1 Represents a non-exhaustive list of the main risks and opportunities currently identified across MUST's real estate portfolio. Risks and opportunities are subject to change over time and are ultimately addressed on a case-by-case basis depending on the individual characteristics of each property. 2 According to International Energy Agency (IEA), the Net Zero Emissions (NZE) by 2050 Scenario is a normative scenario that shows a pathway to the global energy sector to achieve net zero CO2 emissions by 2050, with advanced economies reaching net zero emissions in advance of others. According to IPCC, RCP 2.6 represents low greenhouse gas emissions and stringent mitigations to limit global warming to below 2.0°C by 2100. 3 According to Intergovernmental Panel on Climate Change (IPCC), Representative Concentration Pathway (RCP) 8.5 represents a high greenhouse gas emissions scenario in the absence of policies to combat climate change, leading to continued and sustained growth in atmospheric greenhouse gas concentrations. RCP 6.0 represents the intermediate levels of greenhouse gas emissions, resulting in intermediate levels of warming. Climate-related Risk, Mitigation and Opportunity1 In 2020, a portfolio-wide climate risk study was conducted using a third-party tool that applied both current and forward-looking risk scenarios to assess asset-level climaterelated risk exposure. This comprehensive assessment incorporated resilience measures such as flood risk management protocols, property characteristics, property team resilience management practices, and emergency and business continuity planning, forming key components of the Manager’s climate-related physical risk mitigation strategy. In 2023, the Asset Manager completed a comprehensive climate scenario analysis for its global portfolio, which included MUST’s properties. This forward-looking assessment, performed by third-party climate risk providers, aimed to deepen understanding of potential operational impacts arising from identified physical risks. Consistent with the Asset Manager's Real Estate Climate-related Financial Disclosure report, the analysis applied sciencebased methodologies and historical data whilst considering IEA NZE2, RCP 2.62, RCP 6.03, and RCP 8.53 climate scenarios projected across 2030 to 2100 timeframes. The Manager adopts the Asset Manager’s temporal horizon definitions for climate-related issues: • Short-term: 1 – 5 years • Medium-term: 5 – 10 years • Long-term: 10+ years The Manager further streamlined the physical risks that are relevant to MUST under two scenarios: • Scenario 1: Failure to act (>4.0°C) (RCP 6.0 and RCP 8.5) Participants believe that physical climate risks will increase costs and reduce value; supply chain disruptions and market variability from changing climate conditions will also affect the business. • Scenario 2: Paris-aligned (<2.0°C) (IEA NZE and RCP 2.6) Participants expect sizeable investments to overcome transition risks; despite these costs, participants identified significant opportunities in being an early mover in transitioning to net zero. For each climate impact, a climate hazard score was determined. The study found that none of the assets in MUST's portfolio are located in 100-year flood zones currently, and in both scenarios between 2030 and 2100. Physical Risk Type Primary Risk Driver Potential Impacts Timeline Potential Mitigation Measures Acute Risks Tropical Cyclone More frequent and severe tropical cyclones • Increase in asset structural damage • Increase in insurance premiums and deductibles • Increase in operation (e.g. business interruptions) and repair costs (e.g. structural repairs) Short- to long- term • Regular site assessments for building condition River Flood Property damage in areas with a high risk of flooding • Increase in asset structural damage • Increase in insurance premiums and deductibles • Potential for reduced availability of insurance for assets in river flood-prone areas • Increase in operation (e.g. business interruptions) and repair costs (e.g. structural repairs) Short- to long- term • Properties are expected to have regular site assessments completed by an insurer, and/or building condition assessments, and where applicable, to adopt recommended protection measures Storm Surge More frequent and extreme storms • Increase in asset structural damage • Increase in insurance premiums and deductibles • Increase in operation (e.g. business interruptions) and repair costs (e.g. structural repairs) Short- to long- term • Regular site assessments for building condition • Emergency management planning • Minimise downtime by using on-site backup power generators / 15 / MANULIFE US REIT
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