68 CAPITALAND CHINA TRUST APPENDIX TCFD RECOMMENDATIONS CLI and its REITs, including CLCT, commenced its climate scenario analysis in 2022 for its global portfolio to understand how the identified climate-related risks and opportunities could impact future operations. This analysis considers scenarios based on the latest global and scientific developments, and the scenarios from 1.5°C to 3 °C scenarios for current to long-term time frames, to draw conclusions on the financially material physical and transition risks and validate its current strategy. CLI and the REITs will then review their mitigation and adaptation plans, and identify opportunities, in alignment with CLI’s 2030 SMP. The SMP was designed to build resilience throughout its operations and futureproof CLI’s real estate portfolio to guard against climate change risks and to avoid premature obsolescence and adopt available opportunities. Scenario analysis on future climate-related risks and opportunities The climate scenario analysis for CLI’s global portfolio (including CLCT) considered the parameters listed below: Physical risk scenarios NGFSi | 1.5°C Orderly, 2100 NGFS | 2°C Orderly, 2100 NGFS | 3°C Hot House World (NDCii), 2100 Most severe physical risk impacts & costs at 3°C and in the longer term Transition risk scenarios CRREMiii| 1.5°C, 2050 Most severe transition risk impacts & costs at 1.5°C and in the shorter term NGFS | 2°C | Orderly, 2100* NGFS | 3°C | SSP2iv | Hot House World, 2100 Geographical coverage All assets * The CRREMiv 2°C, 2050 transition risk scenario was chosen in the beginning of this climate scenario analysis. However, the platform updated its models and this option was removed during CLI’s analysis. The NGFS 2°C, 2100 Orderly scenario was then identified to replace the removed CRREM 2°C, 2050 scenario i The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) ii Nationally Determined Contributions (NDC) iii Carbon Risk Real Estate Monitor (CRREM) iv Shared Socioeconomic Pathways (SSP) The following heatmap on physical risk reflects the quantitative approach based on assessment performed by a third-party platform. The heatmap on transition risks includes the quantitative approach based on assessment performed by a third-party platform, augmented by additional qualitative research undertaken by an external consultant. The quantitative analysis represents analysis with respect to the asset values of CLI’s assets worldwide and their respective exposure to climate related risk change. It is important to note that the risk level is based on the change of the risk in future scenarios – it is assumed that there is currently a certain level of risk exposure for each of the climate-related risks and the risk level reflects the magnitude of change. The colour-coded heatmap was derived based on thresholds of financial exposure, which have been grouped into the five major categories presented in the legend. The risk levels are relative to baseline exposure. These are the specific exposures for CLCT’s portfolio.
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