Task Force on Climaterelated Financial
Disclosures
2021 ReportContents
Governance2

Board oversight  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2Management oversight  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3Strategy

3

Initial scenario analysis  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4Example climate-related risks  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4Example climate-related opportunities  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 5Example impacts of climate change on our business strategy  .  .  .  .  .  .  . 6Example impacts of climate change on our financial planning  .  .  .  .  .  .  . 7Risk management

8

Identification, assessment, and management of climate-relatedrisks and opportunities .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 8Enhancing organizational resilience  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 9Metrics and targets

10

Commitments and targets to manage climate-related risks
and opportunities  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 10ii

Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportTo our stakeholders:Over the past two years Microsoft has set ambitious climate commitments—to operate asa carbon negative, water positive, zero waste, company that protects ecosystems. These
commitments come due in 2030 and are part of a broader awareness of the climate-relatedrisks, opportunities, and associated sustainability and resilience measures any company
must undertake . Aligning with best practices on these issues will be important for achieving
operational excellence, and over the last two years we have ramped up our efforts to moreclosely align with the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD). In this time, we have conducted a forward-looking climate scenario analysis,
expanded our governance and strategy of climate-related risks and opportunities, set ambitious
climate-related targets to become carbon negative, water positive, zero waste, and protect
ecosystems, and measured and reported on our progress. We have also developed an internal
Climate Risk and Resilience plan, informed by the TCFD recommendations. We have set goals toequitably minimize our climate-related risks, maximize our climate-related opportunities, andenhance the resilience of our enterprise, operations, supply chain, and partner communities
over the next 10 years. These goals will not be achieved overnight. They will require focus,
collaboration with our partner communities, and a commitment to drive change. It won’t beeasy, but it is possible to create equitable, sustainable, and resilient solutions, together.

Lucas Joppa, Chief Environmental Officer

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Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportGovernance

Board oversight related to climate
Microsoft’s Board of Directors acts as a unitary board
with four standing committees to assist it in discharging its oversight responsibilities (Figure 1):
1. Regulatory and Public Policy
2. Compensation
3. Governance and Nominating
4. AuditBOARD

C-SUITEPRESIDENT

MANAGEMENTClimate change is included under the umbrella of“environmental sustainability,” and this committee
is responsible for reviewing and providing guidanceon our climate-related policies and programs . During
at least one meeting each year and on an as-neededbasis, our President and Vice Chair and our Chief
Environmental Officer present to this committee
on our overall sustainability agenda, including our
climate-related work, and solicit high-level input on
new and emerging initiatives, including our carbon
reduction goals and strategies .

Regulatory and Public Policy Committee

President and Vice Chair
Corporate, External, and Legal Affairs (CELA) group

Chief Environmental Officer

EXECUTIVE
MANAGEMENTThe Regulatory and Public Policy Committee ofMicrosoft’s Board of Directors provides oversight andguidance on Microsoft’s environmental sustainability
strategy and commitments . Environmental sustainability is among the topics specifically listed in its charter.

Climate Council
CO+I*

GWS**

ERM

Finance

Investor
Relations

Director,
Director,

Director,GWS

Sr Manager

Director,
Treasury

Director, ESG

CO+I

Environmental
Sustainability group

Global Water Program

Global CR+R Program

CR+R Working group

Global Carbon Program

Global Waste Program

Global Ecosystem(AI for Earth) Program* CO+I - Cloud Operations & Innovation** GWS - Global Workplace Services

Figure 1. Microsoft’s Climate-related Governance Structure.

2

Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportManagement oversight
The President and Vice Chair as well as the Chief Environmental Officer hold senior executive accountability
for environmental risk management. The President andVice Chair is responsible for our Corporate, External,
and Legal Affairs (CELA) group, which is focused onbuilding and maintaining trust with Microsoft’s customers, investors, and stakeholders, including in areas ofenvironmental sustainability and climate change. The
President and Vice Chair presents to the Regulatory andPublic Policy Committee of the Board on the company’s
policies and programs that relate to corporate social
responsibility, including environmental sustainability
and climate change. Our Chief Environmental Officer isthe head of our corporate Environmental Sustainability
team, leading our overall environmental sustainability
vision, strategy, and program execution. The Environmental Sustainability team participates in the Microsoft
Enterprise Risk Management (ERM) program, which
identifies, assesses, and prioritizes risks and, throughregular reporting and discussion, assists senior management and the Board with governance of risk. The
Environmental Sustainability team solicits input fromsubject matter experts across the company to support
this reporting .
In FY20, Microsoft established a Climate Council, chairedby our President and Vice Chair and comprising a number of executives from across the company, including
the Chief Environmental Officer. The Climate Council
is charged with monitoring climate-related risks andopportunities and coordinating and providing oversightfor sustainability initiatives across the organization .

3

To further our commitment to sustainability andcarbon reduction, in February 2020 we established across-company CR+R program and Working Group(WG) to lead us in assessing, managing, and adapting
to climate-related risks to enhance our overall climate
resilience. The CR+R WG meets quarterly and includes
representatives across critical business groups working
together to identify physical and transition climate-related risks and opportunities and align on management
measures, including climate vulnerability assessment,risk management, and enhancing our adaptive capacityand overall climate resilience .

Strategy
Microsoft’s climate strategy is focused on understanding, mitigating, and managing the financial andreputational risks from climate change that directly
impact our own business and our ability to deliver
service to our customers. Its importance is reflected in
the company-wide decision to make climate change
one of our company’s strategic priorities with an aim tobecome carbon negative by 2030 and by 2050 remove
from the environment all the carbon the company has
emitted either directly or by electricity consumption
since it was founded in 1975 .
Microsoft identifies and assesses climate risks andopportunities that could have a financial or strategic
impact on the organization across a range of time
horizons: short-term (0-3 years), medium-term (out to2030), and long-term (out to 2050). In our assessments,
we consider both acute and chronic physical risks,such as temperature extremes, water stress, drought,
wildfire, coastal flooding, tropical cyclones, and extreme
weather damage. We also consider a multitude of risks
associated with a transition to a low-carbon economy,
also known as transition risks, including current andemerging regulation, legal risks, market risks, newtechnology, and reputational risk. In addition to risks,
we also consider several climate-related opportunities
associated with resource efficiency (including energy,
water, and materials), use of lower-emission sources ofenergy, and opportunities to design and develop new
products and services that support the transition to a
low-carbon economy .

Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportInitial scenario analysis
A differentiator within the TCFD recommendations
is the forward-looking scenario analysis, which is awell-established method for developing more flexible
and robust strategic plans that are responsive to arange of plausible future states. To align with the
TCFD-recommended scenario analysis approach,in 2020 we conducted an initial screening-level
TCFD-aligned quantitative climate-related physicaland transition risk and opportunity assessment ofMicrosoft’s physical assets across the next several
decades under two different future climate scenarios.
Approximately 400 Microsoft facilities were included in
the analysis—facilities selected based on highest asset
value and high-energy consuming sites—covering all
geographies. The selection included datacenters, retailstores, offices, and executive suites. Following therecommendations of TCFD, two scenarios were considered in this initial screening-level scenario analysis:(1) RCP8.5: A high emissions scenario wherein Earthwarms over 4°C above preindustrial temperatures by
2100; and 2) RCP4.5: A low emissions scenario wherein
Earth warms 2°C above preindustrial temperatures by
2100. The analysis quantified the climate-related risks
and opportunities having the greatest financial impact.
The software used in this scenario analysis has global
coverage, spans decadal time periods from present
day to 2100, and is aligned with the TCFD recommendations. We intend to revise this assessment every
2–3 years to ensure alignment with the best available
climate science .

Example climate-related risks
The following are examples of specific climate-related risks that we identify and analyze in our risk assessment
process. The inclusion of these examples does not characterize the probability, materiality, or potential financial
impact of these risks and opportunities . A comprehensive account of our climate-related risks is disclosed annuallyin our CDP Climate Change response.

Transition
Risk category

Risk description

Our approach to minimize climate risks

Current andEmerging
Regulations

Risk of increased device energy
efficiency regulations in theEuropean Union (EU) and theUnited States.

• Monitoring upcoming regulations and engaging directly with policymakers tounderstand the likelihood and impacts of new energy efficiency policies on our business.

Emerging datacenter energy rules
in various markets, and carbon tax
proposals around the world .

• Investing in the infrastructure efficiency of our datacenters, applying ourlearning in deployed and new datacenter designs .
• Operating a carbon-neutral cloud since 2012 (e.g., matching our datacenter
GHG emissions with the direct purchase of renewable energy or in-region
energy attribute certificates).
• Making a commitment to procure renewable energy to cover 100% of ourelectricity usage by all our datacenters, buildings, and campuses, by 2025.

Technology

Environmental performanceof Microsoft technologies andservices, such as energy efficiency
of devices and cloud infrastructure,in comparison with those of ourmain competitors• Introducing policies encompassing effective environmental governance and data
security for every product in our cloud infrastructure across each lifecycle stage .

LegalRisk of litigation or enforcement
for misrepresenting the environmental attributes of our products
or services• Collaborating across product groups, marketing teams, legal teams, and corporate
Environmental Sustainability teams to rigorously assess legal risks and help ensurethat our product information and communications are accurate and transparent .

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Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportRisk category

Risk description

Our approach to minimize climate risksMarketShifting customer preferencesin the transition to a low-carbon
future• Considering downstream impacts of our devices by designing for longevity toextend product lifespans and reducing their overall carbon footprint .

Reputational risks related to both
our environmental impact and theclimate resilience of our service• Prioritizing ongoing global business continuity, monitoring risks, implementing
business continuity measures, and ensuring geographic redundancy to help ensure
continued reliability .

Reputational• Investing in IT efficiency, from chips to datacenter infrastructure, and renewableenergy help make our cloud services up to 93% more energy efficient and 98%
more carbon efficient than on-premises datacenters (as reported in our 2018
“The carbon benefits of cloud computing” paper).

• Performing annual testing of Microsoft’s critical services and business processes,
based on scenarios involving loss of facilities, systems, workforce, or critical thirdparty suppliers of goods/services, cybersecurity events, or a combination of two or
more of those scenarios .

PhysicalRisk category

Risk description

Our approach to minimize climate risks

Acute

Examples include flooding,extreme weather, drought, sealevel rise/storm surges• Conducting a TCFD-aligned climate scenario analysis in 2020, working to integrate
those results into our operational plans and processes, and committing to refreshing
the analysis every 2-3 years .

Chronic

Examples include water shortages,
average temperature changes,
increased demand for energy, andsaltwater intrusion from sea level
rise• Assessing property risks annually to value the global property insurance program .
This assessment includes supplier mapping to identify natural hazard risks for any
locations of identified vendors that support Microsoft (to the extent possible given
the fluid nature with which suppliers assign workloads to any of multiple available
production locations) and then model their probabilities.
• Prioritizing ongoing global business continuity, monitoring, and assessing risks,
implementing business continuity measures, and ensuring geographic redundancy
to help ensure continued reliability .

Example climate-related opportunities
The following are examples of specific climate-related opportunities that Microsoft identified. The inclusionof these examples does not characterize the probability, materiality, or potential financial impact of theseopportunities. A comprehensive account of our climate-related opportunities is disclosed annually in our CDP
Climate Change response .
Opportunity
category
Energyresilience:
Use of loweremission sourcesof energy

Opportunity description

Our approach to realize climate opportunities

Increasing our use of clean energy over the next decade and,by 2025, to reach our 100 percent renewable energy goal byprocuring enough renewable energy to cover 100 percent of
our electricity usage at our facilities and datacenters .

• Increasing the carbon fee that we charge each businessdivision based on its carbon emissions to generate more
funds to pay for sustainability improvements, including
renewable energy procurement .

Eliminating our dependency on diesel fuel at our datacentersby 2030. We will shift to low-carbon standby power systems
including battery storage, and low-carbon fuel such ashydrogen, building on a successful test in 2020 usinghydrogen fuel cells as backup power for datacenters .

• Contracting new power purchase agreements, including
500-MW PPA with Sol Systems, tying the purchase ofrenewable energy to environmental justice and equity inunder-resourced communities .

Driving change beyond our operations by creating newmodels and investing in new energy technologies that canbring the benefit of renewable energy to companies andcommunities of all sizes .

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Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportOpportunity
category
Energyefficiency:
Deliver
low-emission
cloud services

Opportunity description

Our approach to realize climate opportunities

Offering a carbon neutral cloud, enabling enterprises
to directly reduce their own carbon emissions and takeadvantage of the higher efficiencies that large cloud service
providers like Microsoft can achieve .

• Working to increase the circularity of our cloudinfrastructure materials and reduce the related GHG
emissions, which will contribute to further cloud service
emission reductions .
• By 2030, reducing our Scope 3 emissions by more thanhalf. Our roadmap covers the product lifecycle, including
manufacturing, designing with lower carbon materials andworking with suppliers to help lower their footprint; in use,
meeting/exceeding efficiency standards; in transportation,
improving shipping efficiency; and in end-of-life,
improving repairability/recyclability .

Resource
efficiency:

Driving our Scope 1 and Scope 2 emissions to near zero by
the middle of this decade .

More efficientbuildings andfleet• Investing into energy-smart buildings that will use Azurefor building system monitoring and optimization of energy
usage at Microsoft campuses .
• Partnering with industry leaders to pilot and fund a newtool, the Embodied Carbon in Construction Calculator(EC3).
• Providing mobility solutions and using lower emissions
vehicles .

Market:Providing technology/services that are resilient to thephysical impacts of climate change, thanks to georedundantdatacenters .

Access to newand emerging
markets

Enabling organizations to develop artificial intelligence (AI)computing resources through AI for Earth that help people,
organizations, and governments anticipate, predict andmanage climate change impacts .

• Providing grants through AI for Earth program to researchand non-governmental organizations to leverage cloudand AI technology to access data, create high-resolution
maps, and inform data-driven decision making.

Example impacts of climate change on our business strategy
We take a holistic approach to mitigating and managing potential impacts of climate-related risks and opportunities on our business strategy, and it includes investing in research and development to improve efficiencies
across our operations, working with our suppliers to minimize the impacts of climate change on our business,and offering sustainable and resilient products to respond to climate-related opportunities. The following tableprovides examples of impacts of climate change to our business strategy .
Business andstrategy area
Products and services

ImpactOpportunities to develop new and invest in existing products/services to help customers reduce their carbon footprint
and plan for climate resilience and business continuity are influencing our strategy through 2030. One of the mostsubstantial strategic decisions we have made influenced by these opportunities is the shift to our cloud-based businessstrategy, including offering lower-carbon cloud services.
• In January 2020, we released the Microsoft Emissions Impact Dashboard, which shows customers the estimated carbon
emissions from their cloud usage. At the time of the 2021 CDP Climate Change response deadline, we were the only
cloud provider to give full transparency to customers across all three emission scopes .
• In FY20, we set a new target to reach 100% recyclable Surface devices by 2030. We set new packaging goals including
100% recyclability and using >80% post-consumer recycled content across our packaging portfolio by 2030 . By 2025
we will source 100% of packaging materials from recycled, renewable or responsibly-sourced content; eliminate all
virgin, single-use petroleum-based plastics; and source all virgin paper materials from forests that have been certified/verified to be responsibly managed.

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Microsoft Task Force on Climate-related Financial Disclosures — 2021 Report

Business andstrategy area
Supply chain and/or
value chain

Impact• Our supply chain and/or value chain strategy extends to at least 2030, which is the date by which we have committed
to cut our Scope 3 emissions by more than half. We will partner throughout our supply chain to achieve thiscommitment .
• The impact of climate-related opportunities on our supply chain is primarily the prioritization of suppliers thatprovide more energy-efficient, lower-emission components, products, and services. We have opportunities to reduceenergy consumption from our operations (e.g., moving to more efficient building design/operation) and material
procurement and to deliver low-emission goods/services, which relies on our ability to source efficient components
for our hardware and reduce the footprint of our datacenters .
• From July 2020, our top suppliers (by spend) are required to report their Scope 1, 2, and 3 GHG emissions and uponrequest develop a plan to reduce them. We plan to highlight suppliers with lower emissions output with special
attention and action. We prioritize investment with suppliers that: (1) meet our requirements for lower-emission
components, goods, and services and (2) demonstrate a commitment to climate change performance, such as throughemissions reporting and target setting (e.g., engaging top suppliers through the CDP Supply Chain program andworking with cloud infrastructure suppliers to help set carbon reduction targets).

Investment in R&D• We invest in R&D for new solutions and datacenter designs that help us contribute to climate resilience throughtechnology innovation while helping increase our operating efficiency, meet growing demand for lower-emission
products/services and establish a stronger competitive position. Our R&D investment strategy extends to at least 2030.
• One of our most substantial strategic decisions influenced by these opportunities is our investment in our AI for Earthprogram. Funded with $50 million and a 5-year commitment from Microsoft President Brad Smith in December 2017,
the program deploys our investments in AI research and technology to enable people and organizations to sustain
and manage Earth’s life support systems, including anticipating, predicting, and managing climate change impacts.
• We are investigating design changes and developing new specifications to facilitate embodied carbon reductions inour datacenter designs over the long term .
• Through Azure IoT solutions for energy and sustainability, we are developing solutions to help organizations reduceand manage emissions and energy consumption. For Surface products, through our Ecodesign program we focus on
three areas: material efficiency, reducing hazardous materials and extending product life; we continue to explore ways
to promote repair, refurbishment and reuse of devices and expand our use of recycled materials and are exploring theuse of recycled ocean plastic .

Operations• Our operations are the area affected the most significantly by our climate-related opportunities. Our strategy
looks out to at least 2050, as the most substantial strategic decision we have made to date influenced by theseopportunities is our commitment by 2030 to be carbon negative and by 2050 to remove from the environment anequivalent amount of all the carbon dioxide the company has emitted either directly or by electrical consumption
since it was founded in 1975 .
• We have also created a $1 billion Climate Innovation Fund to accelerate the global development of carbon reduction
and removal technologies, as well as related climate solutions. These commitments are supported by our existing
action in these areas, such as our latest renewable energy deals (e.g., a 500-MW first-of-its-kind PPA with Sol Systems
that ties the purchase of renewable energy to environmental justice and equity in under-resourced communities).

Example impacts of climate change on our financial planning
We also incorporate climate considerations in our financial planning. In July 2012, we introduced an internalcarbon fee, charging business groups for emissions associated with their energy consumption and business air
travel. In FY19, we announced that we will raise our carbon fee to $15 per ton to more fully reflect our cost ofcarbon abatement. Starting in July 2020, in support of our new commitment to be carbon negative by 2030, we
expanded the fee to start charging for not only our own operational emissions, but also our Scope 3 emissions.
The carbon fee affects our long-term financial planning, providing an incentive, the financial justification, and insome cases the funds for renewable energy investments, climate-related energy and technology innovation, andthe development of carbon reduction and removal projects. The time horizon for the financial planning associatedwith our carbon fee is through 2030 and beyond .
Our carbon fee is primarily influencing our indirect costs, capital expenditures, and liability, and oursustainability performance, carbon commitments, and strategy to realize climate-related opportunities has
an impact on our access to capital and projections of our revenues. The following table provides examples ofimpacts of climate change to our financial planning.
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Microsoft Task Force on Climate-related Financial Disclosures — 2021 Report

Business andStrategy Area

ImpactIndirect Costs• The funds collected through the carbon fee are used to cover (in part) the costs to meet our carbon
commitments. This includes investments in renewable energy (in FY20, it was used to purchase 6,795,482 MWhof renewable energy globally) and other projects.

Capitalexpenditures• For capital expenditures, we use the carbon fee to fund some energy efficiency investments within ourfacilities; these have included investments in, for example, light-emitting diode (LED) lighting projects.

Liabilities• The carbon fee also influences our financial planning for liabilities. Carbon fee investments to reduce energy
consumption, water consumption, and carbon emissions help reduce our possible future legal liabilities inresource-constrained or climate-affected jurisdictions.

Revenues• Our company’s investments in the cloud, artificial intelligence (AI), and Azure IoT are key to helping us gain abetter competitive position as interest in environmentally responsible suppliers and lower-emissions services
increases. The associated revenue projections for these areas are central to Microsoft financial planning.

Access to capital• We view our sustainability performance, carbon commitments, and strategy to realize climate-related
opportunities as an advantage when engaging with our investment community. These are important inputs
to our financial planning related to access to capital, and we integrate information on our sustainability
performance in meetings with our large institutional investors .

Risk management

Identification, assessment, andmanagement of climate-relatedrisks and opportunities
The Environmental Sustainability team, led by our
Chief Environmental Officer, identifies and assesses
Microsoft’s climate-related physical and transition risks
and opportunities across the business portfolio using
quantitative and qualitative analyses. The results fromthese analyses are assessed and validated throughconsultation with subject matter experts (SMEs) acrossthe company (including datacenter, facility, device,and supplier teams) and used to inform Microsoft’s
enterprise risk assessment process led by the enterpriserisk management (ERM) program. With informationfrom the SMEs, the ERM program looks across the risk
portfolio and information received to further identify,
assess, and prioritize the criticality of any potential risks
to Microsoft’s core business functions and operations.
This process determines whether any identified risks
have the potential for substantive financial, strategic,
operational or legal impact on the company .

8

To make decisions on risk, we use our ERM risk prioritization criteria in the context of business continuity andservice resilience, which include the scope of impact(e.g., reputational, regulatory, and cost), potential returnon investment, and time and resources required to
implement changes. The process involves categorizing
risks according to their inherent impact on a scale of 1(minimal) to 5 (critical) in four categories: trust or reputational; operational scope; legal, compliance or environmental; and enterprise value . Risks are then rated
according to their inherent likelihood on a scale of 1
(remote) to 5 (expected). These two ratings are used to
produce an inherent risk score and are then aggregatedwith a management action/control effectiveness rating
for a residual risk calculation .
We also have an Enterprise Resilience Management
program that works with the ERM program to ensure
consistent alignment among risks and risk prioritization
criteria and, ultimately, the final risk ratings. Our
Enterprise Resilience Management program’s Continuity & Resilience and Service Resilience Standards
identify the baseline requirements for implementing
business continuity, disaster recovery and overall

Microsoft Task Force on Climate-related Financial Disclosures — 2021 Reportresilience at Microsoft to help ensure our capability to
prepare, recover and perform in the event of a major or
catastrophic business disruption that affects our ability
to meet customer expectations. For example, to mitigate
physical climate-related risks, the Enterprise Resilience
Management program uses its relevant standards tohelp ensure the existence of effective, reliable, welltested plans, systems, and processes during such a disruptive event to support the continuity and resilience ofbusiness operations and services and minimize adverse
impacts. In the case of datacenters, central to Microsoft
cloud services design is geographic redundancy,
which reduces our vulnerability to climate change
and offers customers a climate-resilient alternative toon-premises datacenters. To help prepare employees
in the event of an emergency, Microsoft maintains
an Employee Preparedness portal with resources
including a global crisis management response team,local office/site updates, regional advisories, andeducational awareness resources .
At an asset level, business groups within our operating
segments have their own processes. For example,
our Cloud Operations & Innovation (CO+I) segment,
which is responsible for Microsoft datacenters, has adefined process for identifying and assessing risk inthe design and siting of new datacenters and duringongoing operations, including availability of waterand renewable energy. Azure Hardware Systems andInfrastructure, responsible for our cloud infrastructure
supply chain, identifies and manages risk related
to the emissions impact of the design, sourcing,
manufacturing, transportation, use, and end-of-life
choices for cloud infrastructure materials and chemicals
by monitoring supplier metrics against compliancestandards and reduction targets through its CloudSupply Chain Sustainability (CSCS) team. Within ourMore Personal Computing segment, the Windows& Devices (W&D) group has an Environmental,
Compliance, and Sustainability team that evaluatesrisks and opportunities pursuant to the ISO 14001
framework in the context of energy efficiency and other9

regulatory and voluntary environmental requirements
at the global, regional, national, and local level forexisting and planned Microsoft-branded hardware andrelated devices and packaging supply chain operations .
Subsidiaries manage their processes based on regionaland geographical factors that affect them individually(such as local regulations).

Enhancing organizational resilience
The results of our most recent climate scenario
analysis revealed that we may experience impacts
from climate change in the future if we do not act
now to mitigate the risks, build adaptive capacity,maximize our opportunities, and enhance the resilienceand equity of our enterprise and the communities
where we live and work. In FY20, we developed an
approach to qualitatively assess adaptive capacity at
20 of our most exposed facilities. This analysis helped
us understand the initial level of adaptive capacity
and climate resilience of our assets, as well as our
employees and host communities. We assess several
dimensions of resilience, including:
1. The structural and operational integrity of ourowned or operated facilities
2. The resilience of our employees, their healthand safety, and ability to work and get to work
3. The resilience and adaptive capacity of the surrounding communities that host our facilities.
The resilience of host communities is not directly in oursphere of influence; however, an understanding of how
they are adapting to climate change is important tounderstanding our overall enterprise resilience . Any gaps
in adaptation and resilience at our sites are opportunities
for us to take steps to close those gaps, and any gaps
in adaptation and resilience within the communities inwhich we operate are opportunities for us to partnerwith the community to protect operations, capital, andcritical services and resources upon which we depend .

Microsoft Task Force on Climate-related Financial Disclosures — 2021 ReportMetrics and targets

Commitments and targets to manage climaterelated risks and opportunities
We measure a variety of climate-related metrics that inform our environmental
sustainability and overall business strategies. We set commitments for our four coresustainability pillars – carbon, water, waste, and ecosystems – to monitor our efficiencies in our operations and value chain . A comprehensive account of our environmental
metrics and progress on achieving these targets is disclosed annually in our CDP
Climate Change response and the Environmental Sustainability Report.
Topic

Commitments

Targets

CarbonCarbon negativeby 2030• By 2025, reduce our Scope 1 and 2 emissions to near zero.

• By 2030, reduce Scope 3 GHG emissions intensity per unit of revenue 30% from a 2017 base year and avoid
growth in absolute scope 3 emission (approved by SBTi).
• In 2021, contract for the removal of 1 million metric tons of carbon dioxide from the environment(goal achieved).

• By 2030, Microsoft will have 100 percent of its electricity consumption, 100 percent of the time, matched byzero carbon energy purchases .
• By 2030, electrify our entire global operations vehicles fleet.

• By 2030, we will reduce our Scope 3 emissions by more than half from a 2020 baseline.

• By 2030, Microsoft will remove more carbon than it emits. By 2050, we΄ll remove an equivalentamount of carbon to all our historical emissions .

Water

Waste

Water positiveby 2030• By 2030, reduce the water intensity of our direct operations, replenish in water-stressed regions where wework, and enable access to 1.5 million people.

Zero waste by2030• By 2030, reduce as much waste as we create across our direct operations, products, and packaging.

• We will reduce water waste in our datacenter operations by 95 percent by 2024.

• Divert 90 percent of our solid waste from landfills and incineration.

• By 2025, all cloud packaging will be reusable, recyclable, or compostable.
• By 2030, all owned datacenters will achieve zero waste certification.

• By 2025, 90 percent of servers and components within our regional datacenter networks will be reused.

• By 2025, we will eliminate single-use plastics in all Microsoft primary product packaging and all IT asset
packaging in our datacenters .

• We will design Surface devices, Xbox products and accessories, and all Microsoft product packaging to be
100 percent recyclable in OECD countries by 2030 .
• We will achieve 90 percent diversion of operational waste at datacenters and campuses and 75 percent
diversion for all construction and deconstruction projects by 2030
Ecosystems

Building a
PlanetaryComputer• Aggregate environmental data from around the world and put it to work through data, AI, and technology
with the Planetary Computer.

• By 2025, permanently protect and restore more land than we use company-wide, using approaches like landacquisition, conservation easement, national park creation, and community or indigenous-led conservation.
• We will take responsibility for the ecosystem impacts of our direct operations by protecting more land thanwe use by 2025 .

Sustainability investments
Through the Climate Innovation Fund, Microsoft is investing $1 billion over four years to accelerate the development of carbon reduction andremoval technologies that will help us and the world become carbon negative .
We established our internal carbon fee in 2012 to fund our carbon neutrality commitment. In 2019, we raised the fee to $15 per ton, which we
charged to each business group across Microsoft based on their Scope 1 and 2 carbon emissions and business air travel. In 2020, we expanded thefee to cover each business group’s Scope 3 emissions. While we’ve initially set the fee at a lower rate for Scope 3, it will ramp up over time until
there is one single fee across our entire emissions portfolio .

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Microsoft Task Force on Climate-related Financial Disclosures — 2021 Report

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