SECTION 07 pg. 202 AL-SALĀM REIT Transition Risks – Market & Tenant Risk Description Risk Rating Key Mitigation Tenant Climate Readiness (F&B) F&B tenants’ high energy use and waste practices affecting asset ESG performance. Green lease clauses (data sharing), voluntary engagement, fit-out guidelines. Shifts in Retail & Office Demand Preference for more efficient, resilient buildings. Asset upgrades where viable, portfolio review, leasing strategy adjustments. Transition Risks – Reputational & Disclosure Risk Description Risk Rating Key Mitigation Greenwashing / Over-Commitment Risk of overstating decarbonisation ambition beyond operational control. Conservative 3% target, clear Scope 1 & 2 boundaries, transparent disclosures. Data Quality & Assurance Inaccurate or incomplete emissions and energy data. Improved metering, data governance, periodic verification. Legend: Moderate Low High Very High The Board recognises that climate change presents physical and transition risks to Al-Salām REIT. Climate risk assessments were conducted and categorised into acute and chronic physical risks, as well as regulatory, market and reputational transition risks. The assessment indicates that flooding and stormwater intrusion represent the highest physical risk exposure, while rising temperatures may increase long-term cooling demand and operating costs. Transition risks primarily relate to evolving energy efficiency, climate reporting and regulatory requirements, as well as tenant-driven energy use, particularly within F&B operations. These risks are monitored through a climate risk heat map and managed through operational controls, preventive maintenance, energy optimisation and enhanced governance. The Board, through the BSC and BARC, provides oversight to ensure climaterelated risks remain within the REIT’s risk appetite and aligned with Bursa Malaysia’s sustainability reporting expectations. The Three Lines of Defence Approach Al-Salām REIT adopts the Three Lines of Defence approach to ensure effective risk management and internal control. Under this model, operational teams act as the first line by managing risks within their day-to-day activities and ensuring compliance with policies and procedures. The second line provides oversight through specialised functions such as Risk Management, Compliance, Shariah, Sustainability, and Finance, which set frameworks, monitor adherence, and support the first line in managing risks. The third line, Internal Audit, provides independent assurance to the BARC on the adequacy and effectiveness of the overall system of internal control. STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
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