Temasek has introduced a “sustainable living” investment portfolio valued at S$44 billion (US$32.6 billion), according to its inaugural report detailing its strategy towards achieving net zero by 2050.
The portfolio, which excludes institutional assets and liabilities, includes S$38 billion in sustainability-focused investments and S$6 billion in climate transition investments.
The figures were released by Temasek on Tuesday (Jul 9) in its first sustainability report during the launch of its annual Temasek Review. As of Mar 31, Temasek announced a total net portfolio value of S$389 billion.
In the past financial year, Temasek added S$3 billion to its sustainability portfolio, investing in sectors such as food, water, waste, energy, materials, clean transport, and the built environment.
Recent investments include electric vehicle companies Mahindra Electric Automobile in India and BYD in China, sustainable battery solutions provider Ascend Elements, and electrolyser manufacturer Electric Hydrogen, both in the US.
In May, Temasek also partnered with Canadian fund Brookfield to acquire Neoen, a renewable energy company based in France.
The climate transition investments focus on high-emission sectors transitioning to climate-friendly products and services, including Sembcorp Industries and Danish gas company Topsoe.
Temasek has reduced its portfolio’s net carbon emissions by 5% from 2010 levels. By 2030, it aims to halve these emissions to 11 million tonnes of carbon dioxide equivalent (MtCO2e) and achieve net zero emissions by 2050.
Chief Investment Officer Rohit Sipahimalani noted that sustainable living investments were initially Temasek’s smallest portfolio but are now the fastest-growing segment, as mentioned during a media briefing.
When asked why Temasek disclosed the portfolio value for the first time this year, Head of ESG Investment Management Park Kyung-Ah stated that the report was in response to feedback requesting more consolidated information.
“We wanted to provide greater depth and transparency. We also took this opportunity to develop a more systematic approach to defining and measuring what we term sustainability living-aligned investments,” said Ms. Park, who is also Temasek’s Managing Director for Sustainability.
The sustainability report will be published annually, she added.
The report indicated that companies with higher ESG standards are likely to outperform their peers in the future. However, there may be short-term contradictions between Temasek’s climate goals and financial objectives, noted Mr. Rohit.
“We must consider the trade-offs involved in making these investments in the short term for the long-term sustainability of returns,” he said.
Top Contributors to Portfolio Emissions
Five companies—Singapore Airlines (SIA), Sembcorp Industries, Olam Group, PSA International, and ST Telemedia—contributed around 80% of Temasek’s total portfolio emissions.
These five companies account for 10% of its portfolio value.
These businesses operate in industries facing significant decarbonization challenges, Temasek noted, adding that these companies have made substantial progress in recent years.
For example, despite the aviation sector’s heavy reliance on fossil fuels, SIA invests in newer, more fuel-efficient aircraft, the report highlighted.
Sembcorp Industries, committed to a “brown-to-green” portfolio transformation, is expanding its renewable energy portfolio. Last year, Sembcorp divested coal firm Sembcorp Energy India, significantly reducing its greenhouse gas emissions.
The sale of the India unit contributed to a 22% reduction—or 6 MtCO2e—in Temasek’s total portfolio emissions for the financial year ending Mar 31, 2024, compared to the previous financial year.
Temasek acknowledged criticism against Sembcorp Industries for a “shift in boundaries” without necessarily reducing carbon emissions but emphasized the need for perspective.
Franziska Zimmermann, Director for Sustainability and Climate Change Strategy, noted that selling the India unit was a “decisive strategic decision” to focus on renewable energy.
Sembcorp Industries will continue working with the new owner, providing financing tied to actual incentives to reduce greenhouse gas emissions, Ms. Zimmermann added.
“We understand the criticism, but it’s important to see the bigger picture and recognize the significant efforts Sembcorp Industries has undertaken.”
Source: CNA