Damage to the natural environment may arise related to our business operations, owned property or commercial mortgage loan portfolio. • Environmental risk may originate from investment properties that are subject to natural or human-made environmental risk. Real estate assets may be owned, leased and/or managed, as well as mortgaged by Manulife and we might enter into the chain of liability due to foreclosure ownership when in default. • Liability under environmental protection laws resulting from our commercial mortgage loan portfolio and owned property (including commercial real estate, timberland and farmland properties) may adversely impact our reputation, results of operations and financial condition. Under applicable laws, contamination of a property with hazardous materials or substances may give rise to a lien on the property to secure recovery of the costs of cleanup. In some instances, this lien has priority over the lien of an existing mortgage encumbering the property. The environmental risk may result from on-site or off-site (adjacent) due to migration of regulated pollutants or contaminants with financial or reputational environmental risk and liability consequences by virtue of strict liability. Environmental risk could also arise from natural disasters (e.g., climate change, weather, fire, earthquake, floods, and pests) or human activities (use of chemicals or pesticides) conducted within the site or when impacted from adjacent sites. • Additionally, as lender, we may incur environmental liability (including without limitation liability for clean-up, remediation and damages incurred by third parties) similar to that of an owner or operator of the property, if we or our agents exercise sufficient control over the operations at the property. We may also have liability as the owner and/or operator of real estate for environmental conditions or contamination that exist or occur on the property or affecting other property. Pandemic risk and potential implications of COVID-19 The COVID-19 pandemic continues to weigh on the global economy and it remains difficult to predict the significance of its longer-term impacts, particularly as COVID-19 becomes endemic in the markets in which we operate. Governments continue to navigate the implications from COVID-19 and changing circumstances may result in future legal, regulatory, tax, and other responses that could have a significant adverse impact on our global business operations and financial results. • COVID-19 could continue to adversely impact our financial results as a result of reduced new business, including a reduction of activity through our distribution channels, reduced asset-based fee revenue, and net unfavourable policyholder experience including claims, lapse and premium persistency experience. • As COVID-19 becomes endemic, there may be unexpected changes to the business and operating environment which may present new headwinds to our business strategy or new opportunities to pursue. The pace of recovery may continue to differ across geographies in which we operate, which could impact the execution of our business strategies. For example, a sustained zero-COVID policy in mainland China throughout 2022 has slowed sales growth in our Asia segment businesses due to border restrictions and immobility of our agents and employees. As mainland China shifts away from its zero-COVID policy, we would expect to experience a rebound in sales growth over time; however, the manner in which the government responds to future outbreaks may further delay our ability to drive sales growth in the region. The sudden easing of restrictions could put significant strain on mainland China’s public health system, which could increase mortality and morbidity claims. This could increase volatility in our financial results or materially reduce our profitability. • We purchase reinsurance protection on certain risks underwritten or assumed by our various insurance businesses. As a result of COVID-19, we may find reinsurance more difficult or costly to obtain. Reinsurers may also dispute, or seek to reduce, or eliminate coverage on policies as a result of any COVID-19 related changes to policies or practices we make. • In pricing or repricing of new business, the impact of any COVID-19 related changes may be compounded with or offset by other pricing inputs. These inputs include assumption changes (e.g., reinsurance, interest rates, morbidity, mortality, expense, and lapse and surrender changes), business considerations related to retaining specific market share or client business and regulatory restrictions impacting the approval process for price changes. • The potential longer-term impacts of the pandemic may include latent morbidity impacts from the deferral of medical treatment by policyholders. It may be a factor in increasing morbidity claims and there may be implications from other factors such as long-term post COVID-19 symptoms. • Previously imposed COVID-19 related restrictions have been gradually lifting in markets in which we operate but have also been introduced or reimposed in a limited number of other markets. In the jurisdictions where the restrictions have been lifted, the majority of our employees have returned to office on a hybrid work arrangement. The implementation of widespread remote work arrangements has also increased other operational risks, including, but not limited to, fraud, money laundering, information security, privacy, and third-party risks. We are relying on our risk management strategies to monitor and mitigate these and other operational risks during this period of heightened uncertainty. • The global recessionary environment could continue to put downward pressure on asset valuations and increase the risk of potential impairments of investments, particularly for more exposed sectors such as transportation, services, and consumer cyclical industries. Furthermore, reduced demand for office space as a result of widespread full-time remote or hybrid work arrangements could continue to have a negative impact on our commercial real estate portfolio. • Borrowers or counterparty downgrades or defaults would cause increased provisions or impairments related to our general fund invested assets and derivative financial instruments, and an increase in provisions for future credit impairments to be included in our policy liabilities. This could result in losses potentially above our long-term expected levels. • Extreme market volatility and stressed conditions resulting from possible longer-term impacts of COVID-19 could result in additional cash and collateral demands primarily from changes to policyholder termination or renewal rates, withdrawals of customer deposit 82 | 2022AnnualReport | Management’sDiscussionandAnalysis