Johnson Controls Sustainable Finance Framework

Second-Party Opinion

Johnson Controls Sustainable Finance Framework

Evaluation Summary

Use of Proceeds Instruments

Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan Principles 2021

Sustainalytics is of the opinion that the Johnson Controls Sustainable Finance Framework is credible and impactful and aligns with the four core components of the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan Principles 2021 (the “Use of Proceeds Principles”). The eligible categories for the use of proceeds – Eco-efficient and/or Circular Economy adapted products, production technologies and processes, Green Buildings, Pollution Prevention & Control, Sustainable Water and Wastewater Management, Clean Transportation, Renewable Energy and Socioeconomic Advancement and Empowerment, including gender inclusion – are aligned with those recognized by the Use of Proceeds Principles and will lead to positive environmental and social impacts.

Sustainability-Linked Instruments

Sustainability-Linked Bond Principles 2020, Sustainability-Linked Loan

Principles 2021

Sustainalytics is of the opinion that the Johnson Controls Sustainable Finance Framework aligns with the Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2021 (the “Sustainability-Linked Principles”). Overview of KPIs and SPTs:

KPI SPT Strength of the

KPI Ambitiousness

of SPT

Reduction in Scope 1 and 2 GHG emissions (tCO2e)

Reduction in Scope 1 and 2 emissions by 35% by 2025 and by 55% by 2030 globally, from a 2017 baseline

Very Strong Highly

Ambitious

Reduction in Scope 3 GHG emissions from Use of Sold Products (tCO2e)

Reduction in Scope 3 emissions by 5% by 2025 and by 16% by 2030 globally, from a 2017 baseline

Very Strong Ambitious

Evaluation Date September 7, 2021

Issuer/Borrower Location

Cork, Ireland

The UoPs and SPTs contribute to the following SDGs:

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Table of Contents

Evaluation Summary ......................................................................................................................... 1

Table of Contents .............................................................................................................................. 2

Scope of Work and Limitations ........................................................................................................ 3

Introduction ....................................................................................................................................... 5

Sustainalytics’ Opinion ...................................................................................................................... 7

Section 1: Sustainalytics’ SPO on the Alignment of the Framework with Relevant Market Standards ... 7 Alignment with Use of Proceeds Principles ......................................................................................................... 7

Alignment with Sustainability-Linked Principles ................................................................................................ 10

Section 2: Assessment of Johnson Controls’s Sustainability Strategy ................................................. 15

Section 3: Impact of the UoPs and SPTs Selected ................................................................................. 17

Conclusion....................................................................................................................................... 19

Appendix 1 Sustainability Bond / Sustainability Bond Programme - External Review Form ........ 20

Appendix 2: Sustainability-Linked Bonds - External Review Form ................................................. 27

Disclaimer ....................................................................................................................................... 32

About Sustainalytics, a Morningstar Company .............................................................................. 33

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Scope of Work and Limitations

Sustainalytics’ Second-Party Opinion reflects Sustainalytics’ independent1 opinion on the alignment of the Johnson Controls Sustainable Finance Framework with current market standards. As part of the Second-Party Opinion, Sustainalytics assessed the following:

• The Framework’s alignment with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, Social Loan Principles 2021, Sustainability-Linked Bond Principles 2020, and Sustainability-Linked Loan Principles 20212, 3 (the “Principles”);

• The credibility and anticipated positive impacts of the use of proceeds and SPTs; and

• The issuer’s sustainability strategy, performance and sustainability risk management;

As part of this engagement, Sustainalytics held conversations with various members of Johnson Controls’ management team to understand the sustainability impact of their business processes and the core components of the Framework. Johnson Controls representatives have confirmed that:

(1) They understand it is the sole responsibility of Johnson Controls to ensure that the information provided is complete, accurate or up to date;

(2) They have provided Sustainalytics with all relevant information; and

(3) Any provided material information has been duly disclosed in a timely manner.

Sustainalytics also reviewed relevant public documents and non-public information. This document contains Sustainalytics’ opinion of the Framework and should be read in conjunction with that Framework. Any update of the present Second-Party Opinion will be conducted according to the agreed engagement conditions between Sustainalytics and Johnson Controls.

Sustainalytics’ Second-Party Opinion, while reflecting on the alignment of the Framework with market standards, is no guarantee of alignment nor warrants any alignment with future versions of relevant market standards. The Second-Party Opinion is valid for issuances aligned with the respective Framework for which the Second-Party Opinion was written up to 24 months or until one of the following occurs: (1) A material change to the external benchmarks4 against which targets were set; (2) A material corporate action (such as material M&A or change in business activity) which has a bearing on the achievement of the SLBs and SLLs or the materiality of the KPI.

For use of proceeds instruments, Sustainalytics relied on its internal taxonomy, version 1.10.1, which is informed by market practice and Sustainalytics’ expertise as an ESG research provider. The Second-Party Opinion:

• addresses the anticipated impacts of eligible projects expected to be financed with bond proceeds but does not measure the actual impact. The measurement and reporting of the impact achieved through projects financed under the Framework is the responsibility of the Framework owner.

• opines on the potential allocation of proceeds but does not guarantee the realized allocation of the bond proceeds towards eligible activities

For sustainability-linked instruments, the Second-Party Opinion:

• addresses the anticipated SPTs of KPIs but does not measure the KPIs’ performance. The measurement and reporting of the KPIs is the responsibility of the bond issuer.

1 When operating multiple lines of business that serve a variety of client types, objective research is a cornerstone of Sustainalytics and ensuring analyst independence is paramount to producing objective, actionable research. Sustainalytics has therefore put in place a robust conflict management framework that specifically addresses the need for analyst independence, consistency of process, structural separation of commercial and research (and engagement) teams, data protection and systems separation. Last but not the least, analyst compensation is not directly tied to specific commercial outcomes. One of Sustainalytics’ hallmarks is integrity, another is transparency. 2 The bond Principles, Guidelines and Handbooks are administered by the International Capital Market Association and are available at: https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/ 3 The loan Principles and Guidelines are administered by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications & Trading Association and are available at: https://www.lsta.org/content/?_industry_sector=guidelines-memos-primary-market 4 Benchmarks refers to science-based benchmarks

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No information provided by Sustainalytics under the present Second-Party Opinion shall be considered as being a statement, representation, warrant or argument, either in favor or against, the truthfulness, reliability or completeness of any facts or statements and related surrounding circumstances that Johnson Controls has made available to Sustainalytics for the purpose of this Second-Party Opinion.

For inquiries, contact the Sustainalytics Corporate Solutions project team:

Jhankrut Shah (Toronto) Project Manager [email protected] (+1) 647 264 6641

Shreeya Garg (Amsterdam) Project Support [email protected] (+31) 20 205 0000

Paramjot Kaur (New York) Client Relations [email protected] (+1) 646 518 0184

Arnab Deb (Mumbai) Project Support [email protected] (+91) 22 6121 7100

Nimisha Shah (Mumbai) Project Support [email protected] (+91) 22 6121 7100

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Introduction

Founded in 1885, Johnson Controls International plc (“Johnson Controls”, “JCI” or the “Company”) is an international technology company headquartered in Cork, Ireland. The Company’s product line is focused on building and home technologies and include air systems, building management, HVAC equipment and controls, security systems, industrial refrigeration products and fire safety solutions. JCI has approximately 100,000 employees in more than 150 countries.

Johnson Controls has developed the Johnson Controls Sustainable Finance Framework (the “Framework”) under which it intends to issue use-of-proceeds (green, social, sustainability) bonds and loans and sustainability-linked bonds and loans. Johnson Controls engaged Sustainalytics to review the Framework, dated August 2021, and provide a Second-Party Opinion on the Framework’s alignment with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, Social Loan Principles 2021, Sustainability-Linked Bond Principles 2020, and Sustainability-Linked Loan Principles 2021 (the “Principles”). This Framework has been published in a separate document.5

Issuances from use of proceeds instruments will finance or refinance, in whole or in part, existing or future projects that deliver positive environmental impact, promote social inclusion, and advance the Company’s sustainability strategy. The Framework defines eligibility criteria in six green and one social areas:

Eligible Green Projects

1. Eco-efficient and/or Circular Economy adapted products, production technologies and processes 2. Green Buildings 3. Pollution Prevention & Control 4. Sustainable Water and Wastewater Management 5. Clean Transportation 6. Renewable Energy

Eligible Social Projects

1. Socioeconomic Advancement and Empowerment, including gender inclusion

Under sustainability-linked instruments, the financial characteristics of the bonds and loans (such as coupon, redemption price or margin) are tied to the achievement of SPTs for two KPIs which measure the reduction in GHG emissions.

The KPIs and SPTs used by Johnson Controls are defined in Tables 1 and 2 below.

Table 1: KPI Definitions

KPI Definition

KPI 1: Reduction in Scope 1 and 2 GHG emissions (tCO2e)

The KPI is defined as the Scope 1 and 2 GHG emissions calculated in accordance with the Greenhouse Gas Protocol.

KPI 2: Reduction in Scope 3 GHG emissions from Use of Sold Products (tCO2e)

The KPI is defined as the Scope 3, Use of Sold Products category, GHG emissions calculated in accordance with the Greenhouse Gas Protocol

5 The Johnson Controls Sustainable Finance Framework is available on Johnson Controls International plc’s website at:[PLACEHOLDER for link to Framework]

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Table 2: SPTs and Past Performance

KPI 2017

(baseline) 2018 2019 2020 SPT 2025 / 2030

Reduction in Scope 1 and 2 GHG emissions (tCO2e)

1,079,373 937,330 906,487 779,167 Reduction in Scope 1 and 2 emissions by 35% by 2025

and by 55% by 2030 globally

Reduction in Scope 3 GHG emissions from Use of Sold Products (tCO2e)

128,700,000 130,600,000 127,600,000 112,400,000 Reduction in Scope 3

emissions by 5% by 2025 and by 16% by 2030

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Sustainalytics’ Opinion

Section 1: Sustainalytics’ Opinion on the Alignment of the Framework with

Relevant Market Standards

Alignment with Use of Proceeds Principles

Sustainalytics is of the opinion that the Framework is credible, impactful and aligns with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan Principles 2021 (the “Use of Proceeds Principles”). For detailed information please refer to Appendix 2: Sustainability Bond/ Sustainability Bond Programme External Review Form. Sustainalytics highlights the following elements of the Framework:

Use of Proceeds

Overall Assessment of Use of Proceeds

Use of Proceeds

Activity Classification Description and Sustainalytics’ Assessment

Eco-efficient and/or Circular Economy adapted products, production technologies and processes

Eco-efficient products and solutions

Green

- Digital Solutions: Artificial Intelligence and Internet of Things (IoT) based solutions that lead to improved environmental performance of buildings through use of smart data analytics and energy management softwares.

- Building Automation and Controls: Integration technologies to extend automated control to building systems, including smart HVAC and smart lighting, to enhance energy performance and optimize resource consumption in buildings.

- Residential and Smart Home: Sensor-based controls and smart home thermostats as well as eco-certified air conditioning and electric heat pump units.

- Eco-Efficient HVAC Equipment: Components and systems

focused on a minimum of 15% improvement in energy efficiency to heating, ventilation, and air conditioning systems in buildings. Equipment considered for financing contains refrigerants with ultra-low Global Warming Potential (along with zero Ozone Depletion Potential).6

- Distributed Energy Storage: Systems to support renewable

energy generation, demand response, backup power, peak shaving, frequency regulation and load shifting to optimize energy usage in buildings.

- Overall, Sustainalytics views investments under this category to

be aligned with market practice.

6 Johnson Controls has listed as an example the YZ Magnetic Bearing Centrifugal Chiller which has a low Global Warming Potential (GWP), zero Ozone Depletion Potential (ODP) and delivers up to 35% annual energy savings: https://www.johnsoncontrols.com/media-center/news/press-releases/2018/01/03/york-yz-magnetic-bearing-centrifugal-chiller-is-first-chiller-optimized-for-new-low-gwp-refrigerant

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Eco-efficient services and support

Green

- Provision of services such as energy demand response installations, energy performance contracting, energy retrofit programs, intelligent lighting infrastructure, renewable energy installation and maintenance and water conservation solutions. This is aligned with market practice.

Green Buildings Certified green buildings

Green

- Expenditures related to design, construction, maintenance or refurbishment of buildings that have achieved, or are expected to achieve, one of the following green building third-party certifications: LEED (“Gold” or “Platinum”), BREEAM (“Excellent” or “Outstanding”) or Chinese Green Building Evaluation Label (“3 Stars”). Sustainalytics views these certification schemes as credible, and the selected levels as being aligned with market practice. See Appendix 1 for an overview of the certification schemes.

Pollution Prevention and Control

Diversion of waste sent to landfill

Green

- Financing activities that will minimize or eliminate waste sent to landfill by JCI’s manufacturing facilities such as implementing measures to follow the waste hierarchy. Sustainalytics notes the importance of waste hierarchy in assessing the impact of waste management projects and highlights positively the focus on waste reduction.

Sustainable Water and Wastewater Management

Water management and treatment

Green

- Investments in the installation of water and wastewater treatment systems and water saving technologies that improve water quality or water efficiency. Project examples include leak detection systems and ultra-efficient water-cooling technologies. This is aligned with market practice.

Clean Transportation

Electrification of self-owned vehicle fleet

Green - Acquisition of battery electric vehicles as well as associated

infrastructure such as electrical charging stations. Sustainalytics considers this to be in line with market practice.

Renewable Energy

Procurement of renewable energy

Green

- Procurement of renewable energy through long-term (atleast five years) physical and virtual Power Purchase Agreements (PPAs). Sustainalytics views this to be aligned with market practice.

- Procurement of renewable energy through long-term energy attribute certificates such as Renewable Energy Certificates (RECs). The Company has informed Sustainalytics that it intends to purchase long-term unbundled RECs which will be directly tied to specific and identifiable renewable energy projects and exclude one-time short-term purchase of RECs. Sustainalytics views this as aligned with market practice.

Onsite solar and wind energy

Green

- Investments in the development, construction, maintenance and operation of solar and wind power projects as well as associated energy storage systems are aligned with market practice.

Socioeconomic Advancement and Empowerment, Including Gender Inclusion

Procurement of products and services

Social

- Procurement of products and services from diverse businesses7 that are majority owned by women or minority groups as well as businesses designated as small or disadvantaged8 by the government. Expenses financed may include construction services, contractual labor, IT services, marketing services and logistics costs among others and will exclude that all procurement related to fossil fuel and nuclear energy activities.

7 JCI defines diverse businesses according to definitions used by the National Minority Supplier Development Council at: http://www.nmsdc.org and the Women’s Business Enterprise National Council at: http://www.wbenc.org. In order to be certified, businesses are required to be atleast 51% owned, operated and controlled by women and/or minority management teams. 8 JCI defines small and disadvantaged businesses according to the US government’s Small Business Administration whereby, depending on the industry, a small business could be defined as a business with a maximum of 250 employees or a maximum of 1,500 employees. They are privately-owned corporations, partnerships, or sole proprietorships that have less revenue than larger businesses.

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- Sustainalytics notes that the social bond market generally

favors expenditures directly associated with an issuer’s socially beneficial activities, and that allocation toward procurement costs based on the identity of suppliers rather than the nature of the products and services being supplied is not fully aligned with market practice. Sustainalytics nonetheless recognizes the benefits of such procurement programs focused on supporting SMEs owned or operated by members of historically disadvantaged groups and encourages JCI to report on its expenditures in this area.

Education and Training programs

Social

- Financing cost of fellowship for training programs focused on financial analysis, customer focus, leveraging the value chain and leadership for managers of diverse firms7, with an aim to enhance the professional development of women and minority populations. This is in line with market practice.

Project Evaluation and Selection

• Johnson Controls’ Sustainable Finance Committee, comprised of members from the Sustainability Leadership

Committee (SLC), Treasury, Legal, and nominated subject matter experts, will be responsible for project

evaluation and selection based on compliance with the Framework and JCI’s Enterprise Risk Management

Program (ERM).

• Additionally, all projects financed must comply with JCI’s ERM program which takes into consideration

environmental and social risks. Sustainalytics considers these environmental and social risk management

systems to be adequate and aligned with market expectation. For additional detail, see Section 2.

• Based on the establishment of a Sustainable Finance Committee and its cross divisional membership,

Sustainalytics considers the project evaluation and selection process to be in line with market practice.

Management of Proceeds

• JCI’s Finance Department will be responsible for management of proceeds and will maintain a level of allocation

to the portfolio that matches the proceeds from the sustainable finance instruments.

• Johnson Controls intends to allocate all proceeds within 24 months following the issuance date. Until allocation,

any proceeds will be held or invested in cash or cash equivalents, and/or treasury securities on a temporary

basis. The Company has established a look-back period of 24 months for its refinancing activities.

• Based on the disclosure of temporary use of proceeds, Sustainalytics considers this process to be in line with

market practice.

Reporting

• Johnson Controls intends to prepare and make publicly available Sustainable Finance reporting one year after

each issuance, to be renewed annually and until full allocation on the Company’s website. Allocation reporting

will be prepared on a portfolio basis and will include the total amount of proceeds allocated to eligible projects,

the balance of unallocated proceeds and the amount or percentage of new financing and refinancing. The

reporting will include qualitative and, where feasible, quantitative environmental and social metrics such as

estimated annual GHG emissions avoided. or reduced, tons of waste diverted from landfill, estimated water

savings and number of women or minority-owned businesses engaged.

• Based on the commitment to both allocation and impact reporting, Sustainalytics considers this process to be

in line with market practice.

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Alignment with Sustainability-Linked Principles

Sustainalytics is of the opinion that the Johnson Controls Sustainable Finance Framework aligns with the Sustainability-Linked Bond Principles 2020 and Sustainability-Linked Loan Principles 2021 (the “Sustainability-Linked Principles”). For detailed information please refer to Appendix 3: Sustainability Linked Bond External Review Form. Sustainalytics highlights the following elements of Johnson Controls’ Johnson Controls Sustainable Finance Framework:

Selection of Key Performance Indicators (KPIs)

Relevance and Materiality of KPIs

In its assessment of materiality and relevance, Sustainalytics considers i) whether an indicator speaks to a material impact of the issuer’s/borrower’s business on environment or social issues, and ii) to what portion of impact the KPI is applicable.

KPI 1: Greenhouse Gas Emissions (Scope 1 and 2) and KPI 2: Greenhouse Gas Emissions (Scope 3) from Use of Sold Products

Sustainalytics notes that KPI 1 and 2 collectively address the issue of GHG emissions from JCI’s operations and use of products and as such has taken a combined view towards rating these KPIs. Sustainalytics considers the KPIs to be material and relevant based on the following:

Globally, GHG emissions increased to a record high of 52.4 GtCO2e in 2019 in comparison to previous yearsi. As per World Resources Institute, in 2018, manufacturing and construction sector contributed to 12.6%, roughly 1/8th of the total emissions globally.ii According to Environmental Protection Agency, more than three quarters of the greenhouse gas (GHG) emissions associated with manufacturing and construction sectors come from their supply chains.iii

Sustainalytics’ ESG Risk Ratings Assessment identifies “Carbon-Own Operations”9 as a material ESG issue (MEI) for Johnson Controls. As per Sustainalytics, Industry report on Building Products, “Carbon-Own Operations” is a MEI for the entire Building Products sector, owing to high energy consumption during production and manufacture of products. All companies within the Building Products sector are mediumly exposed to the risk of operational carbon emissions.10 Further, the Sustainability Accounting Standards Board (SASB)11 identifies energy management in manufacturing process and efforts to manage product lifecycle impacts as relevant topics to track and disclose by the building products and furnishings industry. SASB report explains that a substantial amount of energy is consumed in the operations phase and during the use phase of the products sold for this sector.12

Johnson Controls Materiality Assessment identified the Company’s top ESG material aspects, including (i) Energy-efficient products, (ii) Energy and environment laws and regulations, (iii) Climate policy and engagement leadership and (iv) Sustainable products and services.13

Sustainalytics considers KPI 1 and 2 to be material and relevant based on how it contributes to a material issue for the sector and to Johnson Control’s sustainability commitments towards climate change mitigation.

9 The Sustainalytics’ Carbon – Own Operations MEI refers to a company’s management of risks related to its own operational energy and GHG emissions (Scope 1 & 2). It also includes parts of Scope 3 emissions, such as product use, fuel and energy related emissions. 10 Sustainalytics Industry Report, Building Products, (2020) 11 SASB was founded in 2011 as a not-for-profit, independent organization, that establish and maintain industry-specific standards that assist companies in disclosing financially material, decision-useful sustainability information to investors. 12 SASB, “Building Products and Furnishings Industry Standard”, https://www.sasb.org/wp-content/uploads/2018/11/Building_Products_Furnishings_Standard_2018.pdf 13 Johnson Controls, “Sustainability Materiality Assessment”, at: https://www.johnsoncontrols.com/-/media/jci/corporate-sustainability/reporting-and-policies/gri/2019/jci-sustainability-materiality-assessment-2020.pdf?la=en&hash=C44BB2797CB27261F134AD5C3F92DEC953ACB479

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In terms of applicability, Sustainalytics notes that KPI 1 and 2 together cover roughly 94.3% of total emissions (Scope 1, 2 and 3) in baseline 2017. Scope 1 and 2 emissions cover roughly 0.8% of total emissions and Scope 3 Use of products sold, covers 93.5% of total emissions in baseline 2017.

KPI Characteristics

In its assessment of the KPI characteristics, Sustainalytics considers i) whether a clear and consistent methodology is used, ii) whether the issuer/borrower follows an externally recognized definition, iii) whether the KPIs are a direct measure of the performance of the issuer/borrower on a material environmental or social issue, and, if applicable, iv) whether the methodology can be benchmarked to an external, contextual benchmark.14

KPI 1: Greenhouse Gas Emissions (Scope 1 and 2) and KPI 2: Greenhouse Gas Emissions (Scope 3) from Use of Sold Products

Sustainalytics considers Johnson Controls’ definition and methodology to calculate the KPI 1 and 2 to be clear and consistent. Johnson Controls calculates its GHG emissions in accordance with the GHG Protocol standards including Corporate Standard and GHG Protocol’s Scope 2 Guidance which is commonly used in the industry and therefore facilitates benchmarking against external carbon trajectories as well as peer performance. Johnson Controls follows CDP15 Climate Change 2020 Reporting and all Scopes of GHG data have been assured by a third party.

Overall Assessment

Sustainalytics overall considers KPI 1 and 2 to be very strong given that they (i) represent direct measures of JCI’s GHG emissions from its own operations and through the lifecycle of product use; (ii) represent a material environmental issue for the sector and the Company; (iii) are defined following clear and consistent definitions as per GHG Protocol Standard which supports benchmarking against external emission reduction strategies.

Greenhouse Gas Emissions (Scope 1 and 2) and Greenhouse Gas Emissions (Scope 3) from Use of Sold Products

Not Aligned Adequate Strong Very strong

Calibration of Sustainability Performance Targets (SPTs)

Alignment with Issuer’s/Borrower’s Sustainability Strategy

Johnson Controls has set the following SPTs for its KPIs:

• SPT 1: Reduce Scope 1 and 2 GHG emissions by 35% by 2025 and by 55% by 2030 globally compared to a 2017 baseline.

• SPT 2: Reduce Scope 3 use of sold products GHG emissions by 5% by 2025 and by 16% by 2030 globally compared to a 2017 baseline.

Overall, Sustainalytics considers the SPTs to be aligned with Johnson Controls’ sustainability strategy (please refer to Section 2 for analysis of the credibility of Johnson Controls’ sustainability strategy).

Climate policy and engagement leadership, energy-efficient products and sustainable products and services are identified as key material issues for the Company and its stakeholders.16 Johnson Controls follows TCFD recommendations for disclosing clear, comparable and consistent information about climate related risks and opportunities and was recognized by CDP with a climate change “A-“ score in 2020.17 Johnson Controls’ long-

14 External contextual benchmarks provide guidance on the alignment with ecological system boundaries. This criterion is not applied to social KPIs or impact areas for which such contextual benchmarks are not available. 15 The CDP is an international non-profit organization based in the UK, Germany and the US that helps companies and cities disclose their environmental impact, at: https://guidance.cdp.net/en/guidance?cid=8&ctype=theme&idtype=ThemeID&incchild=1&microsite=0&otype=Guidance&tags=TAG-585,TAG-605,TAG-599 16 Johnson Controls, “2021 Sustainability Report”, at: https://www.johnsoncontrols.com/2021sustainability 17 Climate Disclosure Platform, “CDP”, at: https://www.cdp.net/en/responses?utf8=%E2%9C%93&queries%5Bname%5D=Johnson+Controls

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term sustainability strategy focuses on energy efficiency at facility level, increasing use of renewable energy and reducing emissions throughout vehicle fleet and delivering sustainability to their customers through their product offerings. In line with these commitments, Johnson Controls has committed to reducing its global GHG emissions to “net-zero” by 204016 and confirmed that its 2030 carbon reduction targets are validated by Science Based Targets initiative (SBTi) in line with reductions required to keep warming to 1.5°C.18

Strategy to Achieve the SPTs

SPT1: Reduce Scope 1 and 2 GHG emissions by 35% by 2025 and by 55% by 2030 globally.

Johnson Controls plans to achieve SPT1 through the following strategy:

• Reducing energy consumption from all global operations, including manufacturing plants, distribution centers, service centers, offices, vehicle fleets and other operations worldwide. Johnson Controls has implemented Johnson Controls Manufacturing System (JCMS) which provides continuous improvement in operation management by developing high performance operation excellence culture which resulted in three-fold rise in energy saving projects.19 Energy Hunt Program was implemented to empower employees at facility level with necessary knowledge, procedures and tools to identify and implement projects that result in annual energy intensity improvements on continuous basis.20 To further improve energy efficiency of manufacturing operations in a systematic manner the Company has begun implementing ISO 50001 and ISO 14001 in its manufacturing facilities.

• Increase use of electricity from renewable energy sources and additionally also purchase Green -e-certified Renewable Energy Credits (RECs) without replacing green power that may be offered in the standard electricity mix. in 2020, emissions from manufacturing plants in the USA were offset through RECs. On-site renewable energy is being used in few locations in USA, China and Mexico. Johnson Controls HVAC manufacturing plant in Wichita, Kansas is powered by 100% wind energy.

• Reducing GHG emissions from vehicle fleet by tracking and managing using information technology. Johnson Controls plans to use of higher fuel economy and electric vehicles where possible. Implementation of policy that inculcates good driving practice and prohibits speeding.

• Johnson Controls also plans to use energy storage and other new technologies that can help reduce emissions.

SPT 2: Reduce Scope 3 use of sold products GHG emissions by 5% by 2025 and by 16% by 2030 globally

Johnson Controls plans to achieve SPT 2 through the following strategy:

• Reducing GHG emissions by using alternate refrigerants with low Global Warming Potential (GWP) in its chiller platforms. GWP of the alternate refrigerants is expected to be lower by 56% to 99% compared to conventional refrigerants. Combining low GWP refrigerants with energy efficiency in its chiller platform Johnson Controls can reduce GHG emissions of its customers and consequently its Scope 3 emissions from use of sold products.

Ambitiousness, Baseline and Benchmarks

To determine the ambitiousness of the SPTs, Sustainalytics considers whether the SPTs go beyond business-as-usual trajectory, ii) how the SPTs compare to targets set by peers, iii) and how the SPTs compare with science.21

Johnson Controls has set the baseline for SPT 1 and SPT 2 at 2017, as in 2016, Johnson Controls merged with Tyco international which resulted in a material change in the Company’s size and operation.

SPT1: Reduce Scope 1 and 2 GHG emissions by 35% by 2025 and by 55% by 2030 globally versus a 2017 baseline

18 Science Based Targets initiative, “Companies taking Action”, at: https://sciencebasedtargets.org/companies-taking-action#table 19 Johnson Controls, “Johnson Controls wins top global award for manufacturing excellence”, at: https://www.johnsoncontrols.com/insights/2017/enterprise/features/johnson-controls-wins-top-global-award-for-manufacturing-excellence 20 Better Buildings, “JOHNSON CONTROLS: ENTERPRISE-WIDE ENERGY HUNT PROGRAM”, at: https://betterbuildingssolutioncenter.energy.gov/implementation-models/johnson-controls-enterprise-wide-energy-hunt-program 21 We refer here to contextual benchmarks, that indicate the alignment of targets with ecosystem boundaries.

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Sustainalytics was able to use the following benchmarks to assess ambitiousness: past performance, peer performance and SBTi approved targets. In terms of past performance, Johnson Controls achieved a reduction of 13.16% between 2017 and 2018 and achieved 3.29% between 2018 and 2019, highlighting a moderate decreasing trend before 2019. As of 2019, Johnson Controls reduced their Scope 1 and 2 emissions by 16.02% compared to baseline of 2017. To meet the SPT 1, the Company will need to reduce its Scope 1 and 2 (market-based) GHG emissions by 3.16% yearly between 2019 and 2025 and by roughly by 4% yearly between 2025 and 203022 which based on the past performance seems in line with the target set and achievable. In comparison to its peers, Johnson Controls SPT 1 is aligned with respect to Scope 1 and 2 emission reduction targets in the building and construction industry. Based on the analysis of Sustainalytics on Johnson Controls peer group, 18

peer companies have set their targets in SBTi and among them nine companies have SBTi targets aligned to 1.5C scenario.

Sustainalytics considers the SPT 1 to be beyond business-as-usual trajectory. In addition, the targets align with targets set by peers and align with science (1.5ºC scenario).

SPT 2: Reduce Scope 3 use of sold products GHG emissions by 5% by 2025 and by 16% by 2030 globally versus a 2017 baseline

Sustainalytics was able to use the following benchmarks to assess ambitiousness: past performance, peer performance and SBTi approved targets. In terms of past performance, Johnson Controls Scope 3 use of sold products emission saw an increase of 1.48% between 2017 and 2018 and achieved a reduction of 2.3% between 2018 and 2019, highlighting a fluctuating trend before 2019. As of 2019, Johnson Controls reduced their Scope 3 emissions use of sold products by 0.85% compared to baseline of 2017. To meet the SPT 2, the Company will need to reduce Scope 3 use of sold product emissions by roughly 0.69% yearly between 2019 and 2025 and by 2.2% yearly between 2025 and 2030, which based on the past performance seems in line with target set and achievable.22 In comparison to peers, Johnson Controls SPT 2 is consistent to its peer’s target, though under scope 3, many of the peers have set targets against different Scope 3 category and hence not entirely comparable.

Johnson Controls SPT 2 target is aligned to 2C scenario.

Sustainalytics considers the SPT 2 to be aligned. In addition, the targets align with targets set by peers and align with science (2ºC scenario).

Overall Assessment

Sustainalytics considers the SPTs to align with Johnson Controls International plc’s sustainability strategy and considers Johnson Controls’ SPT 1 to be highly ambitious given that it presents a material improvement compared to past performance, and the SPTs align the targets set by the Group’s peers as well as aligns with SBTi’s well-below 1.5-degree scenario.

Sustainalytics considers Johnson Controls’ SPT 2 to be ambitious given that it presents a material improvement compared to past performance and the SPTs align the targets set by the Group’s peer as well as aligns with SBTi’s 2ºC scenario.

Reduce Scope 1 and 2 GHG emissions by 35% by 2025 and by 55% by 2030 globally {Greenhouse Gas Emissions (Scope 1 and 2)}

Not Aligned Moderately Ambitious

Ambitious Highly Ambitious

Reduce Scope 3 use of sold products GHG emissions by 5% by 2025 and by 16% by 2030 globally {Reduce Scope 3 use of sold products GHG emissions by 5% by 2025 and by 16% by 2030 globally}

Not Aligned Moderately Ambitious

Ambitious Highly Ambitious

Bond and/or Loan Characteristics

22 As 2020 pandemic had impact, globally and economy wide, so for realistic reduction 2019 data was referred in place of 2020 data.

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Johnson Controls International plc has disclosed that it will link the financial characteristics of all issued sustainability-linked securities under the Framework to the achievement of the SPTs. The financial characteristics may include step-up margin, coupon/margin adjustment or the premium payment amount as applicable if Johnson Controls fails to meet the stated SPTs. Specific details on the financial characteristics selected for each financial instrument will be specified in their respective indenture.

Reporting

Johnson Controls commits to report on an annual basis on its performance on the KPIs and expects to include the relevant figures as Sustainability-linked bond update in Annual Sustainability Report which will be made publicly available on Johnson Controls website on an annual basis. The reporting provisions are aligned with the SLBP and SLLP. Johnson Controls further commits to disclose relevant information that enabling investors to monitor the level of ambition of the SPTs.

Verification

Johnson Controls commits to having an external verifier provide limited assurance on the published KPI performance figures for each fiscal year and in relation to any target observation dates of the SPT which is aligned with the SLBP and SLLP on verification. The verification will be made publicly available on Johnson Controls website.

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Section 2: Assessment of Johnson Controls’ Sustainability Strategy

Credibility of Johnson Controls’ Sustainability Strategy

According to Sustainalytics’ ESG Rating, Johnson Controls is considered an average performer on ESG issues compared to its industry peers.23 Sustainalytics’ analysis is based on Johnson Controls’ overall performance in environmental, governance and social issues. The report highlights that the company has received an overall rating of an average performer in environment and social issues but has received a rating of an outperformer in governance.24

The Company has been a signatory since 2004 to the United Nations Global Compact’s (“UNGC”) with Advanced level qualification for its Communication of Progress since 2012.25 These principles are based on the Universal Declaration of Human Rights, the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development and the United Nations Convention against Corruption. Furthermore, Johnson Controls adopted the Science-Based Targets that provides companies with pathway to reduce emissions in line with the Paris Agreement goals among others to advance its commitment towards sustainability.16

Johnson Controls’ sustainability strategy focuses on five key pillars: (i) “Solutions” focuses on integrating sustainable design for products and services to have the highest environmental and social impact, (ii) “People” intends to foster a culture of sustainability that engages and attract people who want to make a difference, (iii) “Partnerships” across the globe that increase the Company’s sustainability impact, (iv)”Performance” on key sustainability parameters and track the Company’s progress,(v) “Governance” aims to demonstrate the Company’s commitment from the top and integrate sustainability into the Company’s goals and decision-making.26

Within the Performance pillar, the Company identifies reducing its carbon footprint to be one of its priorities and has outlined specific targets by 2025 which include: 25% reduction in GHG intensity and 25% reduction in energy intensity.26 As part of Johnson Controls’ commitments to achieve its energy and emissions target, the Company has policies and set operational practices to reduce energy from its global operations, including manufacturing plants, distribution centers, service centers, offices, fleets and other operations worldwide (for more details, please refer to Section 1). Beyond 2030, Johnson Controls aims to achieve net zero carbon emissions before 2040.16 Based on Sustainalytics ESG Rating, it is observed that Johnson Controls is an outperformer in areas such as GHG reduction program, carbon intensity, environmental policy, environmental management system, green building memberships,27 while having a low rating in its eco design and renewable energy programs.28

Within the People pillar, Johnson Controls primarily focuses on advancing diversity and inclusion, integrating sustainability into recruitment and volunteering. As part of its supplier diversity initiative, Johnson Controls works with more than 700 businesses that are certified in the United States as owned by minorities or women, or designated by their countries as small or disadvantaged businesses.29 30 Based on Sustainalytics ESG Ratings, it is observed that John Controls also performs well in terms of discrimination

23 This assessment has been derived from Sustainalytics’ ESG Ratings framework, last updated on September 29, 2020, comparing Johnson Controls with other 36 peers (14 out of 37) in the building products sub-industry. 24 This assessment has been derived from Sustainalytics’ ESG Ratings framework, last updated on September 29, 2020, The company’s ESG score details: Overall ESG score (66) - Environment (58), Social (65) and Governance (80). 25 United Nations Global Compact (UNGC), at: https://www.unglobalcompact.org/what-is-gc/participants/5656-Johnson-Controls-International-plc#company-information 26 Johnson Controls, ”Global Sustainability Strategy Report”, at: https://www.johnsoncontrols.com/-/media/jci/insights/2018/corporate/jci-2025-sustainability-strategy.pdf?la=en&hash=63893FB6BB818B1E363F607EED8D1A847E5A70C5 27 This assessment has been derived from Sustainalytics’ ESG Ratings framework, last updated on September 29, 2020, the Company received the following rating for each of these indicators: GHG reduction program (100) , Carbon Intensity(100), environmental policy(100), environmental management system (100), green building membership(100) 28 This assessment has been derived from Sustainalytics’ ESG Ratings framework, last updated on September 29, 2020. The Company’s score for the following indicators is: renewable energy program (25), eco design (50). 29 Johnson Controls, “Diversity and Inclusion”, at: https://www.johnsoncontrols.com/corporate-sustainability/reporting-and-policies/business-and-sustainability-report/social-responsibility/diversity-and-inclusion 30 Johnson Controls, ”Statement policy- global supplier diversity and business development”, at: https://www.johnsoncontrols.com/-/media/jci/suppliers/media-folder/supplier-diversity/supplier-diversity-policy-2017.pdf

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policy, supply chain monitoring, scope of social supplier standards, freedom of association policy and health & safety management system.31

Sustainalytics considers Johnson Controls to have a strong sustainability strategy and considers that the SLBs, SLLs, Green Bonds, Green Loans, Social Bonds and Social Loans eventually issued or obtained under the Framework will further support Johnson Controls’ sustainability strategy.

Johnson Controls’ Environmental and Social Risk Management

According to Sustainalytics’ ESG Risk Rating, Johnson Controls’ overall management of Material ESG Issues (MEI) is strong, ranking in the top 4% of the best-performing companies within its sub-industry of building products.32 Sustainalytics also recognizes that while the Johnson Controls’ defined targets are impactful and the projects financed under the Framework are anticipated to deliver positive environmental or social impact, it is acknowledged that achieving the SPTs bears environmental and social risks related to GHG emissions from own operations and of their transportation fleets, occupational health and safety, managing community relations and ensuring stakeholder participation, and effluents and waste generated in construction or other projects executed by the Company. In the following section Sustainalytics comments on Johnson Controls’ ability to mitigate such potential risks.

• In addition to respecting all applicable laws and regulations in the countries where Johnson Controls operates, the Company has implemented a set of policies and code of conducts, namely the conflict mineral policy, human rights and sustainability policy, slavery and human trafficking policy and statement, political contributions policy, global environment, health & safety (EHS) policy, slavery and human trafficking policy and policy on energy and climate change33

to strengthen the governance and management of its environmental and social risks.

• To ensure responsible sourcing throughout its supply chain and mitigate risks associated with sourcing of conflict components, and materials, the Company has a conflict minerals policy which is based on the rules issued by U.S. Securities and Exchange Commission (SEC). The Company is also a member of the Conflict-Free Sourcing Initiative (CFSI). It compares the lists of smelters provided by its suppliers with the CFSI list of compliant smelters to determine the smelters in the Democratic Republic of the Congo (DRC) that are conflict free.34 Johnson Controls has adopted a due diligence framework aligned with the primary principles of the Organization for Economic Co-operation and Development (OECD) framework to access and mitigate risks associated with sourcing of conflict minerals. The company also has a slavery and human trafficking policy to mitigate risks associated with slavery and human trafficking in its supply chain as well as its own business.35

• Johnson Controls has a health and safety policy which outlines the principles adopted by the company to minimizing the environmental impacts and occupational injuries from its operations. The Company strives to integrate EHS design principles and practices into its material supply, products, processes and services.36 The company reports that 60% of its manufacturing facilities are certified to the ISO 14001 standards. Additionally, another 15% of the manufacturing facilities are compliant with the ISO 14001 standards.

• The Company relies on its ‘Values First, the Johnson Controls’ code of ethics’ which lays down the human rights and sustainability policy. This policy defines specific principles and employee responsibilities regarding health and safety including minimization of worker exposure to safety hazards, maintaining appropriate emergency controls, and effectively tracking and managing any safety incidents.37

31 This assessment has been derived from Sustainalytics’ ESG Ratings framework, last updated on September 29, 2020, the Company’s score for the following indicators is: discrimination policy (100), diversity program(100),supply chain monitoring (100), scope of social supplier standards (75), freedom of association policy (100) and health & safety management System(100). 32 This assessment has been derived from Sustainalytics’ ESG Risk Ratings framework, last updated on September 29, 2020, comparing Johnson Controls with other 123 peers (4 out of 124) in the building products sub-industry. 33 Johnson Controls, Sustainability reporting and policies”, at: https://www.johnsoncontrols.com/corporate-sustainability/reporting-and-policies 34 Johnson Controls,” Conflict mineral policy”, at: https://www.johnsoncontrols.com/-/media/jci/suppliers/media-folder/supplier-diversity/2015-jcicm-policy-statement--final-20171017.pdf?la=en&hash=998872C4088AF59874C1B6F33698FD956B72B6E5 35 Johnson Controls, “Slavery & human trafficking policy”, at: https://www.johnsoncontrols.com/-/media/jci/suppliers/media-folder/corporate-responsibility/batteries/sustainability/conflict-minerals/msa-final-10172017.pdf?la=en 36Johnson Controls, “Environment, health & safety [EHS] Policy”, (2021), at: https://www.johnsoncontrols.com/-/media/jci/corporate-sustainability/reporting-and-policies/gri/2020/jci-ehs-policy-2021_rev.pdf 37 Johnson Controls, “Values First, the Johnson code of ethics’ report“, at: https://valuesfirst.johnsoncontrols.com/wp-content/uploads/2017/09/ENG_JCCodeEthics.pdf

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• Johnson Controls follows a total risk management approach to identify and monitor risks across five pillars focused on different risks within the organization and communicate them to senior management. Within this approach, the Company has established an enterprise risk committee which acts as a forum to discuss risks along with their potential impact and communicate key risks to the Board.38

• Johnson Controls periodically conducts a materiality assessment to gather input about issues that are most important to internal and external stakeholders. The feedback gathered is plotted on a materiality matrix to determine priorities and actions taken to address these issues are summarized and published on the Company website.39

• In 2020, Johnson Controls conducted a climate-related risk and opportunity scenario analysis based on the Task Force on Climate-Related Financial Disclosures. The Company used the analysis to identify the most critical climate-related risks and opportunities and to develop management strategies to mitigate risks and build on the opportunities. The risks and opportunities identified by the company are as follows: (i) Emerging regulation, (ii) Innovation of solutions that reduce our customers’ greenhouse gas emissions, (iii) Raw material costs, (iv) Achieving sustainability commitments, (v) Extreme weather events, (vi) Water stress and climate-related opportunities are: (i) Move to more efficient buildings, (ii) Use of lower-emission sources of energy, (iii) Revenue from solutions that directly address building efficiency, (iv) Revenue from technologies that support building resilience (v) Revenue from increased demand for lower emission goods and services.16 As per Sustainalytics’ Carbon Risk report, the Company has a 5.4. Carbon Risk rating, a carbon exposure score of 24 and carbon management score of 77. As per Sustainalytics analysis, Johnson Controls has a low-risk score among its industry peers.40

Overall, Sustainalytics considers that Johnson Controls has strong management programs and policies to mitigate risks that could arise from its operations.

Section 3: Impact of the UoPs and SPTs Selected

Importance of investments in renewable energy and energy efficiency improvements in the US

The 2015 Paris Agreement established the goal to limit global warming to well below 2°C.41 In 2019, the Intergovernmental Panel on Climate Change further highlighted the need to limit global warming to 1.5°C above pre-industrial levels.42 As per the UN Environment Programme (UNEP), global GHG emissions need to decline by 7.6% each year between 2020 and 2030 in order to be aligned with the goals under the Paris Agreement.43

Building construction and operations, accounted for the largest share of global total final energy consumption (35%) and energy-related CO2 emissions (38%) in 2019.44 In the transition to a low-carbon economy, buildings play a dominant role as they are among the largest sources of greenhouse gas (GHG) emissions due to their high energy consumption.44 As per the International Energy Agency (IEA), energy-related CO2 emissions from buildings have risen in recent years largely due to a growth in energy demand for heating and cooling, air-conditioner ownership and extreme weather events.45 In order to meet the net-zero carbon building stock target by 2050, it is estimated that CO2 emissions from buildings would need to fall by 50% by 2030.46

38Johnson Controls, “Enterprise Risk Management , Executive Summary”, at: https://www.johnsoncontrols.com/-/media/8c834b7e35254e00b33832939765cf10.ashx 39 Johnson Controls, “Materiality assessment report,” (2020), at: https://www.johnsoncontrols.com/-/media/jci/corporate-sustainability/reporting-and-policies/gri/2019/jci-sustainability-materiality-assessment-2020.pdf?la=en&hash=C44BB2797CB27261F134AD5C3F92DEC953ACB479 40 This assessment has been derived from Sustainalytics’ Carbon Risk Ratings report, accessed on April 8th, 2021 41 UNFCCC, “The Paris Agreement”, (2015), at: https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement 42 IPCC, “Global warming of 1.5°C”, (2019), at: https://www.ipcc.ch/site/assets/uploads/sites/2/2019/07/SR15_Full_Report_Low_Res.pdf 43 UNEP, “Emissions Gap Report”, (2019), at: https://www.unep.org/emissions-gap-report-2020 44 The Global Alliance for Buildings and Construction (GABC) Report,” Global status report for buildings and construction”, (2020), at: https://globalabc.org/resources/publications/2020-global-status-report-buildings-and-construction 45 International Energy Agency, ”Tracking Buildings, 2020”, at: https://www.iea.org/reports/tracking-buildings-2020 46 UNEP, “Building Sector Emission hit record high, but low-carbon recovery can help transform sector-UN report”, at: https://www.unep.org/news-and-stories/press-release/building-sector-emissions-hit-record-high-low-carbon-pandemic

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Space heating, air conditioning and ventilation are among the largest contributors of electricity consumed by residential and commercial buildings.47 48 As a result, there is a need to reduce building related GHG emissions by focusing mainly on increasing energy efficiency, reducing operational energy demand and increasing the use of renewable energy. As per IEA’s Sustainable Development Scenario, energy efficiency has the potential to deliver more than 40% of the reduction in energy-related greenhouse gas emissions over the next 20 years.49

Residential and commercial buildings consume 75% of all electricity generated in the United States and 40% of the nation's total energy.50 Buildings in the US account for 35% of the nation’s carbon dioxide emissions.50 Technology can help reduce CO2 emissions from buildings in various ways - for instance, advanced HVAC systems can help in studying and reducing energy consumption in unoccupied zones, adapting to varying demand needs as well as detecting the need for maintenance.51 Research conducted by the Buildings Performance Institute Europe (BPIE) in 2017 found that building automation could reduce household electricity consumption by 27% and smart technology could reduce office electricity consumption by 23%.51 Building automation also contributes towards the stabilization of the energy system through storage capacity and demand response activities while enabling a larger uptake of renewable energy.52

Based on the above context, Johnson Controls’ efforts to promote energy efficiency products, building automation and controls, HVAC equipment, and reduce emissions from its operations will contribute towards the global climate goals and the transition towards a low-carbon economy.

Alignment with/contribution to SDGs

The Sustainable Development Goals (SDGs) were set in September 2015 and form an agenda for achieving sustainable development by the year 2030. The Johnson Controls Sustainable Finance Framework advances the following SDG goals and targets:

UoP Category and KPI SDG SDG Target

Eco-efficient and/or Circular Economy adapted products, production technologies and processes

7. Affordable and clean energy

7.3 By 2030, double the global rate of improvement in energy efficiency

Green Buildings 9. Industry, innovation, and infrastructure

9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries taking action in accordance with their respective capabilities

Pollution Prevention and Control 11. Sustainable cities and communities

11.6 By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management

Sustainable Water and Wastewater Management

6. Clean water and sanitation

6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally

47 US Energy Information Administration, “Use of energy explained: Energy use in homes”, at: https://www.eia.gov/energyexplained/use-of-energy/homes.php 48 US Energy Information Administration, “Use of energy explained: Energy use in commercial buildings”, at: https://www.eia.gov/energyexplained/use-of-energy/commercial-buildings.php 49 International Energy Agency, “Energy Efficiency”, at: https://www.iea.org/topics/energy-efficiency 50 Office of Energy Efficiency and Renewable Energy, “About the building technology office”, at: https://www.energy.gov/eere/buildings/about-building-technologies-office 51 BuildUp: The European Portal for Energy Efficiency in Buildings, Overview: Smart HVAC systems in buildings and energy savings,(2017), at: https://www.buildup.eu/en/news/overview-smart-hvac-systems-buildings-and-energy-savings-0 52 BPIE report, Smart Buildings Decoded, (2017), at: https://www.bpie.eu/wp-content/uploads/2017/06/PAPER-Smart-buildings-decoded_05.pdf

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Clean Transportation 11. Sustainable cities and communities

11.2 By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons

Renewable Energy 7. Affordable and clean energy

7.2 By 2030, increase substantially the share of renewable energy in the global energy mix

Socioeconomic Advancement and Empowerment, including gender inclusion

8. Decent work and economic growth

8.5 By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value

KPI 1: Reduction in Scope 1 and 2 GHG emissions (tCO2e)

7. Affordable and clean energy

7.2 By 2030, increase substantially the share of renewable energy in the global energy mix 7.3 By 2030, double the global rate of improvement in energy efficiency

KPI 2: Reduction in Scope 3 GHG emissions from Use of Sold Products (tCO2e)

7. Affordable and clean energy

7.3 By 2030, double the global rate of improvement in energy efficiency

Conclusion

Johnson Controls has developed the Johnson Controls Sustainable Finance Framework under which it may issue use of proceeds and/or sustainability-linked bonds.

Under the green, social, sustainability bonds and loans, use the proceeds may finance projects related to eco-efficient products, pollution prevention, green buildings, wastewater management, clean transportation, renewable energy generation and socioeconomic advancement and empowerment. Sustainalytics considers that the projects funded by the use of proceeds bonds and loans are expected to provide positive environmental and social impact. The Johnson Controls Sustainable Finance Framework outlines a process by which proceeds will be tracked, allocated, and managed, and makes commitments for reporting on the allocation and impact of the use of proceeds.

Under the sustainability-linked instruments, the Johnson Controls International plc intends to tie the financial characteristics of the bonds and loans to the achievements of the following SPTs:

(1) Reduce Scope 1 and 2 GHG emissions by 35% by 2025 and by 55% by 2030 globally compared to a 2017 baseline.

(2) Reduce Scope 3 use of sold products GHG emissions by 5% by 2025 and by 16% by 2030 globally compared to a 2017 baseline.

Sustainalytics considers the KPIs chosen to be relevant and material and aligned with JCI’s sustainability strategy.

Sustainalytics considers KPI 1 - Greenhouse Gas Emissions (Scope 1 and 2) and KPI 2 - Greenhouse Gas Emissions (Scope 3) from Use of Sold Products to be very strong. SPT 1 is considered to be highly ambitious and SPT 2 is considered to be ambitious. Furthermore, Sustainalytics considers reporting and verification commitments to be aligned with market expectations.

Furthermore, Sustainalytics believes that the Johnson Controls Sustainable Finance Framework is aligned with the overall sustainability strategy of the company and that Johnson Controls has a strong ESG risk management.

Based on the above, Sustainalytics is confident that Johnson Controls International plc is well-positioned to issue green, social and sustainability use of proceeds bonds and loans, and sustainability-linked bonds and loans and that Johnson Controls Sustainable Finance Framework in alignment with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, Social Loan Principles 2021, Sustainability-Linked Bond Principles 2020, and Sustainability-Linked Loan Principles 2021.

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Appendix 1: Certification Schemes for Green Buildings

BREEAM LEED

Background

BREEAM (Building Research Establishment Environmental Assessment Method) was first published by the Building Research Establishment (BRE) in 1990. Based in the UK. Used for new, refurbished and extension of existing buildings.

Leadership in Energy and Environmental Design (LEED) is a US Certification System for residential and commercial buildings used worldwide. LEED was developed by the non-profit U.S. Green Building Council (USGBC).

Certification levels

Pass Good Very Good Excellent Outstanding

• Certified

• Silver

• Gold

• Platinum

Areas of Assessment

• Energy

• Land Use and Ecology

• Pollution

• Transport

• Materials

• Water

• Waste

• Health and Wellbeing

• Innovation

• Energy and atmosphere

• Sustainable Sites

• Location and Transportation

• Materials and resources

• Water efficiency

• Indoor environmental quality

• Innovation in Design

• Regional Priority

Requirements

Prerequisites depending on the levels of certification and credits with associated points This number of points is then weighted by item35 and gives a BREEAM level of certification, which is based on the overall score obtained (expressed as a percentage). Majority of BREEAM issues are flexible, meaning that the client can choose which to comply with to build their BREEAM performance score. BREEAM has two stages/ audit reports: a 'BREEAM Design Stage' and a 'Post Construction Stage', with different assessment criteria.

Prerequisites independent of level of certification, and credits with associated points. These points are then added together to obtain the LEED level of certification  There are several different rating systems within LEED. Each rating system is designed to apply to a specific sector (e.g., New Construction, Major Renovation, Core and Shell Development, Schools-/Retail-/Healthcare New Construction and Major Renovations, Existing Buildings: Operation and Maintenance).

Performance display

Qualitative Considerations

Used in more than 70 countries: Good adaptation to the local normative context. Predominant environmental focus. BREEAM certification is less strict (less minimum thresholds) than HQE and LEED certifications.

Widely recognized internationally, and strong assurance of overall quality.

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Appendix 2: Sustainability Bond / Sustainability Bond Programme - External Review Form

Section 1. Basic Information

Issuer name: Johnson Controls International plc

Green Bond ISIN or Issuer Green Bond Framework Name, if applicable:

Johnson Controls Sustainable Finance Framework

Review provider’s name: Sustainalytics

Completion date of this form: September 7, 2021

Publication date of review publication:

Section 2. Review overview

SCOPE OF REVIEW

The following may be used or adapted, where appropriate, to summarize the scope of the review.

The review assessed the following elements and confirmed their alignment with the GBP and SBP:

☒ Use of Proceeds ☒ Process for Project Evaluation and Selection

☒ Management of Proceeds ☒ Reporting

ROLE(S) OF REVIEW PROVIDER

☒ Consultancy (incl. 2nd opinion) ☐ Certification

☐ Verification ☐ Rating

☐ Other (please specify):

Note: In case of multiple reviews / different providers, please provide separate forms for each review.

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)

Please refer to Evaluation Summary above.

Section 3. Detailed review

Reviewers are encouraged to provide the information below to the extent possible and use the comment section to explain the scope of their review.

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1. USE OF PROCEEDS

Overall comment on section (if applicable):

Sustainalytics is of the opinion that the Johnson Controls Sustainable Finance Framework is credible and impactful and aligns with the four core components of the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan Principles 2021 (the “Use of Proceeds Principles”). The eligible categories for the use of proceeds – Eco-efficient and/or Circular Economy adapted products, production technologies and processes, Green Buildings, Pollution Prevention & Control, Sustainable Water and Wastewater Management, Clean Transportation, Renewable Energy and Socioeconomic Advancement and Empowerment, including gender inclusion – are aligned with those recognized by the Use of Proceeds Principles and will lead to positive environmental and social impacts.

Use of proceeds categories as per GBP:

☒ Renewable energy ☐ Energy efficiency

☒ Pollution prevention and control ☐ Environmentally sustainable management of living natural resources and land use

☐ Terrestrial and aquatic biodiversity conservation

☒ Clean transportation

☒ Sustainable water and wastewater management

☐ Climate change adaptation

☒ Eco-efficient and/or circular economy adapted products, production technologies and processes

☒ Green buildings

☐ Unknown at issuance but currently expected to conform with GBP categories, or other eligible areas not yet stated in GBPs

☐ Other (please specify):

If applicable please specify the environmental taxonomy, if other than GBPs:

Use of proceeds categories as per SBP:

☐ Affordable basic infrastructure ☐ Access to essential services

☐ Affordable housing ☐ Employment generation (through SME financing and microfinance)

☐ Food security ☒ Socioeconomic advancement and empowerment

☐ Unknown at issuance but currently expected to conform with SBP categories, or other eligible areas not yet stated in SBP

☐ Other (please specify):

If applicable please specify the social taxonomy, if other than SBP:

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2. PROCESS FOR PROJECT EVALUATION AND SELECTION

Overall comment on section (if applicable):

• Johnson Controls’ Sustainable Finance Committee, comprised of members from the Sustainability Leadership Committee (SLC), Treasury, Legal, and nominated subject matter experts, will be responsible for project evaluation and selection based on compliance with the Framework and JCI’s Enterprise Risk Management Program (ERM). • Additionally, all projects financed must comply with JCI’s ERM program which takes into consideration environmental and social risks. Sustainalytics considers these environmental and social risk management systems to be adequate and aligned with market expectation. For additional detail, see Section 2. • Based on the establishment of a Sustainable Finance Committee and its cross divisional membership, Sustainalytics considers the project evaluation and selection process to be in line with market practice.

Evaluation and selection

☒ Credentials on the issuer’s social and green objectives

☒ Documented process to determine that projects fit within defined categories

☒ Defined and transparent criteria for projects eligible for Sustainability Bond proceeds

☐ Documented process to identify and manage potential ESG risks associated with the project

☒ Summary criteria for project evaluation and selection publicly available

☐ Other (please specify):

Information on Responsibilities and Accountability

☒ Evaluation / Selection criteria subject to external advice or verification

☐ In-house assessment

☐ Other (please specify):

3. MANAGEMENT OF PROCEEDS

Overall comment on section (if applicable):

• JCI’s Finance Department will be responsible for management of proceeds and will maintain a level of allocation to the portfolio that matches the proceeds from the sustainable finance instruments. • Johnson Controls intends to allocate all proceeds within 24 months following the issuance date. Until allocation, any proceeds will be held or invested in cash or cash equivalents, and/or treasury securities on a temporary basis. The Company has established a look-back period of 24 months for its refinancing activities. • Based on the disclosure of temporary use of proceeds, Sustainalytics considers this process to be in line with market practice.

Tracking of proceeds:

☒ Sustainability Bond proceeds segregated or tracked by the issuer in an appropriate manner

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☒ Disclosure of intended types of temporary investment instruments for unallocated proceeds

☐ Other (please specify):

Additional disclosure:

☐ Allocations to future investments only

☒ Allocations to both existing and future investments

☐ Allocation to individual disbursements

☒ Allocation to a portfolio of disbursements

☒ Disclosure of portfolio balance of unallocated proceeds

☐ Other (please specify):

4. REPORTING

Overall comment on section (if applicable):

• Johnson Controls intends to prepare and make publicly available Sustainable Finance reporting one year after each issuance, to be renewed annually and until full allocation on the Company’s website. Allocation reporting will be prepared on a portfolio basis and will include the total amount of proceeds allocated to eligible projects, the balance of unallocated proceeds and the amount or percentage of new financing and refinancing. The reporting will include qualitative and, where feasible, quantitative environmental and social metrics such as estimated annual GHG emissions avoided. or reduced, tons of waste diverted from landfill, estimated water savings and number of women or minority-owned businesses engaged. • Based on the commitment to both allocation and impact reporting, Sustainalytics considers this process to be in line with market practice.

Use of proceeds reporting:

☐ Project-by-project ☒ On a project portfolio basis

☐ Linkage to individual bond(s) ☐ Other (please specify):

Information reported:

☒ Allocated amounts ☐ Sustainability Bond financed share of total investment

☐ Other (please specify): share of financing versus refinancing

Frequency:

☒ Annual ☐ Semi-annual

☐ Other (please specify):

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Impact reporting:

☐ Project-by-project ☒ On a project portfolio basis

☐ Linkage to individual bond(s) ☐ Other (please specify):

Information reported (expected or ex-post):

☒ GHG Emissions / Savings ☐ Energy Savings

☒ Decrease in water use ☒ Number of beneficiaries

☐ Target populations ☐ Other ESG indicators (please specify):

Frequency:

☒ Annual ☐ Semi-annual

☐ Other (please specify):

Means of Disclosure

☐ Information published in financial report ☐ Information published in sustainability report

☐ Information published in ad hoc documents

☒ Other (please specify): website

☐ Reporting reviewed (if yes, please specify which parts of the reporting are subject to external review):

Where appropriate, please specify name and date of publication in the useful links section.

USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.)

SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE

Type(s) of Review provided:

☐ Consultancy (incl. 2nd opinion)

☐ Certification

☐ Verification / Audit ☐ Rating

☐ Other (please specify):

Review provider(s): Date of publication:

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ABOUT ROLE(S) OF REVIEW PROVIDERS AS DEFINED BY THE GBP AND THE SBP

i. Second-Party Opinion: An institution with sustainability expertise that is independent from the issuer may provide a Second-Party Opinion. The institution should be independent from the issuer’s adviser for its Sustainability Bond framework, or appropriate procedures such as information barriers will have been implemented within the institution to ensure the independence of the Second-Party Opinion. It normally entails an assessment of the alignment with the Principles. In particular, it can include an assessment of the issuer’s overarching objectives, strategy, policy, and/or processes relating to sustainability and an evaluation of the environmental and social features of the type of Projects intended for the Use of Proceeds.

ii. Verification: An issuer can obtain independent verification against a designated set of criteria, typically pertaining to business processes and/or sustainability criteria. Verification may focus on alignment with internal or external standards or claims made by the issuer. Also, evaluation of the environmentally or socially sustainable features of underlying assets may be termed verification and may reference external criteria. Assurance or attestation regarding an issuer’s internal tracking method for use of proceeds, allocation of funds from Sustainability Bond proceeds, statement of environmental or social impact or alignment of reporting with the Principles may also be termed verification.

iii. Certification: An issuer can have its Sustainability Bond or associated Sustainability Bond framework or Use of Proceeds certified against a recognized external sustainability standard or label. A standard or label defines specific criteria, and alignment with such criteria is normally tested by qualified, accredited third parties, which may verify consistency with the certification criteria.

iv. Green, Social and Sustainability Bond Scoring/Rating: An issuer can have its Sustainability Bond, associated Sustainability Bond framework or a key feature such as Use of Proceeds evaluated or assessed by qualified third parties, such as specialized research providers or rating agencies, according to an established scoring/rating methodology. The output may include a focus on environmental and/or social performance data, process relative to the Principles, or another benchmark, such as a 2-degree climate change scenario. Such scoring/rating is distinct from credit ratings, which may nonetheless reflect material sustainability risks.

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Appendix 3: Sustainability-Linked Bonds - External Review Form

Section 1. Basic Information

Issuer name: Johnson Controls International plc Sustainability-Linked Bond ISIN: Independent External Review provider’s name for second party opinion pre-issuance (sections 2 & 3): Sustainalytics Completion date of second party opinion pre-issuance: September 7, 2021 Independent External Review provider’s name for post-issuance verification (section 4): Completion date of post issuance verification:

At the launch of the bond, the structure is:

☒ a step-up structure ☐ a variable redemption structure

Section 2. Pre-Issuance Review

2-1 SCOPE OF REVIEW

The following may be used or adapted, where appropriate, to summarize the scope of the review.

The review:

☒ assessed all the following elements (complete review) ☐ only some of them (partial review):

☒ Selection of Key Performance Indicators (KPIs) ☒ Bond characteristics (acknowledgment of)

☒ Calibration of Sustainability Performance Targets (SPTs)

☒ Reporting

☒ Verification

☒ and confirmed their alignment with the SLBP.

2-2 ROLE(S) OF INDEPENDENT EXTERNAL REVIEW PROVIDER

☒ Second Party Opinion ☐ Certification

☐ Verification ☐ Scoring/Rating

Note: In case of multiple reviews / different providers, please provide separate forms for each review.

2-3 EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)

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Section 3. Detailed pre-issuance review

Reviewers are encouraged to provide the information below to the extent possible and use the comment section to explain the scope of their review.

3-1 SELECTION OF KEY PERFORMANCE INDICATORS (KPIS)

Overall comment on the section (if applicable): Sustainalytics overall considers KPI 1 & 2 to be very strong given that they (i) represent direct measures of JCI’s GHG emissions from its own operations and through the lifecycle of product use; ( (ii) represent a material environmental issue for the sector and the Company; (iii) are defined following clear and consistent definitions as per GHG Protocol Standard which supports benchmarking against external emission reduction strategies.

List of selected KPIs:

• KPI 1: Greenhouse Gas Emissions (Scope 1 and 2)

• KPI 2: Greenhouse Gas Emissions (Scope 3) from Use of Sold Products

Definition, Scope, and parameters

☒ Clear definition of each selected KPIs ☒ Clear calculation methodology

☐ Other (please specify):

Relevance, robustness, and reliability of the selected KPIs

☒ Credentials that the selected KPIs are relevant, core and material to the issuer’s sustainability and business strategy.

☒ Evidence that the KPIs are externally verifiable

☒ Credentials that the KPIs are measurable or quantifiable on a consistent methodological basis

☒ Evidence that the KPIs can be benchmarked

☐ Other (please specify):

3-2 CALIBRATION OF SUSTAINABILITY PERFORMANCE TARGETS (SPTs)

Overall comment on the section (if applicable): Sustainalytics considers the SPTs to align with Johnson Controls International plc’s sustainability strategy and considers Johnson Controls’ SPT 1 to be highly ambitious given that it presents a material improvement compared to past performance, and the SPTs align the targets set by the Group’s peers as well as aligns with SBTi’s well-below 1.5-degree scenario. Sustainalytics considers Johnson Controls’ SPT 2 to be ambitious given that it presents a material improvement compared to past performance and the SPTs align the targets set by the Group’s peer as well as aligns with SBTi’s 2ºC scenario.

Rationale and level of ambition

☒ Evidence that the SPTs represent a material improvement

☒ Credentials on the relevance and reliability of selected benchmarks and baselines

☒ Evidence that SPTs are consistent with the issuer’s sustainability and business strategy

☒ Credentials that the SPTs are determined on a predefined timeline

☐ Other (please specify):

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Benchmarking approach

☒ Issuer own performance ☒ Issuer’s peers

☒ reference to the science ☐ Other (please specify):

Additional disclosure

☒ potential recalculations or adjustments description

☒ issuer’s strategy to achieve description

☒ identification of key factors that may affect the achievement of the SPTs

☐ Other (please specify):

3-3 BOND CHARACTERISTICS

Overall comment on the section (if applicable): Johnson Controls International plc has disclosed that it will link the financial characteristics of all issued sustainability-linked securities under the Framework to the achievement of the SPTs. The financial characteristics may include step-up margin, coupon/margin adjustment or the premium payment amount as applicable if Johnson Controls fails to meet the stated SPTs. Specific details on the financial characteristics selected for each financial instrument will be specified in their respective indenture.

Financial impact:

☒ variation of the coupon

☒ margin adjustment

☒ Other (please specify): premium payment

Structural characteristic:

☐ …

☐ …

☐ Other (please specify):

3-4 REPORTING

Overall comment on the section (if applicable): Johnson Controls commits to report on an annual basis on its performance on the KPIs and expects to include the relevant figures as Sustainability-linked bond update in Annual Sustainability Report which will be made publicly available on Johnson Controls website on an annual basis. The reporting provisions are aligned with the SLBP and SLLP. Johnson Controls further commits to disclose relevant information that enabling investors to monitor the level of ambition of the SPTs.

Information reported:

☒ performance of the selected KPIs ☒ verification assurance report

☒ level of ambition of the SPTs ☐ Other (please specify):

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Frequency:

☒ Annual ☐ Semi-annual

☐ Other (please specify):

Means of Disclosure

☐ Information published in financial report ☒ Information published in sustainability report

☐ Information published in ad hoc documents ☐ Other (please specify):

☐ Reporting reviewed (if yes, please specify which parts of the reporting are subject to external review):

Where appropriate, please specify name and date of publication in the “useful links” section.

Level of Assurance on Reporting

☒ limited assurance ☐ reasonable assurance

☐ Other (please specify):

USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.)

Section 4. Post-issuance verification

Overall comment on the section (if applicable):

Information reported:

☐ limited assurance ☐ reasonable assurance

☐ Other (please specify):

Frequency:

☐ Annual ☐ Semi-annual

☐ Other (please specify):

Material change:

☐ Perimeter ☐ KPI methodology

☐ SPTs calibration

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Disclaimer

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The information, methodologies and opinions contained or reflected herein are proprietary of Sustainalytics and/or its third-party suppliers (Third Party Data), and may be made available to third parties only in the form and format disclosed by Sustainalytics, or provided that appropriate citation and acknowledgement is ensured. They are provided for informational purposes only and (1) do not constitute an endorsement of any product or project; (2) do not constitute investment advice, financial advice or a prospectus; (3) cannot be interpreted as an offer or indication to buy or sell securities, to select a project or make any kind of business transactions; (4) do not represent an assessment of the issuer’s economic performance, financial obligations nor of its creditworthiness; and/or (5) have not and cannot be incorporated into any offering disclosure.

These are based on information made available by the issuer and therefore are not warranted as to their merchantability, completeness, accuracy, up-to-dateness or fitness for a particular purpose. The information and data are provided “as is” and reflect Sustainalytics` opinion at the date of their elaboration and publication. Sustainalytics accepts no liability for damage arising from the use of the information, data or opinions contained herein, in any manner whatsoever, except where explicitly required by law. Any reference to third party names or Third Party Data is for appropriate acknowledgement of their ownership and does not constitute a sponsorship or endorsement by such owner. A list of our third-party data providers and their respective terms of use is available on our website. For more information, visit http://www.sustainalytics.com/legal-disclaimers.

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In case of discrepancies between the English language and translated versions, the English language version shall prevail.

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About Sustainalytics, a Morningstar Company

Sustainalytics, a Morningstar Company, is a leading ESG research, ratings and data firm that supports investors around the world with the development and implementation of responsible investment strategies. For more than 25 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Sustainalytics works with hundreds of the world’s leading asset managers and pension funds who incorporate ESG and corporate governance information and assessments into their investment processes. Sustainalytics also works with hundreds of companies and their financial intermediaries to help them consider sustainability in policies, practices and capital projects. With 17 offices globally, Sustainalytics has more than 800 staff members, including more than 300 analysts with varied multidisciplinary expertise across more than 40 industry groups.

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