Amid the headwinds such as restrictive macro policies, a “highly polarised geopolitical environment”, as well as climate change, which remains an “existential threat”, Temasek remains focused on doing its part to “build a better, more inclusive and sustainable world”, says chairman Lim Boon Heng.
Sustainability is at the heart of Temasek’s agenda, with the climate agenda becoming more “urgent”, says the group’s executive director and CEO, Dilhan Pillay.
“Businesses, governments, multilateral agencies, philanthropic organisations, investors and societies need to collectively accelerate efforts to scale decarbonisation efforts and low-carbon solutions, taking into account the immediate need for energy security and uplifting of communities where access and affordability present challenges which are insurmountable without external assistance and funding,” he notes, adding that Industry 4.0, while boosting productivity, has also led to “rising inequality and the need to partner business transformation with workforce transformation”.
“The advent of generative artificial intelligence (AI) could magnify opportunities and bring with it challenges, with social, economic and political consequences that will need to be addressed. We will need to ensure that there is sustainable and inclusive growth so that this and future generations can prosper,” says Pillay.
Temasek has added sustainability to one of its core pillars in its T2030 strategy. The strategy, a 10-year roadmap, was developed in 2019. Pillay continues: “Sustainability and climate change was an add-on that we believe that we should pay attention to. We should be cognisant of the issues for the decade ahead.”
He adds that Temasek does not condone greenwashing, and has an environmental, social and governance (ESG) framework that it applies to all of its current investments and potential investments at the evaluation stage. “If we identify key ESG risks and if there’s no pathway to resolving them, we won’t invest [in these companies].”
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With the elevation of sustainability and climate change to a core pillar, Temasek will be investing more in climate-aligned sectors such as food, water, waste, and so on. “More capital should be going there when we see opportunities for growth.
Some of this involves early stage investments, some will be a little bit more mature,” he adds, noting that the group actually started thinking about sustainability back in 2011. Some of the companies Temasek has invested in include Israel-headquartered Rivulis, which provides water-saving technology solutions to farmers around the globe.
Temasek is stepping up its investments in funds and companies that aim to generate a positive impact for underserved communities while achieving sustainable returns over the long term. One of these investments was in a new fund that was managed by its strategic partner, LeapFrog Investments. It also made its first direct investment in SarvaGram, a company that provides financial and productivity-enhancing solutions to rural households in India.
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“As we step up efforts to encourage decarbonisation across our portfolio and continue to invest in less carbon-intensive businesses, we expect our portfolio emissions, in absolute and intensity terms, to decrease over time,” says Pillay.
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