Environmental and Social Assessment and Management System, and Identification of Risks and Impacts

The Company is currently in the process of developing an E&S Management System (ESMS). In the meantime, its operations are being conducted in line with applicable local legal requirements. The Company has secured the necessary environmental licenses and operational authorizations for the collection, transport, and disposal of sargassum. In accordance with local regulations, the Project is not required to undergo a formal E&S impact assessment. Ensol, the entity responsible for sargassum collection, has adopted an E&S Policy to minimize its E&S impacts, ensure legal compliance, and define staff and management roles in implementing and overseeing E&S practices. As per ESAP #1, the Company will develop and implement an Environmental and Social Management System (ESMS) that includes all necessary management plans and procedures applicable to its operations in Mexico. This system must comply with applicable state and national regulations, the requirements of the IFC Performance Standards (PS), and the World Bank Group (WBG) General Environmental, Health, and Safety (EHS) Guidelines (2007).

Management Programs

Carbonwave has developed written procedures specifically for laboratory management practices and sargassum collection. However, key aspects such as water and waste management remain under development. In line with ESAP #1 above, the Company will develop the necessary management plans and procedures to avoid, mitigate or manage the E&S risks associated with its operations (including collection / processing / disposal).

Organizational Capacity and Competency

Carbonwave has established an E&S organizational structure covering its operations in both Puerto Rico and Mexico. The structure includes a Global Head of ESG, with E&S responsibilities also delegated to the Operations Manager for each country. All environmental matters related to sargassum collection are managed by the General Director of Ensol, who oversees regulatory compliance. Other E&S aspects related to the processing of sargassum are managed by Carbonwave’s Coordinator of Operations in Mexico. As per ESAP #2, the Company will appoint a qualified E&S Coordinator/Manager for Mexico operations, with knowledge of the national regulatory requirements and applicable requirements of IFC PS, responsible for the development, implementation and maintenance of the ESMS and related E&S programs, plans and procedures, including the grievance mechanism. The EHS Coordinator/Manager will be responsible for delivering the ESMS Training Plan and overseeing the implementation of corporate E&S requirements.

Monitoring and Review

The Company monitors key E&S indicators across four categories: impact, environmental, social, and governance. Key metrics include hectares of coral reefs benefited from sargassum management activities, seaweed volume collected, and coastline length protected. It also tracks employment generation and stakeholder engagement, ensuring comprehensive evaluation of project outcomes. As part of ESAP #1, Carbonwave will develop procedures to monitor and measure effectiveness of its ESMS and compliance with legal and contractual obligations, and the WBG EHS Guidelines and related environmental limit values, including E&S key performance indicators (KPIs) and performance targets.

Emergency Preparedness and Response

Carbonwave has a global framework for emergency response planning, detailing actions to be taken in each operating country in line with relevant and applicable laws in each country. This framework defines the general requirements for signage and communications for each facility. In addition, the Company has a procedure for monthly inspections of fire extinguishers and smoke detectors. To strengthen emergency response planning, Carbonwave will, as per ESAP #3, develop an Emergency Preparedness Respond Plan (EPRP) with facility-specific procedures, assessing the potential scenarios that may occur (including operational risks and natural hazards such as storms and hurricanes), response procedures, provision of equipment and resources, designation of roles and responsibilities, periodic training, and communication plans, (including communication with external emergency services and other relevant stakeholders).

At the time of the appraisal, Carbonwave employed 54 permanent full-time employees, 64 part-time employees, and 43 temporary workers. Among the full-time workforce, 31% are women. Labor-related matters are managed by Carbonwave’s HR Director, based in Mexico. There are no full-time contract workers. No significant increase in the workforce is anticipated over the duration of the co-development initiative. Human Resources Policies and Procedures, Working Conditions and Terms of Employment The Company’s employee handbook outlines its commitment to non-discrimination, anti-sexual harassment, transparency, and integrity, and is generally aligned with IFC PS2 requirements. Regarding worker grievances, the handbook establishes a procedure for employees to raise concerns directly with their supervisors, with the option to escalate issues to the HR Director. Carbonwave complies with national labor regulations in Mexico regarding minimum wage, benefits, working hours, shift schedules, and overtime compensation. All workers are employed under written contracts in accordance with Mexican labor law and are provided with a copy. Additionally, the Company has established general guidelines promoting non-discrimination, applicable across all its global operations and offices, along with specific goals related to gender equality and inclusion, in alignment with IFC PS2. As per ESAP #4, the Company will develop a grievance mechanism in line with IF PS 2. The mechanism will be easily accessible, have a clearly documented procedure, allow for anonymous complaints, ensure a transparent process for handling grievances, and provide timely feedback to complainants. This mechanism will be also available for contractors. In addition, the mechanism will incorporate a specialized grievance handling procedure, to be activated in cases of Sexual Exploitation, Abuse, and Harassment (SEAH) reports. Workers Engaged by Third Parties Carbonwave uses contractors and subcontractors to perform certain activities, including structural and equipment maintenance, cleaning, and minor construction works required at the processing facility. The Company follows general guidelines for contractor management from selection, evaluation, contractual requirements and performance monitoring. As per ESAP #5, Carbonwave will build on its general guidelines to develop and implement a Contractor E&S Management Procedure for its Mexico operations, consistent with the IFC PS and WBG EHS Guidelines. Occupational Health and Safety (“OHS”) Carbonwave has a global industry safety policy that outlines the Company’s commitment to accident prevention, compliance with applicable laws and regulations, and the implementation of effective safety controls. Additionally, the Company has developed a comprehensive risk matrix evaluating activities related to the collection and processing of sargassum. This process is still under development, and not all standard operating procedures (SOPs) have been formalized to date. To systematically manage OHS across its Mexico operations, as part of ESAP #1, the ESMS will include an OHS policy and a comprehensive suite of OHS SOPs, in accordance with the requirements of IFC PS and WBG EHS Guidelines.

Resource Efficiency Carbonwave is committed to optimizing resource use across its operations. Electricity for its processing facilities is sourced from the public grid, and the company is actively measuring its greenhouse gas emissions for Scope 1 and Scope 2, which amounted to 166 tCO2e and 129 tCO2e, respectively, for 2024. These measurements serve as the foundation for Carbonwave’s efforts to reduce its carbon footprint and enhance energy efficiency. Water consumption, primarily tied to sargassum processing, averages approximately 70 m3 per month. Currently, water is extracted from the Company’s own well, and Carbonwave closely monitors and manages its usage to ensure operational efficiency. In alignment with ESAP #6, Carbonwave will develop a comprehensive Water Management Plan which will establish KPIs for tracking water usage, identify reuse and efficiency practices, set clear goals to improve water consumption efficiency, and outline the actions required to achieve those goals. Pollution Control The sargassum processing facility generates approximately 90 m3 of wastewater per month, characterized by a high organic load, elevated nutrient levels, salinity, and trace amounts of heavy metals. Currently, this wastewater is stored on-site and collected for treatment by an authorized third-party provider in Cancun. Domestic wastewater generated at the facility is managed through an on-site septic tank, which is regularly serviced and emptied by the same provider. Carbonwave is planning to develop a wastewater reuse system using reversed osmosis (RO), with the objective of reducing both water consumption and effluent generation by up to 80%, (with RO reject water managed by the current third-party provider). As per ESAP #7, the Company will implement a comprehensive Wastewater Management Plan detailing treatment processes, operational controls, and monitoring protocols. The plan will also include monitoring the authorized third-party provider to ensure continued legal compliance. The pilot facilities and vehicles are not a significant source of air emissions. While odors from decomposing sargassum are possible, the facility exclusively processes fresh sargassum, which minimizes the likelihood of decomposition-related emissions. Waste Management General solid waste generated at the facility is segregated on-site and collected by the local municipality. Current production capacity allows for the processing of only approximately 20% of the collected sargassum, with the remaining 80% being disposed of at an authorized landfill in Puerto Morelos. As per ESAP #8, Carbonwave will develop and implement a comprehensive Waste Management Plan to ensure the safe handling, segregation, storage, and disposal of both hazardous and non-hazardous waste, in alignment with local regulations, IFC PS, and WBG EHS Guidelines.

Community Health and Safety The buildings used for the processing operations are rented, and the Company has obtained the necessary operating permits from the local fire department. Fire prevention devices and installations are tested regularly. Future improvements related to fire prevention and the development of EPRPs are addressed under ESAP Action #3. In addition, the collection process is performed in coordination with the hotels, agreeing on time of collection and operation of machinery without affecting guests. Spills and accidents are closely monitored by the coordinator of the services. Going forward, and as part of ESAP #1, Carbonwave will include a Transportation Safety Plan which will address risks to the public posed by the Project's vehicles. As part of ESAP # 4, Carbonwave will disclose its grievance mechanism to the hotels where they operate, in case hotel guests have any grievances or concerns to raise about the Company’s operations. Security Personnel No armed guards or private security forces are employed by the Company. Security services are provided by a third-party contractor for each facility, whose hiring process includes background checks and identity verification. The training provided to security personnel covers topics such as proportional use of force, human rights, and other relevant standards, in alignment with IFC PS4. To formalize this practice, as part of ESAP #1, the ESMS will include a security procedure in line with IFC PS4, and security personnel will comply with the principles of conduct outlined in the procedure.

Carbonwave’s processing facility in Mexico is located between the Yucatán Moist Forest and the Mesoamerican Gulf-Caribbean Mangroves terrestrial ecoregions (WWF). Most collection sites are beaches or nearshore areas located either in these two ecoregions or in the Western Caribbean marine ecoregion (UNEP-WCMC). The coastline has undergone significant impacts by anthropogenic activities, particularly due to the growing hospitality industry. Species associated with these beaches include the Hawksbill Turtle (Eretmochelys imbricata) and the Green Turtle (Chelonia mydas), which are listed as Critically Endangered and Endangered on the Global IUCN Red List, respectively. The processing facility and four beaches where Carbonwave collects sargassum, overlap with Key Biodiversity Area (KBA) Corredor Central Vallarta. One location is 1 km from the Legally Protected Area (LPA) Manglares de Puerto Morelos (IUCN Category VI). The four beaches also overlap the Arrecife de Puerto Morelos National Park (IUCN Category II). There are another five beaches which overlap with the same LPA and KBA where Carbonwave provides transportation and disposal services but the collection of sargassum is carried out by resort personnel. There is one additional beach where Carbonwave provides only transportation and disposal services which overlaps with the LPA Caribe Mexicano Biosphere Reserve (IUCN Category Ia). These locations are on the Caribbean coast, adjacent to the MesoAmerican Reef, an IUCN Critically Endangered ecosystem. The beaches and marine areas where the Company collect sargassum are Natural Habitat. Priority Biodiversity Values (PBV) for these areas are the Hawksbill Turtle, the Green Turtle and all coral species. While none of the current beaches where Carbonwave provides services include active marine turtle nesting, these are common along Quintana Roo’s coast and, if present, they may meet Critical Habitat thresholds. Therefore, as per ESAP #9, the Company will conduct a “Critical Habitat Assessment” for the three PBVs which will cover Quintana Roo’s coast and consider the species’ Ecologically Appropriate Area of Analysis (EAAA), based primarily on secondary information, with primary information collected as needed. The Company has an Environmental Policy that states Carbonwave’s commitment to preserve the coastal and marine environments of the Riviera Maya, along with their guiding principles to achieve this, including actively monitoring their collection methods to ensure minimal disturbance to coastal flora and fauna, avoiding nesting sites and sensitive habitats. The Company avoids placing barriers in locations where coral reefs are present. Since Carbonwave’s activities are not expected to have any significant adverse impacts on biodiversity values, No Net Loss requirements are deemed to have been achieved. However, as per ESAP #10, Carbonwave will develop a Biodiversity Procedure, which will include i) monitoring alignment with the Mitigation Hierarchy and “No Net Loss” principles in all current and future collection areas; ii) in case of overlaps with LPAs, Internationally Recognized Areas or Critical Habitat, the processes to meet PS6 requirements; 3) training and communication programs related to biodiversity for all relevant stakeholders—including staff, contractors, and clients (i.e. resorts).