73 ENERGY TRANSITION RISK Definition and impact of the risk on Yinson Energy transition risk in essence refers to the energy sector’s shift from fossil-based resources (e.g. oil, coal, natural gas) to renewable energy (e.g. solar, wind, hydropower). Examples of energy transition risk may include climate-related risk pertaining to market demand for fossil fuels and regulatory changes. As the world is transitioning from fossilbased systems of energy production and consumption to carbon-friendly energy solutions, Yinson, which generates significant revenue from its FPSO business unit, is at risk from shifts in government energy-generation policies and changes in investing preferences of asset-owners due to heightened environmental awareness, economic viability of renewables through technological improvements, carbon-related legislation and others. The failure to keep up with and adapt to the energy transition may cause loss of business opportunities from clients with sustainability-related requirements, exclusion from sustainability indexes, legal consequences and reputational damage. How we manage or mitigate the risk • Establishment of Yinson’s Climate Goals Roadmap and various key strategies to manage the energy transition. • Expansion and growth of Yinson’s renewables and green technologies business units. • Operationalisation of carbon abatement strategies for carbon-heavy assets (i.e. closed flaring, hydrocarbon blanketing system, combined cycle technologies to maximise energy efficiency and utilising low-emission alternatives as energy sources). • Continuous improvements in ESG Rating scores such as FTSE4Good Index, Morgan Stanley Capital International (MSCI), Sustainalytics and S&P’s Corporate Sustainability Assessment (CSA). • Providing assurance on the carbon intensity performance for YP and renewable energy generation for YR. Moving forward (opportunities) • As sustainability has become a global concern, the efforts made to mitigate energy transition risk allow Yinson to fulfil sustainability requirements from existing and potential clients while staying relevant in the industry. • This will also result in a more resilient business model and sustainable growth trajectory as a result of incorporating climate change considerations into decision-making. • To further explore innovative technologies to be implemented in our assets and operations that could also be commercialised to contribute to global climate targets. • Accelerating interest from clients and financial institutions to see sustainability elements incorporated into our assets will provide impetus for us to continue focusing on carbon reduction initiatives. • Consideration of suitable investments into key segments which could support our Climate Goals of carbon neutrality by 2030 and net zero by 2050. RISKS AND OPPORTUNITIES VALUE CREATION AT YINSON
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