Beyond COVID-19: Towards a Net Zero World

Beyond COVID-19: Towards a Net Zero World

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By: Dilhan Pillay, Executive Director and Chief Executive Officer, Temasek International 

Dilhan Pillay shared his thoughts with members of the Singapore Institute of Directors (SID) ahead of the national association of company directors' annual conference. Here is the full version of his piece.

A year on, we continue to see the world battle against COVID-19. It is the single biggest humanitarian crisis we have faced since World War II, as the pandemic ravages economies, and impacts countless lives and livelihoods.

However, we have also seen a resilience of human spirit that is remarkable. Developing vaccines used to take decades; but advances in science and ingenuity have delivered vaccines with a high level of efficacy in under a year. Now that same spirit must apply to distributing the vaccines around the world, especially to lesser developed nations, because the pandemic has taught us that nobody is safe till everybody is safe.

This past July, Temasek released its 2021 Temasek Review, themed around a simple message: Bounce Forward. As we emerge from the dark shadows of COVID-19, we cannot afford to bounce back to a pre-COVID world, like it was in 2019.

Instead, we need to bounce forward, to a more sustainable world, tackling bigger threats like climate change, by harnessing that innovation drive in science and technology, the pace of which has accelerated as a result of the pandemic. We need that incredible, indomitable, human spirit to continue, so our resources, capabilities and efforts will be catalysts to develop solutions to the next global challenges.

Climate Change: An Existential Challenge

Evidence is now clear that if we don’t address man-made contributors to global temperature rises urgently, we risk more lives, advance species extinction and irredeemably impact our biosecurity and, indeed, life on our planet. We must address climate change: our natural resources have already been significantly depleted and impacted, and we just cannot continue the way we have all these years.

There is a real need for all of us to focus on achieving a ‘net zero world’ by 2050. That role cannot be led by governments alone. Businesses, communities, individuals, indeed every one of us, must play our part. For if we don’t contain temperature rises, the impact will be far more deleterious than the pandemic; even more so for developing countries, which do not have the resources to deal with climate change. 

We are currently living in the hottest decade on record. Despite a brief dip in carbon emissions due to the pandemic, the world is still heading for a temperature rise in excess of 3 degrees Celsius this century, which is beyond the 1.5 degrees Paris Agreement Goal. The Intergovernmental Panel on Climate Change has just released a report stating that the current trajectory is that we will reach 1.5 degrees by 2040, in which case it is imperative that we act now – individually and collaboratively – with urgency.

Closer to home, Singapore is heating up twice as fast as the rest of the world – it is already an average two degrees hotter today compared to the 1950s. It may not seem much, given we already live in a tropical part of the world, but the damage to fragile natural ecosystems will become irreversible if we don’t address our contributions to climate change.

This continual global temperature increase is unsustainable. It is already leading to rising sea levels, and an increase in destructive weather events and the disasters that follow, such as typhoons and flooding, heat waves and wild fires.

Role of Corporates and Private Capital

As the world modernises, the role of business, and of private capital, becomes more critical to drive large scale solutions to climate change. 

I am heartened to see many companies pivoting and refocusing their business models toward solutions that achieve a greener world. Some have even committed themselves to net zero targets.  

This is a sign of how expectations of business are rapidly shifting. Every business is expected to be purpose-driven; to have a focus on its role as a corporate citizen in a much wider community of stakeholders than just its shareholders and its customers. Because businesses can only thrive when the communities around them thrive.

At Temasek, our charter defines our roles to do well as an active investor and shareholder, to do right as a forward looking institution, and to do good as a trusted steward.

We are more than just an investor; we are a provider of catalytic capital. We deploy financial capital to stimulate innovation and growth; develop human capital to uplift capabilities and enhance potential; enable natural capital to foster sustainable solutions; and seed social capital to transform lives for a more inclusive and resilient world.

As we deploy capital, we constantly reshape our portfolio around four key structural trends that we see driving growth and solutions to global challenges, as we seek to deliver sustainable returns over the long term. These trends are digitisation, sustainable living, the future of consumption, and longer lifespans.

Some say maybe we should just invest in market indices, riding the waves of market growth when they come. However, investing in indices does not let us shape a portfolio around how we see the world in future years: a world that must become more sustainable, and can become so if we help emitters to change their business models and invest in solutions to transform. Investors, globally, have begun to allocate capital to promising technologies in pursuit of decarbonisation solutions, seeking to contribute to the carbon abatement process and the reduction of its cost curve. Temasek is absolutely committed to this path.

Benefits from Climate Change Mitigation

We have simulated the expected long term returns pathways of our portfolio based on different scenarios across our portfolio over the next 20 years. Broadly, our Central Scenario models our baseline expectations of growth. We also model for other scenarios where growth may be impacted by external events, such as escalating trade tensions, geopolitical events, and climate change.

We have specifically looked at two scenarios around climate change (See Fig.1): the first is what we call ‘low ambition’ – few efforts made to address climate change. The second is ‘high ambition’: where the world is prepared to make hard decisions to achieve the goal of containing temperature increases within the Paris Agreement.

In the case of the low ambition scenario, despite marginally better returns during the shorter term, the trade-off will be an unliveable planet within our lifetime, and commensurate lower returns further out to 20 years.

In a High Ambition Climate Change Scenario, despite moderated returns in the medium term due to transition costs, the payoff will be a more liveable planet for all, and higher expected returns over the long term. 

Temasek Simulated Geometric Returns over 20 years by various selected scenarios (Source: Temasek Review 2021)

This is why, directionally, we choose to advocate, and invest in, high ambition models that seek to mobilise solutions to climate change.

At Temasek, we choose to lean in to work with companies in our portfolio, supporting their transformation of business models and abatement actions where it makes financial sense to do so, rather than simply divest them. Divestment of carbon-emitting businesses could easily allow us to show a lower carbon portfolio in a shorter period of time, but that does nothing to actually reduce emissions.

We need to work with the boards and management teams of our portfolio companies in their climate change mitigation and transition strategies and initiatives, so that they too can contribute to a better world. By doing so, they will have more robust business models, and be more future-ready, than the status quo.

We see this approach consistent with being a purpose-driven organisation, a provider of catalytic capital, and a responsible steward of our portfolio and our communities. We share our vision for a more sustainable world because we believe business – and all of us who lead businesses – can and must play a thoughtful, constructive role in tackling this defining challenge.

We’ve seen what a pandemic can do to disrupt our business models, and how, as stewards of our companies, we’ve had to act boldly and nimbly to address what nature threw at us these past few years.

The Role of Boards

As this is a SID conference, it would be remiss of me not to mention a few things about the leadership role that boards play in the context of the many challenges companies face in a pandemic and post-pandemic world. Companies – especially publicly-listed ones – need to embrace ESG. Frameworks and metrics around ESG are now common-place among most leading asset managers. 

In this regard, I would highlight three issues. Firstly, I have already highlighted the existential threat of climate change. Every company needs to have climate change adaptation, mitigation and transition strategies. This is not just a board risk management issue; it is imperative from the perspective of having a robust business model, so that companies will share value among their various stakeholders, including deriving long term sustainable returns for their shareholders.

Secondly, the increasing prevalence of cyberattacks is a key board risk management issue. Companies need robust cyber defence postures and capabilities. Cyber risks may be existential for many businesses – it is not just the financial loss arising from an attack (whether in connection with the cost of remediation or the threat of ransomware), but also the reputational risks associated with a cyber hack. 

The pace of acceleration of digitisation and technological enablement of business models have made systems – and hence business models – more susceptible and vulnerable to this significant threat. Increasingly, companies and their ecosystems are being threatened by their weakest links.

Boards and management teams have to put in place robust governance frameworks associated with cyber issues, and match that with the requisite capabilities – internal teams, augmented by external expertise and systems that are fit for the risk level. This requires constant vigilance and attention from boards, because companies are now entrusted with more data than ever before – from customers, suppliers, partners and employees. The bond of trust underpins a company’s reputation, so ensuring data systems are well-protected, and capabilities exist to actively defend and respond to cyber threats, is a key board responsibility.

Lastly, but by no means the least, the future of Industry 4.0 should be human-centred and human led, which provides opportunities for directors to play leadership roles in readying companies, and their workforces, for the future.

Technology and digitisation are imperatives for every business (all the more so in a pandemic and post-COVID-19 world), but as imperative as they are, we get the best from our people by ensuring that they collectively and individually remain relevant and are supported to adapt.

This means continual workforce development – training for skilling, reskilling and upskilling. It also means being more inclusive in our workplace hiring: including older workers who can make valued contributions, and those with disabilities, who are no less able to contribute. We all have an obligation across our companies to put in place fair work practices and a safe environment for all employees.

Diversity is also important – not because it is the politically correct thing to do, but because it is good for business and the company’s engagement with its various stakeholders. Diversity takes many forms, but a way forward is perhaps to ask ourselves whether our workforce represents a broad sample of our community, and all the differences in it, which makes the whole greater than the sum of the parts. This is analogous to the concept Ravi Menon advocated in the last of his four lectures on the Singapore Synthesis1; that in pursuing meritocracy, we must embrace a broader, more inclusive and compassionate meritocracy.

Steps leaders take in this regard add to the strength of their human capital. They also build social capital, which itself contributes towards social cohesion and resilience in the communities in which they operate. That is an important outcome, because businesses can only thrive if the communities in which they operate also thrive.


We live in a VUCA (Volatile, Uncertain, Complex and Ambiguous) world. The VUCA world has been with us for some time – though it has become more complex, and more unpredictable, as a result of the emerging threats of climate change, cyber risks and pandemics. Where there are threats and gaps, and the challenges may seem perpetually hard, there are also opportunities for companies to make a difference – to their wider group of stakeholders – employees, customers, suppliers, shareholders and the communities in which they operate.  

With a focus on the challenges of today, companies – led by directors with a clear eye on the opportunities of the future and bringing a strong sense of purpose to their roles – will be able to transcend the ups and downs of a changing global environment and chart a course, not just to survive, but to prosper.

Let’s use the lessons of COVID-19 to become more resilient, and bounce forward.


1 Mr Menon, the Managing Director of the Monetary Authority of Singapore, was the 9th Institute of Policy Studies - SR Nathan Fellow, and his fourth lecture, An Inspiring Nation, was delivered on 28 July 2021.


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