Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Not disclosed

Social Achievements

• Launched single-family rental business
• Developed a staff diversity profile improving a subset of "S" score by 6 points

Governance Achievements

• Updated governance policies
• Developing a board diversity matrix required by NASDAQ
• Updated Environmental Policy
• Updated Human Rights Policy

Climate Goals & Targets

Environmental Challenges

• Inflationary pressures
• Slowing markets
• Rising interest rates

Mitigation Strategies

• Focus on delivering finished lots on time and on budget
• Anticipate continuing to grow through the remainder of fiscal 2022

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Integrating conservation practices and incentives, together with effective water reuse, demonstrates our commitment to providing environmentally responsible and sustainable water and wastewater services.

Social Achievements

• We aim to give back to the communities where we live and work and believe that this commitment helps in our efforts to attract and retain employees. We offer employees the opportunity to give back through volunteering or company donations to approved causes.
• We believe that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better, more innovative services and is crucial to our efforts to attract and retain key talent. We continue to focus on building a pipeline for talent to create more opportunities for workplace diversity and to support greater representation within Pure Cycle. We develop and encourage an inclusive culture through company events, participation in our recruitment efforts, and input into our hiring strategies.

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Our operations are concentrated in the Front Range area of Colorado; we are subject to general economic conditions in Colorado.
• We are dependent on the housing market and development in our targeted service areas for future revenue.
• Providing wholesale water service using our Colorado Front Range water supplies is one of our key sources of future revenue.
• Although there have been positive market gains in the Colorado housing market in recent years, inflation and rising interest rates have caused slowdowns in the homebuilding industry.
• Significant competition from other development projects could adversely affect our results.
• Our operations could be adversely impacted by increases in material, labor, supplier, logistics and other operating costs, or supply chain delays and shortages, which could cause lower margins or lost sales and adversely impact our business, financial position, results of operations and cash flows, and component price volatility and availability, as well as supplier concentration.
• Our water business is subject to seasonal fluctuations and weather conditions that could affect demand for our water service and our revenue and that could become more extreme with climate change.
• We depend on an adequate water supply to meet the present and future demands of our customers and their end-use customers and to continue our expansion efforts.
• The physical impacts of natural disasters and severe weather conditions could reduce consumer demand for housing, result in service disruptions, delay the closing of the sale of residential lots at Sky Ranch and increase our costs, any of which could harm our sales and results of operations.
• Government regulations and legal challenges may delay the closing of the sale of our residential lots, increase our expenses or limit other activities, which could have a negative impact on our results of operations.
• We must provide water that meets all federal and state regulatory water quality standards and operate our water and wastewater facilities in accordance with these standards.
• Laws and regulations related to climate change, greenhouse gases, and energy may adversely affect us by directly and indirectly increasing the cost of or restricting our planned future growth activities.
• Our construction of water and wastewater projects and improvements at Sky Ranch may expose us to certain completion, performance, and financial risks.
• The enactment and implementation of SB 19-181 increasing state and local regulatory oversight of oil and gas development could have an adverse effect on our water sales to the oil and gas industry for hydraulic fracturing (fracking) and demand for new homes at Sky Ranch.
• A significant portion of our water supplies come from non-renewable aquifers and inadequate water and wastewater supplies could have a material adverse effect on us.
• To utilize our water resources as intended, we may need to apply for a change of use with the water court from time to time.
• A failure of the water wells or distribution networks we own, or control could result in losses and damages that may affect our business and financial condition.
• Development on the Lowry Ranch is not within our control and is subject to obstacles.
• The funds we are advancing to the Sky Ranch CAB for construction of public improvements might not be repaid, which would negatively impact our income, gross margin on selling lots, and cash flows.
• Supply shortages and risks related to the demand for skilled labor and building materials could increase costs and delay closings.
• We may purchase additional land parcels for development or other purposes, thereby exposing us to certain financial risks.
• Delays in property development may extend the time it takes us to recover our property development costs and delay our revenue from water and wastewater resource development services.
• Fluctuations in real property values may require us to write-down the book value of our land interests.
• Our single-family home development activities expose us to additional operational and real estate risks, which may adversely affect our financial condition and operating results.
• We will depend on our tenants for all of our rental home revenue.
• Tenant relief laws, including laws restricting evictions and other regulations could limit our ability to evict bad tenants which may negatively impact our rental income and profitability.
• It would be difficult for us to quickly generate cash from sales of our properties.
• Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business.
• We may not generate sufficient cash flows from operations or other capital resources to pursue our business objectives.
• We may not be able to manage the increasing demands of our expanded operations.
• We may be unsuccessful in managing our operations and growth.
• Our water sales for the past several years have been highly concentrated among companies providing hydraulic fracturing services to the oil and gas industry, and such sales can fluctuate significantly.
• Future Ballot Initiatives at the State or Local Level Could Restrict Oil and Gas and Land Development.
• We may be subject to significant potential liabilities because of warranty and liability claims made against us.
• A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.
• Conflicts of interest may arise relating to the operation of the Rangeview District, the Sky Ranch Districts and the Sky Ranch CAB.
• Growth limitations or moratoriums imposed by governmental authorities could adversely affect our land development activities or the land development activities of our customers, which could adversely impact both the land development and water and wastewater segments of our business.
• We could be hurt by efforts to impose liabilities or obligations on us regarding labor law violations by other persons whose employees perform contracted services.
• Contamination to our water supply may result in disruption in our services and litigation, which could adversely affect our business, operating results and financial condition.
• We may be adversely affected by any future decision by the Colorado Public Utilities Commission to regulate us as a public utility.
• The Rangeview District’s and our rights under the Lease have been challenged by third parties.
• Our Lowry Ranch surface water rights are “conditional decrees” and require findings of reasonable diligence.
• Our operations are affected by local politics and governmental procedures that are beyond our control.
• The number of connections we can serve are affected by local governmental policies that are beyond our control.
• We are dependent on the services of a key employee.
• Our stock price has been volatile in the past and may decline in the future.
• Unauthorized access to confidential information and data on our information technology systems and security and data breaches could materially adversely affect our business, financial condition, and operating results.
• Failure to maintain effective internal controls over financial reporting could result in material misstatements in our financial statements and affect our ability to meet our reporting requirements.
• Conflicts, terrorist attacks, public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 coronavirus and general instability could adversely affect our business.

Mitigation Strategies

• We design, construct, operate and maintain our water and wastewater facilities using advanced water treatment and wastewater treatment technologies, which allow us to use our water supplies in an efficient and environmentally sustainable manner.
• We develop our water and wastewater systems in stages to efficiently meet customer demands in our service areas by managing capital investments required for construction of facilities.
• We use third-party contractors to construct our facilities as needed.
• We employ licensed water and wastewater operators to run our water and wastewater systems.
• Our water and wastewater systems conjunctively use surface and groundwater supplies and storage of raw water and highly treated reclaimed water supplies to provide a balanced sustainable water supply for our customers.
• We believe that regional cooperation among area water providers in developing new water supplies, water storage, and transmission and distribution systems provides the most cost-effective way of expanding and enhancing service capacities for area water providers.
• We continue to seek opportunities for developing water supplies and water storage opportunities with other area water providers.
• We believe we are well positioned to assist certain of these providers in meeting their current and future water needs.
• We competitively bid contracts for infrastructure improvements (grading, utilities, roads, water, and wastewater infrastructure) at Sky Ranch.
• While we contract with third parties for our labor and materials at a fixed price, which we believe allows us the ability to mitigate the risks associated with shortages of and increases in the cost of labor and building materials, other unforeseen factors may arise which could increase our costs.
• We estimate that the water assets we own and have the exclusive right to use have a supply capacity of approximately 60,000 SFE units, and we believe that they provide us with a significant competitive advantage along the Front Range.
• We believe that our pricing structure is competitive and that our water portfolio is well balanced among surface water rights, groundwater rights, storage capacity and reclaimed water supplies.
• We believe we have exceeded the market’s expectations with the delivery of our lots at Sky Ranch and have demonstrated the ability and expertise to continue to deliver lots in a large-scale master planned community.
• We attempt to align capital budgeting and expenditures to address these issues in a timely manner.
• We have a program in place to monitor facilities for compliance with permitting, monitoring, and reporting for wastewater discharges.
• We have a program in place to monitor our facilities for compliance with regulatory requirements, and we do not anticipate that costs associated with our handling and disposal of waste material from our water and wastewater operations will have a material impact on our business or financial condition.
• Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our shareholders.
• We provide employees with compensation packages that include base salary, incentive bonuses, and long-term equity awards tied to the value of our stock price and other key performance indicators.
• In addition to cash and equity compensation, we also offer employees benefits such as fully or partially paid health insurance (medical, dental and vision), paid time off, paid sick leave, paid parental leave, paid bereavement time, and a 401(k) plan with a company match.
• We have established processes for assessing, identifying and managing cybersecurity risks, which are built into our information technology function and are designed to safeguard our information assets and operations from internal and external cyber threats, including protecting employee information from unauthorized access to or attacks on our networks and systems.
• We have engaged external parties, including risk management consultants and computer security firms, to enhance our cybersecurity oversight.
• In an effort to deter and detect cyber threats, we periodically provide training programs to our employees on issues related to privacy and data protection, cybersecurity risks, and the importance of reporting all incidents immediately.
• We use technology-based tools to mitigate cybersecurity risks and to bolster our employee-based cybersecurity programs.
• We also perform annual vulnerability assessments, conducted by independent, third-party cybersecurity firms.
• Additionally, as part of our overall risk mitigation strategy, the Company obtains certain insurance policies.
• To address this material weakness, management devoted significant effort and resources to the remediation and continues its efforts to improve its internal control over financial reporting by implementing additional steps in the review process of various complex schedules that support accounting entries on a monthly and quarterly basis or moving these manual tracking and reconciliation processes to a more automated software system.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Droughts
• Freezing weather

Transition Risks

• Regulatory changes
• Market shifts

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed