Type of Transition Risk Country Country-specific Developments Regulatory or compliance risk, prompted by certain regulations in the countries of operation The United States of America • In March 2021, the US introduced the CLEAN Future Act with an aim to achieve Net Zero emissions by 2050 with an interim target of at least 50% reduction by 2030 from 2005. There is also a push for stronger building energy codes that aim for all new buildings built by 2029 to use 50% less energy as compared to existing buildings built under current codes. The new energy codes will ensure that all new buildings built in and after 2030 should be “zero energy ready”. This means that they are highly efficient and can meet their energy needs onsite or from nearby zero-emission energy sources. • On 6 March 2024, the US SEC adopted rules to enhance and standardise climate-related disclosures by public companies and in public offerings. These rules are aimed at providing investors with more consistent, comparable and reliable information about the financial effects of climate-related risks on a registrant’s operations and how it manages those risks while balancing concerns about mitigating the associated costs of the rules. The final rules will become effective 60 days following publication of the adopting release in the Federal Register, and compliance dates for the rules will be phased in for all registrants, with the compliance date dependent on the registrant’s filer status. Japan • In 2021, Japan’s Financial Services Agency (FSA) announced its intention to make climate disclosures mandatory for large Japanese companies from April 2022. This comes after the FSA introduced a range of climate disclosures into the corporate governance code of Japan. However, since this code does not legally demand compliance from participating organisations, the FSA started requiring companies listed on the Prime market to comply with its new Japan mandatory climate disclosure regulations and disclose business risks in line with the TCFD recommendations. This regulation increased the number of companies in Japan that are disclosing information in alignment with the TCFD. Market risks including shifts in carbon and electricity prices, or customer expectations Global level • These developments are prompted by various country-specific or global platforms, including COP28 in November and December 2023, where the key takeaway was that progress on climate action was too slow across all areas such as reduction of greenhouse gas emissions and strengthening resilience to changing climate. The main decision was to accelerate action across all areas by 2030, including to speed up the transition away from fossil fuels to renewables such as wind and solar power in their next round of climate commitments. It was recognised that urgent action is needed to combat global warming, and this can only be done through global action from governments and businesses. ENVIRONMENTAL 37 CAPITALAND ASCOTT TRUST
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