FRONTKEN CORPORATION BERHAD 200401012517 (651020-T) ANNUAL REPORT 2025 40 SUSTAINABILITY REPORT (CONT’D) 3.4 Climate Scenario Analysis and Strategic Resilience Frontken has assessed strategic resilience under two internationally recognised climate scenarios, covering a time horizon to 2050, consistent with the Group’s Net Zero commitment. The analysis was conducted by the Sustainability Steering Committee with input from operations, finance, and risk management, and reviewed by the Board in FY2025. Parameter Scenario 1: Orderly Transition Scenario 2: High Physical Impact Temperature alignment 1.5°C — limit warming to 1.5°C above preindustrial levels. ~4°C by 2100 — high-emission pathway, limited mitigation. Framework IEA Sustainable Development Scenario (“SDS”) / Net Zero Emissions by 2050. IPCC AR6 SSP3-7.0 (high emissions, moderate mitigation). Time horizon 2025–2050 (short: 2025–2028; medium: 2028–2035; long: 2035–2050). 2024–2050, with physical impacts intensifying post-2035. Key transition assumptions Carbon price: USD75/tCO2e by 2030, USD130/tCO2e by 2050; electricity decarbonisation per IEA SDS; semiconductor sector demand growth +8% p.a.; Taiwan NETA 2023 renewable energy mandates. Not applicable (transition policies assumed weak). Key physical assumptions Drought return period remains ~40 years; minimal increase in extreme weather frequency. Taiwan drought return period reduces to ~10 years by 2050; Kaohsiung facility flood probability increases from 0.5% to 2% annual by 2040; average temperature +2.5°C above current by 2050. Financial impact Net positive: refurbishment demand increases as customers seek to reduce Scope 3 emissions. Carbon compliance costs ~1% of revenue by 2050. Net Zero capex modest relative to revenue. Drought event estimated at <2% revenue impact; rising energy costs +3–5% above baseline by 2040; no material facility damage at current risk assessment. Strategic assessment Frontken's refurbishment model is structurally advantaged: the circular economy business is demand-advantaged in the transition. FTSE4Good and CDP ratings support access to capital. All adaptive standards are already implemented (backup water supply, flood drills, wind reinforcement). Adaptive capex is modest and manageable within the existing ERM framework. Frontken’s strategy is assessed as resilient across both scenarios. The core business model of component refurbishment is inherently low-carbon and demand-advantaged under transition scenarios. Physical risks are manageable through adaptive standards that were fully implemented in FY2025. 3.5 Net Zero Roadmap Frontken’s Net Zero Roadmap is structured in three phases: • Phase A — Zero emissions growth by 2030: fuel reduction, LED upgrades, renewable energy adoption and upgrades. • Phase B — Return to 2020 absolute emission levels by 2040: energy management systems, supplier collaboration, waste recycling. • Phase C — Full net zero across the value chain by 2050: Carbon Capture, Utilisation and Storage investment, Power Purchase Agreements, and cascading SBTi requirements to suppliers. The roadmap is subject to annual review by the Sustainability Steering Committee and Board of Directors.
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