Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental stewardship
• Diversity and inclusion
• Corporate governance

Environmental Achievements

• Agilent ranked in the top three of Barron’s Most Sustainable Companies in America for the third year in a row; Starbucks committed to cut its carbon, water, and waste footprints by half by 2030; Lowe’s invested more than $1 billion in employee support, community donations, and enhanced store safety; Howard Hughes Corporation set 10-year goals for energy, water, waste, and carbon emissions.

Social Achievements

• Lowe’s invested more than $1.2 billion in special associate support, community donations and enhanced store safety; Chipotle announced that 10% of its officers’ annual incentive bonus will be tied to the company’s progress toward achieving ESG objectives; The Howard Hughes Corporation regularly received awards for owning and managing communities considered among the best places to live in the United States; Investment Manager showed strong commitment to diversity initiatives internally and in connection with the PSTH offering.

Governance Achievements

• Chipotle refreshed its Board and management, improving governance; The Investment Manager’s incentives are fully aligned with the performance of the funds, ensuring no conflict of interest between the Investment Manager and PSH.

Climate Goals & Targets

Environmental Challenges

• The COVID-19 pandemic and its impact on portfolio companies and operations; PSH shares traded at a significant discount to NAV; Regulatory risks and changes in laws or regulations; Portfolio concentration; Dependence on William Ackman; Market risk and economic downturns.

Mitigation Strategies

• Implementation of a hedging program to mitigate the impact of the COVID-19 pandemic; Issuance of bonds to raise capital; Share buyback programs; Quarterly dividend payments; Increased insider ownership; Active monitoring of portfolio positions and regulatory changes; Business continuity plan; Robust information security controls; Vendor supervision policy; Conservative leverage levels.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: AIC Code of Corporate Governance

Third-party Assurance: Ernst & Young LLP

Environmental Metrics

ESG Focus Areas

• Climate change
• Diversity
• Governance

Environmental Achievements

• The Investment Manager has integrated ESG into its investment selection, risk management and stewardship processes, and has embedded ESG considerations into its operations as a firm. To meet its goal of being carbon-neutral by the end of 2022, the Investment Manager has implemented environmentally sustainable practices throughout its office space and will purchase carbon credits for the emissions it is unable to eliminate.

Social Achievements

• The Investment Manager continued its leadership on diversity initiatives by selecting female and minority owned banks as co-managers for the 2027 and 2031 Bond offerings and by adding women and representatives of ethnic minority groups to its analyst and operational teams.

Governance Achievements

• The addition of Tope Lawani, Rupert Morley and Tracy Palandjian expanded the Board to seven members, six of whom are independent.

Climate Goals & Targets

Environmental Challenges

• Widening discount to NAV at which PSH shares traded.
• Decrease in value of PSH’s commitment to invest in Pershing Square Tontine Holdings (“PSTH”).
• Potential impact of inflation on PSH’s portfolio.
• Geopolitical events (Russia-Ukraine war).

Mitigation Strategies

• Continued strong investment performance to attract long-term investors.
• Increased marketing efforts to broaden investor base.
• Implementation of asymmetric interest rate swaption hedge to protect against inflation.
• Reinvestment of hedge proceeds into undervalued companies like Netflix.
• Active monitoring of the discount to NAV and consideration of potential measures to reduce it.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: AIC Code of Corporate Governance

Third-party Assurance: Ernst & Young LLP

Environmental Metrics

ESG Focus Areas

• Environmental management
• Human rights
• Safe and healthy working conditions
• Fair treatment of employees
• Collective bargaining issues
• Business integrity and avoidance of corruption
• Compliance with applicable laws and regulations
• Strong corporate governance
• Risk management culture
• Diversity and Inclusion

Environmental Achievements

• Goal to be carbon-neutral by the end of 2022. Implemented environmentally sustainable practices throughout our office space, including recycling, waste reduction and energy efficiency programs.

Social Achievements

• Commitment to fostering a diverse and inclusive work environment. Established a Diversity & Inclusion Committee to provide strategic leadership to our efforts.
• Pershing Square Foundation committed more than $600 million in grants and social investments in health and medicine, education, economic development and social justice.

Governance Achievements

• Maintains a robust compliance program designed to support high standards of business conduct and fulfill applicable legal obligations. Employees receive regular training on compliance policies and procedures.
• Adopted anti-discrimination, anti-corruption and anti-money laundering policies and procedures, and maintains a Code of Ethics to address potential conflicts of interest.

Climate Goals & Targets

Environmental Challenges

• Data addressing Sustainability Risks may be opaque, incomplete, inaccurate or non-existent and Sustainability Risks are not always disclosed by companies.
• Most of the available information on a company’s Sustainability Risks is generally based on historical data, which may not fully reflect the future performance of that company or the Sustainability Risks it is exposed to.

Mitigation Strategies

• The Firm seeks to incorporate all appropriate information into its investment decision-making process.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Climate change
• Governance

Social Achievements

• The Investment Manager continues to build a diverse team of high-performance professionals and seeks meaningful ways to promote an inclusive work environment, care for its employees and contribute to charitable and community projects. The Investment Manager donated $869,900 to charitable causes in 2023 and employees participated in a community revitalization project near the office and served meals at a community mission.

Governance Achievements

• Amendments to the Variable Performance Fee provisions in PSH’s IMA that could reduce the performance fees paid by PSH, potentially starting in 2024.
• Initiated a new methodology for determining the future dividends that PSH pays which established that the dividend payment would increase based on NAV growth.
• Authorized a total of $350 million in share repurchase programs in 2023.

Climate Goals & Targets

Environmental Challenges

• NAV Discount: Public Shares have traded at a significant discount to NAV.
• Investment Risk: Investments are exposed to the risk of loss of capital.
• Investment Manager’s Authority: Investment Manager has broad authority and performance fees may incentivize excessive risk.
• Portfolio Concentration: Portfolio is highly concentrated, making it sensitive to market fluctuations.
• Corporate Engagement: Engaged investing may require substantial resources and involve litigation.
• Portfolio Liquidity Risk: Restrictions on trading certain securities.
• Regulatory Risk: Changes in laws or regulations could negatively impact the Company.
• Key Personnel: Departure of key personnel could materially affect the Company.
• Tax Risk: Changes to tax laws could adversely affect the value of investments.
• Market Risk: Adverse changes in global financial markets could negatively impact performance.
• Information Security: Information security breach could result in disclosure of sensitive information.
• Service Providers: Key service providers performing inadequately or being significantly disrupted.

Mitigation Strategies

• Actions taken to address the discount to NAV include adding a listing on the Main Market of the LSE (2017), adding a USD denominated LSE quotation (2018), initiating a quarterly dividend (2019), moving to the North American investment sector of the Association of Investment Companies (2022), amending its dividend policy in 2022, engaging Cadarn Capital Ltd and LodeRock Advisors Inc. in 2023, and amending the IMA’s performance fee offset provisions.
• Investment Manager is an experienced investor and makes investment decisions in accordance with its investment principles.
• Investment Manager seeks to limit the impact of unsuccessful novel investments by sizing them appropriately and regularly reevaluating any unrealized losses.
• Investment Manager performs extensive research prior to making new investments, along with ongoing monitoring of positions held.
• Investment Manager has significant experience engaging constructively with the management of portfolio companies.
• Investment Manager actively monitors positions with trading restrictions to manage its future liquidity needs.
• Investment Manager actively manages the Company’s cash and cash equivalents to ensure sufficient liquidity.
• Investment Manager considers possible legal and regulatory issues prior to initiating an investment.
• Investment Manager has structured the incentive compensation of key personnel to promote their retention.
• Investment Manager monitors emerging risks to global markets and may opportunistically invest in hedges.
• Company’s sensitive information is maintained by the Investment Manager and the Administrator, which have implemented robust information security controls.
• Investment Manager has adopted a vendor supervision policy and performs due diligence on service providers.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: AIC Code of Corporate Governance

Third-party Assurance: Ernst & Young LLP

Environmental Metrics

ESG Focus Areas

• Environmental management
• Human rights
• Safe and healthy working conditions
• Fair treatment of employees
• Collective bargaining issues
• Business integrity and avoidance of corruption
• Compliance with applicable laws and regulations
• Strong corporate governance
• Risk management culture
• Diversity and Inclusion

Environmental Achievements

• Implemented environmentally sustainable practices throughout our office space, including recycling, waste reduction and energy efficiency programs.
• Goal to be carbon neutral; intends to purchase carbon credits to offset unavoidable emissions

Social Achievements

• Established a Diversity & Culture Committee to provide strategic leadership to our efforts to enhance our culture and company.
• Pershing Square Foundation (PSF) has committed more than $700 million in grants and social investments in health and medicine, education and economic development
• Offers employees volunteer opportunities and encourages staff to participate in various philanthropic efforts

Governance Achievements

• Maintains a robust compliance program designed to support high standards of business conduct and fulfill applicable legal obligations.
• Adopted anti-discrimination, anti-corruption and anti-money laundering policies and procedures
• Maintains a Code of Ethics to address potential conflicts of interest

Climate Goals & Targets

Environmental Challenges

• Unmitigated ESG risks introduce unpredictability in the analysis of the potential long-term success of a business and expose the business to extrinsic factors that are beyond our control.
• Data addressing Sustainability Risks may be opaque, incomplete, inaccurate or non-existent and Sustainability Risks are not always disclosed by companies.
• Most available information on a company’s Sustainability Risks is generally based on historical data, which may not fully reflect the future performance of that company or the Sustainability Risks it is exposed to.

Mitigation Strategies

• Integrates ESG risks into existing due diligence process to understand potential key risk factors in investments.
• Seeks to deeply understand the business, the industry sector, and the context in which it operates to assess the extent to which ESG-related risks and management’s approach to ESG issues potentially expose the investment to the risk of a permanent loss of capital.
• May engage with boards and management to improve practices that pose sustainability risks in order to facilitate long-term value creation.

Supply Chain Management

Climate-Related Risks & Opportunities