78 YINSON HOLDINGS BERHAD SUSTAINABILITY REVIEW We selected our scenarios with reference to the IEA, World Energy Outlook 2023 (IEA, WEO 2023) and Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report (AR6). For transition risks analysis, we adopted the Stated Policies Scenario and Net Zero Emissions by 2050 Scenario. As for physical risk analysis, we utilised the Representative Concentration Pathways (RCP) 8.5. Stated Policies Scenario transition risks The demand for oil & gas products and services is expected to remain broadly sustained over the medium- and long-term horizon, with gas production projected to outpace oil production growth through to 2050. Cumulative investments in the oil & gas industry are anticipated to peak around 2030, after which environmental criteria are expected to feature more prominently in financial institution assessments. This could result in growing market and policy pressures on high-emitting industries to adopt carbon-efficient technologies and carbon-removal solutions. Additionally, a global average carbon price is projected to range from USD 15/tCO2e in 2030 to USD 30/tCO2e in 2050, alongside a gradual slowdown in investments in oil & gas-related projects. Against this backdrop, Yinson Production will continue its FPSO operations in key regions, including South America, Africa and Southeast Asia, where flexible and cost-effective energy infrastructure remains essential. While the transition presents limited financing and operational risks. It may influence contract awards, renewals and extensions. Nonetheless, Yinson is expected to remain among the leading independent FPSO operators. Yinson Renewables and Yinson GreenTech will continue to support the Group’s energy transition journey, enabling greater access to clean energy in line with the shifting global energy landscape. Net Zero Emissions by 2050 scenario transition risks Demand for oil & gas products and services is expected to peak within the decade and gradually decline towards 2050. In response, financial institutions may establish policies that favour a transition away from the oil & gas sector, with environmental assessments potentially taking precedence over financial criteria. The global average carbon price range is projected to be USD 40/tCO2e in 2030 to USD 120/tCO2e in 2050, reflecting the growing urgency for climate action and contributing to reduced investments in oil & gas. Under this scenario, more aggressive global trends are expected to intensify transition risks, impacting the outlook of oil & gas products and services. The assessment indicates a potential slowdown in the FPSO market in the medium- to long-term, with lower profit margins due to higher technology deployment costs. Mergers and acquisitions (“M&A”) activities may increase as companies seek to streamline operations in a more competitive environment. Environmental criteria may potentially outweigh financial considerations, leading to financing challenges and limited initiation of new projects. While this evolving landscape presents challenges, it also facilitates growth opportunities for Yinson Renewables and Yinson GreenTech, and positions Yinson Production to develop low-carbon value chains and innovative floating solutions in support of a sustainable energy transition. Physical risks Yinson’s current and future FPSOs are engineered with consideration for potential impacts from the external environment. These assets are built to endure a combination of environmental loads and events, including increased wave heights and wind intensity. Each FPSO is designed with a conservative return period to withstand maximum environmental loads of up to 100 years, ensuring that both acute and chronic climate-related events are accounted for and incorporated into the design. In the renewables and green technologies sectors, we address physical risks through comprehensive planning and robust risk management strategies to mitigate the impacts of extreme weather and climate conditions, enhancing resilience and ensuring operational continuity. Climate-related opportunities • Leverage low-carbon solutions to create new business streams that meet shifting market preferences and ensure sustainable financial performance. • Adopt and innovate technologies to enhance operational efficiency and reduce emissions. • Implement strategic carbon management practices to ensure compliance and establish a clear transition pathway, demonstrating Yinson’s commitment to achieving our Climate Goals. • Pursue growth opportunities in the renewable energy and green technologies sectors, including expanding renewable energy sources and the EV ecosystem, to strengthen business resilience and growth. • Enhance corporate reputation through robust sustainability initiatives and transparent reporting, boosting confidence among stakeholders, the public and potential future talent. • Leverage available incentives and support for investments in renewable energy and green technologies. Scan to view Yinson‘s Climate Report.
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