Materiality Assessment 2021 Kickoff Webinar Dialogue Matters – Support Us to Spur Positive Impact February 8, 2021 Agenda

BusinessNovartis or Organizational Unit FranchiseESG Management or Department Office

Materiality Assessment 2021 Kickoff Webinar Dialogue matters – support us to spur positive impact February 8, 2021 Agenda

Welcome

Why it’s important?

What have we achieved?

Where are we heading?

We would like to hear from you Jeff Sturchio Open Q&A

2 Novartis Materiality Webinar | 08.02.2021 Welcome

Duration: 1 hour

At any time, we invite you to type your questions in the Q&A box

If you are struggling to connect: . Audio is typically more reliable over a telephone/ mobile line than computer audio . Close other applications not in use, especially those that take bandwidth (e.g. email and additional internet browser tabs) . Connect to the internet via cable rather than wireless, if possible

3 Novartis Materiality Webinar | 08.02.2021 Moderator & Speakers

Jeff Sturchio Dr. Patrice Matchaba Dr. Lutz Hegemann Samir Shah Carrie Scott Chairman Head US Corporate Group Head Corporate Affairs Head Investor Relations Head ESG Management Responsibility and President and Global Health Office

Rabin Martin Novartis US Foundation Novartis Novartis Novartis

4 Novartis Materiality Webinar | 08.02.2021 Agenda

Welcome

Why it’s important?

What have we achieved?

Where are we heading?

We would like to hear from you Dr. Patrice Matchaba Open Q&A

5 Novartis Materiality Webinar | 08.02.2021 Agenda

Welcome

Why it’s important?

What have we achieved?

Where are we heading?

We would like to hear from you Dr. Lutz Hegemann Open Q&A

6 Novartis Materiality Webinar | 08.02.2021 Our purpose is to reimagine medicine to improve Novartis “ and extend people's lives. We use innovative Our Purpose science and technology to address some of society's most challenging healthcare issues. We discover and develop breakthrough treatments and find new ways to deliver them to as many people as possible. We also aim to reward those who invest their money, time and ideas in our company.”

7 Patients Listening to our Peers stakeholders to Regulators we are understand embedded in Novartis Materiality Webinar |a M&E complex 8| 28.10.2020 what matters health Investors most for our ecosystem mission Customers Suppliers Materiality Assessments at Novartis have shaped our approach

4.0 Drug (product) safety and transparency

Bribery and corruption

Compliance with laws and regulations

Senior management commitment: "walk the talk"

Societal perception of patents and intellectual property

Drug pricing

Employee attraction/retention 3.0

Genetic engineer ing, biotechnology, cloning, stem cells Access to health MA21 Innovation for societal health needs: preventive vs. reactive Clinical data transparency Significance to NOVARTIS Stakeholders NOVARTIS to Significance Animal Testing

Human Rights 2.0 2.0 3.0 4.0 Impact on NOVARTIS Business

20002001 2006 2008 2013 2014 2015 2017 2019 2020 2021

Demonstrating outcomes

Preparing to transform

Moving from reacting to healthcare system Sole donor to Antimalarial Healthy Family Local innovative Novartis Novartis Access New strategy ESG Bond challenges to WHO of Coartem® brands in LMIC Access Principles for SS Africa proactively shaping multidrug (no-loss systems and solutions! therapy for strategy) leprosy

9 Novartis Materiality Webinar | 08.02.2021 Stakeholder input from the materiality assessment informs our core actions

MA results will inform:

. Divisional & Functional Processes

. Enterprise Risk Management

. Annual Corporate Strategy Review

Ownership:

. Novartis Executive Committee

. Board of Directors

10 Novartis Materiality Webinar | 08.02.2021 Agenda

Welcome

Why it’s important?

What have we achieved?

Where are we heading?

We would like to hear from you Samir Shah Open Q&A

11 Novartis Materiality Webinar | 08.02.2021 How can a healthcare company increase its value? Novartis share price dependent on:

Increase Reduce Driving top line cash flows the cost 1 excellence in launches of capital

Firm Driving bottom line value 2 operational excellence

Pipeline Increase Increase length expected of growth 3 delivering on innovation growth period 4 ESG

Source: Aswath Damodaran: Value Enhancements: Back to Basics, Vontobel Equity Research

12 Novartis Materiality Webinar | 08.02.2021 ESG principles in Novartis

1 Materiality Analyses

ESG needs to be integrated into functions 2 e.g. sustainability bond

3 Great ESG scores are not the direct objective

13 Novartis Materiality Webinar | 08.02.2021 Consensus

Materiality Analyses are fundamental to determining relevance of ESG factors (e.g. company, or investment decision)

14 Novartis Materiality Webinar | 08.02.2021 Novartis also uses Materiality Analyses for this Key first step to defining the ESG strategy

Most relevant ESG factors ESG pillars

External Ethical Standards Pricing & Access stakeholders Patient health Access to and safety healthcare

Ethical business Innovation practices

Others including governance, Global Health Challenges Corporate Citizenship people,

Increasing importance Increasing environment

Internal stakeholders Increasing importance

1. Interactions with 200+ stakeholders from academia, fin. markets, governments, healthcare providers, NGOs. Materiality assessment webinar series: https://www.novartis.com/investors/environmental-social-and-governance/materiality-assessments

15 Novartis Materiality Webinar | 08.02.2021 But materiality…

Is about answering what the purpose is of using ESG data

Depends on stakeholder (IR world, asset manager, investor, hedge fund, pension fund)

Depends on geography

Changes with time

16 Novartis Materiality Webinar | 08.02.2021 ... which explains why materiality is the most and least consensual term in ESG investing

Relevance of a sustainability factor Pose direct financial Any fact, describing to a company's risks, may be an asset, that helps financial Information that is regulated, drive best you decide whether 3 performance important, relevant practices, raised by or not you should and critical to stakeholders, invest in this asset1 long-term value opportunities for creation2 innovation / growth4

1. JPMorgan research March 2020: What Happened to ESG, Hecker et al 2. WEF Measuring stakeholder capitalism September 2020 3. https://www.robeco.com/en/key-strengths/sustainable- investing/glossary/materiality.html#:~:text=The%20relevance%20of%20a%20sustainability,margins%2C%20required%20capital%20and%20risk. 4. SASB’s approach to materiality for hte purpose of standards development staff bulletin no. SB002-07062017 July 2017

17 Novartis Materiality Webinar | 08.02.2021 Robust methodology is important Novartis approach: varied inputs from stakeholders, geography, time-relevant

1 2 Local Materiality Secondary research Primary research Analyses (desk) Quantitative & qualitative (interviews) Medical journals Forward-looking Analyst reports - externals scenario analysis Research - internals ~180 articles

18 Novartis Materiality Webinar | 08.02.2021 It’s not ESG per se, but the focus on material ESG issues that is correlated to improved share price

Ethical Standards Pricing & Access +6% +2% ESG issues ESG

Global Health Challenges Corporate Citizenship material -2.9% +0.6% O HIGH LOW

LOW HIGH Performance on Performance Performance on immaterial ESG Issues

1. Serafeim, George et al. (2015): Corporate Sustainability: First evidence on materiality. HBS Working Paper 15-073. Other sources: Cheng, Ioannou and Serafeim (2014); Dhaliwal et. al (2011); Dhaliwal et. al (2012); Grewal, Riedl and Serafeim (2017); Khan, Yoon and Serafeim (2016); Grewal, Hauptman and Serafeim (2017).

19 Novartis Materiality Webinar | 08.02.2021 First sustainability-linked bond in the industry An open accountability to our ESG commitments

“Driving purpose, Novartis Sustainability linked bond stakeholder value; happens when at center of systems, integrated, targets Treasury issued (ESG) linked bond mandatory & conditional” 1 Materiality Analyses bases of Targets “Creating symbiotic (access/patients reached with medicines) innovation ecosystem 2 Conditional requires new methods, Step up metrics, and indicators” 3 Mandatory Mariana Mazzucato Targets included in CEO balanced scorecard

4 Symbiotic Bond buyers partnership with company

20 Novartis Materiality Webinar | 08.02.2021 Operationalized Materiality Analyses into strategic pillars and then into management targets

See Novartis in Society ESG Report 2020

21 Novartis Materiality Webinar | 08.02.2021 Agenda

Welcome

Why it’s important?

What have we achieved?

Where are we heading?

We would like to hear from you Carrie Scott Open Q&A

22 Novartis Materiality Webinar | 08.02.2021 A systematic stakeholder engagement follows a robust methodology

https://www.youtube.com/watch?v=IqFLSV6Hnms&feature=youtu.be

23 Novartis Materiality Webinar | 08.02.2021 Process Overview

1 2 3 4 5 6 Q3 Q32020 2020 Q3Q1 2020 2021 Q1 2021Q2 2021 Q2 2021 Q2 2021Q2 2021 Q3 2021

Desk Management Materiality Stakeholder Analysis & ManagementManagement Research Survey Surveys Discussions Interpretation ReportReport Assurance Manual review Via function & Quantitative Qualitative Ranking of Informing of key division to online survey interviews and cluster and business stakeholder define internal among internal workshop with issues, strategies, sources to contact & external internal & correlation management create impact owners of stakeholders external analysis and processes and and external stakeholders scenario decision dependency list stakeholders analysis making

https://www.youtube.com/watch?v=IqFLSV6Hnms&feature=youtu.be

24 Novartis Materiality Webinar | 08.02.2021 Process Overview

1 2 3 4 5 6 Q3 Q32020 2020 Q3Q1 2020 2021 Q1 2021Q2 2021 Q2 2021 Q2 2021Q2 2021 Q3 2021

https://www.youtube.com/watch?v=IqFLSV6Hnms&feature=youtu.be

25 Novartis Materiality Webinar | 08.02.2021 Agenda

Welcome

Why it’s important?

What have we achieved?

Where are we heading?

We would like to hear from you Jeff Sturchio Open Q&A

26 Novartis Materiality Webinar | 08.02.2021 Dialogue matters – why should you support us?

Rabin Martin Novartis US Foundation Novartis Novartis Novartis

27 Novartis Materiality Webinar | 08.02.2021 Thank you for your attention!

For more information 1. Visit our site: www.novartis.com 2. Read the CR Materiality Assessment Results Report 2017 3. Read the Novartis In Society Report 2020

Any feedback, send an email to [email protected]

28 Novartis Materiality Webinar | M&E | 28.10.2020 Backup Materiality Assessments highlight our impacts from the perspectives of our stakeholders

across all dimensions of Environment, Social and Governance

Strategic Build Reporting insights stakeholder relationships Structure and Align with societal prioritize reporting; expectations, Intensify dialog with highlight impact business needs and key stakeholders on measuring needs; market a systematic basis validate current developments; tease to strengthen impact valuation out white space for relationships and indicators and competitive enable stakeholder contextualize their advantage and specific relevance leadership communication opportunities

30 Novartis Materiality Webinar | 08.02.2021 Novartis’ corporate responsibility “materiality” definition

Social, environmental or economic issues are being considered to be material for Novartis if they have a substantial likelihood to influence the judgment and decisions of key stakeholder groups and a significant impact on Novartis performance and business overall

Key sources

31 Novartis Materiality Webinar | 08.02.2021 2017 Results at a glance show each topic‘s relative importance

How to read the chart Outer circle Priority topics Middle circle External stakeholders perceive as more important Internal stakeholders perceive as more important No significant difference in perception Inner circle Material issue clusters

32 Novartis Materiality Webinar | 08.02.2021