4 MANAGEMENT DISCUSSION AND ANALYSIS 71 Description Climate-related risks have become a critical focus for investors, regulators and clients. These risks fall into two categories: • Transition risks arising from new climate policies, carbon pricing, regulatory shifts and evolving market expectations; and • Physical risks resulting from extreme weather, heat stress, flooding and long‑term environmental changes. Malaysia’s planned carbon tax for 2026, aligned with the National Carbon Market Policy and the upcoming Climate Change Act, introduces a new layer of transition risk for organisations. The tax is expected to start at approximately RM15/tCO₂e and expand over time as the national framework matures. These developments increase the importance of strengthening climate governance, anticipating cost exposures and preparing for a progressively low‑carbon operating environment. R8 CLIMATE-RELATED RISK Context Mitigation Globally, climate expectations have shifted from voluntary commitments to mandatory climate disclosures, carbon pricing mechanisms and regulated transition plans. Countries are imposing increasingly stringent requirements to accelerate decarbonisation and ensure resilience. Malaysia is on the same trajectory, with several shifts that heighten transition risk: • Carbon tax implementation in 2026, starting with high‑emission sectors, and expected to expand or escalate over time. • Integration with the National Carbon Market Policy and future Climate Change Act, which will define emissions governance and compliance structures. At the same time, physical climate risks, such as heavy rainfall, flooding and heatwaves, pose threats to infrastructure performance, service continuity, asset maintenance and workforce safety. For UEM Edgenta, these combined risks influence cost structures, service reliability, operational planning and stakeholder expectations across its healthcare, infrastructure and facilities management operations. • Introducing internal carbon pricing (“ICP”) to anticipate future carbon‑related cost impacts associated with the 2026 carbon tax, with ICP guiding strategic planning, investment decisions and prioritisation of efficiency and emissions‑reduction initiatives to help us prepare for evolving transition risks. • Continuing to strengthen the resilience of our operations and critical assets to minimise disruptions from extreme weather events, by enhancing maintenance systems, improving facility and infrastructure readiness, strengthening workforce safety protocols, and adopting resilience measures to support continuity of essential services. • Embedding physical and transitional climate-related risks within our Risk Management Framework to ensure structured oversight, timely risk identification and responsive strategic planning in alignment with Malaysia’s evolving climate policies. • Continuing to enhance operational efficiency through energy optimisation, technology upgrades and emissions‑reducing initiatives, mitigating exposure to future carbon pricing and improving environmental performance. • Expanding climate-related awareness and capabilities across leadership and operations to prepare for emerging climate policies, support transition planning and strengthen organisational readiness.
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