TRANSITION RISKS IMPACT OPPORTUNITIES Short Term – Medium Term Energy Prices Increasing energy prices Cost Increase Incur additional energy costs in operations Costs to retrofit and upgrade infrastructure like chillers in order to optimise energy consumption Energy Transition Explore Green Transportation & infrastructure for our operations and potentially for our clients Energy Efficiency solutions Zero CAPEX programme Medium Term – Long Term Regulatory • Increasing regulatory requirements and policies • Adoption of Carbon Tax in 2026 Cost Increase Non-compliance fines and penalties and carbon tax Market Demand and Shifts in Customer Preference Non-compliance will result in reputational damage as clients will prefer service providers that comply with all regulatory requirements Stakeholder Engagement • Building relationships through engagement and knowledge sharing session • Offer our Zero CAPEX programme to our clients to fund their energy transition plans Capacity Building • Ability to create awareness and prepare the organisation for the regulatory compliance • Provide training to internal and external stakeholder on transition risk Medium Term – Long Term Financial Risks • Lenders increase interest rate • Increased cost of operations Cost Increase Lenders will assess climate risk and sustainability performance and potentially increase UEM Edgenta’s cost of lending Reduction in overall margin as financing costs increase Cost of rising insurance premium Market Demand and Shifts in Customer Preference Non-compliance will result in reputational damage as clients will prefer service providers that comply with all regulatory requirements Green Financing • Sustainability-linked loans offer favourable financing terms Business Model • Zero CAPEX will help our clients who are in their energy transition plans to manage Capex and cashflows Short Term – Medium Term Markets • Changes in market demand from traditional facility management to smart/optimum facility management Loss of Revenue Clients will prefer asset and facilities management companies that provide climate solutions Markets • Increasing demand for OPUS Consultants’ specialisation in sustainable asset solutions • Development of Climate Solutions application and dashboard Medium Term – Long Term Markets Investors may shift toward companies with that integrated environmental, social, and governance (ESG) and smart facility management, potentially devaluing companies seen as noncompliant with sustainability goals Loss of Revenue Investors and shareholders may divest company Markets • Included in Sustainability Indexes CLIMATE RISK MANAGEMENT PROCEDURE The Board plays a central role in overseeing sustainability and climate risks, recognising their potential impact on UEM Edgenta’s business resilience. It recognises climate change as a relevant risks and opportunities and through the BGRC, reviews and approves climate-related risks, mitigation, and opportunities on a quarterly basis. This ensures that strategies are in place to safeguard UEM Edgenta against the adverse effects of climate change while positioning the company to capitalise on emerging sustainability opportunities. Before undertaking new business ventures, we conduct Project Risk Assessments as part of our due diligence process to ensure that climate-related risks are factored into investment and operational decisions. Physical climate risks such as flooding, storms, landslides, and soil erosion pose potential disruptions to our assets and operations, such as our incinerator, laundry plant, research centre, and RAP plant. These risks can impact service delivery, increase operational costs, and affect profit margins, particularly in our highways maintenance business. The Risk, Integrity & Compliance Department (RICD) plays a key role in facilitating the risk monitoring process, ensuring that risks are identified and effectively managed across both strategic and operational levels. Sustainability at UEM Edgenta UEM EDGENTA BERHAD 122 Integrated Annual Report 2024
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