BASF Report 2021 Management’s Report – E.U. Taxonomy 95 E.U. Taxonomy In accordance with the E.U. Taxonomy Regulation and the supplementary delegated acts, the Nonfinancial Statement includes, for the first time, the share of the Group’s taxonomy- eligible s ales, investments and operating expenses for the 2021 business year relating to the environmental objectives of “climate change mitigation” and “adaptation to climate change.” BASF activities that are not currently covered by the E.U. taxonomy, and as such, are not relevant from a taxonomy perspective are generally reported as taxonomy-non- eligible in accordance with the delegated acts. These include large parts of BASF’s activities that may nevertheless be in line with the E.U.’s environmental objectives. To determine taxonomy eligibility, we first identified the activities – Afforestation investments reported in the Consolidated Financial Statements. relevant to BASF. The entire portfolio of products manufactured by – Electricity generation using solar photovoltaic technology Investments in the “manufacture of organic basic chemicals” and in BASF as well as production plants and investment projects were – Production of heat/cool from bioenergy the “manufacture of batteries” made the greatest contribution. then reviewed to determine whether they belong to one of the – Production of heat/cool using waste heat Operating expenses include non-capitalized costs that relate to 2 following activities in the manufacturing sector that had been identi- – Close to market research, development and innovation research and development, and maintenance and repair. They are fied as relevant: not reported in the Consolidated Financial Statements in this form. – Manufacture of hydrogen These activities made no material contribution to our overall tax- All of the investments and operating expenses of a production – Manufacture of carbon black onomy eligibility and were generally classified as taxonomy-non- facility with a taxonomy-eligible activity are counted as taxonomy- 1 eligible. Taxonomy-eligible operating expenses accounted for 11% – Manufacture of soda ash eligible. – Manufacture of chlorine of total operating expenses. The largest contributions were from the – Manufacture of organic basic chemicals Buildings constructed and operated by BASF, traffic facilities and activities “manufacture of organic basic chemicals” and “manufac- – Manufacture of anhydrous ammonia central water supply and wastewater management systems, i.e., the ture of plastics in primary form.” – Manufacture of nitric acid infrastructure that supports our core activities, may also fall under – Manufacture of plastics in primary form the E.U. taxonomy’s description of activities in the areas “Water BASF entered into several partnerships to transform energy supply supply, sewerage, waste management and remediation,” “Trans- in 2021 (see page 128). The resulting investments are not included We additionally assessed the following enabling activities in the E.U. port,” and “Construction and real estate activities.” In assessing in the analysis of taxonomy eligibility, as investments in joint ventures taxonomy to take into account solutions that contribute to climate taxonomy eligibility, we focused in 2021 on activities in the manufac- and associated companies do not have to be reported under the change mitigation at our customers: “manufacture of batteries” and turing sector and closely related activities in the energy and research taxonomy. “manufacture of energy efficiency equipment for buildings.” To avoid and development sectors. We generally classified potential contri- For more information on sales revenue, see Note 7 to the Consolidated Financial Statements from double counting, assignment to an enabling activitiy is only made if butions from infrastructure- related activities as taxonomy-non- page 221 onward a taxonomy-eligible product or project had not already been eligible. For more information on investments, see Notes 14 and 15 to the Consolidated Financial Statements from page 236 onward included under another activity. BASF also contributes solutions used to produce technologies for renewable energy or low-carbon We assessed the taxonomy eligibility of our sales based on sales Sales, investments and operating expenses in 2021 mobility. Since the E.U. taxonomy focuses on the manufacture of revenue as defined and reported in the Consolidated Financial Million € technologies and thus excludes precursors, we have classified Statements of the BASF Group. Taxonomy-eligible sales revenue Taxonomy- Taxonomy- Total eligible % non- eligible % these as taxonomy-non-eligible. accounted for 11% of total sales revenue in 2021. The largest con- Sales 78,598 8,881 11 69,717 89 tributions were from the activities “manufacture of plastics in primary In addition to our core business, the production of chemical prod- form” and “manufacture of organic basic chemicals.” Taxonomy- Investments 4,627 1,340 29 3,287 71 ucts, we have identified further BASF activities that can be allocated eligible investments (including acquisitions and excluding goodwill in Operating expenses 4,424 504 11 3,920 89 to the following activities presented in the E.U. taxonomy: accordance with the E.U. taxonomy) accounted for 29% of the total 1 The production of heat/cool using waste heat was also partially covered by other activities. 2 The criteria for the activity “close to market research, development and innovation” (for example, a technology readiness level of at least six) were used to determine taxonomy-eligible research and development costs.