PHYSICAL RISKS ASSOCIATED TO CLIMATE CHANGE Heavy Rain and Flash Flooding Matrix has identified its climate change risks based on business divisions and these are centred on physical, transitional and legal risks associated / brought on by climate change. Physical risks include flash flooding caused by torrential rain and altered weather patterns that may disrupt construction operations, particularly progress of works at sites. This may delay completion and delay revenue recognition. Increased rainy weather is equated to reduced manhours and workdays and may also require additional safeguards to prevent increased risk of injuries due to slippery work conditions. An additional concern is water-ponding at construction sites which can increase the probability for vector borne diseases such as dengue, which would affect employees and workers on site. Aside from construction, risk of flooding may necessitate rethinking of project planning as certain low-lying locations may be more prone to floods during rainy weather. This may require re-adjusting the landbank portfolio or even development plans. Modifications to property masterplans such as change in designs to prevent waterponding on roofs and increased drainage requirements may entail additional costs. Choice of materials may also see changes as more weather resistant alternatives for external paints, roof tiles and other components may lead to higher operating costs per property built. Such costs would either erode margins or be passed to property buyers, thus affecting the attractiveness of the property amidst a highly competitive property sector. However, the effects of the aforementioned are to an extent, negated as all property developers would be encountering similar challenges. Drought and Rising Temperatures In contrast, drought like conditions could affect construction operations which consume significant amounts of water. Alternatives may be required such as groundwater harvesting (when rainwater harvesting is not possible), especially in water stressed locations. Scorching temperatures may lead to increased incidences of heatstroke which would affect the health of site workers and this would also hinder the progress of works. Similar to middle eastern countries, the number of actual productive hours could be reduced, thus impacting completion schedules of projects. The repercussions include delayed revenue recognition as well as potential Liquidated and Ascertained Damages (“LAD”) charges for late delivery of properties. Similar to flooding, landbank and development plans may need to change to ensure that townships and other property projects have sufficient water post completion and handover. Increased allocations for rainwater harvesting, bigger water tanks and more may lead to increased costs. In providing a larger heatsink, increased greenspaces may be required, which will eat into developmental space. As a result, sizes of homes may become smaller, or prices of homes will increase. The cultivation of more greenery and green space may see an increased landscaping and maintenance costs. TRANSITIONAL AND LEGAL RISKS ASSOCIATED TO CLIMATE CHANGE The transition to Zero Carbon by 2050 may likely entail significant capex over the long run. While Matrix has the financial capacity to undertake such CAPEX, the costs for solar panel acquisition and installation and other factors may increase over time. This is due to external factors such as disruptions to the supply chain dynamic that are beyond the control of the Group. Funds allocated to decarbonisation may see an opportunity cost vis-à-vis the utilisation of such funds for landbank acquisition, development of more properties, investments into construction technologies, talent development and more. Legal risks include loss of access to preferable financing due to lack of progress achieved on decarbonisation or reduced ratings by regulators and the financial community. The Group’s ability to tap green financing, preferable interest rates and more may be affected. Matrix has achieved full compliance with the Malaysian Urban Stormwater Manual requirements for drainage and irrigation towards preventing risks of flooding on all construction sites and property development projects Mitigation Measures MATTERS MATERIAL TO VALUE CREATION INTEGRATED ANNUAL REPORT 2023 MATRIX CONCEPTS HOLDINGS BERHAD 84 VALUE CREATION STRATEGIC REVIEW
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