Environmental concerns remain at the forefront of global discourse and trends. Worldwide, heightened calls for action were noted in limiting global temperature rises to less than 1.5°C. In 2022, at COP27, the shipping sector’s climate actions were highlighted and the need to convert climate action pledges to concrete action was stressed. Alongside this, leading organisations and initiatives across the shipping value chain along with the largest producers of green hydrogen signed a Joint Statement on Green Hydrogen and Green Shipping at COP27. 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. 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 77th 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 and Carbon Intensity Indicator. These measures are to be implemented from 2023 onwards. 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 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 Our Response • MISC 2050 will drive our businesses to identify, develop and commercialise new business portfolios that will be relevant in the circular and net-zero carbon economy come 2050. • As part of our Green Initiative, AET, Lloyd’s Register and Samsung Heavy Industries, the founding members of The Castor Initiative, signed an MOU for the development and construction of two zero-emission VLCCs in April 2022. • In September 2022, PTT and AET signed an MOU for the development and construction of two zero-emission Aframaxes to be powered by green ammonia. • In the longer term, new businesses commercialised by MISC 2050 will eventually take over as the main driver of income and growth for the Group. MEDIUM TO LONG TERM (> 5 YEARS) • MISC has been a supporter of the TCFD since 2021. Having implemented TCFD initiatives in our core business segments in 2021, in 2022 we expanded this to our key enablers segments. We have translated the findings of our TCFD analysis into MISC’s Climate Framework which guides in terms of climate governance, climate strategy, climate risks and metrics and targets. DECARBONISING THE MARITIME INDUSTRY ENERGY TRANSITION For more details, refer to SR2022, under Environment Performance and TCFD Report. • In February 2022, MISC pledged to net-zero 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 along with our partners continue to progress on The Castor Initiative to develop ammonia-fuelled ZEVs by 2030. In April 2022, AET signed an MOU with two members of The Castor Initiative – Lloyd’s Register - for the deployment of the first two ammonia-fuelled zeroemission VLCCs. • In September 2022, AET also signed an MOU with PTT for the development and construction of two zeroemission Aframaxes which are slated for delivery in 2025 and 2026 respectively. Material Matters Governance and Integrity Ocean Health Increasing Climate Related Regulations and Requirements Risks Climate Change Shift in Stakeholder’s Preference Towards Low Carbon Solutions Technology Developments Increasing Climate Related Regulations and Requirements Risks Health and Safety Climate Change OUR OPERATING ENVIRONMENT Material Matters Natural Resource Use Energy Management Natural Resource Use Energy Management Air Emissions Talent Development and Retention Strategic Review Strategic Review 69 68 MISC Berhad Integrated Annual Report 2022
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