STOBG Climate Risk Report_2026

C L I M AT E R I S K MITIGATION REPORT SB 261 EXTERNAL DISCLOSURE

Prepared by Trio: November 13th, 2025

Climate Risk Mitigation Report | 2026

CONTENTS 03 INTRODUCTION 04 PILLAR 1: GOVERNANCE 05 PILLAR 2: STRATEGY 10 PILLAR 3: RISK MANAGEMENT 12 PILLAR 4: METRICS AND TARGETS

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Climate Risk Mitigation Report | 2026

INTRODUCTION This enterprise-wide climate-related risk disclosure statement of Structure Tone, Layton Construction, and Abbott Construction subsidiaries of STO Building Group (referred to herein as STOBG) - covers the first reporting period (the financial year from January to December 2025). This disclosure statement was prepared in accordance with California’s Senate Bill 261 (SB 261), also referred to as Health and Safety Code § 38533.

The STO Building Group family of builders includes:

This disclosure statement follows the Recommendations of the Task Force on Climaterelated Financial Disclosures (TCFD) framework covering four key pillars: • Governance: How STOBG’s governance body and management oversee, assess, and manage climate-related risks and opportunities.

• Strategy: How climate change currently impacts STOBG, and how it might do so in the future.

Abbott Construction, Ajax Building Company, • BCCI Construction, Govan Brown, Layton Construction, LF Driscoll, LF Driscoll Healthcare, Pavarini Construction Co., Pavarini McGovern, RC Andersen, Structure Tone, Structure Tone Southwest, Structure Tone International, and • STO Mission Critical.

Risk Management: How STOBG identifies, assesses and manages climate-related risks, and how those processes are integrated into existing risk management processes.

Metrics and Targets: How STOBG measures and manages climate-related risk and opportunities.

At STOBG, we recognize that climate risk poses evolving operational and financial risk. We are continually refining our processes and systems for climate risk management so that our reporting remains robust, decision-useful, and aligned with best practices and emerging regulatory requirements. STOBG has not disclosed our greenhouse gas (GHG) emissions in this report as we intend to disclose emissions in compliance with final SB 253 guidelines in 2026.

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Climate Risk Mitigation Report | 2026

PILLAR 1

GOVERNANCE

BOARD OVERSIGHT OF CLIMATE-RELATED FINANCIAL RISK The Board of Directors provides oversight of enterprise risk management and is responsible for ensuring that management has implemented and maintains a disciplined, enterprisewide ERM framework incorporating the key elements appropriate for STO Building Group’s scale and operations.. Their consideration of climate-related risk is supported by its committees, consistent with their respective charters and areas of responsibility.

The Board’s Safety, Health, Environment, and Quality (SHEQ) Committee meets three times a year and reviews corporate responsibility programs, employee safety risks, and environmental matters, including climate-related considerations as they relate to safety and operational impacts. Additionally, the Board’s Audit, Finance and Risk (AFR) Committee meets quarterly and reviews management’s approach to enterprise-level financial and compliance risks. To the extent climate-related risks are identified as enterprise-level risks through STOBG’s enterprise risk processes, the AFR Committee provides review and guidance with respect to those risks, Together, these committees provide governance related to climate risks and update the Board, as appropriate, on material issues related to climate risk and their integration into enterprise risk management.

MANAGEMENT’S ROLE AND RESPONSIBILITIES General risks, including environmental and climate-related risk, are considered and evaluated in STOBG’s Enterprise Risk Assessment (ERA) process. The ERA process is overseen by the AFR Committee, which engages external legal counsel to direct the process with support from an external consultant. Day-to-day coordination of the ERA is managed by STOBG’s Compliance & Ethics and Internal Audit Departments.

These groups (collectively, the “Risk Assessment Team”) identify and assess enterprise risks, including strategic, operational, compliance, and climate-related risks. The Risk Assessment Team develops a draft list of risks that is refined through facilitated workshops with the risk management committee, which prioritizes risks based on likelihood and impact and recommends mitigation strategies. Key risks and related mitigation actions are presented to the AFR Committee for oversight.

STOBG intends to transition to a dynamic Enterprise Risk Management (ERM) system using AuditBoard software in 2026. This ERM system will enable continuous risk monitoring, standardized risk scoring, clearer ownership assignments, and integrated tracking of mitigation activities, including those addressing climate-related risks.

At an operational level, climate risks are assessed and managed alongside other risks through a prescriptive risk management process during all phases of the construction lifecycle. More information on this process can be found in the Risk Management Pillar.

STOBG monitors transitional climate change risks with assistance from external stakeholders, by monitoring evolving local and global regulations and requirements so that we can seek to maintain compliance and address changes in each jurisdiction we operate in.

Together, these risk management structures help to integrate climate risks into STOBG’s broader governance and strategic planning processes. While climate risk has not yet resulted in significant financial impacts, we will continue striving to monitor and manage these risks proactively.

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PILLAR 2

STRATEGY

At STOBG, we are strengthening our approach to integrating climate change considerations into strategic business processes. In 2025, we conducted our first climate risk assessment and scenario analysis. This assessment evaluated both physical and transition risks across multiple scenarios and time horizons, aligned with the recommendations of TCFD.

To build a robust understanding of climate risk, we explored the relevance of climate risks and opportunities across our global operational footprint. This assessment drew on climate science and global projections to identify potential risks and opportunities that are relevant to our operations and value chain. The findings were then tested through a series of stakeholder focus groups with representatives from across the business so that the assessment reflected both external science and lived business experience.

The analysis found that physical climate risks are expected to intensify under a high-emissions scenario, driven by the increasing frequency and severity of extreme weather events and broader climatic changes. Conversely, transition risks are more pronounced under a low-emissions scenario, reflecting the potential impacts of policy shifts, market dynamics, and technological developments associated with global decarbonization efforts.

Relevant climate-related risks and opportunities for our business were identified across the following categories: Type

Definition

Physical risks

Risks stemming from climate-related hazards.

• Acute physical risks are event-driven, including extreme weather events, such as heatwaves, floods, storms, wildfires, and hurricanes.

• Chronic physical risks are longer-term shifts in climate patterns, such as rising temperatures and sea levels.

Transition risks

Risks that arise from the process of shifting to a low-carbon economy or adapting to the impacts of climate change including changes in policy, technology, market dynamics, and societal expectations.

Climate-related opportunities

Potential benefits that arise from efforts to mitigate or adapt to climate change, such as to improve efficiency and resilience.

TABLE 1.

DEFINING CLIMATERELATED RISKS AND OPPORTUNITIES

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CLIMATE SCENARIO ANALYSIS As STOBG operates globally, our assessment captured risks across different regions, recognizing that the type, frequency, and severity of climate impacts vary by geography.

The time horizons for the analysis are defined below.

Present day 2030

2050

2100

• Short term: present day to 2030. A near-term timeframe that focuses on immediate priorities and reflects current policies and actions.

• Medium term: 2030 to 2050. A mid-century milestone that aligns with common targets for net-zero commitments, such as The Paris Agreement.

This allows for the impact of sustained mitigation or inaction to become more pronounced.

• Long term: 2050 to 2100. This horizon is important to capture the longlasting consequences of present-day policy and actions, particularly on physical climate systems.

STOBG used scenario analysis to explore how different climate futures could impact our business.

Climate scenarios are not forecasts, but structured tools for examining how risks and opportunities may evolve under a range of potential future conditions. Our assessment is grounded in the latest scientific data and methodologies, including the Intergovernmental Panel on Climate Change’s (IPCC) Shared Socioeconomic Pathways (SSPs) and the Network for Greening the Financial System (NGFS) scenarios.

For this assessment, we analyzed a low-emissions scenario, representing a world with ambitious climate policies that present greater transition risks, and a high-emissions scenario, representing a world with limited policy action and heightened physical risks. This approach allowed STOBG to test resilience to both types of risk and opportunity.

Type

TABLE 2.

CLIMATE SCENARIOS OVERVIEW

Description

Reference scenarios Global warming in 20801 1

Low-emission scenario

High-emission scenario

Strong efforts to decarbonize keep warming below 1.5ºC as defined in the Paris Agreement.

A fossil-fuel driven, high growth future.

Minimal mitigation efforts result in high levels of warming and more severe physical impacts.

SSP1-1.9 NGFS Net Zero 2050

SSP5-8.5 NGFS Current Policies

1.4ºC

4.4ºC

Temperature values sourced from Intergovernmental Panel on Climate Change Sixth Assessment Report (2023).

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TABLE 3. PHYSICAL RISK SUMMARY

CLIMATE-RELATED RISK AND OPPORTUNITY FINDINGS The most significant risks and opportunities that were identified during the assessment are presented in this section, covering how STOBG could be exposed, potential impacts, and mitigations or strategic responses to build resilience.

Hazard

Risk Description

Regional Exposure

STOBG Strategic Responses

Heatwaves and heat stress

An increase in extended periods of extreme heat poses health, safety and well-being risks to our employees, trade partners, and the communities we work in. Extreme heat can also lead to operational disruptions such as reduced productivity. Rising costs can also be associated with increased air conditioning and investment in temperature-controlled environments.

Our operations within the continental U.S. and Canada are the most exposed to heatwaves and heat stress in the long-term high emissions scenario. The Northeast, Mountain, Southwest and Canada regions have severe exposure.

Hawaii and Western Europe have moderate to high exposure.

STOBG employees regionally tailor responses to allow flexibility in heat-safety practices based on local conditions. These workforce protection measures include adjusted schedules, cooling stations, hydration strategies, and emergency heat preparedness plans. We prioritize employee engagement and address health and well-being needs through active communication and support.

Wildfires pose health and safety risks for employees. Wildfires can also cause infrastructure vulnerability, such as damage to assets and reduced access to critical systems. Operational and financial disruptions may also increase due to reduced working days, unmet supply obligations and high recovery and adaptation costs.

Our operations in the Southwestern U.S. region have the highest exposure to wildfire risk. Although exposure is highest in the long-term high emissions scenario, exposure remains high to very high in the Southwest and Mountain regions for all time horizons under both scenarios.

We have protocols in place for wildfire events to manage serious incidents, such as crisis communication and internal employee safety responses. To manage indoor air quality, SMACNA measures are readily implemented on jobsites, including use of portable HEPA air cleaners in enclosed spaces and ensuring HVAC systems inuse have high-efficiency filters (MERV 8 or higher). These efforts can also provide some protection in the event of wildfire.

An increase in the frequency and Our U.S. operations in the Northeast, intensity of heavy precipitation and Mid-Atlantic, Southeast, Southwest, and flooding may cause operational Hawaii have moderate to high exposure disruptions, including supply chain to heavy precipitation across all time interruptions, barriers to employee horizons in both scenarios, with the commuting and reduced ability to meet highest exposure in the long-term high service or quality standards. These types emissions scenario. In the Northeast of extreme weather events also pose and Mid-Atlantic, flooding has caused health and safety risks for our employees significant disruptions in recent years. due to environmental or operational conditions. Increased costs from rising insurance premiums, asset and infrastructure damage, and workforce impacts could also be anticipated.

We invest in long-term resilience improvements and use NOAA weather data to inform the scheduling of our projects.

Site-based water retention and stormwater management are also incorporated into project design support.

PHYSICAL RISKS Physical risks arising from climate change include both acute events, such as extreme weather, and chronic risks associated with long-term shifts in climate patterns. These risks can directly or indirectly affect our operations, project sites, and financial performance.

To better understand our exposure, we analyzed physical climate risks across 44 locations in our operational portfolio using third-party climate risk software. This analysis quantified our exposure under selected climate scenarios and time horizons. Sites located in close proximity were consolidated into representative regions. We assessed exposure to 10 acute and chronic physical hazards across two emissions scenarios and three time horizons, short-, medium-, and long-term.

Wildfires

Physical risks were evaluated through two core elements: hazard exposure, which measures the likelihood of risk based on location and asset characteristics, and degree of change, which reflects how conditions are projected to evolve over time.

Overall, physical risks were found to be more pronounced under the highemissions scenario across all regions. The level of exposure and potential impact increases over time, with the long-term horizon showing the greatest risk. Although impacts are less significant under the low-emissions scenario, both acute and chronic risks are still projected to rise relative to present-day conditions. The following section summarizes scenario analysis findings for the most significant acute and chronic physical risks.

Heavy precipitation and flooding

STOBG has crisis management protocols for significant natural disasters which include a disaster preparedness plan with specific procedures that personnel are trained on.

We also implement safety protocols for securing or dismantling cranes and securing materials in advance of a storm.

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TRANSITION RISKS Transitioning to a lower-carbon economy or adapting to climate change is expected to result in policy, legal, social, technological, and market shifts. Depending on the nature and speed of these changes, transition risks create varying levels of impact for our organization. We have primarily taken a qualitative approach to our transition risk scenario analysis. Transition risks were identified and validated through the risk assessment and stakeholder engagement process.

Aligned with the leading models, we understand that transition risks are seen as more significant to our business under a low-emissions scenario. The impact of transition risk is likely to be more pronounced in the short- to medium-term and reduces over time as decarbonization is enacted under this scenario. The qualitative scenario analysis findings for our most key transition risks are summarized below.

TABLE 4. TRANSITION RISK OVERVIEW Hazard

Risk Description

Potential Impacts

Increased climate-related costs associated with adapting to or mitigating climate change.

Costs associated with meeting regulatory and compliance obligations may rise. Climate-related events may continue to increase insurance premiums, adding financial pressure. Private developers may be less willing to fund climate adaptation or resiliency features, slowing progress.

Reputation

Risk of losing client trust and market share due to poor communication of sustainability efforts or failure to meet evolving sustainability demands.

Customers may increasingly expect STOBG to deliver social and environmental value, as well as disclose key KPIs and participate in sustainability disclosure frameworks. Proactive and transparent sustainability reporting may be required to gain competitive advantage.

Technology

Uncertainty around evolving technology and global competition, combined with the risk of missing opportunities to adopt low-carbon construction methods.

Demand for sustainable building materials may not be driven directly by STOBG customers, however, not adopting new technologies or materials quickly could hinder competitiveness.

Difficulty staying ahead of evolving climate-related regulations, mandates, and sustainability contract requirements.

Differing regulatory frameworks across states and jurisdictions poses compliance and reporting challenges. Risk of increased cost or penalties if regulatory requirements are not met or potential damages if contractual obligations are not satisfied.

Market

Policy/Legal

STOBG Strategic Responses STOBG aims to manage our environmental impact and prepare for the climate transition. We have started to explore the use of sustainable building materials such as low-carbon concrete and mass timber. The increased use of prefabricated materials is also more resource efficient as it helps us to minimize waste and limit climaterelated labor risks. We have also begun to incorporate environmental and social questions while sourcing suppliers to manage risk within our value chain. To prepare us for the climate transition we are also focused on building internal capacity to track and crossreference emerging requirements and evolving sustainability standards across jurisdictions.

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Climate Risk Mitigation Report | 2026

CLIMATE-RELATED OPPORTUNITIES Climate-related opportunities are the potential benefits that arise from efforts to mitigate or adapt to climate change, such as to improve efficiency and resilience. Through the assessment process, STOBG identified potential opportunities for our business to continue to deliver value for our customers. The qualitative scenario analysis findings for our most significant climate-related opportunities are summarized below.

TABLE 5.

CLIMATE-RELATED OPPORTUNITY OVERVIEW

Opportunity Type

Products & Services

Markets

Resource Efficiency

Resource Efficiency

Description

STOBG Strategic Responses

Innovating for a sustainable future

STOBG aims to continue innovating and expanding our services and construction solutions to help clients achieve their sustainability goals. We have begun to explore sustainable building material options and have seen increased customer interest in re-use and disassembly planning, as well as disaster-hardening infrastructure projects.

Enhancing brand reputation through transparent sustainability reporting

To build trust and strengthen our reputation, STOBG intends to share our sustainability journey.

Accelerating decarbonization through value chain partnership

To accelerate decarbonization, STOBG aims to continue partnering with our value chain, both customers and suppliers, to drive collective efforts to reduce embodied carbon of building materials and reduce scope 3 emissions.

Implementing operational and resource efficiency measures

By reducing jobsite waste and promoting circular practices, STOBG aims to help lower project costs while delivering added value to clients who want to support more sustainable construction outcomes. Several waste reduction programs have been piloted to date.

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PILLAR 3

RISK MANAGEMENT

CLIMATE-RELATED RISK IDENTIFICATION AND MANAGEMENT The risk assessment highlighted in the previous pillar evaluated how climate change may affect our operations over short, medium, and longterm horizons, under both low- and high-emission futures, in line with TCFD recommendations.

Going through this process has provided us with a prioritized view of climate-related risks and opportunities and has enabled us to assess which of these risks will be integrated into our enterprise risk management (ERM) and strategic planning.

Through the surveys and focus group discussions into our business decision-making processes. with global leaders from operations, finance, legal, The assessment culminated in actionable executive leadership, human resources, strategy, recommendations for future integration into our environmental health and safety, compliance, ERM program so that climate risks are embedded sustainability, innovation, IT, communications and within our broader risk management framework. risk management, we identified and assessed how physical and transition risks could impact Climate-related risks are considered through our future business operations. These findings multiple lenses. Operational teams evaluate informed our qualitative scenario analysis and risk location-specific conditions, such as extreme heat, scoring, enabling us to prioritize material risks and heavy rainfall, flooding, and high winds, during evaluate how to incorporate climate considerations project planning and delivery. At the project-level,

climate risks are assessed and managed alongside other risks through a risk management process applied throughout all phases of the construction lifecycle. This process uses structured reviews to identify, escalate, and mitigate risks at all stages of a project’s lifecycle. Crisis management protocols address severe events and serious incidents, while broader business continuity practices are being refreshed to strengthen our resilience.

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CLIMATE-RELATED RISK INTEGRATION INTO ENTERPRISE RISK MANAGEMENT As discussed above, STOBG employs a multifaceted approach to risk assessment and monitoring across our operations. We periodically conduct enterprise risk assessments to identify, evaluate, and manage organizational risks, enhance risk management programs, and assess control effectiveness. These assessments draw on internal input, audit findings, and industry benchmarks, supported by external advisors.

Industry Ethics and Compliance Initiative. These memberships provide access to best practices and support continuous improvement in governance and integrity across the enterprise.

STOBG is advancing toward a dynamic ERM framework designed to enhance organizational resilience. As part of this transition, we are implementing a standardized 5x5 risk scoring methodology to evaluate risks—climate-related and otherwise—based on both impact and likelihood. This structured approach reflects recognized best practices and will support An independent Internal Audit function evaluates consistent, transparent, and decision-useful risk assessments and risk governance across compliance with policies and procedures, the company. The Climate Risk Register, which contractual obligations, and regulatory collates potentially significant climate-related requirements. This team works closely with the compliance and legal departments to review risk risks and opportunities identified in our climate risk assessment, will be assessed and integrated management protocols and internal controls in where appropriate into the enhanced ERM light of best practices. STOBG also benchmarks our programs against industry standards through framework upon its finalization. STOBG endeavors participation in recognized ethics and compliance to continually improve risk governance and refine our processes in an effort to effectively identify, initiatives, such as Ethisphere’s Business Ethics assess, and manage climate-related risks.

Leadership Alliance and the Construction

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PILLAR 4

METRICS AND TARGETS

At STO Building Group, we use a range of metrics and targets to assess and manage climate-related risks and opportunities. Our environmental policy prioritizes carbon reduction, waste management, pollution prevention, and resource conservation across our operations.

for carbon reporting, monitoring jobsite-level ESG metrics, and evaluating the embodied carbon of building materials. Our project teams also benchmark performance through thirdparty certifications and standards, such as LEED, WELL, BREEAM, and Green Globes, to drive improvements in energy, water, and material use.

To track our progress and inform decision-making, we leverage specialized tools and technologies Where we are tracking GHGs, we calculate our annual carbon footprint in line with the for carbon accounting, waste management, and resource efficiency. These include platforms Greenhouse Gas Protocol and report to EcoVadis,

a globally recognized sustainability assessment platform, to evaluate our performance across environmental impact, labor and human rights, ethics, and procurement practices. We review our environmental metrics and targets regularly as part of our broader risk management and sustainability programs, and we collaborate with customers and partners to identify opportunities for further improvement.

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