Our Chief Operational Excellence and Safety Officer, along with our Chief Environmental Officer, who both report to our COO, have ultimate accountability for American Water’s approach to adaptation and mitigation strategies associated with climate change. Climate change is a global issue with local implications; therefore, our state Presidents also hold responsibility for our performance.

The Safety, Environmental, Technology & Operations (SETO) Committee, which meets quarterly, oversees programs and policies with respect to protecting the environment, including the Company’s sustainable efforts concerning water conservation, climate variability, contaminants of emerging concern, and GHG emissions.

The SETO Committee monitors and reviews operational risk exposure, mitigation strategies and processes for assessing business continuity risks, including asset hardening, resiliency and contingency plans. This includes climate-related risks such as more frequent extreme weather events and increased severity of natural disasters, and resulting resiliency investments and efforts.

The SETO Committee reviews and monitors significant environmental strategies as well as policy and planning issues related to operations— including matters before environmental regulatory agencies, compliance with environmental laws and regulations, and environmental performance. Additional committee responsibilities include overseeing programs and policies regarding the protection of the environment, water conservation and GHG emissions.

Climate change is a global issue with local implications, therefore, our state Presidents also hold responsibility for our performance.

Our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Environmental Officer, Senior Vice President and Chief Operational Excellence and Safety Officer and Capital Planning Management Committee all have responsibility for both assessing and managing climate-related risks and opportunities, on a more frequently than quarterly basis.

CEO has overall responsibility for creating, planning, implementing and integrating the strategic direction of the Company. Integration of climate-related issues and strategy to mitigate such risks into overarching Company plans is integral to the success of the business. Climate-related responsibilities are assigned to this position because the CEO is accountable for the long-term sustainability of the business.

CFO leads the Finance and Operational Services teams, including responsibility for all aspects of financial management and strategy, including directing finance strategy, investor relations, ESG, treasury, financial planning, accounting, internal audit, risk management, regulatory compliance, and control functions. The CFO reports directly to the CEO, as well as manages the ESG efforts and position, under Investor Relations. Climate-related responsibilities are assigned to this position because the CFO is responsible for the financial sustainability of the Company and integration of climate-related risk and resiliency are imperative to long term sustainability.

COO has overall responsibility for creating, planning and integrating the strategic direction of the business including oversight of advancement of technology within operations to improve effectiveness. Climate-related responsibilities are assigned to this position because the COO is responsible for our operations meeting current/future capacity requirements and having the resiliency to withstand climate-related impacts. This position reports to the CEO.

Chief Environmental Officer is responsible for Environmental Leadership and oversight of activities directly related to the management of climate-related risks. This includes the advancement of research and development, water quality, and technology to improve effectiveness; compliance with requirements in multiple media (including drinking water, wastewater, air, and waste), environmental stewardship, and oversight of the Central Lab that analyzes 80,000+ drinking water samples per year; and ensuring our operations meet current/future capacity, water quality requirements, and have resiliency to withstand climate-related impacts. The Chief Environmental Officer shapes the organizational Environmental Leadership mission, vision, and targets for American Water’s employees This position reports to the COO.

Senior Vice President and Chief Operational Excellence and Safety Officer is responsible for leading the Operational Excellence efforts, which are helping to support the business’ efforts in achieving growth and operational efficiency in Safety, Meter Operations, and Engineering. An example of the overlap of climate-related issues and Operational Excellence is the portfolio wide initiative to implement Advance Meter Infrastructure (AMI) which interconnect with customer applications to assist in conservation measures, usage tracking and increased communication with customers regarding their use of water resources. This position reports to the COO.

Short Term (0-1yr): American Water tracks, monitors, and studies extreme weather events on an on-going basis and is routinely taking action in this area to provide safe, reliable, and consistent water and wastewater services to our customers. We are also active in conservation activities with our customers, with an eye on the potential impact related changes in water supply and usage will have on our operations. We commit approximately $1.6 billion annually to capital investment, and approximately 8% of our total capital investment, to increasing the resiliency of our assets.

Medium Term (1-5yrs): American Water updates System Master Plans, through Capital Planning Studies, for our water and wastewater systems at approximately 5 to 7 year intervals, and implements projects identified in these plans. Various other specific engineering studies and inspections may also be undertaken. We expect to spend between $10.3 billion - $10.5 billion on capital investments from 2021- 2025 to address aging infrastructure, reduce or eliminate leaks, improve cyber and physical security, and increase resiliency of critical assets from the impacts of climate variability, including approximately 8% dedicated to resiliency. Capital investment in part go to projects that improve energy efficiency, enhance resiliency of our assets and facilities and enhance water treatment processes to maintain compliance with all environmental regulations. For more information about our medium-term risks, please see our response to question C2.3a in our CDP response.

Long Term: As part of the Comprehensive Planning work, American Water examines longer term climate related impacts such as drought and flooding recurrence intervals, increasing storm intensity and related grid power outages, and the impact of heat/cold weather patterns on critical assets and water use. Where significant impact from climate-related droughts, flooding, sea level rise or natural disasters drive major capital improvement upgrade projects, the risks will be evaluated on a longer time period such as 25-50 years. We expect to spend between $22 billion and $25 billion on capital investments from 2021 to 2030 to address aging infrastructure, reduce/eliminate leaks, improve cyber/ physical security, and increase resiliency of critical assets to climate variability. For more information about our long-term risks and opportunities, please see our CDP response to questions C2.3a and C2.4a.

Revenues: American Water compiled revenue for our inclining block states (CA and NY), combined that with our Revenue Stabilizing Mechanism states (NY, CA, and IL) and added in the fixed meter charges from our other regulated states, which resulted in approximately 47% of our customers having adaptive rates - related to the risks and opportunities provided.

Capital Expenditures: Acute physical climate risks such as extreme weather events pose increasing risks to American Water. American Water is tasked with addressing potential risks posed by aging infrastructure and the increasing impacts of climate variability to continue providing safe and reliable water and wastewater services to customers. American Water expects to spend between $22 billion and $25 billion on capital investments from 2021 to 2030 to address issues, including climate-related risk. A specific example of an action taken includes an investment of $4 million on 32 generator projects across 12 states in 2020. In addition, as the need for standby generators is crucial during power loss events, we have entered into agreements to help improve fuel deliveries for emergency use. These projects, and the other capital investments made by American Water improve asset resiliency and the reliability of water service to customers during an emergency. We anticipate our investment budget will continue to rise as infrastructure ages, climate-related risks are realized, new regulations are promulgated and growth continues.

Direct Costs: Climate variability has impacted certain treatment facilities located in flood prone areas. As the need for standby generators is crucial during power loss events, we have entered into agreements to facilitate fuel delivery for emergency use. Additionally, to prepare for such events American Water maintains Emergency Response Plans.

Indirect Costs: The increased cost of treatment and pumping due to changes in input pricing and loading from other external factors presents financial and strategic risk. The cost of electric energy for water treatment, wastewater treatment and pumping operations (about 1 million MWh/year) represents a significant portion of our annual operations budget. Increased fuel and power costs may cause changes to the operational efficiency profile by limiting financial resources available.

Capital Allocation: Asset replacement to improve efficiency, meet regulations, provide supplies and reduce the loss of “High Risk Assets” are core drivers for capital allocation and investment. Each of these core drivers can be impacted by climate variability such as water supply quantity, impacts to water quality or the need to harden assets due to increased storm activity and severity. Examples of capital allocated for improved resiliency include increased flood wall protection, reservoir projects in Maryland and Missouri, increased installation of standby power systems, redundancy and interconnections with adjacent water purveyors.

Acquisitions and divestments: A component of evaluating potential acquisitions is the ability to integrate adjacent systems and assets into our current infrastructure. Many acquired systems are under distress and have not been maintained. Identifying inefficiencies early on through due diligence review, many with a direct impact on GHGe, such as aged leaking water mains and inefficient assets (e.g., pumps) are factored into our acquisition strategy. These approaches not only allow for a reduction in the existing carbon footprint through more efficient operations, but also improve customer service and satisfaction. With increasingly stringent environmental, water quality and health and safety laws and regulations, including with respect to contaminants of emerging concern, and the need for increased infrastructure investment, many community water and wastewater systems may be strained to meet the increasing standards of operation. American Water considers the impacts of climate-related risks during system upgrade and project designs, and business development opportunities.

Access to Capital: Traditional means of access to capital are currently not impacted. American Water has sufficient access to capital for the anticipated risk mitigation activities and capital improvement plan.

Liabilities: Our capital program planning process examines and includes projects such as flood walls that mitigate related liabilities due to climate related risk. The planning process integrates several scoring factors including identification of high-risk assets that can be impacted by several factors, including climate related risk. Reduction of risk and hardening of high-risk assets reduces liabilities.

American Water reviews current climate science and global models related to temperature, precipitation and sea level rise on an ongoing basis. Where actionable forecasts are available, American Water will use this information in our CPS and Master Plans, which assess the climate risk and resiliency of our water and wastewater systems over short, medium and long-term time horizons (0–25+ years). Our CPS process enables us to evaluate and predict how water supplies, water quality and water demands may change over time. We also consider how increasing intensity and frequency of extreme weather events may affect our infrastructure and assets, which helps determine any updates or changes to our design standards. We enhanced our CPS process in 2019 to include RRAs, which will be updated on a five-year cycle.

American Water performs Comprehensive Planning Studies with Risk and Resiliency assessments which incorporate climate-related scenario analysis and uses information from climate model scenarios where applicable to identify and select facility upgrade projects. American Water performed a sea level rise (SLR) impact study in NJ using available Light Detecting and Ranging (LiDAR) topographic data, created a GIS base map of the facility and superimposed the Federal Emergency Management Agency (FEMA) flood mapping data. This coastal facility was selected for the assessment due to its critical operation and vulnerability to flooding. Then, we compared the FEMA mapping with other inundation mapping layers that were available from National Oceanic and Atmospheric Administration (NOAA). This information was used to identify the extent of flooding under different scenarios (category 1 and 2 hurricanes plus SLR) and time horizons (2030 and 2070). Precipitation and temperature scenarios were based on the regional information gathered from the National Climate Assessment, as well as other climate variability planning studies that have been conducted on a state-wide scale in NJ. The National Weather Service Sea, Lake and Overland Surges from Hurricanes (SLOSH) model was also used to model storm surge. We also examined temperature increases projected under RCP 2.5, RCP 6 and RCP 8.5. In each component of the analysis, we bracketed the impact to low impact and high impact scenarios. The SLR study in NJ was used to develop a long-term plan for the facility assessed. Immediate/short term improvements were identified, and a long-term strategy was developed. The long-term strategy includes expanding facilities outside of the area of concern to reduce the critical dependence on this facility.

The Comprehensive Planning work identifies needed system improvements, which drive financial planning and business strategy. To date, we have examined the risk of sea level rise for one facility in NJ and use this methodology as an approach for future studies. The risk of flooding is routinely accessed for all facilities in FEMA flood zones during the Master Plan process. We continue to follow climate science modelling to develop better ways to model the impacts from increasing storm intensity. These studies will continue to influence where we build new facilities and how the facilities are designed.

Climate-related risks and opportunities are manifested throughout American Water. Potential risks and opportunities to water supplies and water wastewater system assets, including climate-related risks, are identified and assessed through a disciplined process that includes the Company’s Asset Management and Comprehensive Planning process.

The planning process incorporates various tools including system master plan studies, AWWA J100 standard risk and resiliency assessments, the use of computerized hydraulic models, pipeline condition assessment studies and wastewater system evaluation programs. Potential risks to service delivery, environmental compliance and safety, and financial risk are assessed. Potential risks are logged and tracked on system risk registers. Climate risks evaluated may include increased storm severity and frequency; duration of power outages; changes in precipitation trends impacting stream flows, aquifer recharge, flood and drought occurrences; water quality impacts due to shifting temperature patterns, increased rainfall runoff intensity; and other natural hazards. Opportunities, such as flood resiliency, changes in treatment technology, and improved energy efficiency are also identified through the planning process.

Climate related policy risks are also identified through our government affairs and environmental compliance oversight process. For example, the Commonwealth of Pa amended the state code in 2018 (Section 109.708a) requiring community water suppliers operating in PA to certify the development of an Uninterrupted System Service Plan (USSP). The USSP is a feasible plan to consistently supply adequate quantity of drinking water during emergency situations.

Understanding, tracking, and responding to the enterprise and local impacts of climate-related risks and opportunities are critical to implementing targeted adaptation and mitigation plans that will bolster climate resiliency, efficient operations, and GHGe reductions.

The company has an Enterprise Risk Management process which includes an Asset Risk Assessment and Management process focused on the company’s assessment and tracking of the highest potential risks. The asset risk register is compiled at an individual state level and rolled up into a corporate view. State asset risk registers are used to manage actions to mitigate potential risks to service and environmental compliance. Mitigation of potential asset risks is through the Capital Improvement Program (CIP) and refinements to emergency response and business continuity plans.

Our Board of Directors’ Safety, Environmental, Technology and Operations Committee receives, reviews and discusses with executive management quarterly briefings on risks from natural hazards, such as drought and loss of supply due to extreme weather events and natural disasters. The Safety, Environmental, Technology and Operations Committee monitors and reviews operational risk exposure, mitigation strategies and processes for assessing business continuity risks, including asset hardening, resiliency and contingency plans. This includes climate-related risks such as more frequent extreme weather events and increased severity of natural disasters, and the resulting resiliency investments and efforts. Operational risks cascade up from the company’s management and its Enterprise Risk Management Committee to the Audit, Finance and Risk Committee and the Board.

Substantive financial risk is defined as anything $50 million or more. Such risk is elevated to the Enterprise Risk Management Committee and managed using a heat map that defines risk by financial consequence and event likelihood. Three categories of substantive financial consequence are (1- Manageable) 0<$50m, (2-Major) $50 - $100m and (3-Critical) >$100m. Climate-related risks are evaluated as stand- alone, such as drought on water supplies, and as cross cutting risks where non-climate related risks, such as aging infrastructure, in combination with climate-related risks, such as flooding or increase threat of power outages, may amplify overall risk likelihood. Cross cutting risks may drive capital project investment decisions especially for facilities that have an expected service life of 25 or more years.

In our direct operations, our processes for identifying, assessing, and responding to climate-related risks is integrated into our multi- disciplinary company-wide risk management process. The impact of climate-related risks on critical assets is considered in combination with other potential risks including the risks posed by aging infrastructure.

Energy & Emissions: We have committed to reducing our absolute scope 1 and scope 2 GHG emissions by more than 40% by 2025 from a 2007 baseline. Our GHG emissions as of 2020 were 545,111, meaning we achieved approximately a 36% reduction from our base year, and are approximately 90% of the way toward our goal.

Climate Variability/Water Supply Resilience: By 2030, increase our water system resiliency to respond to more extreme events (measured as a 10% increase in Utility Resilience Index (URI) from the 2020 baseline weighted average). By committing 8% of our total capital investment on resiliency projects each year and continuing to strengthen our workforce through incident management training and emergency preparedness, we will be able to increase our ability to absorb and/or cope with an incident and return to normal operations.

Water Use & Efficiency: By 2035, continue to meet customer needs while saving 15% in water delivered per customer compared to a 2015 baseline. We will achieve this target by expanding best practices from existing conservation programs, utilizing innovative technologies, investing capital to improve system performance to reduce water loss and non-revenue water while minimizing customer rate impacts, and continuing to benefit from the ongoing national trends of declining residential water use related to fixtures and appliances.