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48 About Strategy and Governance Our People Our Business Our Outcome AppendixThe transition risk assessment drew on the Net-Zero Emissions Scenario (NZE) set out by the International Energy Agency (IEA). The NZE defines a pathway to achieving netzero CO2 emissions by 2050 in keeping with the Paris Agreement%u2019s goal to limit the rise in global temperatures to 1.5%u00b0C relative to pre-industrial levels. The scenario assumes key parameters facilitating the transition to a low-carbon economy regarding energy, technological, political, and market developments. It allows us to make scenario-based assumptions about the impacts and risks associated with the transition to net-zero CO2 emissions by 2050.Our physical risk assessment was grounded in scenarios contained in the Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). We examined scenarios looking at two-degree global warming (SSP1-2.6) and four-degree global warming (SSP5-8.5) across three different horizons. As recommended by TCFD, our analysis focused on the four-degree scenario to map physical risks to our business associated with a changing climate. As a first step, we performed an in-depth physical hazard assessment for DKSH%u2019s entire value chain in 2022 (our own sites and our upstream and downstream value chains). We used the IPCC World Atlas Regional Information Tool, which found that physical hazards, such as mean temperature increase, heavy precipitation, and drought, pose a high risk in some regions where we source products and in some regions where we sell products. We also expect rising sea levels to become a hazard in the long term, because DKSH is active in areas that will most likely be seeing increasing sea levels and operates sites that are close to the coast. The assessment has some limitations; for example, it does not allow for site-specific ratings. In 2023, we conducted an in-depth analysis of physical hazards for 50 selected own sites using the Climate Change Edition of the Location Risk Intelligence platform from the reinsurer Munich Re. The analysis is based on Shared Socioeconomic Pathway (SSP) scenarios from the latest IPCC Assessment Report (IPCC AR6, 2023). The tool analyzes location-specific hazard exposure for different acute and chronic hazards. We identified heat stress and precipitation stress as potentially significant challenges for our own sites across all time horizons.We analyzed our own sites for the hazards of tropical cyclones, river flooding, sea level rise, wildfires, drought, heat, and precipitation.2828%u2002 The figures for our own sites reference the share of DKSH-owned sites, in keeping with the variables contained in the Munich Re Climate Change Edition.Current (2023) Medium-term (2050) Long-term (2100)Tropical Cyclones (four-degree global warming scenario, IPCC SSP5 %u2013 8.5) Tropical cyclones are among the most destructive weather phenomena. Coastal regions and islands are particularly vulnerable, as they are affected not only by the direct impact of storms but also by secondary hazards, such as storm surges and pounding waves. The MunichRe hazard score is based on probable maximum wind intensities with a return period of 100 years.Currently, only 2 % of the assessed own sites face an extreme hazard of tropical cyclones. This jumps to 10 % of the sites for the medium- and long-term scenarios.2 % 10 % 10 %very lowlowmediumlargevery largeextremeno hazardHazard assessment