NVE TCFD Report

NVE TCFD Report Task Force on Climate-Related Financial Disclosures (TCFD) Recommendation NVE Corporation Disclosures Governance
Disclose the organization’s governance around climate-related risks and opportunities. Oversight for climate-related policies
Our Board oversees our climate-related policies and our management reviews our climate-related policies and our climate risks with the Board at least annually. The Board has reviewed and approved this Report. Management
Our goals and Key Performance Indicators (KPIs) are guided by a Management Review Committee (MRC) coordinated by our Quality Manager. The MRC includes our CEO, Principal Financial Officer, and staff-level managers. The MRC meets at least annually to evaluate our strategic priorities, including those related to sustainability and climate.

Managing climate risks
The MRC considers the interests of interested parties, including regulators and investors, and their policies relating to climate change. For example, proxy guidelines from three of our large institutional investors, BlackRock, State Street, and Vanguard include guidelines related to sustainability reporting and climate risk.

The MRC also monitors emerging climate risk topics such as fuel efficiency standards, electric vehicle mandates, carbon taxes, and closed loops and supply chain resiliency.

Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. The TCFD highlights two primary types of climate risks: physical and transition. Physical risks include extreme weather events such as flooding, and the longer-term impact of increasing average global mean temperatures. Transition risks include the global transition to a low-carbon economy, new regulations, and innovations in energy efficiency.

We have identified a number of climate-related risks and opportunities with potential impact to our business as described below:

PHYSICAL RISKS Wafer supply chain disruption
Risk Type: Acute physical
Time horizon: Short-term
Likelihood: Possible
Magnitude of impact: Medium-high Description:
Our critical suppliers include suppliers of certain raw silicon and semiconductor foundry wafers that are incorporated in our products. We maintain inventory of some critical wafers, but we have not identified or qualified alternate suppliers for many of the wafers now being obtained from single sources. In the past fiscal year there have been industry-wide semiconductor wafer shortages and leadtimes have increased for certain of our foundry wafers. Wafer supply interruptions for any reason, including acts of God such as floods, typhoons, cyclones, earthquakes, or pandemics could seriously jeopardize our ability to provide products that are critical to our business and operations, and may cause us to lose revenue. Risks related to extreme weather may be exacerbated by the effects of climate change.

Packaging vendor supply disruption
Risk Type: Acute physical
Time horizon: Short-term
Likelihood: Possible
Magnitude of impact: Medium-high Description:
We are dependent on our packaging vendors. Because of the unique materials our products use, the complexity of some of our products, unique magnetic requirements, and high isolation voltage specifications, many of our products are more challenging to package than conventional integrated circuits. Some of our products use processes or tooling unique to a particular packaging vendor, and it might be expensive, time-consuming, or impractical to convert to another vendor in the event of a supply interruption due to vendors’ business decisions, business condition, or acts of God, including floods, typhoons, earthquakes, or pandemics. Leadtimes for packaging services have increased during the COVID-19 pandemic and there have been shortages of raw materials and equipment our packaging vendors need for their process. Government lockdown restrictions, labor shortages, and raw-material shortages have reduced our vendors’ capacity and increased their lead-times. These conditions could continue, worsen, or recur. Additionally, certain of our packaging vendors are in flood-susceptible areas. Flooding risks to such vendors may increase in the future due to possible higher ocean levels, extreme weather, and other potential effects of climate change. We have alternate vendors or potential alternate vendors for the majority of our products, but it can be expensive, time-consuming, and technically challenging to convert to alternate vendors. Furthermore, we may not be able to recover work in process or finished goods at a packaging vendor in the event of a disruption. Supply delays, interruptions, or loss of inventory could seriously jeopardize our ability to provide products that are critical to our business and operations and may cause us to lose revenue.

TRANSITION RISKS
Regulatory Compliance and External Commitments
Risk Type: Emerging regulation
Time horizon: Medium-term
Likelihood: Possible
Magnitude of impact: Low-medium Description:
Climate change regulations at the federal, state or local level or in international jurisdictions could require us to limit emissions, change our manufacturing processes, or undertake other costly activities. Additionally, we could be subjected to future liabilities, fines or penalties or the suspension of product production for failing to comply, or being alleged as failing to comply, with various laws and regulations, including environmental regulations. Specific gasses we use that could be subject to future regulations include certain refrigerants used in our air-handling equipment and sulfur hexafluoride used in our production processes. Increased Cost of Electricity
Risk Type: Emerging regulation
Time horizon: Near-term
Likelihood: Likely
Magnitude of impact: Low-medium Description:
NVE uses a relatively large amount of electricity for clean room air handling and for production equipment. The cost of electricity is expected to increase due to regulatory mandates to increase generation from renewable sources, nuclear power disincentives, and restrictions and higher costs for fossil fuels used to generate electricity. Our risks are mitigated somewhat by a relatively low contribution of fossil fuels to electricity production in the upper Midwest. Xcel Energy reported the following breakdown for 2024 its Upper Midwest service area of Minnesota, North Dakota, South Dakota, Wisconsin, and Michigan: 10% coal, 26% natural gas, 23% nuclear, 29% wind, 4% solar, and 7% other renewable [Excel Energy 2024 Sustainability Report]. Excel reported NSP System’s electricity was 52% carbon-free in 2024. It plans to reduce carbon emissions 80% on the way to being a net-zero energy provider by 2050. A Minnesota law requires utilities to provide carbon-free electricity standard is for 100% carbon-free electricity by 2040. The transition to carbon-free electricity may increase the cost of our electricity. Electricity Shortages Due to Less Electricity Generated by Fossil Fuels
Risk Type: Emerging regulation with acute physical effects
Time horizon: Long-term
Likelihood: Possible
Magnitude of impact: High Description:
Xcel Energy reports that its power generation for our region is 36% fossil fuels [Excel Energy 2024 Sustainability Report]. Under legislation enacted in February 2023, Minnesota utilities will be required to provide electricity that is 80% carbon-free by 2030, 90% carbon-free by and 55% renewable by 2035, and 100% carbon-free by 2040. This could lead to electricity shortages, brownouts, or rolling blackouts that could disrupt our production. Electricity Shortages Due to Less Nuclear Power
Risk Type: Acute physical
Time horizon: Long-term
Likelihood: Possible
Magnitude of impact: High Description:
Xcel Energy reports that its power generation for our region has 23% nuclear power generation from two nuclear generating plants [Excel Energy 2024 Sustainability Report]. Xcel’s Federal license for its Monticello plant expires in 2050. The Minnesota Public Utilities Commission has allowed it to extend operations through 2040, and Xcel has said it will seek PUC approval for the additional 10 years. Xcel's Prairie Island Nuclear Generating Plant Federal licenses expire in 2033 for Unit 1 and 2034 for Unit 2. Minnesota has had a moratorium since 1994 on nuclear power construction. The decommissioning of nuclear plants without enough alternative generating capacity could lead to electricity shortages, brownouts, or rolling blackouts that could disrupt our production. TRANSITION OPPORTUNITIES

Nanopower sensors
Opportunity Type: Products and services
Time horizon: Near-term
Likelihood: Highly likely
Magnitude of impact: Medium Description:
We make sensors that require only nanowatts of power, allowing sensors to be powered by small batteries or harvested energy such as solar power in applications including utility meters and portable instruments. Energy savings in battery-powered applications are magnified significantly since more than 500 times the energy a typical small battery produces goes into making the battery, plus there are additional end-of-life environmental costs related to batteries [based on data from “Life Cycle Impacts of Alkaline Batteries with a Focus on End-of-Life,” National Electrical Manufacturers Association, https://www.epbaeurope.net/assets/resources/NEMA_alkalinelca2011.pdf]. Sensors for smart utility meters
Opportunity Type: Products and services
Time horizon: Near-term
Likelihood: Highly likely
Magnitude of impact: High Description:
Our sensors enable smart utility meters, particularly water meters. Such meters facilitate water conservation programs that reduce energy to supply water to homes and businesses or reduce water usage. Products for smart grids
Opportunity Type: Products and services
Time horizon: Medium-term
Likelihood: Somewhat likely
Magnitude of impact: Medium Description:
Our isolators, particularly new isolators with integrated step-up DC-to-DC convertors, address one of the challenges for smart grids, which is that microcontrollers run on low voltages like three or five volts, while motors that consume energy, such as those in furnaces or refrigerators, run on 120 or 240 volts. Our isolators provide a bridge between control systems and line voltage measurements, allowing more efficient control of motors and other energy consumers. Products that improve power conversion efficiency
Opportunity Type: Products and services
Time horizon: Short-term
Likelihood: Likely
Magnitude of impact: Medium Description:
We have opportunities to facilitate designs for more efficient power conversion in applications such as electric vehicle charging stations and battery management systems for electricity storage. Our isolator products can increase the efficiency of these systems, often in conjunction with advanced power switches such as gallium nitride and silicon-carbide FETs. Products that improve motor efficiency
Opportunity Type: Products and services
Time horizon: Short-term
Likelihood: Likely
Magnitude of impact: Medium Description:
By one estimate, motors account for 45% of global power consumption [“The Changing Landscape of Electric Motor Efficiency Standards,” magneticsmag.com, 7/18/18]. U.S. Energy Star guidelines and European Union standards encourage power factor control [“Power Factor and Power Factor Correction,” CUI, Inc., 4/20/19]. We have the opportunity to facilitate designs that improve electric motor efficiency by measuring motor position and speed with our angle, rotation, and gear-tooth sensors; measuring instantaneous motor current with our current sensors, and high efficiency motor power control and power-factor correction using our isolators. Products that improve the efficiency of hybrid/electric vehicles
Opportunity Type: Products and services
Time horizon: Medium-term
Likelihood: Fairly likely
Magnitude of impact: Medium Description:
We have opportunities to facilitate designs that improve the efficiency of hybrid/electric vehicles by measuring actuator position, rotation, and current with less power consumption than conventional alternatives; and improving the efficiency of on-board battery charging electronics and battery management systems. Products that enable home electricity storage
Opportunity Type: Products and services
Time horizon: Short- to Medium-term
Likelihood: Fairly likely
Magnitude of impact: Medium Description:
In January 2023 we announced a design win with a high-profile provider of residential battery systems for renewable. Such systems may encourage and enable more widespread use of photovoltaic solar and wind-based residential power sources by storing power to be used when the wind isn’t blowing or the sun isn’t shining. Products that enable charging infrastructure for electric vehicles
Opportunity Type: Products and services
Time horizon: Medium-term
Likelihood: Fairly likely
Magnitude of impact: Medium Description:
In January 2023 we announced a design win with a high-profile provider of electric vehicle charging stations. Such stations may encourage and enable more widespread adoption of electric vehicles. Reduce resource usage
Opportunity Type: Resource efficiency
Time horizon: Short-term
Likelihood: Very likely
Magnitude of impact: Low-medium Description:
Our process engineering group continuously evaluates opportunities to use less resources in our production process. Candidates for resource reduction projects include electricity, water, bulk chemicals, bulk gasses, liquid nitrogen, and silicon wafers. In addition to direct reductions in resource use, reducing usage would decrease the impacts of transportation and electricity used to process or manufacture the resources. Reduce sulfur hexafluoride usage
Opportunity Type: Resource efficiency
Time horizon: Short-term
Likelihood: Very likely
Magnitude of impact: Medium Description:
Sulfur hexafluoride (SF6) has been identified by the the US Environmental Protection Agency (EPA) as an especially potent greenhouse gas, and is widely used in the semiconductor industry and in our production. Our equipment is designed to avoid leaking SF6 into the atmosphere, but SF6 can inadvertently escape if there are leaks. Improve the efficiency of our manufacturing infrastructure
Opportunity Type: Resource efficiency
Time horizon: Short-term
Likelihood: Likely
Magnitude of impact: Low-medium Description:
We have and will continue to upgrade our heating, air conditioning, air-handling, and water heating systems for higher efficiency. We also convert to more environmentally-friendly refrigerants as practical. POTENTIAL FAVORABLE IMPACTS OF CLIMATE CHANGE Less use of heating fuels
Opportunity Type: Resource use
Time horizon: Long-term
Likelihood: Likely
Magnitude of impact: Low Description:
A warming climate could reduce our need for heating in the winter months. More desirable climate for attracting employees
Opportunity Type: Resource use
Time horizon: Long-term
Likelihood: Likely
Magnitude of impact: Low Description:
The Minnesota State Demographer has said that a warming climate could help increase foreign immigration and migration from other states and help address medium-term worker shortages [https://www.mprnews.org/story/2022/12/07/demographer-minnesota-has-one-of-the-tightest-labor-markets-and-its-unlikely-to-change ]. Risk Management
Disclose how the organization identifies, assesses, and manages climate-related risks. Our overall risk management strategy and risk oversight is disclosed in our Proxy Statement and risk factors are described in our Annual Reports on Form 10-K as updated in our Quarterly Reports on Form 10-Q. Metrics & Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. We monitor regulatory compliance, stakeholder engagement, and governance metrics impacted by climate-related risks.