90 SECTION 06 AL-`AQAR HEALTHCARE REIT SUSTAINABILITY STATEMENT CLIMATE CHANGE & DECARBONISATION (CONT’D) CLIMATE RISKS AND OPPORTUNITIES (CONT’D) The REIT’s sustainability strategy is designed to integrate climate-related and broader ESG considerations into its core business operations, in line with IFRS Sustainability Disclosure Standards S1 and S2. Al-`Aqar’s strategic planning adopts a structured time horizon framework to ensure clear prioritisation and measurable outcomes: short-term (0–2 years), medium-term (3–5 years) and long-term (beyond 5 years). The REIT identified several physical and transition risks that impact its operations, financial performance, and the wellbeing of the employees and stakeholders. Based on the identified risks, the REIT developed mitigation measures to counter them and while also identifying opportunities that can be capitalised on to strengthen its position. Transition Risks Potential Impact Opportunities Time Frame Policy and Legal Potential carbon tax and pricing implementations • Higher operating costs to maintain compliance due to more stringent environmental regulations and standards In addition to complying with potential upcoming regulations, the REIT taps into a new market and stay abreast of regulatory development Medium to long term Technology Barriers in the implementation of new technologies and lowcarbon processes • Higher capital expenditures for new technologies, including solar panels and smart building solutions, that optimise energy consumption and decarbonises the portfolio • Additional costs to adapt existing processes to align with emerging standards Investments in low-carbon and energy-efficient technologies reduces its GHG footprint and positions the REIT to be a leader in sustainable property management Short to medium terms Market Evolving market conditions and customer demand • Rising costs contributing to lower revenue • External economic events such as recessions that lower property values and rental income, increase vacancies and unproductive properties, and other financial challenges Showcasing Al-`Aqar’s sustainability commitment and implementations to differentiate the REIT from competitors and attract environmentally aware clients Short term Reputation Reputational damage as a polluting or lagging organisation in portfolio decarbonisation • Climate-resilient and sustainable properties remain a top priority for investors and tenants. Failing to meet these expectations could result in dissatisfaction and reputational harm • Infrastructure failure or disruptions caused by climate events reduce the brand perception and reliability of the portfolio, potentially leading to dissatisfaction and loss of market share, tenants, and investors Developing low-carbon and climate-resilient implementations prevents impacts from occurring and strengthens the image as a responsible and reliable REIT Long term
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