Increase in extreme wind and precipitation (acute) Increasing environmental / carbon policies and legislation Development of new technologies for low-carbon solutions Training for the right expertise and skills required to manage new vessels / shipment Shift in customer expectations Changing capital providers trends Market interest shift towards low-carbon economy Being perceived as advanced or a laggard in climate change action / failure to comply with regulation Talent retention and attraction Sea level rise (chronic) PHYSICAL TECHNOLOGICAL REGULATORY MARKET REPUTATION & SOCIAL We then conducted scenario workshops to map and assess the identified transition and physical risks and opportunities against the two future climate scenarios. The discussions focused on how each risk and opportunity could manifest in the respective core businesses, their likelihood and potential impacts, the strategy and decarbonisation pathway to mitigate the risks, and the value creation opportunities that could be captured. We also identified the key climate-related risks and opportunities for MISC Group. MISC’s Climate-related Risks and Opportunities OUR RESPONSE • • Proactively keep abreast with maritime legislation and the unilateral decisions of maritime nations • • Continuously monitor any new or emerging regulatory developments OUR RESPONSE • • Beginning in 2022, MISC will include chronic physical risks into its risk register • • Continuously monitor these risk indicators and develop specific measures to ensure our business resilience Types of Risks are denoted by the following: PR = Physical Risks TR = Transition Risks *For TCFD, short term is defined as within the next five years, medium term is within the next 10 years (~2030) and long term is within the next 30 years (~2050). • 50% reduction of our shipping fleet’s GHG intensity by 2030, compared to 2008 • Progressive fleet renewal to vessels with low-carbon technologies • Explore and invest in R&D of zero-carbon emission vessels • Increase use of renewable energy where possible • Explore carbon removal technologies and new business segments of Renewable Energy and Waste-to-Value • Decarbonisation of our operations to meet the growing demands of the market for the sustained growth of our existing portfolio via our Net-Zero GHG Commitment • In parallel we will be exploring new income streams that can support the value chain of Renewable Energy and Waste-to-Value pillars via our MISC 2050 strategy At MISC, we believe that climate action must be taken to realise the 1.5 degrees Celsius scenario. Our climate strategy responds to the risks and opportunities posed by climate change in two parts: • A transition plan for short and medium-term risks; and • A longer-range climate strategy to mitigate our long-term financial impacts and position ourselves competitively in the lowcarbon economy Our Climate Strategy to Realise the 1.5 Degrees Scenario For full details on our TCFD disclosures, please refer to our TCFD Report in our Sustainability Report. Transition Plan (up to 2030) Long Range Climate Strategy (up to 2050) OUR TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) JOURNEY IN 2021 STRATEGIC OVERVIEW STRATEGIC REVIEW OUR RESPONSE • • Monitor industry trends and expectations of customers and capital providers, and implement relevant strategies and solutions • • Partnership in The Castor Initiative • • MISC 2050 strategy to explore and develop new businesses relevant in circular and netzero economy TR Market Risks: Changing market preferences for lowcarbon and environmentally-friendly solutions would lead to reduced demand for oil and gas-related assets and services Opportunities: Increased demand in the medium to long term* for new asset classes, transportation of alternative fuels and new businesses that contribute to circular and net-zero economy OUR RESPONSE • • We diligently innovate our service offerings to remain competitive and exceed customers’ expectations • • We incorporate green technology in our newbuilds and retrofit low-carbon technologies on existing vessels • • Partnership in The Castor Initiative to develop commercially-viable ammonia-fuelled tankers to support a decarbonised future for the shipping industry TR Technology Risks: R&D for low carbon solutions and training to manage such technology requires higher investment, and higher risk of technological uncertainty Opportunities: Potential savings from more energy-efficient technologies, and increased marine business revenue from retrofitting vessels with carbon capture or low carbon technology PR Physical Risks - Chronic: Rising sea levels can disrupt operations and affect availability of transportation routes (e.g. flooding, port closures) OUR RESPONSE • • Continuously improve the specifications of our newbuild vessels • • Apply stringent safety controls to vessel navigation • • Group Crisis Management Plan (GCMP) in place to govern crises at corporate level PR Physical Risks - Acute: Increase in extreme weather events such as hurricanes can cause interruptions in the value chain, and jeopardise the safety of personnel, assets and cargo Opportunities: Increased demand for marine repair and maintenance TR Regulatory Risks: Increasing environmental/ carbon regulation leads to higher compliance costs, and risks of higher borrowing cost and decreased asset values Opportunities: Increased demand for LNG in the short to medium term*, and demand for new asset classes and transportation of alternative fuels in the medium to long term* OUR RESPONSE • • Setting GHG intensity emissions reduction goals • • Committing to net-zero GHG emissions by 2050 • • Communicating sustainability efforts and achievements to internal and external stakeholders TR Reputation & Social Risks: Increasing stakeholder pressure to reduce value chain emissions and reputational impact on talent retention and attraction Opportunities: Taking a stewardship position and driving advancement in decarbonisation MISC Berhad 48 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 49
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