94 YINSON HOLDINGS BERHAD | INTEGRATED ANNUAL REPORT 2024 CLIMATE-RELATED RISKS AND OPPORTUNITIES Risk management Yinson applies a structured process to identify material climate-related risks and opportunities as part of our risk management process. The identified climate-related risks and opportunities are documented with a unique risk identification number and captured in a dedicated register. This supplements Yinson’s overall Enterprise Risk Management (“ERM”) processes. We adopt the concept of ‘double materiality’ during this process, considering the effects of climate change on finance and corporate activities, and vice versa. Following TCFD recommendations, we evaluate our business portfolio against future scenarios, tying assessment results back to the ERM framework for appropriate risk response actions. Yinson uses scenario analysis to better understand climaterelated matters. These scenarios, while carrying a degree of uncertainty and assumptions, serve as good references for signals and indicators on the plausible trends of developments of parameters related to the businesses. The Stated Policies Scenario (STEPS) and Sustainable Development Scenario (SDS) are adopted for transition risk analysis, while Representative Concentration Pathways (RCP) 8.5 is adopted for climate-related physical analysis. Physical risk Yinson’s current and future FPSOs are engineered with consideration to potential impacts from the external environment. They are built to endure a combination of environmental loads and events, such as increased wave heights and wind potential. They are designed with a conservative return period to withstand maximum environmental loads of up to 100 years. As such, acute and chronic events have been incorporated into the design of our FPSOs. Transition risk • Market: Shifting consumption patterns to cleaner alternative energies may disrupt the fossil fuel-based market, affecting Yinson’s revenue stream. Additionally, enhanced climate-related assessments from financial institutions as they respond to pressures to reduce exposure to carbon-intensive industries may lead to a change in Yinson’s financing approach, which could in turn lead to increased capital costs. • Technology: Investing in new technologies presents risks such as uncertain technical outcomes, unpredictable market adoption, regulatory challenges, high initial costs and intense competition. Our activities in new lowcarbon solution technologies have high initial investment costs, with eventual adoption onto our operating fleet subject to client approval. • Policy and legal: Increasing rollout of carbon-based regulations and instruments could lead to increased compliance costs in the energy market. Increasingly stringent carbon policies could drive regulatory pressure to accelerate the phasing down of fossil fuel-based assets. • Reputation: The oil & gas industry faces heightened expectations to step up climate action. Failure to align operations with the Paris Agreement or to meet our climate commitments could pose a risk to Yinson’s reputation due to increasing societal expectations.
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