Integrated Annual Report 2021

Short to medium term (Within 5 years) Push for new areas of growth within our current portfolio, while ensuring ability to generate predictable, secured and recurring cash flows: • Five-year rolling business plan; and • Sustainability Strategy 2021-2025 OUR STRATEGY MISC’s corporate and sustainability strategies set the direction and priorities for our action plans, resource allocation and business activities, culminating in business results and outcomes that we have identified as key to creating value in the short, medium and long term. From 2016 to 2020, MISC successfully delivered on our MISC2020 strategy, which had been developed with the aim of ensuring that the Group would have a sustainable level of recurring income to remain resilient even during the most difficult times. Despite the COVID-19 pandemic that surged through the world since early 2020, our focus on secured income enabled the Group to continue creating substantial value for our shareholders and other stakeholders. Having proven its worth, we will continue to pursue this secured income agenda as an overarching objective. 2021 was a year of temporary deemphasis of growth, where we focused on execution and delivery of our sizeable pool of projects, while positioning ourselves for market recovery. It was also a time to focus on internal transformations and capability and capacity building of our people. Our five-year rolling business plan has been drawn up based on the analysis of our operating environment for both the near and long-term future. We have identified both existing and emerging risks and opportunities, and have assessed the outlook for our industry. At the same time, we have integrated sustainability imperatives into our strategy, along with a consideration of the needs of our stakeholders and our material matters. Our five-year rolling business plan aims to grow our secured income, strengthen our business fundamentals and diversify our business portfolio, within the Group’s risk appetite and affordability. Just as vital, we continue our five-year Sustainability Strategy journey to meet the increasing ESG expectations of our stakeholders. MISC believes that our corporate and sustainability strategies – bolstered by our fundamentally strong business model – will enable the Group to withstand the buffeting headwinds during and beyond the pandemic as we continue to deliver our value creation promise to our stakeholders. STRATEGIC OVERVIEW STRATEGIC REVIEW Our Analysis of Our Operating Environment Temperature Trajectories Used for MISC’s Scenario Analysis Global average surface temperature change ECONOMIC SOCIETAL POLITICAL REGULATORY TECHNOLOGY ENVIRONMENT INDUSTRY TRENDS STRATEGY MISC Group’s Corporate and Sustainability Strategies Medium to long term (Beyond 5 years) Two-pronged strategy to prosper in a circular and net-zero economy: • Decarbonise our operations to meet changing market demands and ensure sustainability of our existing business; and • MISC 2050 long-range strategy to build new businesses to be added to our present business portfolio Our ships and operations run on fossil fuels which contribute to global GHG emissions, and we are subject to increasing regulatory and stakeholder pressure Our current business of transporting fossil fuels in the long term will face slowing growth and eventual decline as the world moves towards a circular and net-zero economy To address the impacts to MISC’s long-term financial sustainability arising from the energy transition, we have just launched a twopronged approach to future proof our business against the key long-term threats that we face: More details on the above can be found in the Our Strategic Focus section. OUR TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) JOURNEY IN 2021 In 2021, MISC embarked on a structured journey to strengthen our management and disclosure of climate-related risks by adopting the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). As part of the exercise, we conducted a series of TCFD reviews and workshops for our four core businesses to deepen our understanding of the climate-related risks that we are exposed to, as well as opportunities arising, and to evaluate the significance of those exposures under different climate scenarios. 4 degrees scenario • In 2012, the World Bank reported that a four degree world would be one of “unprecedented heatwaves, severe drought and major floods in many region”. • The risks of doing nothing are clearly very high, and increasingly plausible without stronger efforts to reduce carbon emissions. • The latest Intergovernmental Panel on Climate Change (IPCC) report indicate that the hotter the planet gets, the greater the risks of crossing dangerous “tipping points,” like the irreversible collapse of the immense ice sheets in Greenland and West Antarctica. 1.5 degrees scenario • The IPCC has reported that limiting the risks from global warming of 1.5 degrees Celcius in the context of sustainable development and poverty eradication implies system transitions that can be enabled by an increase of adaptation and mitigation investments, policy instruments, the acceleration of technological innovation and behaviour changes. Scenario Analysis We considered two climate scenarios for the year 2050 - global warming of 1.5 degrees Celsius and 4 degrees Celsius. Difference from average temperature (ºC) Modelled past warming Aggressive emissions reductions "Business as usual" emissions 1950 2000 2050 2100 -2.0 0.0 2.0 4.0 6.0 Source: Climate change 2021 The Physical Science Basis ( technical-summary/) (Time horizon used for MISC’s scenario analysis) We have announced MISC’s commitment to attain net-zero GHG emissions by 2050, with an interim milestone to reduce our shipping carbon intensity by 2030 MISC 2050 is a roadmap for our 30-year journey in reimagining the economic and social role of MISC come the year 2050. More specifically its goal is to identify new business opportunities that will allow us to develop and commercialise into new businesses and asset portfolios to be added to our present business portfolio mix MISC Berhad 46 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 47