IFRS
S1 & S2

Alignment with IFRS S1 and S2 standards to strengthen risk management, transparency, and decision-making.

CYDSA has integrated IFRS S1 and IFRS S2 standards to ensure transparent, consistent, and comparable disclosure of sustainability-related (S1) and climate-related (S2) information.

This alignment enables the management of sustainability and climate-related risks and opportunities, with an impact on financial and operational performance.

The following section describes CYDSA’s alignment according to the four pillars of IFRS S1 and S2.

Sustainability
risk
management

1. Governance

CYDSA has a Sustainability Committee composed of employees with expertise in social and environmental matters. Additionally, the Group has a formal process to quarterly monitor the sustainability strategy, in which the Executive Chairman of the Board of Directors and leaders of corporate functions participate. In both instances, progress on aligning the sustainability strategy with IFRS S1 and S2 standards was reported.

2. Strategy

CYDSA’s strategy aligned with IFRS S1 and S2 focused on identifying risks and opportunities related to material sustainability topics (in accordance with IFRS S1) and those arising from climate change (in accordance with IFRS S2, focusing on climate-related physical and transition risks).

CYDSA assessed the prioritization of identified risks, opportunities, and impacts with the support of a third-party expert, considering their materiality to the Company and their relevance to stakeholders. This process involved determining which issues require immediate attention and which can be addressed in the medium and long term, based on their potential impact on operations and strategic decision-making.

This selection stage considers:

  • The probability of occurrence.
  • The degree of severity and nature of potential impacts.
  • The type and level of possible operational disruptions.
  • The associated financial and regulatory costs.

Through this process, CYDSA identified four risks derived from critical material topics for the Group.

S1

  • Risk: Sustainability-related risk concerning the scarcity and distribution of water resources. It may affect operational continuity, increase costs, and compromise assets.
  • Mitigation measure: The development of water storage and collection infrastructure was initiated to ensure alternative sources during contingency situations at two of the Group’s main locations.
  • Risk: Sustainability-related risk concerning exposure to accidents, occupational illnesses, and the handling of hazardous substances. It impacts employee integrity, operations, and corporate reputation.
  • Mitigation measure: CYDSA implements health and safety measures guided by an Internal Industrial Safety Management System and the Internal Health, Occupational Safety, and Environmental Protocol (HSE). These actions primarily aim to protect the integrity of employees and communities, while ensuring operational continuity and regulatory compliance. This preventive approach integrates early risk identification, continuous training, operational supervision, and the systematic improvement of safety controls in industrial environments.

S2

  • Risk: Climate-related physical risk associated with disruptions to the water supply network due to extreme weather events. It may cause operational shutdowns and limit access to potable or treated water.
  • Mitigation measure: The development of water storage and collection infrastructure was initiated to ensure alternative sources during contingency situations at two of the Group’s main locations.
  • Risk: Climate-related physical risk associated with impacts on distribution due to events such as heavy rainfall or flooding. It may cause delivery delays and disruptions in the supply chain.
  • Mitigation measure: The railway distribution fleet was expanded. In addition, infrastructure and stormwater drainage systems were strengthened at key facilities.

3. Risk Management

In 2025, the Company focused its efforts on initiating a comprehensive sustainability risk management strategy. The objective was to identify potential adverse impacts and establish concrete plans to prevent or mitigate them, while also capitalizing on opportunities that could strengthen the business model.

As a result, an analysis of physical risks was conducted, along with progress in the assessment of transition risks.

The Company sought to formalize this process in accordance with the parameters and requirements established by IFRS S1 and S2 standards. To this end, a third-party expert was engaged to strengthen the analysis focused on risks, opportunities, and potential impacts that could specifically affect each business area.

4.  Metrics and Targets

Strengthening CYDSA’s strategy toward compliance with IFRS S1 and S2 standards will involve adapting targets and metrics linked to sustainability and climate-related risks, to monitor progress and support data-driven decision-making.