DECARBONISING THE MARITIME INDUSTRY Environmental issues will remain an ongoing topic for the coming years, as the world grapples with the impacts of natural disasters caused by increasing CO2 emissions and climate change. In 2021, COP26 stressed the urgency of climate action in ‘this critical decade’ to reduce CO2 emission levels by 45% in 2030, towards a net-zero goal by 2050. Similarly, the International Maritime Organisation (IMO) has stressed the need to accelerate the decarbonisation of the maritime sector. Material Matters For more details, refer to our Sustainability Report 2021 under Environment Pillar section. MEDIUM TO LONG TERM (> 5 years) Outlook and Opportunities The IMO has set the ambition of reducing the shipping sector’s GHG emissions by at least 50% by 2050 compared to 2008; and reducing the carbon intensity of ships by 40% by 2030, and 70% by 2050 compared to 2008 levels. During the 76th session of the IMO’s Marine Environment Protection Committee (MEPC), the committee adopted two new regulations mandating the reduction of CO2 emissions, namely Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII). These measures are to be implemented from 2023 onwards. Our response • In February 2022, MISC has stepped up its commitment to decarbonise our business by making a pledge to net-zero greenhouse gas (GHG) emissions by 2050, with a mid-term target of 50% GHG intensity reduction by 2030, compared to a base year of 2008 for our shipping operations. • MISC is already making progress through the Castor Initiative, where we are working with other global industry players to develop ammonia-fuelled zero-carbon emissions vessels (ZEV). Our goal is to have a viable on-water ZEV prototype model by 2025 and commercialise these by 2030. • We have identified our climate-related risks and opportunities, conducted scenario analysis and developed a roadmap to further integrate climate-related risks into our strategic planning and risk management process. OUR OPERATING ENVIRONMENT STRATEGIC REVIEW Governance and integrity Risks Extreme weather and sea level rise Increasing climate-related regulations and requirements ENERGY TRANSITION The rise in development of alternative energy sources and new efficient technologies as substitutes for fossil fuels is a longterm trend that will affect energy players. Plummeting costs have made it more and more attractive to deploy solar and wind infrastructure. More resources are being invested to improve energy storage technologies such as batteries, to overcome the energy intermittency limitations of renewables. Meanwhile, increasing demands for climate change action by various stakeholders is starting to affect the appetite for investment and funding of oil and gas projects. Similarly, governments will be continuously revising their energy policies to meet the net-zero carbon emission initiatives by 2050. The scope and rate of carbon tax is expected to increase in the long run. Material Matters Please refer to Our Strategic Focus section in this report on page 56 regarding MISC 2050. Outlook and Opportunities Going forward, natural gas will remain a key component of the energy mix and will continue to grow, wrestling away market share mainly from coal. In the longer term, demand for hydrocarbon is projected to decline, starting with coal and oil. Nevertheless, oil is expected to continue playing a significant role in the global energy mix even until 2050. In line with the global climate change agenda, investors and financiers would shift their interest away from the oil and gas sectors. Renewables will gain momentum. Over the next 20 years, renewables will see the largest growth in the world’s energy mix, driven by technological advances. As the world moves towards a net-zero and circular economy, the shift to renewable energy and the unlocking of value through proper and efficient management and reusing/recycling of waste will become even more pronounced. Our response • We have designed MISC 2050, a long-range 30-year strategy charting the Group’s path to remain a relevant business come 2050 by diversifying into new business areas that address the issues of climate change and energy transition, namely in the renewable energy chain and waste-to-value chain. • MISC 2050 will drive our businesses to identify, develop and commercialise new business portfolios that will be relevant in the circular and net-zero economy come 2050. • In the longer term, the new businesses commercialised by MISC 2050 will eventually take over as the main driver of income and growth for the Group. Asset availability, utilisation and marketability Risks Peak oil and market shift towards low carbon economy Evolving LNG market MISC Berhad 74 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 75
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