195 CORPORATE GOVERNANCE REPORT Integrated Annual Report 2025 In line with IFRS S1/S2, risks are classified into physical (flooding, storms, heatwaves, power interruptions, temperature and humidity shifts) and transition risks (regulatory requirements, carbon reporting, low-carbon expectations, and technology changes), alongside opportunities such as energy-efficiency enhancements, solar PV, smart systems, and healthcare-complex resilience. Climate considerations are embedded into investment reviews, leasing decisions, preventive maintenance, asset readiness, and insurance pricing. Mitigation measures include flood-resilience works, HVAC efficiency upgrades, water-saving systems, indoor air-quality monitoring, and real-time building performance tracking. The Framework is reviewed annually to incorporate updated climate data, regulatory developments, and operational learnings. Using the above model, the Climate Risk assessment of Al-`Aqar assets are as follows: CLIMATE RISK CLASSIFICATION RESIDUAL RATING MITIGATION PLAN OPPORTUNITIES Flooding & Stormwater Intrusion Physical – Acute • Flood risk mapping & drainage upgrades • Strengthen stormwater management & perimeter protection • Reinforce M&E rooms and elevate sensitive equipment • Review insurance adequacy & emergency response plans • Enhance asset valuation through resilience upgrades • Potential reduction in insurance premiums • Higher tenant confidence from improved resilience • Reduce business disruption → stronger retention Extreme Heat & Heatwaves Physical – Acute • Chiller upgrades under Zero CapEx model • Energy efficiency retrofits & shading solutions • Install/expand solar PV to reduce cooling load • Energy cost savings from efficient chillers & solar PV • Improved thermal comfort → tenant satisfaction • Access to green financing • Market differentiation as low-carbon REIT Long-Term Temperature Increase (Cooling Load Rise) Physical – Chronic • Long-term HVAC replacement programme • Portfolio-wide energy performance planning • Incorporate resilience criteria into AEI/CapEx plans • Future-proofed assets with lower lifecycle cost • Potential rental premium for climate-adapted buildings • Achieve/upgrade green building ratings (GreenRE/ MyCREST/GBI) Water Scarcity / Supply Disruptions Physical – Chronic • Conduct water efficiency audits • Install low-flow fixtures & submeters • Evaluate rainwater harvesting feasibility • Lower water bills from reduced consumption • Supports green building certification pathways • Enhanced BCM attractiveness to tenants Green Building / Energy Efficiency Standards Transition – Regulatory • Conduct detailed energy audits • Adopt green lease clauses • Upgrade HVAC, insulation, lighting • Align portfolio plans with regulatory thresholds • Early compliance leadership → competitive advantage • Increase asset valuation as green-certified buildings attract premium tenants • Reduce operating expenses via efficiency upgrades • Qualify for green tax incentives / grants STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
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