational emissions.

This includes both the power we generate ourselves and the power we buy from grids around the world. Our strategy seeks to accelerate the transition to lower carbon sources of electricity while balancing cost, reliability and emissions reductions.

Zero-carbon material movement •

Emissions from fuel and distillate make up 35 per cent of our operational emissions, primarily from the consumption of diesel in the course of material movement (for example haul trucks). Our strategy is to accelerate and de-risk technologies and innovations that can transition operations over time to alternate fuels and greater electrification of mining equipment and mining methods.

Fugitive emissions •

Fugitive methane emissions from our petroleum and coal assets make up 18 per cent of our operational emissions. Our strategy is to pursue innovation in mitigation technologies for these emissions, which are among the most technically and economically challenging to reduce. *Includes Scope 1 emissions from our natural gas-fired power generation as well as Scope 2 emissions from purchased electricity.

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Low Emissions Technology Lakeland Solar and Storage • Batteries offer potential to deliver baseload renewable power.

• BHP is participating in the Lakeland Solar and Storage Project, a three-year knowledge sharing partnership to demonstrate connecting large-scale battery storage to a fringe-of-the-grid solar project in regional Queensland, Australia.

• Outcomes of an extensive test program at Lakeland will provide insight for BHP and the resource sector with respect to security of energy supply.

Image sourced from the Lakeland Solar and Storage.

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Low Emissions Technology Light electric vehicles • For the first time, BHP is trialling light electric vehicles at our Olympic Dam operation in South Australia.

• We’re committed to reducing the number of people exposed to particulate matter, such as diesel, by 50 per cent and replacing fuel with lithium-ion batteries is just another step in that important journey.

• Because we rely on vehicles like this for day-to-day operations, we expect the shift to battery powered, eco-friendly cars will have a significant impact once deployed on a wide scale across our other operations.

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Low Emissions Technology BHP SaskPower CCS Knowledge Centre • In 2014, SaskPower’s Boundary Dam became the first post-combustion, coal-fired power station with CCS. • BHP founded the International CCS Knowledge Centre in February 2016 to share knowledge and learnings from the project.

• The Knowledge Centre now has significant international profile and engagement with project developers.

Image sourced from SaskPower.

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The International CCS Knowledge Centre

Image sourced from The International CCS Knowledge Centre.

"The agreements signed today will enable the use of Canadian expertise and knowledge to advance Carbon Capture, Utilization and Storage applications in China.

This is just one of the many examples of Canadian institutions and companies working around the world to reduce carbon pollution and deliver clean solutions.“

CCS Knowledge Centre @ccsknowledge

Catherine McKenna, Minister of Environment and Climate Change Canada (8 December 2017) Driving sustainability through strategic partnerships 16 May 2019

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Low Emissions Technology Peking University and partners – steel sector CCS • BHP, Peking University, the University of Edinburgh and the National Centre for Climate Change Strategy and International Cooperation agreed in June 2016 to establish a collaborative centre focussed on steel sector CCS. • The centre is focused on addressing policy, economic and technical barriers to the application of CCS to the steel sector.

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Innovative Technology Partnerships Equity investment in Carbon Engineering • BHP is an equity investor in Carbon Engineering Ltd, a Canadian-based company leading the development of Direct Air Capture (DAC). • DAC has the potential to deliver large-scale negative emissions by removing carbon dioxide from the atmosphere.

Image sourced from Carbon Engineering.

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IMO shipping emissions Paris Agreement 2015 is to limit global warming to below two degrees Celsius, aiming for 1.5 degrees Celsius, by the end of the century.

The IMO translated this to a roadmap for shipping emissions:

2020 - Sulfur cap - Strengthen emission benchmark and speed optimization

*compared to 2008 Driving sustainability through strategic partnerships 16 May 2019

2030 - Innovative reduction mechanisms - Market Based Measures = Carbon pricing - 40% Reduction* per unit of transport

2050 - Zero Carbon Fuels - 70% Reduction* per unit of transport - 50% total Emission Reduction*

BHP Maritime translated that to specific actions: Benchmarking and vessel selection criteria: Influencing industry to build more efficient vessels.

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LNG fueled vessel chartering:

Second generation Biofuels:

Influencing industry to build efficient LNG fueled ships and bunkering network.

Trials completed on sea and great interest from our customers.

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GHG rating • Since Sept 2017, BHP does not accept any G rated vessels, and F rated vessels only by exception.

• <2% of BHP vets per annum not accepted based on GHG rating.

• <10% of Cape sized vessels F&G rated.

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GHG rating: Emissions reductions The 35 vets denied due to F and G rule lead to emissions reductions:

Example A

Example B

F rated vessel (Marvellous) denied

F rated vessel (HL Saijo) denied

A rated vessel (Courageous) selected

D rated vessel (SM Puma) selected

Voyage details:

Voyage details:

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From: Port Hedland

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From: Port Hedland

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To: Fancheng, China

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To: South Korea

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Cargo: approx. 176,000 tonnes of Iron Ore

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Cargo: approx. 200,000 tonnes of Iron Ore

Emissions saving of 415 tCO2-e or 23% of total voyage emissions.

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Emissions saving of 170 tCO2-e or 8% of total voyage emissions.

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Industry changes • BHP, in collaboration with RightShip and Ship Owner X, launched an extensive hydrodynamic retrofitting investigation.

• Ship Owner X focused on least efficient vessels (F rated) and on upgrades to propulsion system.

• Upgrades resulted in 5-9% improvement in performance.

• One vessel improved from F to D rated vessel.

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Mitigation Reducing emissions from deforestation and forest degradation • Developed guide to REDD+* governance with Baker and McKenzie.

• Made US$5 million commitment to Alto Mayo in Peru, managed by Conservation International and protecting around 182,000 hectares of globallysignificant, threatened forests.

• Supported the world’s first Forests Bond, which could stimulate the global market by enabling investors to receive interest in cash or REDD+ credits. *Reducing Emissions from Deforestation and Forest Degradation, as well as conservation, sustainable management of forests and enhancement of forest carbon stocks.

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Eight years of partnership and countingâ&#x20AC;Ś

Valdivian Coastal Reserve Project Launch

Climate ACTT Launch: Action by civil society in Trinidad & Tobago to build resilience to climate change

2013

2015

Finance for Forests Launch 2017

2019 Next phase of BHP-CI Alliance 2011

2014

2016

Formed to support BHPâ&#x20AC;&#x2122;s conservation and land management efforts

Five Rivers Conservation Project Launch

Alto Mayo REDD+ Project support

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Forests Bond listing

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Our work to date

Alto Mayo 182,000ha USD$5M Five Rivers 11,000ha AUD$13.4M Valdivia 50,000ha USD$20M Driving sustainability through strategic partnerships 16 May 2019

Climate ACTT capacity building

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Forests Bond USD$12M

Sharing what we have learned Finance for Forests • Aims to build understanding and advancing investment in natural climate solutions (REDD+).

• Joint initiative between BHP, CI and Baker McKenzie.

• Developed out of recognition of the role of nature as a solution to climate change and lack of private sector finance.

• Identify concrete opportunities to channel private sector funding into forest conservation.

Finance for Forests 2.0 • Developed concepts for six innovative financial mechanisms, which are designed to provide investors with Verified Carbon Units and Paris-compliant REDD+ credits from existing REDD+ activities or development of new REDD+ programs.

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Our actions We are committed to taking action on climate change by: • Reducing our emissions.

• Working in partnership to accelerate the development and deployment of low emissions and renewable technologies.

• Adapting to the physical impacts of climate change.

• Testing and building the resilience of our portfolio.

• Working with others to enhance the global response.

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Adaptation Focusing on the future • Our assets are long-lived, therefore we must take a robust, risk-based approach to adapting to the physical impacts of climate change.

• We require all our operations to assess the potential physical impacts of climate change.

• We are already taking action to build the resilience of our operations.

• We also consider ways to build community and ecosystem resilience to climate impacts.

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Our actions We are committed to taking action on climate change by: • Reducing our emissions.

• Working in partnership to accelerate the development and deployment of low emissions and renewable technologies.

• Adapting to the physical impacts of climate change.

• Testing and building the resilience of our portfolio.

• Working with others to enhance the global response.

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Portfolio evaluation We have been testing the resilience of our portfolio for many years â&#x20AC;˘ We develop forecasts based on detailed analysis. â&#x20AC;˘ We have a robust scenario planning process to test the resilience of our portfolio against a range of scenarios and shock events. â&#x20AC;˘ We use signposts to help us understand which scenario is becoming more dominant.

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Our portfolio is resilient Portfolio Resilience • Our analysis shows that BHP will continue to create substantial value for shareholders under both an orderly and a more rapid transition to a 2oC world: ü Diversified portfolio; ü Low cost assets; ü High quality products; ü Growth options of ~20% IRR*; ü Scenario planning and future optimisation.

• We will continue to adapt and evolve to strengthen the portfolio and deliver long term shareholder value. *Refer to BHP’s 2015 report ‘Climate Change - Portfolio Analysis’

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Portfolio Analysis In September 2015, we released our Climate Change: Portfolio Analysis.

This report: • Provides insight into our approach to scenario analysis.

• Explores the potential implications for our company of both an orderly and a more rapid transition to a 2 degree world.

• Shows that in these scenarios our diverse portfolio is resilient because of its high quality resources, low costs of production and rapid payback periods.

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Views After Paris Views after Paris provides: • A tangible demonstration of how we monitor the external environment.

• An explanation of how we identify and track signals which provide timely insights into potential impacts on our portfolio.

• An insight into how these inform our strategic decision-making at the highest levels of our company.

• An update on our actions, as part of our integrated approach to climate risk management.

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Our actions We are committed to taking action on climate change by: • Reducing our emissions.

• Working in partnership to accelerate the development and deployment of low emissions and renewable technologies.

• Adapting to the physical impacts of climate change.

• Testing and building the resilience of our portfolio.

• Working with others to enhance the global response.

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Broader stakeholder engagement Stakeholder engagement • Published CEO COP21 Statement.

• Signed UNFCCC’s Paris Pledge.

• Joined World Bank’s High-Level Commission on Carbon Pricing.

• Recognised in CDP’s Climate Disclosure Leadership Index – The only resources company to score an “A” ranking.

• Participated in the Financial Stability Board’s Task Force on Climate-related Financial Disclosures

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Conclusion Addressing climate change is a priority for BHP • We have a clear and consistent position.

• Our integrated strategy address a range of climate-related risks and opportunities.

• Transparency is critical – more disclosure will help everyone make informed choices.

• Partnerships are essential to progress.

• We remain committed to taking action and supporting an effective global response.

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