Sustainability Report 2023/24

Transition Risk In assessing our transition risks to a low-carbon economy, we focused on two strategically important sectors, property (retail and office) and hotel and serviced apartments, in Hong Kong and Shanghai. We undertook quantitative and qualitative assessments, by analyzing the data projections provided by the two constructed scenarios. Additionally, we constructed a qualitative analysis of the policy development in Hong Kong and Shanghai. This mixed-method approach combines quantitative, science-backed projections with qualitative analysis of policy developments to assess the impacts on our business operations and value chain under two different climate futures. This year, we organized workshops and surveys to gather insights from our departments and business units regarding our resilience to climate risks across our value chain. This engagement ensured that our transition risk assessment results were highly relevant and aligned closely with our operation. We evaluated 21 risk parameters, including political, economic and market indicators, for the property (retail and office) sector, and 15 for the hotel and serviced apartments sector. These assessments were performed for both the 2030 and 2050 timeframes, with input from key stakeholders to identify material transition risks at the value chain level. Transition risk assessment also shares similar uncertainties with physical risk assessment, as both use data forecasted by climate models. However, transition risk assessment also involves uncertainties coming from the judgments and opinions of our in-house experts. These opinions may be influenced by market trends and regulatory changes, which are continuously evolving. We have identified material transition risks and opportunities, along with their corresponding business and financial impacts, as well as our resilience strategy. The results were: Through evaluating the severity and likelihood of transition risk exposures within the value chain, we identify the transition risks that are significant to the Group 3 The collected data and information are utilized to evaluate the exposure risks of the selected operations and their respective value chains, including both upstream and downstream activities 2 We compile and integrate data from reputable sources, such as the IPCC, IEA, and NGFS. Our assessment process includes qualitative research, policy and regulation analysis as well as gathering input from key business functions. This ensures the relevance and alignment of the assessment results with our operations 1 Technology (short/medium/long term) • Growing trend of adopting energy-efficient and low-carbon technology • Rising adoption of renewable energy Potential Impact • More drive to invest in energy-efficient and low-carbon technologies • Increased adoption of renewable energy sources such as on-site solar panels Potential Financial Impact • Increased capital expenditure on low-carbon product investment • Increased cost of training for new technology • Decreased operating costs owing to energy savings Example of Our Strategy • Conduct energy and carbon audits to identify areas for energy- efficient retrofits, such as lifts, chillers, and lighting systems • Implement smart building management systems, energy optimization systems, and other innovative solutions to optimize operations • Enhance on-site renewable energy generation such as solar energy • Consider purchasing RECs where applicable • Foster collaborations with partners and universities to drive green technology development • Established Sanfield Construction Innovations Limited to develop innovative and low-carbon solutions for the construction industry • Partnered with DBS Bank to launch the Sustainability-linked Supplier Payment Service (SPS) programme, offering financial incentives for supplier carbon reduction Sun Hung Kai Properties Limited | Sustainability Report 2023/24 < 37 > Our Reporting Approach Message from the Sustainability Steering Committee Our Business Our Approach to Sustainability Value Created for the Environment Value Created for People Value Created for Customers Value Created for Supply Chain Value Created for Community Appendices