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Climate Related Financial Risk Disclosure

1.0 Introduction

Sutter Home, Inc. has conducted a Climate Related Financial Risk Disclosure in accordance with the guidelines provided in the California Air Resources Board (CARB), Draft Checklist (CARB Checklist) posted September 2, 2025, as prescribed in Senate Bill 261.  For this reporting period, Sutter Home Inc. is following the Task Force on Climate-Related Financial Disclosures (TCFD) framework as outlined in the CARB Checklist for this first reporting cycle.

The report identifies the specific climate-related financial risks, which are material to the company’s operations and business performance. Sutter Home Inc.’s disclosure reflects the company’s efforts to assess and communicate risk.

2.0 Governance

Disclose the organization’s governance around climate-related risks and opportunities:

2.1 Governance    

a) Describe your organization’s governance structure, if any, for identifying, assessing, and managing climate-related financial risks.

On a semi-annual basis, the Executive Leadership Team and  members of the Family Board of Directors maintain oversight of environmental sustainability to include a review of climate-related risks.  These risks are assessed by the business functions within Operations, Winemaking, Supply Chain, Marketing, Finance, and are summarized by the Environmental Health & Safety (EHS) function.  Reviews include:

  • Climate risk assessments and mitigation strategies
  • Capital allocation for climate resilience investments
  • Progress against emissions reduction targets
  • Emerging regulatory requirements

b) Discussion of any management oversight of climate-related risks and opportunities should provide a description pertaining to Board oversight of those climate-related risks and opportunities.

Sustainability, including climate action, and performance is regularly reported to our Leadership Team and at least annually to the Family Board of Directors.   Leaders from across the business participate in subcommittees and initiatives to advance our strategy and initiatives. This cross-functional team, comprised of personnel from the company’s internal Operations, Winemaking, Supply Chain, Marketing, Finance and EHS organizations, are responsible for developing climate-related scenarios that pose risks to Sutter Home Inc., in line with the TCFD framework.

3.0 Strategy           

Describe the actual and potential impacts of climate-related risks and opportunities on the company’s operations, strategy and financial planning (where material).

3.1 Strategy           

a) The climate-related risks and opportunities the organization has identified over the short, medium, and long term.

We have assessed physical and transition risks from climate change that could impact our business and financial performance. Risks, impacts and opportunities are categorized by timeframe:

  • Short-term: 1–5 years
  • Medium-term: 5–10 years
  • Long-term: 10+ years

Physical Risks

Climate-related physical risks were evaluated using scenarios aligned with the Intergovernmental Panel for Climate Change (IPCC) Representative Concentration Pathways (RCPs), specifically PCR 4.5, RCP 6.0 and RCP 8.5. Representative Concentration Pathways (RCPs), are standardized scenarios showing how different levels of future greenhouse gas emissions could drive global warming and climate impacts. These pathways provide a range of possible climate futures, and the severity and nature of impacts vary across scenarios.   However, across all RCP pathways, we  recognize that extreme weather events, already occurring today, are expected to intensify, affecting nearly all sites and our agricultural supply chain.  Potential impacts include:

  • Operational disruptions, crop losses, and supply chain instability
  • Increased water costs, relocation of water-dependent processes
  • Damage to assets and infrastructure, higher insurance costs
  • Health hazards and employee relocation
  • Reduced utility grid electricity reliability

Chronic climate shifts (e.g., water scarcity, changing precipitation patterns, rising temperatures) may further disrupt operations and supply chains. California projections indicate water demand will exceed supply in coming decades.

Transition Risks

Key challenges include:

  • Incomplete implementation of renewable electricity strategy
  • Limited supplier engagement on Scope 3 decarbonization
  • Difficulty deploying technologies for hard-to-abate emission sources

Additional pressures:

  • Growing demand for aggressive net-zero targets from customers and consumers
  • Reputational risk if climate efforts lag
  • Financial institutions requiring climate risk data for credit decisions
  • California legislation mandating climate disclosures starting in 2026
  • Emerging climate regulations and carbon taxes

We recognize that these risks highlight the need for proactive climate resilience planning and collaboration across our value chain.

b) Describe the actual and potential impacts of climate-related risks and opportunities on the company’s operations, strategy and financial planning (where material). This includes describing:

1) The climate-related risks and opportunities the organization has identified over the short, medium, and long term.

Annual and long-term plans include capital and operating investments for mitigation initiatives, such as technologies that improve efficiency and reduce water and energy use in wineries, vineyards, and across our supply chain.

Physical risks are expected for the next 15–30 years regardless of global decarbonization progress, while transition risks depend on evolving national and regional policies. Compliance and adaptation to these risks are embedded in our management practices.

2) The impact of climate- related risks and opportunities on the organization’s operations, strategy, and financial planning.

For climate-related risks screening scenarios analysis, the physical risks were evaluated under the IPCC RCP 4.5 (moderate stabilization pathway), RCP 6 (high stabilization pathway) and RCP 8.5 (worst case pathway) scenarios.   Under these scenarios, based on an analysis of Sutter Home Inc.’s current operating locations and the regional areas  we assess our resilience as follows:

Physical Risks

Water Stress/Drought (High exposure, all scenarios)
Climate change may increase water scarcity and degrade water quality in key regions, driving competition for high-quality water and raising costs for purification and waste treatment. Agricultural impacts include crop stress; mitigation efforts focus on resilient cultivars and sustainable farming. Wineries are improving efficiency and water reuse. Potential impacts: higher cost of goods, lower net sales.
Probability: Moderate | Control: Partly controllable

Riverine Flooding (Medium exposure, all scenarios)
Extreme rainfall could affect sites in flood-prone or urban areas. Mitigation plans are being assessed.
Probability: Moderate | Control: Partly controllable

Wildfire (Medium exposure in 2 scenarios; High in 4–5°C)
Localized disruptions in vineyard regions, especially Napa/Sonoma. Mitigation plans ongoing.
Probability: High in Napa/Sonoma; Low–Moderate elsewhere | Control: Partly uncontrollable

Extreme Weather/Temperature (High exposure, all scenarios)
Severe weather and rising temperatures may damage infrastructure, reduce crop quality, and increase operating costs.
Probability: Very likely | Control: Partly uncontrollable

Transition Risks

Regulatory Alignment
Operations are in regions with established climate policies. Compliance with evolving regulations is essential for competitiveness.

Net Zero Commitment
To meet global and company net-zero goals, strategic actions include:

  • Electrifying operations
  • Increasing renewable electricity use
  • Adopting low-carbon equipment and fuels
  • Improving packaging materials to reduce waste
  • Engaging suppliers to cut Scope 3 emissions

Cost of Regulation
Carbon taxes, emissions trading, and clean energy mandates may raise energy and production costs.
Probability: Likely | Control: Partly controllable

Consumer Expectations
Growing demand for sustainable products creates reputational and market risks if expectations are unmet.
Probability: Likely | Control: Partly controllable

4.0 Risk Management

Describe how the reporting entity identifies, assesses, and manages climate-related risks including a description of:

a) Describe how the reporting entity identifies, assesses, and manages climate-related risks including a description of:

As part of the company’s Enterprise Risk Management (ERM), climate-related risks are assessed twice a year, focusing on physical and transition risks that could impact business and financial results. In Q2 2025, a detailed scenario analysis was conducted using the TCFD framework in order to evaluate exposure and severity, which confirmed existing risk assessments. In Q3 2025, this process was formalized in order to align with California SB 261 requirements.

Physical Risks: Drought, extreme heat, flooding, severe weather events, frost, wind, and wildfires.

Transition Risks: Carbon pricing, emissions regulations, water curtailments, mandated GHG reporting, and increased raw material costs due to climate factors.

b) The process the reporting entity uses for identifying, managing and assessing climate-related risks, and how those considerations and processes are integrated into the organization’s overall risk management.

To manage these risks, site-level assessments (e.g., watersheds) were conducted while cross-functional teams, Operations, Winemaking, Finance, Supply Chain, and Environmental Health & Safety were engaged in developing and implementing mitigation plans. Key initiatives include improving water efficiency, conducting watershed risk assessments, reducing greenhouse gas emissions, implementing renewable electricity strategies, and strengthening raw material supply resilience.

Climate-related risks and opportunities are fully integrated into the company’s semiannual ERM process, which includes evaluating mitigation plans. Cross-functional teams monitor and manage policy and regulatory developments that could affect the business, ensuring proactive compliance and adaptation.

5.0 Metrics & Targets        

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities:

5.1 Metrics & Targets        

a) Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.

Sutter Home Inc. conducted a climate-related risk screening and scenario analysis using the Task Force on Climate-related Financial Disclosures (TCFD) framework to evaluate both exposure and severity of potential impacts.  Sutter Home Inc. has collected data on its energy consumption and has calculated Scope 1 and 2 greenhouse gas emissions inventory and carbon intensity, and is currently working on calculating Scope 3 emissions in line with internationally recognized protocols. This information is used as a basis for developing additional metrics relating to specific elements of the company’s strategy including, for example, the percentage of renewable energy used within Sutter Home Inc.’s direct operations and its supply chain, as well as the carbon foot printing of winery and vineyard operations.

To assess financial severity, the physical and transition risks considered in the exposure assessment were reviewed.  For the scenario analysis:

Physical risks were evaluated under three IPCC Representative Concentration Pathway (RCP) projections:  RCP 4.5, RCP 6, RCP 8.4.

Transition risks were assessed reviewing winery and State specific scenarios and goals:

  • Net Zero by 2045
  • Announced Pledges
  • Stated Policies from the State of CA or US Fed Government

This approach provides a structured and forward-looking assessment of climate-related risks and opportunities, aligned with global standards.

Related Risks:

Climate-related physical risks represent the most prevalent threat across the company’s operations, with potential impacts across nearly all sites under the three IPCC RCP scenarios (4.5, 6.0 and 8.5). Extreme weather events, already being experienced, are expected to intensify, and previously uncommon or new types of events may emerge. These risks also extend to agricultural supply chain and other key suppliers.

In addition to physical risks, transition risks pose significant challenges. These include:

  • The potential failure to fully implement the company’s renewable electricity strategy
  • Limited engagement or progress with suppliers on Scope 3 decarbonization
  • Difficulty in identifying and deploying viable technologies for hard-to-abate emissions, including carbon capture and alternative solutions specific to the Wine and Spirits industry.

Together, these risks underscore the importance of proactive climate resilience planning and strategic collaboration across the value chain.

6.0 Conclusion

This report includes forward-looking statements based on current expectations, assumptions, and anticipated developments. They are subject to numerous risks, uncertainties, and changing circumstances that may cause actual outcomes to differ materially from those expressed or implied.

Forward-looking statements are made as of the date of this report. Sutter Home Inc. assumes no obligation to update them in light of new information or future events. However, Sutter Home Inc. is committed to evolving its disclosures over time to provide stakeholders with meaningful insights, in alignment with emerging data and regulatory developments related to climate change.

The inclusion of information in this report should not be interpreted as an indication of its materiality or financial impact, nor as a commitment to ensure that the described actions or investments will occur.