Business TransformationLinked Financing Framework
August 2021

Philip Morris International Business Transformation-Linked Financing Framework

Contents
About Philip Morris International

1

Transforming our business2

Product transformation
Transforming beyond nicotine
Transparent reporting on progress
Our 2025 aspirations

2
4
5
6

Sustainability at PMI

7

Focusing on what matters
Strategic framework
Our 2025 Roadmap
Contributing to the Sustainable Development Goals

7
8
9
10

PMI’s Business Transformation-Linked
Financing Framework

11

Selection of Key Performance Indicators

12

Calibration of Sustainability Performance Targets

13

Characteristics of the BusinessTransformation-Linked Financing

14

Reporting

15

Verification

16

Disclaimer

17

PMI’s plant research facility where the team explores avenues for selecting
crops for more environmental resilience and reduced footprint, Switzerland

Philip Morris International Business Transformation-Linked Financing Framework

About Philip Morris International
Philip Morris International Inc. (PMI) is leading a transformation in
the tobacco industry to create a smoke-free future and ultimately
replace cigarettes with smoke-free products to the benefit of adults
who would otherwise continue to smoke, society, the company,
its shareholders and its other stakeholders.

PMI is a leading international tobacco company
engaged in the manufacture and sale ofcigarettes, as well as smoke-free products,
associated electronic devices and accessories,
and other nicotine-containing products inmarkets outside the U.S. In addition, PMI ships
versions of its IQOS Platform 1 device andconsumables to Altria Group, Inc. for sale underlicense in the U.S., where these products havereceived marketing authorizations from the U.S.
Food and Drug Administration (FDA) under thepremarket tobacco product application (PMTA)
pathway; the FDA has also authorized themarketing of a version of IQOS and its
consumables as a Modified Risk Tobacco
Product (MRTP), finding that an exposure
modification order for these products isappropriate to promote the public health.
PMI is building a future on a new category ofsmoke-free products that, while not risk-free,
are a much better choice than continuing tosmoke. Through multidisciplinary capabilities in
product development, state-of-the-art facilities
and scientific substantiation, PMI aims to ensurethat its smoke-free products meet adultconsumer preferences and rigorous regulatory
requirements. PMI’s smoke-free productportfolio includes heat-not-burn and nicotinecontaining vapor products. As of June 30, 2021,
PMI’s smoke-free products were available forsale in 67 markets in key cities or nationwide,
and PMI estimates that approximately 14.7
million adults around the world have alreadyswitched to IQOS and stopped smoking.
For more information, please visit
PMI.com and PMIscience.com

PMI’s Operations Center in Lausanne, Switzerland

1

Philip Morris International Business Transformation-Linked Financing Framework

Transforming our businessIn 2016, we set a new course for PMI—staking our future on replacing
cigarettes with scientifically substantiated, less harmful alternatives.
Five years since announcing our new vision,
reaffirmed by our Board of Directors in
our Statement of Purpose, we remaincommitted to accelerating the end of
smoking. This means not only transforming
our company to deliver on our purpose,but also inspiring our industry to follow
our lead. We aim to create a sustainable
positive impact that benefits our company,
shareholders, consumers, and society.

Delivering on our purpose requires ambitious
goals and targeted decision-making.
Transforming from a cigarette company
into a world-leading smoke-free businessis about more than replacing one productwith another. It requires a holistic review andoverhaul of our entire business model andvalue proposition, including extensive changes
within our operations and value chain, andin the ways we interact with society.

More than one billion people worldwide
smoked cigarettes or other combustible
tobacco products in 2020, and, according
to the World Health Organization (WHO),around the same number will smoke in2025.1 At PMI, we want to provide better,science-based alternatives for those adults
who otherwise would continue to smoke.
Our commitment is backed by a substantial
R&D program and significant, sustained
investments in the manufacturing, commercial
and human capabilities, and infrastructureneeded to bring these alternatives to market.

But what does transformation mean? It has
become a buzzword many refer to lightly.
Some companies are “transforming” byselling off the “bad” part of their business,often to private investors not subject to thelevel of scrutiny applied to publicly listedcompanies. Some of our stakeholders haveasked us why we haven’t sold our cigarettebusiness to speed up our transformation.
Even though selling off our cigarette businesswould (indeed) make our company smokefree faster, it would not resolve the problem
of smoking. To the contrary, the purchaserof the cigarette business would only beinterested in maximizing its financial returns
and would have no interest in a transition
towards a smoke-free future. Our purpose
is not only to make our company smokefree, but to make cigarettes obsolete.

To date, we are the only company within the
traditional international tobacco industry tohave committed to going completely smokefree by encouraging adult smokers who do
not quit to instead fully switch to better
alternatives than continued smoking. And,
we have already built a leading position in
the smoke-free category globally, reportingon our progress transparently and regularly.

By replacing cigarettes with less harmful
alternatives, we can significantly reduce thenegative impact our products have on the

PMI’s business transformation

cts

ti n

he

ova

gt

on
ati oldersrmeh
sfo ith stakanl tr ngage w
nae
ter way we

gin

nn

Ex

an

tra
ns
for
g fo
rb
ma
et t
er
tio
p ro
n
du

Please refer to our Integrated
Report 2020 for further
details on our External andInternal transformation.

Ch

Pr
od
uc
t
I

2

A new organization and value chain

Internal transformation

health of our consumers. That is why the coreof our strategy focuses on addressing theimpact of “P” (“Product”), the first and mostcritical pillar of our approach to sustainability.
This is what differentiates our company andhighlights our unique value proposition, as the
final piece of our ‘ESG + P’ framework.

Product transformation
Innovating for
better products
People who do not smoke should not start.
Those who do smoke should quit. And thoseadult smokers who otherwise would not quit
should switch to one of the better alternatives
to cigarettes now available. Our priority is toaddress the health impacts associated withsmoking by offering science-based options
that have been scientifically demonstrated to
be a far better choice than continued smoking.
Public health authorities, the scientificcommunity, and many regulatory bodies, such as
the U.S. Food and Drug Administration (FDA),
agree that the primary cause of smoking-relateddisease is not nicotine but the inhalation ofharmful and potentially harmful constituents,
the vast majority of which are emitted as a resultof burning (combusting) tobacco.2 We havetherefore developed, and continue to refine,a portfolio of products that deliver nicotine
without combustion — smoke-free products.
While not risk-free, these products are a far
better choice than continuing to smoke.
The reduced risk potential of these products
is scientifically substantiated by employing a
step-by-step program derived from practices
followed by the pharmaceutical industry.
Our scientific results are supported by a
growing body of independent research.
Several government agencies have alreadyreviewed the available evidence or conducted
research of their own (read more here). The
list of independent studies (over 160 in total)
published around PMI’s smoke-free products
and/or our methods and results as of April
29, 2021 is available on PMIscience.com.

1	Source: WHO Global Report on Trends in
Prevalence of Tobacco Use 2000-2025, third
edition (December 2019)2	Source: FDA

Philip Morris International Business Transformation-Linked Financing Framework

In 2019, a version of our heat-not-burnproduct IQOS became the first innovativeelectronic alternative to cigarettes to beauthorized by the FDA for sale in the U.S. On
July 7, 2020, the FDA went one step further,authorizing IQOS to be marketed as a
Modified Risk Tobacco Product (MRTP) withthe following “reduced exposure” information:• The IQOS system heats tobacco
but does not burn it.
• This significantly reduces the production ofharmful and potentially harmful chemicals.
• Scientific studies have shown thatswitching completely from conventional
cigarettes to the IQOS system significantly
reduces your body’s exposure to harmful
or potentially harmful chemicals.
This decision followed a multi-year reviewof the scientific evidence PMI submitted to
the FDA in December 2016. The agency
found that the use of reduced-exposure
claims would be “appropriate to promote thepublic health and is expected to benefit thehealth of the population as a whole taking
into account both users of tobacco products
and persons who do not currently use
tobacco products”.3 The FDA also concluded
that the totality of evidence presented
suggests that a measurable and substantial
reduction in morbidity or mortality amongindividual tobacco users is reasonably likely
to be established in subsequent studies. The
order letter as well as the decision summary
are available on the FDA’s website.
At PMI we want to accelerate the end of
smoking and are therefore transforming
our operations to purposefully phaseout cigarettes as quickly as possible. We
believe every company has an ethicaland societal responsibility to address
and mitigate the negative impacts of the
products it manufactures and sells.

To be clear, we do not believe it is enoughsimply to offer more choice of combustible
and smoke-free products to adult consumers.
Instead, we believe the responsible
approach is to guide and encourage adultconsumers to make a fundamental change
in behavior by switching completelyfrom combustible products to smokefree alternatives, while simultaneously
working with policymakers to ensure theseproducts ultimately replace cigarettes.
Science and technology are a vital engine
of innovation and growth for our company,
and they are also the key to tobacco harm
reduction. We have harnessed the latest
scientific advances to develop better
alternatives to cigarettes, but that is notenough. Now we must ensure that thoseadult smokers who otherwise would not quit
are aware of and have access to them (readmore here) so that they can switch to them.

Our smoke-free products
To address a variety of adult consumer
preferences, we have developed a portfolio
approach that includes both heat-not-burnproducts and nicotine-containing vapor
products. Our current smoke-free productportfolio incorporates four platforms—all
centered on eliminating combustion—in various stages of development andcommercialization. An overview of our productplatforms is available on PMIscience.com.
As of June 30, 2021, PMI’s smoke-free
products were available for sale in 67
markets in key cities or nationwide. Currently,
our main smoke-free product is a heatnot-burn product that is commercialized
under the IQOS brand name. Read more
about our smoke-free products here.

Our combustible products
In support of our transformation, we havereallocated a significant proportion of ourcommercial spending from cigarettes to smokefree products and have streamlined our cigarette
portfolio to focus on fewer brands and variants.
Nevertheless, maintaining our competitive
position in the cigarette market while wetransition to our smoke-free future is critical, as
it best positions us to significantly accelerate oursmoke-free journey. The extensive commercial
and distribution infrastructure of our traditional
tobacco business provides an effective platformfrom which to launch our smoke-free products
at scale. Furthermore, maintaining leadershipwithin the cigarette segment during the transition
period enables us to engage more smokers
regarding the benefits of switching, especiallywhere we can communicate directly with ourconsumers. While seeking to remain competitivein the cigarette segment, we carefully consider
the commercial activities needed to do so. Ourdecisions are based on consumer insights andadherence to responsible commercialization
practices guarding against youth access andare guided by the following triplet: People
who do not smoke should not start, those who
smoke should quit, and those who won’t quit
should switch to less harmful alternatives.
Our cigarette brands are the choice of an
estimated 130 million consumers worldwide.
Our cigarettes are sold in more than 175
markets; in many markets, they hold the number
one or number two market share position.
Our portfolio includes a wide range of premium,mid-price, and low-price brands, including
Marlboro, L&M, Chesterfield, Philip Morris, andParliament, which are among the 15 mostpopular brands in the international cigarettemarket (which excludes China and the U.S.).
3	The forgoing summary is qualified in its entirety
by the full text of the MRTP order

IQOS status of scientific substantiation
Product health benefits

Access to smoke-free products

Innovating for better products

Individual
risk reduction

Consumerswitching

Population
harm reduction

Data gathered so far
Average 95 percent reduction in harmful
chemicals measured in laboratory studies

73 percent of adult smokers who switch
to IQOS stop smoking cigarettes

12.7 million smokers have stopped
smoking and switched to IQOS*

Analyses of aerosol identify few to no
new risks compared with cigarette smoking

Very low levels of use of IQOS among
youth and nonsmokers

IQOS significantly accelerates decline
in cigarette smoking

Clinical studies find favorable changes
in risk markers among smokers who switch
Data being gathered
A substantial reduction in morbidity or
mortality among individual tobacco users is
likely to be established in future studies* PMI estimates as of December 31, 2020

Ecological studies are being undertaken
to establish public health impact
of IQOS on smoking-related diseases(COPD and IHD) at population level3

4

Philip Morris International Business Transformation-Linked Financing Framework

Access to smoke-free products
and positive impact
The public health benefit of smoke-free
products depends not only on their potential
to reduce the risk of smoking-related disease,
but also on their actual use as alternatives
to cigarettes by adult smokers who would
otherwise continue to smoke. To succeed in
making the world smoke-free, these adults needto have access to PMI’s smoke-free products.

By access, we mean that:• Smokers are aware of the benefitsof smoke-free products;• The products are accepted by smokers
as a viable alternative to cigarettes;• The products are conveniently
available for sale to smokers; and• Smoke-free products areaffordable to smokers.
In this context, a regulatory framework
allowing the products to be sold and adultsmokers to know that these products
exist and are available is essential.

In 2020, we launched IQOS in 12 additional
markets, bringing the total number of markets
in which the product is commercialized to
64. As of June 30, 2021, PMI smoke-free
products were available for sale in 67 markets.
The responsible commercialization of tobaccoand nicotine-containing products is of profoundinterest to society. At PMI, we support regulationthat supports tobacco harm reduction, as wellas measures that discourage initiation, encourage
cessation, and encourage smokers who do notquit to switch to less harmful non-combusted
alternatives to cigarettes. Read more here about
our responsible marketing and sales practices.

AccessAwareness

Acceptability

Availability

Affordability

Transforming beyond nicotine
Thinking net positive
As we continue to transform our products,
business model, and value proposition,
stakeholder engagement and constructive
dialogue remain paramount. This implies
having forthright conversations that embrace
the concept of transformative change.
The positive impact that phasing out
cigarettes, and thereby ending smoking, canhave on public health (at both the individualand collective level) is undeniable.
Even though the beginning of ourtransformation journey started by articulating
a vision centered on phasing out cigarettes anddeveloping and commercializing better and lessharmful alternatives to smoking, we realize that
this cannot be our end goal. We understandthat a complete and successful transformationis one that allows our company’s businessto move from a value proposition centeredon doing less harm toward one where we
can have a net positive impact on society.

Sustainability offers us an opportunity
for growth through investments
in scientific research to continue
innovating for better products, withthe aim of becoming net positive.
Researching and developing less harmful noncombustible alternatives that are scientifically
substantiated was the first step; broadening
access for adult smokers, while simultaneously
and deliberately working to phase out cigarettesmoking, completed the equation of oursmoke-free purpose. In the process, we have
expanded our social, human, intellectual, andmanufactured capital in ways that allow us togo a step further and develop products that
seek to be better than merely less harmful.
In order to demonstrate the seriousness of
our endeavor, we introduced a new aspiration:
Net revenues of at least USD 1 billion derived
from “beyond nicotine” products by the endof 2025. This aspirational goal aims to further
cement the confidence we have about thelong term, as we evolve into a broader lifestyleand consumer wellness company, leveraging
our ability to monetize the skills and assets wehave accrued and developed in the processof our transformation. These include ourcommercial and digital abilities as well as our
focus on consumer-centricity, which haveenabled us to better inform adult smokers,
allowing them to make fundamental behavior
changes to improve their health and well-being.

5

Philip Morris International Business Transformation-Linked Financing Framework

Transparent reporting on progress
PMl’s Business Transformation Metrics
To make our progress both measurable andverifiable, we developed a set of bespoke
key performance indicators (KPIs) that
we call Business Transformation Metrics.
This set of metrics, which we report on
periodically, allows our stakeholders to

Our Business Transformation Metrics also
showcase how we are allocating resourcesaway from our traditional cigarette business,aiming to base our success on a future
where we no longer make or sell cigarettes.

assess both the pace and the scale of ourtransformation. Over the years, basedon our stakeholders’ feedback we have
expanded the number of metrics to increasetransparency and clarity about our progress.

R&D expenditure (in millions USD)*

R&D
Sourcing
Operations
Commercialization
Consumers

2017

2018

2019

2020

429

453

383

465

495
99%

R&D expenditure (smoke-free/total) *

72%

74%

92%

98%

Number of R&D positions (FTEs)2

n/a

n/a

764

942

934

Patents granted in IP5 jurisdictions relating to smoke-free products (cumulative)3

170

300

480

740

1,300

146

1

Number of studies completed by PMI on smoke-free products(cumulative, since 2015)– Toxicological assessment

36

57

82

109

– Clinical assessment

11

12

19

19

22

– Perception and behavior (premarket and post-market)4

7
(7+0)

8
(7+1)

12
(9+3)

13
(9+4)

30
(15+15)

Supply chain direct spend expenditure (smoke-free/total)5

n/a

n/a

n/a

35%

33%

Cumulative investments behind smoke-free products (since 2008, in billions USD)6

3.2

4.6

6.2

7.2

8.1

3 out of48

4 out of46

8 out of44

8 out of38

8 out of39

Year-on-year change in number of SKUs—combustible products8

-1.7%

-6.5%

-6.1%

-5.5%

-4.1%

Year-on-year change in number of SKUs—smoke-free products

78.2%

9.9%

37.1%

24.9%

38.2%

SKUs (smoke-free/total)

4.7%

5.5%

7.8%

10.1%

13.9%

20

38

44

52

64

32%

41%

44%

45%

52%

Number of factories producing smoke-free products out of
total number of factories7 *Number of markets where IQOS is available for sale*
Proportion of markets where IQOS is available for sale that are outside the OECD9 *Number of IQOS stores10

26

63

81

199

259

Number of retailers that sell PMI smoke-free product consumables (in thousands)

90

292

488

679

749
76%

Commercial expenditure (marketing) (smoke-free/total)*

15%

39%

60%

71%

Smoke-free product shipment volume (billion units)*

8

36

42

60

76

Combustible product shipment volume (billion units)*

845

791

767

732

654

Smoke-free product shipment ratio (smoke-free/total)11 *

0.9%

4.4%

5.1%

7.6%

10.4%

Total IQOS users (in millions) *

2.1

6.9

9.6

13.5

17.5

Estimated users who have switched to IQOS and stopped smoking (in millions)12 *

1.5

4.7

6.6

9.6

12.7

Estimated users outside the OECD countries who have switched to IQOS and stopped
smoking (in millions)9 *

0.0

0.2

1.1

2.9

4.3

12

2.7%

12.7%

13.8%

18.7%

23.8%

Number of markets where net revenues from smoke-free products exceed
10% of total net revenues14 *

1

5

19

31

38

Number of markets where net revenues from smoke-free products exceed
50% of total net revenues14 *

0

1

3

4

6

Net revenues (smoke-free/total)13 *Revenues

2016

Metrics linked to 2025 aspirations

Source: PMI Integrated Report 2020
*  The 2020 metrics marked with an asterisk (*) are
subject to PwC’s Assurance Report (please refer to ourIntegrated Report 2020).
1 Smoke-free products include heated tobacco units, devices,and e-cigarettes. Total products include smoke-free products,
cigarettes, and other combustible products.
2 R&D positions include scientists, engineers, technicians,
and support staff. Comparable data for years prior to 2018
are not available, as the scope of R&D positions changed
following company organizational changes.
3 IP5 jurisdictions are Europe (patents granted by theEuropean Patent Office), China, South Korea, Japan, andthe U.S.

4 Data related to perception and behavior studies wererestated to include both premarket and post-market studies.
5 Direct spend focuses on materials used in the manufactureof our products; it includes tobacco leaf, direct materials, andelectronic devices and accessories.
6 Investments reflect research, product and commercial
development, production capacity, scientific substantiation,and studies on adult smoker understanding. Figure does notinclude commercial deployment costs.
7 Production temporarily stopped at one of our factories inGermany in December 2019 and resumed early 2020.
8 “SKUs” stands for stock-keeping units. References to numberof SKUs are based on the latest available data from a numberof internal sources, and exclude China and the U.S.

9

Excluding PMI Duty Free. Data are based on2020 OECD country list.
10 Includes flagship stores, and small, large, andtemporary boutiques.
11 The smoke-free product shipment ratio is compiled
based on millions of units.
12 Excluding PMI Duty Free; see glossary.
13 Net of excise taxes.
14 Excluding PMI Duty Free and the U.S.

6

Philip Morris International Business Transformation-Linked Financing Framework

Our 2025 aspirations

Aspirational goals linked to
our Business Transformation
Metrics give us a clear roadmap
and offer our stakeholders
visibility into the pace andscale of our achievements.

Since the initial pilot launches of IQOS inlate-2014, we have delivered strong growthin our smoke-free product portfolio, which
accounted for nearly a quarter of our total net
revenues in 2020. We intend to accelerate
this growth in the coming years and, inearly 2021, increased our 2025 ambition
for the proportion of our total net revenues
to come from smoke-free products to beat least 50 percent, from our aim of 38
to 42 percent previously. This pioneering
ambition to become a predominantly
smoke-free company within the next five
years demonstrates our commitment todeliver on our purpose and drive the end ofcigarette smoking as quickly as possible.
Critically, we aspire for our smoke-free
products to be available for sale to adultsmokers in 100 markets by the end of 2025.

By the end of 2025, we aspire to grow oursmoke-free shipment volume above 250
billion units while simultaneously decreasing
our combustible product shipment volume
to below 550 billion units. This means
we aspire for smoke-free products torepresent more than 30 percent of our
total shipment volume by that year.
We also aim for at least 40 million adults tohave switched to our smoke-free products
and stopped smoking by the end of 2025.
Finally, as noted previously, this year we
introduced a new aspiration of at least
USD 1 billion in annual net revenues from“beyond nicotine” products by the end of2025, leveraging the capabilities we havebuilt in life sciences, device technology,
and consumer expertise.

>250

<550

>30%

Smoke-free products
shipment volume(in billion units)

Combustible productshipment volume(in billion units)

Smoke-free productshipment ratio(smoke-free/total)

>20m

>40m
Estimated users who
have switched to PMI
smoke-free products andstopped smoking>50%
Net revenues(smoke-free/total)

Note: Aspirational goals do not constitute financial projections≥1bn

Estimated users outside
the OECD countries who
have switched to PMI
smoke-free products andstopped smoking

Net revenues from“beyond nicotine” products(in USD)

100
Number of markets
where PMI smoke-free
products are available
for salePhilip Morris International Business Transformation-Linked Financing Framework

Sustainability at PMI

Focusing on what matters
Materiality

Our purpose of achieving a smoke-free future
must be conducted sustainably.
For PMI, sustainability is an opportunity forinnovation, growth, and long‑term value
creation, and a means to minimize the negative
externalities while maximizing operational
efficiency and resource allocation. Sustainability
stands at the core of PMI’s transformation andhelps address some of the challenges resulting
from this transition, while spurring innovationand securing success over the long term.
Our priority is to address the health impacts
associated with smoking by encouraging adultsmokers to switch to better, science-basedalternatives, ultimately phasing out cigarettes.

1. Developing and commercializing
scientifically substantiated, lessharmful alternatives to cigarettes;
2. Broadening access for all adultsmokers who will not quit, to fully
switch to smoke-free products,
ensuring these products
accelerate the decline of smoking
prevalence;
3. Purposefully working to phaseout cigarettes; andOur approach to sustainability is focused on
addressing the health impacts of smoking.
This is done through a four-fold approach:

4. Developing products that go
beyond nicotine. This is the mostimportant contribution we canmake to public health and thecornerstone of PMI’s purposeand business strategy.

A rigorous materiality4 assessment ensures that
our strategy, work, and reporting cover theright topics in the right way; this allows us tomeasure progress against our sustainability
roadmap. Building on our 2018 exercise, we
refreshed our materiality assessment at theend of 2019 to ensure we focus resources forthe greatest impact. Our 2019 sustainability
materiality refresh (conducted in line with
Global Reporting Initiative guidance) informed
the development of our 2025 Roadmap.
To ensure that our strategy remains current
and is able to best fulfill our stakeholders’expectations, and that our initiatives continue
to address those issues on which our businesscan have the greatest impact, we are currently
conducting a new comprehensive sustainability
materiality assessment in 2021. This new
materiality assessment will allow us to reassess,recalibrate, and reaffirm our goals. We willcommunicate the findings in our next report.
Read PMI’s Sustainability Materiality
Report 20194	In this Framework, the term “materiality,” “material,” andsimilar terms, when used in the context of economic,
environmental and social topics, are defined in thereferenced sustainability standards, and are not meant
to correspond to the concept of materiality under the
U.S. securities laws and/or disclosures required by the
U.S. Securities and Exchange Commission.

HIGH

Defining our strategy: Sustainability materiality assessment

Product health impacts

Step 1
Identifying topics

Responsible marketingand sales practices

Climate protection
Respect forhuman rights

Access to smoke-free
products

Forest conservation

Product eco-designand circularity

Fair working conditions

Littering
prevention

Health, safety, andwell-being at work

Relevance for stakeholders

Responsible andtransparent R&D
Water stewardship

Socio-economic well-being of
tobacco farming communities

Product addictivenessStep 2Gathering stakeholders’perspectives

Sustainable supply
chain management

Diverse and inclusive
working environment
Waste reduction

Biodiversity

Data privacy
and protection

Business integrity

TIER 1 TOPICS

Illicit tobacco
trade prevention
Product reliability
Community
supportTalent attraction, retention,and development
Fair fiscal practices

Key:
Innovating for better products

Responsible advocacy

Operating with excellence
Caring for the people we work with
LOW

Protecting the environment
Topics gaining momentum
LOW

Step 3
Assessing impact

Significance of PMI’s impacts on society

HIGH

Step 4
Building and validating
the sustainability
materiality matrix

7

8

Philip Morris International Business Transformation-Linked Financing Framework

Strategic framework
Our approach to sustainability is structured
around four pillars of action and twotiers of topics. It provides the framework
through which we respond to sustainability
challenges and opportunities.
To become a sustainable company, we must
make every effort to replace cigarettes
completely with better, smoke-freealternatives. Innovating for better products
is therefore at the core of our strategy.
Our other strategic pillars include effective
management of operational topics, social
issues, and environmental matters.

Our two-tiered grouping of topics isbased on the sustainability materiality
analysis we conducted in 2018, andrefreshed in 2019. That analysis identified
10 areas of priority focus—or “tier 1
topics”—across our four pillars of action.
Sustainability is embedded throughout
our business, and its integration into ourcompany relies on a formal structure withclear accountabilities at different levels of theorganization. Our executive compensation
program reflects our commitment to put
sustainability at the core of our corporate
strategy, and our diversity and inclusion
goals form a part of this strategy.

STR ATEGIC PILL ARS

Innovating
for better
products

Operatingwithexcellence

Transforming
for asustainablesmoke-free
futureTIER 1 TOPICS

Product health impacts

For further details on Tier 1 topics,see our Integrated Report 2020
For further details on Tier 2 topics,
visit PMI.com
Please refer to our ‘Governanceand management’ section of ourIntegrated Report 2020

TIER 2 TOPICS

Product addictiveness

Access to smoke-free
products

Product reliability

Responsible marketingand sales practices

Responsible and transparent R&D

Sustainable supply
chain management

Business integrity

Respect for human rights

Responsible advocacy

Data privacy and protection

Illicit tobacco trade prevention

Fair fiscal practices

Caring forthe people wework withProtecting theenvironment

Socioeconomic
well-being of tobacco
farming communities
Health, safety, andwell-being at work

Fair working conditions
Community support
Diverse and inclusive working
environment
Talent attraction, retention,and employability

Climate protection

Forest conservation

Littering prevention

Biodiversity

Product eco-designand circularity

Water stewardship
Waste reduction

Philip Morris International Business Transformation-Linked Financing Framework

Our 2025 Roadmap
Besides reporting transparently on progress,
it is crucial to have forward-looking goals
that inform the route of our long-term plan.
Accordingly, in 2020 we introduced a set of
aspirational targets for each of our tier 1 topics.
Known collectively as our 2025 Roadmap, theycorrespond to the areas in which we believe ourcompany can have the most significant impact.

Despite the unprecedented challenges
brought by the global pandemic, wehave not deviated from our efforts tobecome a sustainable company. In 2020,
we remained focused on achieving ourambitions and realized noteworthy
progress in many of our priority topics.

Learn more about progressagainst our goals, read ourIntegrated Report 2020

Progress on our 2025 Roadmap
Status by the end of 2020

Progress, but with challenges

Not started

Progress on track

Progress, further than anticipatedCompleted

Product health impacts and access to smoke-free products

>40m

>20m

100

Number of adult smokers globally who switch
to PMI smoke-free products and stop smoking

Number of adult smokers in non-OECD countries who
switch to PMI smoke-free products and stop smoking

Markets where PMI smoke-free
products are available for sale

Responsible marketing and sales practices

Sustainable supply chain
management

Respect for human rights

>90%

100%

100%

10

Youth access prevention (YAP)
programs in place in markets
representing over 90 percent of PMI’s
total shipment volume by 2020

Percentage of PMI smoke-freeelectronic devices introducedon the market as of 2023 equippedwith age-verification technology

Percentage of critical suppliers
from whom PMI sources
sustainably

Highest risk countries coveredby external human rights impact
assessments

Socioeconomic well-being of tobacco-farming communities

Health, safety, and well-being at work

100%

Zero

<0.3

Percentage of contracted farmers supplying
tobacco to PMI who make a living income

Zero child labor in PMI’s
tobacco supply chain

Total recordable incidents rate for
employees and contractors

Climate protection

Littering prevention

Product eco-design and circularity

Net zeroNet zero

-50%

100%

100%

Achievement of carbon
neutrality of PMI’s direct
operations (scope 1+2)
by 2030

Achievement of carbon
neutrality of PMI’s value
chain (scope 1+2+3)
by 2050

Reduction of plastic litterfrom our products(versus 2021)

Percentage of PMI smoke-free
product users who haveaccess to collection andrecovery for devices andconsumables

Percentage of PMI smoke-freeelectronic devices introducedon the market as of the endof 2025 that have eco-design
certification

Note: As updated in our Sustainability Webcast in June 2021, we now expect to achieve Scope 1 & 2 neutrality by 2025 (5 years earlier than previous 2030 target)

910

Philip Morris International Business Transformation-Linked Financing Framework

Contributing to the Sustainable Development Goals (SDGs)

The 2030 Agenda for
Sustainable Development
is a universal call for action
to address global challenges.

At PMI, we are committed to doing our partto make the UN SDGs a reality. Thoughnone is unimportant, we impact and are
impacted by different goals to differing
degrees. In 2019, building on our refreshedsustainability materiality assessment, we
reviewed our contribution to the SDGs to
identify areas where we have an opportunity
to make the greatest difference, in linewith our sustainability priorities.
In 2020, we have taken it a step further. To add
more visibility and granularity, we deepened
our analysis and mapped in our SDG Index

H um a n R i g h t s

SECONDARYSDGs

PRIMARY
SDGs

our efforts and ambitions with the targets of
the UN SDGs for each of our sustainability
topics. The goals are interconnected andinfluence each other. We have developed
initiatives to systematically address the mostcritical sustainability challenges affecting
our business and stakeholders. Through ourbusiness transformation, we aspire to have asignificant, positive impact on SDG 3 (Good
Health and Well-Being) while contributing toseveral other SDGs and corresponding targets.

Philip Morris International Business Transformation-Linked Financing Framework

PMI’s Business TransformationLinked Financing Framework
A smoke-free future is
attainable, and the benefits it
can bring to adults who would
otherwise continue to smoke,and hence to global publichealth, are enormous.
However, PMI cannot succeed alone.
Together with governments and civil society,we can maximize this opportunity througha consensus that smoke-free alternatives,
when subject to proper government oversightand regulation, are part of a sound tobacco
policy. We also need the support of ourinvestors, banks, insurers, and other financial
partners to achieve this transformation.
We believe that with the right regulatory
encouragement and support for smoke-free
products from governments and civil society,cigarette sales can end within 10 to 15
years in many countries (read more here).

ESG performance is about a company’s
inputs and operations; it does not address
the positive and negative externalities of acompany’s products and services—the missing“P” (for “Product”) in ESG. With scientificevidence that smoke-free products represent
much better alternatives than combusted
cigarettes to health, PMI will continue tostep up its efforts on all fronts to contribute
positively to people’s lives. We can only
accomplish this by keeping our approachto sustainability at the heart of the way we
do business, focused on our purpose.
Five years ago, we set out to create a new
future for PMI—a future in which cigarettes
would be replaced by less harmful, sciencebased alternatives—with a focus on reducing
the negative impacts of our products on
the health of our consumers, this remains
the core of our strategy. Sustainability
strategy is corporate strategy. ESG issues
are business issues. This is what we want toemphasize through this exercise. We hopeit provides a window into our present, as
well as the better future that we envision.

We hope, too, that it will spark a dialogue withthose who can help to accelerate the paceof change – by directly linking the financingof our company to our ambitious business
transformation targets to become a majority
smoke-free company by the end of 2025;
meaning that in five years, cigarettes are
anticipated to account for less than half of
PMI’s total net revenues. These underpin the
biggest and most sustainable positive impactthat we can have, to the benefit of consumers,society, our company and its shareholders.
To strengthen our commitment and further
highlight to stakeholders the seriousness ofour smoke-free ambitions, we wish to link
our most material sustainability priorities toour financing. In that regard, we believe thata business transformation-linked financing
framework not only helps reinforce ourcommitment to reinvent our company,
but will also allow investors and lenders toengage with and support our industry-leadingtransformation as we work to accelerate theend of smoking and use our strong capabilities
to develop products that go beyond nicotine
and have a net positive impact on society.
We intend to complement our transformation
with business transformation-linked
financing instruments in the debt
capital and loan markets, which may
include public notes offerings, private
placements, loans and any other relevantbusiness transformation-linked financing
instruments (collectively the “BusinessTransformation-Linked Instruments”).
PMI’s Business Transformation-Linked
Financing Framework (the “Framework”) isaligned with the five core components of
the Sustainability-Linked Bond Principles
published by the International Capital Market
Association (ICMA)5 in June 2020, and also
takes into account the Sustainability-Linked
Loan Principles, as published by the Loan
Market Association (LMA)6 in May 2021:• Selection of Key Performance
Indicators (KPIs)• Calibration of Sustainability
Performance Targets (SPTs)• Characteristics of SustainabilityLinked Financing• Reporting• Verification

5 Sustainability-Linked Bond Principles
An Employee at PMI’s Indonesian affiliate, Sampoerna, solar panel farm in Karawang, Indonesia

6 Sustainability-Linked Loan Principles

11

12

Philip Morris International Business Transformation-Linked Financing Framework

Selection of Key Performance
Indicators (KPIs)
At PMI, we are leading a transformation in the tobacco industry to create a smoke-free
future and ultimately replace cigarettes with smoke-free products to the benefit of adultsmokers who would otherwise continue to smoke, society, the company, its shareholders
and its other stakeholders. Our pioneering ambition is also aligned with a long-held goalof NGOs, the scientific community, public health experts, and regulators to reduce theharm caused by smoking.
Our approach to sustainability is focused on addressing the health impacts of smoking.
This is done through a four-fold approach:
1. Developing and commercializing scientifically substantiated, less harmful
alternatives to cigarettes;
2. Broadening access for all adult smokers who do not quit, to ensure they havethe opportunity to fully switch to smoke-free products, thereby ensuring theseproducts accelerate the decline of smoking prevalence;
3. Purposefully working to phase out cigarettes; and4. Developing products that go beyond nicotine.
This is the most important contribution we can make to public health and thecornerstone of PMI’s purpose and business strategy.

KPIs
The selection of KPIs for our business
transformation-linked financing is
consistent with the above-mentioned
approach, in that they directly measure andrespond to the focus of our sustainability
strategy and our most material topic:
addressing the health impact of our
products. Our business transformation
responds to that need and our BusinessTransformation Metrics transparently
report progress towards that goal.
The chosen KPIs are directly linked to twoof PMI’s most ambitious and strategic
Business Transformation Metrics:

KPI 1 PMI’s smoke-free/total net
revenue percentage, measuring thescale of our business transformationin regularly reported financial
terms and reflecting the publicly
announced benchmark by which
we aim to become a predominantly
smoke-free company
KPI 2 Number of markets where
PMI smoke-free products areavailable for sale, measuring theaccess provided to adult smokers
around the world, which serves asa key indicator of our commitment
to drive the obsolescence ofcigarettes as fast as possible inas many markets as possible
The selected KPIs not only allow our
stakeholders to assess both the pace andthe scale of our progress towards ourtarget, but also reflect our continuous
aspiration to have a significant and positive
impact for adult smokers switching tosmoke-free products. As part of ourBusiness Transformation Metrics, they
are measured methodically and reported
on periodically. They are also assessedindependently by our external auditors andincluded in their limited assurance report.
The above two KPIs are key elements
for demonstrating our progress towards
a smoke-free future and demonstrate
our leading position versus the otherglobal industry players, both in actual
performance as well as ambitions for2025 and beyond. The two KPIs serveas an integral part of our broader 2025
aspirations included in our Integrated
Report 2020, as well as verifiable
and regularly reported metrics thatprovide external stakeholders visibility
on how we achieve our goals.
Since the initial launch of IQOS in late2014, we have delivered strong growth inour smoke-free product portfolio. We
intend to accelerate this growth to becomea predominantly smoke-free company
within the next five years and to drive theend of cigarette smoking as fast as possible.
Moreover, we believe that our value
proposition should not rest on expanding
our smoke-free portfolio to offer
choice in addition to cigarettes. Muchto the contrary, our purpose is to makecigarettes obsolete, encouraging adultsmokers to switch to better alternatives.

Definition and methodology
for KPIs measurement
1. PMI’s7 smoke-free/total net revenue
percentage means Smoke-Free Product Net
Revenues as a % of Total PMI Net Revenues• “Total PMI Net Revenues” refer to PMI’soperating revenues from the sale of all
products, including shipping and handlingcharges billed to customers, net of sales andpromotion incentives, and excise taxes.8• “Smoke-Free Product Net Revenues”
represent operating revenues from thesale of Non-Combustible products,
including shipping and handling charges
billed to customers, net of sales andpromotion incentives, and excise taxes.
• “Non-Combustible products” is the term
PMI uses to refer to products, excluding
cigarettes and OTP9. This may include
heated tobacco units, heat-not-burn devices
and related accessories, other nicotinecontaining products, primarily e-vapor
products, and beyond nicotine products.
PMI’s net revenues are reported in conformity withaccounting principles generally accepted in the
United States of America (U.S. GAAP) at the timeand such principles are applied on a consistent basis.
2. 
Number of markets where PMI smokefree products are available for sale• “Number of markets” refers to markets10
where PMI smoke-free products areavailable for general sale to adult smokers
in key cities11 or nationwide throughtraditional or digital retail channels12 .
Relevant determinations and assumptions may beincorporated and/or changed, as deemed appropriate
by management, in a consistent and fair manner toensure comparability and meaningful information
to management and external stakeholders.
PMI smoke-free products may include
additional products under license agreement
or similar arrangements.
General terms, definitions and adjustments may be
updated and/or included from time to time, and will
be part of the relevant disclosures, as applicable.

7 PMI includes Philip Morris International Inc. and its subsidiaries
8 PMI recognizes revenue when control is transferred to thecustomer, typically either upon shipment or delivery of goods
9 “OTP” is defined as “other tobacco products,” primarily roll-yourown and make-your-own cigarettes, pipe tobacco, cigars andcigarillos, and does not include reduced-risk products
10 Markets are defined consistent with how PMI runs its business for
management purposes; they are determined primarily at thecountry level, and also include Canary Islands, Palestine, Reunion,
Turkish Cyprus and International Duty Free
11 Key cities represent large urban areas with a high concentrationof consumers
12 Availability to consumers is measured by in-market sales ofconsumables, whereby products are available for general sale.
In-market sales is defined as sales to the retail channel, dependingon the market and distribution model

Philip Morris International Business Transformation-Linked Financing Framework

Calibration of Sustainability
Performance Targets (SPTs)
Sustainability Performance Target 1

Sustainability Performance Target 2

Increase PMI’s full-year 2025
smoke-free/total net revenue
percentage to more than
50%, from the 2020 baselineof 23.8%

Increase the number of markets
where PMI’s smoke-free
products are available for saleto 100 markets by the end of2025, from the baseline of 64
markets on December 31, 2020

Target observation date
for Sustainability
Performance Targets

31 December 2025

Factors that support theachievement of the SPTs

Historical values and targets
These ambitious SPTs reflect our
determination to become a predominantly
smoke-free company within the next five
years and significantly increase the access ofour smoke-free products to a greater numberof adult smokers across a broad range ofmarkets. The SPTs further demonstrate ourcommitment to deliver on our purpose anddrive the end of cigarette smoking as fast
as possible, with the ultimate objective tosignificantly improve public health.

SPT 1: PMI smoke-free/total net revenue
percentage

SPT 2: Number of markets where
PMI smoke-free products are available
for sale

>50%

100

1. Substantial R&D program directed almost
exclusively to smoke-free products
2. Significant and sustained investmentsin the manufacturing, commercial and humancapabilities, as well as infrastructure needed
to bring these smoke-free alternatives tomarket3. Statement of Purpose issued and signed by
our Board of Directors, underlining
our commitment to a smoke-free future
4. Executive compensation linked to‘ESG + P’ performance
5. Sustainability strategy underpinned byrobust materiality assessment, measured by
27 Business Transformation Metrics (BTMs)

64
52

23.8%
18.7%

38

12.7% 13.8%

44

20

2.7%
2016

2017

2018

2019

2020

2025

2016

2017

2018

2019

2020

2025

Benchmarking vs. global industry peers
PMI’s Statement of Purpose reaffirms
our company’s commitment to deliver asmoke-free future and lays out our uniquebusiness model and value proposition: To
relentlessly focus our resources to replacecigarettes with better alternatives.
PMI is differentiated from other global
tobacco companies13 by its purpose, by its
unique value proposition, by the commitment
to, pace of and scale of its transformation,by the magnitude of its resource allocations
and by the quality of its disclosure. To
date, we are the only tobacco company
within the traditional international tobacco
industry that is purposefully working tophase out cigarettes completely and actively
engaging with stakeholders to do so.

We are also the only company in our
industry that has publicly disclosed ambitious
forward-looking targets for relevant
metrics, including the two selected KPIs.
Our commitment to our purpose is clearlyreflected by our impressive results and impact.
In 2020, PMI net revenues from smoke-free
products accounted for almost one quarterof our net revenues for the year and oursmoke-free products were available forsale in 64 markets, significantly above thesecond global comparable industry player,
which reported 10% of revenue from
non-combustible categories, and over
50 markets where their non-combustible
products were available for sale.

6. Full suite of 8 aspirational targets linked
to our BTMs and 12 ESG targets as partof our 2025 roadmap, including the two KPIs
selected for this Framework, which ourcompany is working towards through ourcore business and sustainability programs.

Factors that might put at risk theachievement of the SPTs
The SPTs rely on our ability to switch
consumers to smoke-free products. We may
be unsuccessful in our attempts to introduce
smoke-free products, and regulators may
not permit the commercialization of theseproducts or the communication of scientifically
substantiated information and claims. Further,
we cannot predict whether regulators will
permit the sale and/or marketing of smokefree products with scientifically substantiatedinformation and claims. Such restrictions
could put at risk the achievement of the SPTs.

13 Based on public disclosures of other global tobaccocompanies; to the best of our knowledge

13

14

Philip Morris International Business Transformation-Linked Financing Framework

Characteristics of the BusinessTransformation-Linked Financing
The proceeds of PMI’s Business Transformation-Linked Instruments
will be used for purposes specified in the relevant BusinessTransformation-Linked Instruments.
PMI’s Business Transformation-Linked
Instruments will include a feature that
may result in a step-up margin, margin
adjustment or premium/discountamount, as applicable, subject to theachievement of the applicable SPT(s).
The relevant KPI(s), SPT(s), step-up margin
amount, margin adjustment amount,premium/discount amount and themechanism for payment of the premium/discount and beneficiaries, as applicable, willbe specified in the relevant documentation
for the specific transaction (e.g., final
prospectus supplement in the case of therelevant business transformation-linked
bonds or credit agreement in the case ofbusiness transformation-linked loans).

Scientists in PMI’s R&D center in Neuchâtel, Switzerland

Such documents may also include, as
appropriate, any fallback mechanisms in casethe relevant SPT(s) cannot be calculated,
and language to take into consideration
potential exceptional or extreme events,
including drastic changes in the regulatoryenvironment14 , that could substantially
impact the calculation of the selected KPI(s),the restatement of the selected SPT(s), and/or pro forma adjustments of baselines or
selected KPI(s) scope. Where relevant, PMI
may exclude potential exceptional or extreme
events that could substantially impact
the calculation of the selected KPI(s) andSPT(s) in the documentation of the relevant
Business Transformation-Linked Instrument.

If, for any reason, the performance level
against an SPT cannot be calculated orobserved in a satisfactory manner (nonsatisfactory manner to be understood as averification assurance certificate provided
by the independent auditor containing amodification or the independent auditor
not being in a position to provide suchverification assurance certificate), the stepup margin, margin adjustment or premium/discount amount, as noted above, may be
applicable. For the avoidance of doubt,
under no circumstances will this trigger
an event of default under any BusinessTransformation-Linked Instrument.
14 Examples of drastic changes in the regulatory environment
include but are not limited to preemptive product banswhich prevent market access and discriminatory market
access requirements that make it significantly more difficult
for smoke-free products to enter the market compared to
combustible tobacco products

Philip Morris International Business Transformation-Linked Financing Framework

Reporting
PMI will publish a report at least
annually, and in any case for any
date/period relevant for assessing
the trigger of the relevant
SPT(s) performance leading
to a potential step-up margin,
margin adjustment or premium/discount amount, including:

1.	Up-to-date information on the performance of each selected KPI,
including the baseline where relevant;
2.	A verification assurance report (limited assurance) relative
to each KPI value against each SPT; and3.	
Any additional relevant information to enable the monitoringof progress of the KPI.

Information may also include, when feasible and possible:
1.	
Qualitative or quantitative explanation of the contribution of the main
factors behind the evolution of the performance on an annual basis;
2.	
Illustration of the positive sustainability impacts of the performance
improvement; and/or
3.	
Any re-assessments of KPIs and/or restatement of SPTs and/or
pro-forma adjustments of baselines or KPI scope, if relevant.

15

16

Philip Morris International Business Transformation-Linked Financing Framework

Verification
Pre-issuance

Post-issuanceAmendments to this Framework

PMI’s Framework has been reviewed by
S&P Global Ratings who has provided asecond party opinion (SPO), confirming
the Framework’s alignment with the
Sustainability-Linked Bond Principles dated
June 2020, administered by the ICMA, andSustainability-Linked Loan Principles dated
May 2021, administered by the LMA.

Annually, and in any case for any date/period
relevant for assessing the relevant SPT(s)performance leading to a potential step-up
margin, margin adjustment or a premium/discount amount, such as a coupon step-up ofa Business Transformation-Linked Instrument,
until after the SPT(s) trigger event of aBusiness Transformation-Linked Instrument
has been reached, PMI will seek independentand limited assurance external verification of
the performance level against the relevant
SPT(s) for the stated KPI(s) by a qualified
external reviewer with relevant expertise.

PMI may review this Framework from time totime, including its alignment to updated versionsof the relevant principles as and when they
are released, with the goal of adhering to bestpractices in the market. PMI may also review
this Framework in case of material changes in
the perimeter, methodology, and in particular
KPIs and/or the SPTs calibration. Such review
may result in this Framework being updated
and amended. The updates, if not minor innature, will be subject to the prior approval ofa Second Party Opinion provider. The updated
Framework, if any, will be published on PMI’s
website and will replace this Framework.

The SPO will be available on both S&P
Global Ratings and PMI’s websites.

An employee in PMI’s plant research facility in Switzerland

Philip Morris International Business Transformation-Linked Financing Framework

Disclaimer
The information and opinions contained in this Framework
are provided as of the date of this Framework and are
subject to change without notice. Neither PMI nor any of
its subsidiaries assumes any responsibility or obligation
to update or revise such statements, regardless ofwhether those statements are affected by the resultsof new information, future events or otherwise. This
Framework represents current PMI policy and intent,
is subject to change and is not intended to, nor can it berelied on, to create legal relations, rights or obligations.
This Framework is intended to provide non-exhaustive,
general information. This Framework may containor incorporate by reference public information notseparately reviewed, approved or endorsed by PMI andaccordingly, no representation, warranty or undertaking,express or implied, is made and no responsibility or
liability is accepted by PMI as to the fairness, accuracy,
reasonableness or completeness of such information.
This Framework may contain statements about future
events and expectations that are “forward-looking
statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking
statements can be identified by the use of words such as“strategy,” “expects,” “continues,” “plans,” “anticipates,”“believes,” “will,” “aspires,” “estimates,” “intends,” “projects,”“aims,” “goals,” “targets,” “forecasts” and other words ofsimilar meaning. PMI cannot guarantee that any forwardlooking statement will be realized, although PMI believes
that is has been prudent in its plans and assumptions.
PMI’s reduced-risk products constitute a new productcategory in its early stages that is less predictable
than its mature cigarette business. Achievement of
future results is subject to risks, uncertainties andinaccurate assumptions. Should known or unknown
risks or uncertainties materialize, or should underlying
assumptions prove inaccurate, actual results could
vary materially from those anticipated, estimated or
projected. Investors should bear this in mind as they
consider forward-looking statements and whether
to invest in or remain invested in our securities.
In connection with the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995,
PMI has identified important factors that, individuallyor in the aggregate, could cause actual results andoutcomes to differ materially from those contained inany forward-looking statements made by PMI; any suchstatement is qualified by reference to these cautionary
statements included in PMI’s Annual Report on Form
10-K for the year ended 2020 and PMI’s Quarterly
Reports on Form 10-Q for the quarters ended
March 31, 2021 and June 30, 2021 and subsequent
securities filings, which discuss certain risks PMI faces
including those related to the COVID-19 pandemic.
PMI’s business risks include: excise tax increases anddiscriminatory tax structures; increasing marketing
and regulatory restrictions that could reduce ourcompetitiveness, eliminate our ability to communicate withadult consumers, or ban certain of our products; healthconcerns relating to the use of tobacco and other nicotinecontaining products and exposure to environmental
tobacco smoke; litigation related to tobacco use andintellectual property; intense competition; the effects ofglobal and individual country economic, regulatory andpolitical developments, natural disasters and conflicts;
changes in adult smoker behavior; lost revenues as a resultof counterfeiting, contraband and cross-border purchases;
governmental investigations; unfavorable currency
exchange rates and currency devaluations, and limitations
on the ability to repatriate funds; adverse changes inapplicable corporate tax laws; adverse changes in the cost,
availability, and quality of tobacco and other agricultural
products and raw materials, as well as components andmaterials for our electronic devices; and the integrityof its information systems and effectiveness of its data
privacy policies. PMI’s future profitability may also be
adversely affected should it be unsuccessful in its attempts
to produce and commercialize reduced-risk products
or if regulation or taxation do not differentiate between
such products and cigarettes; if it is unable to successfully
introduce new products, promote brand equity, enter
new markets or improve its margins through increased
prices and productivity gains; if it is unable to expand its
brand portfolio internally or through acquisitions andthe development of strategic business relationships; orif it is unable to attract and retain the best global talent.
PMI is further subject to other risks detailed from time
to time in its publicly filed documents. PMI cautions thatthe foregoing list of important factors is not a complete
discussion of all potential risks and uncertainties. PMI
does not undertake to update any forward-looking
statement that we may make from time to time, except
in the normal course of its public disclosure obligation.
Future results are also subject to the lower predictabilityof our reduced-risk product category’s performance. The
COVID-19 pandemic has created significant societal andeconomic disruption, and resulted in closures of stores,
factories and offices, and restrictions on manufacturing,
distribution and travel, all of which will adversely impact
our business, results of operations, cash flows and financial
position during the continuation of the pandemic. Our
business continuity plans and other safeguards may
not be effective to mitigate the impact of the pandemic.
Currently, significant risks include our diminished ability
to convert adult smokers to our RRPs, significant volume
declines in our duty-free business and certain other key
markets, disruptions or delays in our manufacturing andsupply chain, increased currency volatility, and delays incertain cost saving, transformation and restructuringinitiatives. Our business could also be adversely impacted
if key personnel or a significant number of employees
or business partners become unavailable due to the
COVID-19 outbreak. The significant adverse impact
of COVID-19 on the economic or political conditions
in markets in which we operate could result in changes
to the preferences of our adult consumers and lower
demand for our products, particularly for our mid-price or
premium-price brands. Continuation of the pandemic could
disrupt our access to the credit markets or increase ourborrowing costs. Governments may temporarily be unable
to focus on the development of science-based regulatory
frameworks for the development and commercializationof RRPs or on the enforcement or implementationof regulations that are significant to our business. In
addition, messaging about the potential negative impactsof the use of our products on COVID-19 risks may leadto increasingly restrictive regulatory measures on thesale and use of our products, negatively impact demandfor our products, the willingness of adult consumers toswitch to our RRPs and our efforts to advocate for thedevelopment of science-based regulatory frameworks
for the development and commercialization of RRPs.
The impact of these risks also depends on factors
beyond our knowledge or control, including theduration and severity of the pandemic, its recurrencein our key markets, actions taken to contain its
spread and to mitigate its public health effects, andthe ultimate economic consequences thereof.
It is not possible to predict or identify all risk factors.
Consequently, risks discussed should not be considered
to be a complete discussion of all potential risks
or uncertainties. None of the future projections,
expectations, estimates or prospects in this document
should be taken as forecasts or promises nor should
they be taken as implying any indication, assurance orguarantee that the assumptions on which such future
projections, expectations, estimates or prospects havebeen prepared are correct or exhaustive or, in thecase of assumptions, fully stated in the Framework.

No representation is made as to the suitability of any
Business Transformation-Linked Instruments to fulfill
sustainability criteria required by prospective investors.
This Framework does not create any legally enforceable
obligations against PMI or any of its subsidiaries; any such
legally enforceable obligations relating to any BusinessTransformation-Linked Instruments are limited to thoseexpressly set forth in the legal documentation governing
each such Business Transformation-Linked Instrument.
Therefore, unless expressly set forth in such legal
documentation, PMI’s or its subsidiaries’ failure to adhereor comply with any terms of this Framework, including,
without limitation, failure to achieve any sustainability
targets or goals set forth herein, will not constitute an eventof default or breach of contractual obligations under theterms and conditions of any such Business TransformationLinked Instruments. Factors that may affect PMI’s ability
to achieve any sustainability goals or targets set forth
herein include (but are not limited to) market, politicaland economic conditions, changes in government policy(whether with a continuity of the government or on achange in the composition of the government), changes
in laws, rules or regulations, and other challenges.
This Framework does not constitute a recommendation
regarding any securities of PMI or its subsidiaries. This
Framework is not, does not contain and may not be deemed
to constitute an offer to sell or a solicitation of any offer tobuy any securities issued by PMI or any of its subsidiaries.
In particular, neither this document nor any other relatedmaterial may be distributed or published in any jurisdictionin which it is unlawful to do so, except under circumstancesthat will result in compliance with any applicable laws
and regulations. Persons into whose possession such
documents may come must inform themselves about, andobserve any applicable restrictions on distribution. Anybonds or other securities that may be issued by PMI or
its subsidiaries from time to time, including any business
transformation-linked bonds, shall be offered by means ofa separate prospectus or offering document in accordancewith applicable laws, and any decision to purchase any
such securities should be made solely on the basis of theinformation contained in any such prospectus or offering
document provided in connection with the offering ofsuch securities, and not on the basis of this Framework.
In this Framework, the term “materiality,” “material,” andsimilar terms, when used in the context of economic,
environmental and social topics, are defined in thereferenced sustainability standards, and are not meant
to correspond to the concept of materiality under
the U.S. securities laws and/or disclosures requiredby the U.S. Securities and Exchange Commission.
While future events discussed in this Framework may
be significant, any significance should not be readas necessarily rising to the level of materiality of thedisclosures required under U.S. federal securities laws.

17

Headquarters
Philip Morris International Inc.
120 Park Avenue
New York, NY 10017-5579
USA

Operations Center
Philip Morris Products S.A.
Avenue de Rhodanie 50
1007 Lausanne
Switzerland

www.pmi.com

www.pmi.com