PEAK OIL AND MARKET SHIFT TOWARDS LOW CARBON ECONOMY – Emerging Risk Description Increasing environmental awareness and climate change may lead to reduced demand for fossil fuel and limit the growth of crude oil production. The rise in development of alternative energy sources and new efficient technologies as substitutes to fossil fuel is heightening this risk. Research and publications indicate that oil demand is projected to reach its peak by the mid-2030s. Moreover, in line with the global environmental agenda, investors may shift their interest away from the industry, and financiers may reduce their appetite within the shipping, and oil and gas sectors, thus limiting long-term business growth. In the near term, the Group may face competition from new low carbon solutions entering the market, which will render vessels with older technology less favourable. Mitigation/Response • Identifying climate-related risks and opportunities, and conducting scenario analysis to position MISC to be ready for the new industry landscape post-peak oil. • Involvement and investments in initiatives towards cleaner and alternative energy sources for future business stream, through our MISC 2050 strategy. • Continue to explore opportunities to diversify our business portfolio and activities. • Technologies incorporating new carbon solutions are taken into consideration for each new business opportunities. PROJECT AND FINANCIAL PERFORMANCE/CLIMATE CHANGE NATURAL/FINANCIAL/PHYSICAL Material Matters: Capitals Affected: Trend: Upward EXTREME WEATHER AND SEA LEVEL RISE – Emerging Risk Description The increase in frequency and severity of weather and climate disasters, as well as rising sea levels may expose the Group to higher risks in terms of disruptions to operations and asset damage. These may result in an increase in capital and/or operational expenditure costs for building assets resilience, repairing damage, or implementing significant changes in operational procedures in order to adapt to the effects of climate change. Mitigation/Response • Continuously monitoring changes in weather patterns, as well as weather conditions so as to be operationally adaptive and ensure operational resiliency and continuity. • Where required, assets are refurbished to meet operational demand in line with related climate change requirements. CLIMATE CHANGE NATURAL Material Matters: Capitals Affected: Trend: Upward STRATEGIC REVIEW OUR RISKS AND MITIGATION STRATEGIES MISC Berhad 84 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 85
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