Annex 7. EU Taxonomy

Introduction

Regulation (EU) 2020/852 established a phased implementation of the regulation, starting with simpler regulatory requirements in 2022 and expanding them from January 2023. From January 1, 2023, all obligations come into force of disclosure of the Taxonomy for the objectives of Mitigation and Adaptation, obliging to report based on Annexes I and II of the Delegated Act of Article 8 (2021/4987/UE). It is then obliged to report alignment, in addition to the eligibility of economic activities at the level of financial data, with all that is involved in quantitative and qualitative verifications for technical selection criteria, Do Not Significant Harm (DNSH) and minimum guarantees.

Consequently, following the regulations that apply from 2023, the analysis of eligibility and alignment of economic activities and calculations of the KPIs to be disclosed this year with data from 2022 have been developed, explaining the reasoning and approaches used during the study.

Methodology

This section aims to provide details on how the calculation process of the different indicators of the Taxonomy has been proposed, based on the economic-financial data, and the phases that have been established in the process. This exercise is based on the taxonomy project carried out since 2021 in preparation for the disclosure of information on the indicators linked to the taxonomy in the Integrated Annual Report for 2021 and 2022.

The process followed to obtain the degree of alignment based on Taxonomy Regulation 852/2020/UE has followed the following steps:

1. Identification of business units
2. Classification of activities based on one or several NACE codes
3. Analysis of Cellnex activities incorporated directly or indirectly in the Taxonomy
4. Detailed assessment of eligibility by activity
5. Assessment of alignment by activity. This phase comprises:
   1. Comply with the Technical Screening Criteria (TSC) established for each activity.
   2. Do Not Significant Harm (DNSH) to any of the other environmental objectives.
   3. Be carried out in accordance with the minimum guarantees established.
6. Extraction of financial indicators according to the Delegated Disclosure Act methodology.

In each of the phases, the data and the appropriate quantitative and qualitative evidence have been compiled for subsequent external verification.

Identification of business units

The identification of large business units is based on the one developed last year with the confirmation and validation of the different business managers. Among these were identified:

• Telecommunications Infrastructure Service (TIS): Co-location in infrastructures of mobile telephone operators so that they can install their wireless broadcasting and telecommunications equipment there. Wide range of integrated network infrastructure services for mobile network operators, wireless telecommunications and broadband.
• Audiovisual broadcasting networks and infrastructures: The broadcasting activity consists of the distribution and transmission of television and radio (FM) signals, the operation and maintenance of broadcasting networks, the provision of connectivity for media content, OTT broadcasting services ( over-the-top multi-screen services) and others.
• Network services and others: Cellnex includes everything from the design, installation, operation and maintenance of Wi-Fi and mobile telephone networks (2G, 3G, LTE/4G) to roaming and download services. This activity includes connectivity services for telecommunications operators (other than broadcast operators), radio communication, operation and maintenance services, commercial services, Smart Cities/ IoT (“Internet of Things”) and other services.
• Investment in R+D+i: Cellnex dedicates part of its budget to research, development and implementation of innovative solutions that have allowed the company to anticipate radical changes that have occurred in the sector, such as the example of 5G technology, the Internet of Things or Infrastructure Services for telecommunications.

The result of this analysis was a list of specific economic activities for each of the three large branches described, providing definitions for each of them and the necessary details to define a specific NACE.

This degree of detail allowed us to begin to consider the fit of the different business units with the statistical definitions of the different economic activities.

Assessment of eligibility to the Taxonomy by activity

Based on the identification of the different economic activities and their respective description, the NACE code was assigned according to each of them. This code, together with the definition of each activity, was used as a basis for the eligibility analysis.

In the eligibility and alignment analysis, the activities have been differentiated and classified according to the KPIs analyzed (operating income, Capex and Opex) since some activities only appear in one of the defined items. The Opex KPI is not shown in the following sections because it has been considered as a non-material indicator. As established in Annex I of the Delegated Disclosure Act (Art. 8) referring to regulation 2020/852/UE, in point 1.1.3.2, those non-financial companies that consider that Opex is not a material indicator for their model of business, are exempt from calculating the numerator of the Opex KPI. The company considers that the Opex margin for the calculation of the Taxonomy is not material, mainly and in accordance with IFRS16 accounting regulations, the most significant item (rental costs) is reflected in financial interests and in the amortization of the financial statements of the company. Therefore, this causes the company to have very high operating leverage and margin.

Operating income

For each of the business activities, it was validated if they really fit with the activities of the proposed Taxonomy. The approach to this task helped to outline the finally eligible activities in relation to those incorporated in the Climate Delegated Act.

In this second year of validation of eligibility for the economic activities carried out by Cellnex, the following list was defined:

As regards Cellnex's operating income, the specific economic activities included in the headings of Telecommunications Infrastructures, Broadcasting Infrastructures and other network services have been considered. The following table shows the adjusted EBITDA items of the different lines as published in the annual accounts.

 

If we now focus on the reason why each of the activities has been considered eligible, we must take into account the following points:

• Datacenters: This activity fits perfectly into the definition of activity 8.1 Data processing, hosting and related activities as a whole. Income comes from the rental of "Racks", physical spaces designed to house servers, network devices, cables or other data center computing equipment. These “Racks” are rented within each data center to independent clients. Cellnex is dedicated to maintaining the conditioned space to store and operate IT or telecommunications equipment. Although this activity is presented in Annexes I and II of the Climate Delegated Act, it has been considered more closely linked to the former. Data centers manage to optimize the performance and processes of computing systems in infrastructures with stable and secure environments. Cellnex is making progress in the decarbonization and efficiency of these centers.
• Broadcast: The activity carried out by Cellnex is directly related to radio and television broadcasting services, an aspect incorporated in the definition of activity 8.3 Radio and television programming and broadcasting activities. This line of business is based on the broadcast of third-party television signals from Cellnex's telecommunications infrastructures. However, the income derived from this activity has not been accounted for in the income indicator (%) since it is considered, at an accounting level, income from an "adapted" eligible activity and cannot be included in the numerator.
• Internet media: The activity in question consists of broadcasting television via the Internet, a nuance that incorporates the definition of the activity 8.3 Radio and television programming and broadcasting activities, since the technology by which the broadcast is made is not discriminated . Cellnex is dedicated to the technological development and management of television broadcast platforms over the Internet. However, the income derived from this activity has not been accounted for in the income indicator (%) since it is considered, at an accounting level, income from an "adapted" eligible activity and cannot be included in the numerator.
• IoT - Utilities: The IoT business carries out two different activities. IoT Utilities is related to projects related to the connectivity and data transmission of electronic water and gas meters to monitor consumption, better manage incidents and ensure intelligent management. The activity has been considered eligible under mitigation activity 7.5 Installation, maintenance and repair of instruments and devices to measure, regulate and control the energy efficiency of buildings.
• IoT - Smart Services: The other leg of the IoT business focuses on Smart Services, digital solutions offered by Cellnex as a smart information management tool with the aim of establishing Smart Cities or Smart Regions. These "Internet of Things" services establish sensor networks and the integration of other data sources in transversal management digital systems to improve mobility management, increase energy efficiency, reduce resource consumption, improve the management of waste or reduce air pollution. This integrated information management tool with the aim of improving energy efficiency has been considered eligible under Mitigation activity 8.2 Data-based solutions to reduce greenhouse gas emissions.
• Mission Critical (MCPN): The activity provides highly reliable and secure broadcasting services to public emergency services such as firefighters, civil protection, maritime rescue or police, key in resilience to acute weather events. Radio connectivity of emergency services has been considered eligible under adaptation facilitating activity 8.3 Radio and television programming and broadcasting activities for its key contribution to resilience to climate risk.

The most relevant revenue item for the group, Telecommunications Infrastructure Services (TIS), 67% of sales, could not be included in the eligibility calculations given that within the environmentally sustainable economic activities presented in the regulation. There is still no activity in line with that carried out by Cellnex. TIS's activity is based on the operational efficiency of telecommunications towers, an activity with a great positive impact as described above. The non-incorporation of environmentally sustainable services linked to connectivity through wireless and wired networks is surprising, a significant loss in the evaluation of the environmental sustainability of Cellnex's business. The lack of development of the Taxonomy damages the transparency of a company whose main business is linked to efficiency.

Capital Expenditures (CAPEX)

The numerator of the Capex indicator, which must be reported according to the Taxonomy regulations, establishes that the following investments can be counted as eligible/aligned:

• Those that are related to assets or processes associated with economic activities aligned with the Taxonomy.
• Those that are part of a plan to expand economic activities aligned with the taxonomy or ensure alignment with the Taxonomy (Capex Plan). This is not yet the case for Cellnex.
• Those related to the purchase of output from economic activities aligned with the Taxonomy or individual measures to facilitate economic activity to be low in carbon (focused above all on Installation, maintenance and repair of energy efficiency equipment, charging stations for electric vehicles, instruments and devices to measure, regulate and control the energy efficiency of buildings or renewable energy technologies).

In general, Cellnex distinguishes its investments in:

• Maintenance: Investments in existing tangible or intangible assets, such as investments in information technology infrastructure, equipment and systems, and are mainly linked to keeping the assets in good working order, but excludes investment to increase the capacity of such businesses.
• Expansion (or organic growth): Adaptation of mobile telephony infrastructures for new customers, land lease (includes advance payments, and renegotiations), and other efficiency measures associated with energy and connectivity, and adaptation of infrastructures to increase capacity of the locations. All this corresponds to the investment related to the expansion of the business, which generates additional Recurring Leveraged Cash Flow (including decommissioning, adaptation of the telecommunications site for new tenants and prepayments of land leases).
• Expansion (build-to-suit projects): Corresponds to committed build-to-suit programs (consisting of towers, backhaul, backbone, edge computer centers, DAS nodes or any other type of telecommunications infrastructure, as well as any advance payment related to the same or Engineering Services to different customers Any ad-hoc maintenance capital expenditures that may be required by any service line may be included.
• Inorganic: This is investment through business combinations (not including deferred payments in business combinations that are payable in subsequent years), as well as investment through the acquisition of parcels of sites or land (purchase of assets).

For each of these categories, the specific investment items have been identified that, after a fit analysis with the definitions, are considered eligible. Most of these come from investments in expansion and maintenance of eligible activities, however, investments in outputs from alienated activities are also added. Below is the corresponding table:

Although the eligible activities have been defined in the previous income section, some of which are listed in the table above, two new activities have been included for the Capex indicator.

• Efficiency Capex (Energy): Although this activity has not been included in the income section due to the fact that it does not generate billing, it has been included in the investment section. This investment item is considered eligible since it is related to the purchase of output and investment in economic activities aligned - at the moment eligible - with the Taxonomy or individual measures to facilitate economic activity to be low carbon. This investment item includes emissions focused on reducing the company's consumption through the implementation of more efficient equipment, remote control systems or the installation of solar panels for the company's self-consumption. Included here are all investments in energy efficiency related to air conditioning improvements;
  • 7.3. Installation, maintenance and repair of energy efficiency equipment; includes investments mainly for efficiency in refrigeration equipment.
  • 7.6. Installation, maintenance and repair of renewable energy technologies. Mainly linked to investments in photovoltaic solar energy.

Assessment of alignment to the Taxonomy by activity

In this phase, the requirements established in Article 3 of Regulation 2020/852/EU for an activity to be considered environmentally sustainable have been assessed. In addition to the point of contributing to one or more environmental objectives that has been previously assessed (Eligibility), compliance with the rest of the criteria has been verified:

• Comply with the Technical Selection Criteria (TSC) established for each activity.
• Do Not Significant Harm (DNSH) to any of the other environmental objectives.
• Be carried out in accordance with the minimum guarantees established.

The four points established in Art.3 must be met simultaneously for an activity to be considered environmentally sustainable. To analyze the degree of alignment of each activity, an eligibility screening was first carried out and then a verification of compliance with the criteria for Do Not Significant Harm (DNSH), minimum guarantees and Technical Selection Criteria (TSC). To ensure a correct alignment analysis, Cellnex has exhaustively examined these criteria and points, working in parallel to meet each of the points that the alignment process marks.

The technical selection criteria (TSC) and DNSH principles of each of the activities identified as eligible for Cellnex are analysed below.

Datacenters

Cellnex has data centers in Spain, France and the Netherlands, the latter two countries having the bulk of centers. To comply with the first CTS, a working group was organized that analysed in detail the European Code of Conduct on energy efficiency in data centers, starting with the document 2022 Best Practice Guidelines for the EU Code of Conduct on Data Center Energy Efficiency, the Participant Guidelines v.3.0.0 and Reporting Form 13.2 spreadsheet. Once the requirements established for participants with underwriter characteristics, such as Cellnex, were analysed, a meeting was held with the heads of the Joint Research Center, who served as a guide to fill out the best practices questionnaire and ensure compliance with the better practices.

Once the questionnaires were filled out with their corresponding data, the information was provided to the auditor to verify compliance with the best practices in energy efficiency and ensure compliance with said TSC for those centers that had the technical characteristics and basic information to demonstrate the alignment.

Thanks to the refrigerant gas data collected for the calculation of the carbon footprint verified under the ISO 14064 standard, it was possible to analyse the data centers that totally or partially had refrigerant gases with a global warming value (GWP) less than or equal to 675. Some data centers have several refrigeration equipment to cool the different rooms of the building, therefore, for those centers where the gases that met the criteria did not represent the total number of gases, partial allocations of alignment have been made based on to the weight of the refrigerant gases.

The explanation of each point of the DNSH that proceeds for the activity is shown below:

• DNSH for objective 2. Adaptation: The activity conforms to the criteria established in appendix A of this annex

• DNSH for objective 3. Sustainable use and protection of water and marine resources

• DNSH for objective 4. Transition to a circular economy

• Obtaining financial data

Internet of Things (IoT)

Cellnex offers data network services dedicated to the Internet of Things in different European countries. The benefits of IoT solutions achieve improvements with low consumption, long reach, low traffic and low cost for customers. In all projects, secure and resilient data communication is provided by collaborative cell designs and random frequency transmission. End-to-end services ultimately achieve an optimal transversal service for resource management and efficiency in all areas of management.

Within the IoT business, although many of the services have implicit characteristics that improve management from an environmental point of view, only services offered to public administrations or energy or natural resource service companies are considered for sustainability purposes.

Internet of Things (IoT) Utilities

The activity fits into the following individual measures:

• Installation, maintenance and repair of building automation and control systems, building energy management systems, lighting control systems and energy management systems;
• Installation, maintenance and repair of smart meters for gas, heat, cold and electricity;

If we focus on services to energy service companies and natural resources, Cellnex provides services to remotely control the consumption or flow of these in different types of solutions, mainly in buildings. The use of this type of solution is fantastic for smart meters, for example water or natural gas, where real-time and low-cost readings are needed to more efficiently manage the provider's infrastructures, optimizing their operations (reducing energy consumption and footprint). carbon) and improving efficiency in use by the end customer, avoiding excessive consumption.

The explanation of each point of the DNSH that proceeds for the activity is shown below:

• DNSH for objective 2. Adaptation: The activity conforms to the criteria established in appendix A of this annex

• Obtaining financial data

Internet of Things (IoT) Smart Services

The digital solution offered by Cellnex is an integrated information management tool with the aim of improving energy efficiency, reducing the consumption of natural resources and, consequently, reducing greenhouse gas emissions (Smart Cities or Smart Regions).

If we focus on services to public administrations or private entities, these are focused on the creation of Smart cities, Smart regions or Smart Companies depending on the client in question. A smart city goes beyond the use of digital technologies for a better use of resources and the reduction of emissions. It means smarter urban transportation networks, improved water supply and waste disposal facilities, and more efficient ways to light and heat buildings, as well as energy services.

Cellnex services include sensor networks and the integration of other data sources in transversal management systems to improve mobility management, increase energy efficiency, reduce resource consumption, improve waste management or reduce air pollution. . The establishment of indicators to assess changes in environmental vectors and ensure compliance with climate objectives in the short, medium and long term, is one of the services provided as a public administration tool. Private companies are more focused on improving efficiency in the use of energy linked to the production of renewable energy or air quality controls. In this way, the administration and private companies can use reliable and real-time data, processed by Cellnex, to make decisions that reduce greenhouse gas emissions.

Through the data, reports and results of the implemented projects, it has been considered proven that the activity complies with the established technical selection criteria.

The explanation of each point of the DNSH that proceeds for the activity is shown below:

• DNSH for objective 2. Adaptation: The activity conforms to the criteria established in appendix A of this annex

• DNSH for objective 3. Circular economy

• Obtaining financial data

Broadcast

The activity carried out by Cellnex de Broadcast is directly related to radio and television broadcasting services, an aspect incorporated in the definition of activity 8.3 Radio and television programming and broadcasting activities. This line of business is based on the broadcast of third-party television signals from Cellnex's telecommunications infrastructures, the company being a key player for companies and individuals to receive the corresponding signals.

The activity is considered almost fully aligned based on the results obtained in the climate risk analysis and the company's climate change adaptation plan. The result of said analysis establishes that between 97% - 90% of the company's telecommunications towers are at a risk level without the need to implement adaptation measures. The 3% - 10% could require some specific measure that will be worked on with the operations teams based on the results of the Climate Change Adaptation Plan.

The income derived from this activity has not been accounted for in the income indicator (%) since it is considered, at an accounting level, income from an "adapted" activity and cannot be included in the numerator as established in the Delegated Disclosure Act 2021/4987/UE.

Internet Media

The activity carried out by Cellnex for Internet Media is directly related to services for broadcasting radio and television via the Internet, an aspect incorporated in the definition of activity 8.3 Radio and television programming and broadcasting activities. This line of business is based on the broadcast through digital platforms of third-party television signals from telecommunications infrastructures.

An example of the Internet Media business is the LOVEStv platform, the new DTT audiovisual platform adapted to new consumption habits. Cellnex Telecom is the technology provider of the platform that the Spanish public channel RTVE and the two large private broadcasting groups, Atresmedia and Mediaset, are working together to launch. This platform, which allows viewers to enjoy the advantages of linear DTT while being able to access content and new non-linear services.

As previously mentioned, Cellnex has carried out a Climate Change Adaptation Plan during 2022 that has analyzed the degree of adaptation of the company. Since Internet Media activity involves different company assets, it has been considered aligned to the same degree as the company as a whole.

The income derived from this activity has not been accounted for in the income indicator (%) since it is considered, at an accounting level, income from an "adapted" activity and cannot be included in the numerator as established in the Delegated Disclosure Act 2021/4987/UE.

Mission Critical

MCPN stands for Mission Critical and Private Networks. The business is based on the construction and operation of private communication networks, for limited and known users for security and efficiency reasons. The business is clearly divided into two parts, the networks called Mission Critical (Emergency Corps) and the networks called Private Networks (Business Sector).

The Mission Critical Networks are those of interest in terms of sustainability, since they are offered to emergency public services such as firefighters, civil protection, forestry agents, police, or medical services. The network technology offered can be Narrowband (TETRA, DMR) or Broadband (4G/5G), depending on the customer's needs. These private networks provide highly reliable and secure radio communication services to public emergency services that are used above all in extreme circumstances such as natural disasters (floods, storms, forest fires, etc.), accidents such as oil spills or gas leaks, etc

Mission Critical's activity has as a priority objective to offer communication services to emergency services to increase resilience to physical climate risks of people, nature, cultural property and private assets. Secure and stable communication ensures that the response of said troops is coordinated, safe and effective, reducing exposure to risks derived from climate change, reducing their impact and increasing resilience thanks to better post-impact management. At the same time, emergency teams need the signal provided by Cellnex to send early warning signals in the face of possible disasters, thus ensuring greater preparation of organizations and people, which increases their resilience to potential damage.

Based on the above, it is considered that this activity fits within the adaptation activity 8.3. Radio and television programming and broadcasting activities within Annex II of the Climate Delegate Act. In its definition it includes “… It also includes data broadcast, which is usually integrated with the radio or television broadcast. The broadcast can be made using different technologies: by airwaves, by satellite, by cable or by Internet…”. In the case of Mission Critical, data is broadcast via radio that facilitates adaptation.

In 2021, this activity was already incorporated into the Cellnex 2021 Taxonomy report and all interested parties considered it reasonable. It is considered that Mission Critical fits into the radio broadcast due to the fact that any communication from the emergency services must pass yes or yes through Cellnex towers, where this signal is received and emitted again so that it is transferred directly to the corresponding system, ensuring safe and efficient transmission.

Considering the section of the activity associated with facilitating activities, it is understood that Cellnex's interpretation is one of the only ones that could fit into the approach made because it uses the emission of radio waves as the means to facilitate an increase in resilience and adaptability to climate change.

Based on the technical clarification of the European Commission regarding the interpretation and implementation of the technical selection criteria and DNSH of the climate objectives of December 19, 2022, it is established that the facilitating activities have to (i) ensure that they are adapted to climate change, and (ii) contribute to the resilience or adaptation efforts of third parties.

Cellnex has carried out a Climate Change Adaptation Plan during 2022 that has two different parts, (i) a first focused on analyzing the climate risk of all its assets, and (ii) a second focused on proposing adaptation activities and proposals to those assets at risk. For the Mission Critical business, the percentage of assets adapted to climate change linked to the transmission of information has been valued, considering the rest as non-aligned.

Minimum guarantees

The Final Report on Minimum Guarantees of the Platform in Sustainable Finance of October 2022 provides relevant information on how to interpret compliance with the criteria established in the reference frameworks presented above. There are overlapping issues in Article 18 and the different principles or recommendations set out in the UNGP and the OECD guidelines. The UNGPs play a general role in the application of the minimum guarantees. They define the responsibilities of private and public companies to ensure respect for human rights. The same is true of the OECD Guidelines for Multinational Enterprises.

Taking into account the above, the substantive and relevant issues that continue to be relevant for the minimum guarantees are the following, leaving the environment and science and technology as aspects of the responsibility of the states:

1. Human rights (including labor and consumer rights)
2. Bribery, bribe solicitation and extortion
3. Taxation
4. Fair competition

Based on the review of the procedures, policies and analysis on the subject of minimum guarantees, it is considered that Cellnex Telecom complies in all its activities and geographical areas with the minimum guarantees established in the framework of Regulation 2020/852/UE of Taxonomy. For each of the substantive issues presented above, the company has identified the documents, where it develops the measures and procedures for each issue and which are available to stakeholders on the corporate website.

Financial indicators and methodology

As previously stated, the Taxonomy requires the reporting, in 2022, of the percentage of income, CapEx and OpEx eligible and aligned based on the economic activities published in the Climate Delegated Act, which covers both adaptation and mitigation to climate change.

The financial information used for this analysis was subject to an external audit when the annual accounts for the year were closed. These were subject to joint analysis and control by the local and central teams to ensure consistency with the consolidated revenue for the year. Controls focused on both the treatment of intragroup transactions and the breakdown of revenue by business segment and sub-segment.

The consolidation of financial data is governed by IFRS accounting policies and is audited by Cellnex's financial auditors. The financial data is extracted from the so-called "reporting package" of each country, whose data comes from the "FCCS" consolidation ERP system, which is fed by "PBCS" which in turn is fed by "SAP" or local ERP depending on each country. The computerization of these processes ensures the minimization of human errors.

The income presented here is recorded as follows by commercial activity:

• The income generated by Datacenter activities is based on the rental of "Racks", physical spaces designed to house servers, network devices, cables or other data center computing equipment. These "Racks" are rented, within each data center, to independent clients. Cellnex is dedicated to maintaining the conditioned space to store and operate IT or telecommunications equipment. The data has been extracted from the PBCS software used by the company for accounting, which is fed by SAP in each country using the Datacenters business line. Since the alignment analysis has been carried out at a very high level of detail, the revenue per data center has been extracted in order to extract the aligned revenue and CapEx.
• IoT contract revenue is determined using the “IoT” line of business. The income of said business unit differs in each of the projects carried out by the IoT teams. In order to allocate the income and CapEx to the Utilities activity (7.5 Installation, maintenance and repair of instruments and devices to measure, regulate and control energy efficiency in buildings) or to the Smart Services activity (8.2 Data-based solutions to reduce emissions of greenhouse gases), the list of projects for 2022 was obtained and together with the teams of each business, the fit or not in each of the defined activities was assessed. The data has been extracted from the PBCS software used by the company for accounting, which is powered by SAP in each country.
• The income generated by Mission Critical's activities is based on service contracts for emergency and relief telecommunications networks, provision of services to the merchant marine, interconnection of broadcasting networks for the police, protection of firefighting networks, etc. Of the total customers of the Mission Critical business, those that fit the definition of climate resilience, such as emergency services, have been identified. Other customers who do not fit the reasoning raised have been ignored. The data has been extracted from the PBCS software used by the company for accounting, which is powered by SAP in each country.

It is necessary to emphasize the casuistry of Broadcast and Internet Media, both activities fit into activity 8.3 Radio and television programming and broadcasting activities of Annex II of Adaptation to Climate Change of Delegated Regulation 2021/2139/UE. Due to the type of activity, they are classified as activities adapted to climate change. For this type of activity, the Delegated Disclosure Regulation (Article 8) 2021/4987/UE, which defines in its Annex I the content to be published by non-financial companies, establishes that the income generated by adapted activities cannot be incorporated into the numerator of the % revenue aligned with the taxonomy. This means that, although Broadcast and Internet Media activities are aligned with the TSC and DNSH established in the Taxonomy Regulation, their income, due to the type of activity, cannot be counted in the income indicator.

Based on this, we could say that of the eligible activities, 8.76% of the eligible income corresponds to leases - Datacenter business - and the remaining 91.24% is based on contracts with clients for specific services.

The data reported in the report does not consider the production of companies for others within the Cellnex group. This case could occur in some activities, but data has only been reported at the consolidated level of income from external customers.

• The CapEx data presented in this report is accounted for as follows:
• Investments linked to Datacenter activities are defined as those focused on the purchase of data centers, their improvement or installation. The data has been extracted from the PBCS software used by the company for accounting, which is powered by SAP in each country.
• Those of Mission Critical have been extracted from the MCPN investment list, analyzing the fit with Mission Critical activity on a case-by-case basis. The data has been extracted from the PBCS software used by the company for accounting, which is powered by SAP in each country.
• Efficiency Capex (Energy) investments are defined by those investments focused on the installation of renewable energy - photovoltaic solar panels - and investments in energy efficiency and control, mainly linked to air conditioning or equipment improvement. Thanks to the analyzes of those responsible for energy and operations, it has been possible to extract the items that fit into the alignment approach. The data has been extracted from the PBCS software used by the company for accounting, which is powered by SAP in each country.
• Investments focused on the specific projects incorporated by IoT Utilities and IoT Smart Services focused on climate change mitigation have also been considered. The data has been extracted from the PBCS software used by the company for accounting, which is powered by SAP in each country.

To avoid double counting, the calculations of the different indicators have differentiated between activities incorporated in the mitigation or adaptation objective, counting only based on the objective where the contribution is considered more substantial. In this way, duplicate accounting of the same item of income or CapEx is avoided.

Changes compared to 2021

At the level of economic activity:

• Internet of Things (IoT): In 2021, a difference was made between the business focused on smart meters (7.5) and that focused on networks (8.3). This, after reviewing it with business and operations teams, has been improved, differentiating between (7.5) energy consumption control and monitoring projects through smart meters (IoT Utilities), and (8.2) the development of "Smart" systems that help to reduce energy consumption and automate processes (IoT Smart Services). When reviewing project by project, the differentiation between one activity and the other, at the level of income and CapEx, has been much more precise, reaching the maximum possible degree of detail.
• Mission critical: In 2021 the entire MCPN line of business (Mission Critical & Private Networks) was used as eligible based on the taxonomy. The fact that private network services (Private Network) is focused on companies without the main objective of being focused on extreme phenomena and emergencies, makes it ineligible. In 2022, the analysis has been improved and only the Mission Critical business has been considered, public clients for emergency networks in the same activity 8.3. Within the Mission Critical business, customer-by-customer analysis has also been carried out to ensure that truly applicable revenues and Capex were incorporated as eligible and aligned.

Capex:

• In terms of Capex, a much more detailed analysis of financial data has made it possible to review all investments in energy matters one by one, facilitating the identification of investments in the activity 7.3 energy efficiency of refrigeration and air conditioning equipment, as well as investments in photovoltaic panels, renewable energy activity 7.6.
• The Capex item awarded to activity 7.2 of building renovation, has been considered as no longer applicable and has not been contemplated since the investments in buildings this year did not fit the definition of the activity.

Based on operating income and Capex items linked to eligible and aligned activities, 2022 presents significant changes from 2021 in terms of:

• Datacenters: The business of Datacenters, fully eligible, it has grown substantially in 2022, reaching 34,816,843 eligible euros, an increase of approximately 271%. Regarding investment, this year it has increased to 76,960,011 euros for the acquisition of businesses, improvement of centers and extensions.
• IoT: The previous year the income from the IoT business was divided into activity 7.5 and 8.3. adding a total of 2,752,092 euros eligible in its entirety. This year, differentiation between IoT Utilities has been improved, with activity 7.5. with a total eligible income of 147,056 euros, and the IoT Smart Services activity, with activity 8.2. with a total eligible income of 1,028,870 euros. The improvement in the eligibility and alignment analysis has reduced the eligibility figure, but it presents a large percentage of alignment. In 2021, approximately 1,516,443 euros were reported in investments linked to IoT activities. But this year, Thanks to more detail, game by game, eligible investments of 66,712 euros have been obtained. The difference is explained by the fact that in 2022 the degree of detail has been improved and investments that did not fit with the Delegated Disclosure Act methodology have been ruled out.
• Mission Critical: The last eligibility report listed the entire MCPN game, which also includes Private Networks, as eligible, adding a total of 44,988,729 euros. This year, thanks to a greater degree of detail of the projects, those from Mission Critical that fit with activity 8.3 have been extracted, adding a total of 39,155,209 euros. Significant growth and a high degree of alignment are identified. For projects selected as eligible. The investment has amounted to 4,436,358 euros, higher than the previous year.
• Broadcast: Comparing Broadcast activity in 2021 and 2022, a growth of 216,362,255 euros to 224,189,229 euros is identified, which are considered eligible and highly aligned. Although they cannot be reported in activity 8.3 for accounting in the revenue alignment KPI due to their classification as aligned activities. Eligible CapEx has been nearly halved in 2022.
• Internet Media: Comparing Internet Media activity in 2021 and 2022, a growth of 2,155,614 euros to 2,540,841 euros is identified, which are considered eligible and highly aligned. Although they cannot be reported in activity 8.3 for accounting in the revenue alignment KPI due to their classification as aligned activities.
• Energy efficiency: In the last eligibility report, a total of 4,802,290 euros were presented in investments linked to activity 7.5. In 2022 the total has been 1,887,295 and the investments have focused more on those described in activity 7.3. mainly in cooling improvements.
• Renewable energies: In the last eligibility report, a total of 48,508 euros were presented in investments linked to the activity 7.6 of self-production of renewable energy. In 2022 the total has been much higher, amounting to 1,770,921 euros, fully linked to investments in photovoltaic solar panels.

Results

Below are the eligibility and alignment results based on the tables in Annex II of the Delegated Act of Article 8. The disclosure of information in this format is required as of 2023, to disclose the results in a standardized manner by of economic agents and participants in the financial market.

• Operating income: Of a total of 3,495,180 thousands of euros of income in 2022, it is considered that 289,143 thousands of euros (8.27% of total income) come from eligible economic activities based on those set out in the Climate Delegate Act and a total of 3,206,037 thousands of euros of activities not eligible with the taxonomy (91.73% of total income). Of the eligible income, a total of 240,695 thousands of euros are considered eligible and aligned with the taxonomy. If from the income from aligned activities we extract those from activities adapted to climate change, the total is 39,324 thousands of euros, which represents 13.60% of the total eligible income and 1.13% of the total income. The eligible and non-aligned income totals 48,448 thousands of euros, 16.76% of the total eligible income and 1.39% of the total.
• Capital Expenditures (Capex): Of a total Capex of 7,471,648 thousands of euros invested in 2022, it is considered 86,258 thousands of euros correspond to eligible investments based on the Taxonomy (1.15% of total Capex) and a total of 7,385,390 thousands of euros in activities not eligible with the taxonomy (98.85% of total CapEx). The total eligible Capex, aligned with the Taxonomy, amounts to 7,843 thousands of euros. a percentage of 9.09% of the total eligible Capex and 0.10% of the total Capex. Eligible and non-aligned CapEx amounts to 78,416 thousands of euros, 90.91% of the total eligible CapEx and 1.05% of the total.
• Operating Expenditures (Opex): Cellnex has not calculated the eligible Opex indicator based on the Taxonomy as it is not considered material for the business.

Conclusions

The results obtained in this second year of evaluation of the degree of eligibility and first year of alignment of Cellnex activities, under the list of economic activities of the Taxonomy regulation, present levels similar to those of the last year. The Taxonomy does not incorporate the bulk of Cellnex's business. It is considered that Regulation 2020/852/EU of the European Union does not conform to a useful tool to assess the environmental sustainability of the group's business. This is so due to the fact that most of the economic activities that are carried out have not been included in the list of mitigation and adaptation activities. Consequently, Cellnex cannot assess whether or not it meets the technical selection criteria and thus assess its substantial contribution to sustainability. For those activities where it does meet the technical selection criteria, you cannot report said income as aligned due to a methodological consideration. The Delegated Disclosure Act (Art. 8) establishes that “adapted” activities cannot be counted in the numerator of the income indicator.

Of the total operating income, 8.27% are established as eligible based on the taxonomy. Of these eligibility percentages. we have that 13.60% of the eligible income is considered aligned. The eligible and aligned income indicator being 1.13% of total income. On the other hand, it is established that 1.15% of Capex is considered eligible, being 9.09% eligible and aligned based on the total eligible. and 0.10% eligible and aligned based on total Capex. The most important variation between eligibility and alignment in the income section comes from the methodological impossibility of accounting for Broadcast and Internet Media income in the numerator. although they are considered aligned.

Cellnex has adopted a conservative approach when reporting eligibility and alignment based on the Taxonomy, avoiding forcing the definitions of economic activities to incorporate activities of its business. It is understood that the regulation has the objective of avoiding "greenwashing" and it would not do any good to try to adjust the regulation in favour of the company. An approach that responds to the principles of integrity, representativeness and veracity has been maintained.

Internally, Cellnex has worked during 2022 to carry out the relevant evaluations and validations to ensure compliance with the criteria set out in article 3 of regulation 2020/852/UE. The technical selection criteria have been validated for each of the different business units that carry out the same Taxonomy activity, trying to obtain evidence or certificates that prove compliance with the criteria established at the most granular level possible. The same approach has been used to validate the criteria of Do Not Significant Harm (DNSH) to other environmental targets. Finally, the minimum guarantees have been validated at the group level due to the fact that they are internal procedures or policies applicable to all the company's subsidiaries.

Cellnex assumes as its purpose in the coming years, to improve the degree of alignment of the company to the technical selection criteria and DNSH principles of its eligible activities, to maintain those classified as aligned during 2022 and to improve the methodologies and procedures for the development of applicability and usability of the Taxonomy.

Below are the mandatory reporting tables for this year on the degree of eligibility and alignment of the company with Regulation 2020/852/UE.

Operating income

Capital Expenditures (CAPEX)

Operating Expenditures (OPEX)