196 SECTION 07 AL-`AQAR HEALTHCARE REIT CLIMATE RISK CLASSIFICATION RESIDUAL RATING MITIGATION PLAN OPPORTUNITIES Transition to New Technologies (Climate Tech) Transition – Technology • Lifecycle replacement planning • Evaluate new low-carbon technologies • Align asset strategy with emerging tech • Allocate CapEx for phased upgrades • Adoption of nextgeneration technologies • Lower long-term CapEx through strategic planning • Improved asset data and digitalisation • Future-ready asset positioning Carbon Reporting & Disclosure (ISSB/TCFD) Transition – Regulatory • Establish ESG data governance structure • Implement digital ESG tracking tools • Strengthen sustainability disclosures • Build internal capacity for climate reporting • Stronger investor trust & better market visibility • Enhanced access to sustainability-linked financing Carbon Tax / Carbon Pricing Exposure Transition – Regulatory/ Financial • Develop carbon inventory & baseline emissions • Conduct carbon pricing impact modelling • Implement EE & solar PV to reduce exposure • Explore green financing options • Cost avoidance by preempting carbon pricing increases • Unlock green financing for decarbonisation projects • Improve NPI through reduced energy use Investor ESG Expectations & Capital Access Transition – Market • Develop REIT-level decarbonisation roadmap • Enhance transparency & TCFD-aligned reporting • Attract long-term ESG aligned institutional investors • Better access to capital from improved ESG scores • Strengthen brand reputation in sustainable real estate Legend: Moderate Low High Very High The Three Lines of Defence Approach Al-`Aqar adopts the Three Lines of Defence approach to ensure effective risk management and internal control. Under this model, operational teams act as the first line by managing risks within their day-to-day activities and ensuring compliance with policies and procedures. The second line provides oversight through specialised functions such as Risk Management, Compliance, Shariah, Sustainability, and Finance, which set frameworks, monitor adherence, and support the first line in managing risks. The third line, Internal Audit, provides independent assurance to the BARC on the adequacy and effectiveness of the overall system of internal control. STATEMENT ON RISK MANAGEMENT & INTERNAL CONTROL
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