SECTION 06 pg. 96 AL-SALĀM REIT SUSTAINABILITY STATEMENT CLIMATE CHANGE AND DECARBONISATION (CONT’D) CLIMATE RISKS AND OPPORTUNITIES (CONT’D) Physical Risks Potential Impact Mitigation Strategies Acute Extreme, short-term climate events such as heat waves, floods, and landslides • Extreme weather events can cause damage to the buildings or the assets • Pose potential safety risks • Conduct risk assessments • Develop emergency response plans • Invest in climate-resilient infrastructure Chronic Gradual but significant long-term climate change, such as extreme weather fluctuations, rising global temperatures, and increased precipitation • Negatively impact infrastructure, such as increased wear-and-tear and fluctuations in resource availability • Deteriorate the health of employees, including an increased likelihood of exhaustion, dehydration • Adopt sustainable practices • Invest in energy-efficient technologies • Build climate-resilient infrastructure CLIMATE SCENARIO ANALYSIS The REIT is progressively assessing the resilience of its portfolio under different climate scenarios, including a 1.5°C and 2°C transition pathway. This assessment considers potential impacts on asset valuation, operational costs and regulatory exposure. Further enhancements to scenario analysis disclosures will be undertaken in subsequent reporting cycles. FINANCIAL IMPLICATIONS The REIT recognises that climate-related risks, both transitional and physical, can materially affect financial performance, operational costs, and asset valuation. Transition risks arise from regulatory, technological, market, and reputational changes, while physical risks stem from acute and chronic climate events. Notably, the climate-related risks may result in: • Increased capital expenditure for asset upgrades • Higher operational costs due to energy transition • Potential asset impairment from physical risks The REIT continues to evaluate these financial implications as part of its comprehensive risk management framework, ensuring that both transitional and physical climate-related risks are assessed in alignment with IFRS standards.
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