Sustainability in Our Investments

At Temasek, we seek to make a difference and to actively shape a better, smarter and more connected world, for today’s and future generations.

Temasek’s DNA is rooted in Singapore’s founding experiences. It shaped our ethos to be financially disciplined; to invest in our people and operate with integrity; to seek growth alongside a clean environment; to foster good governance; and to do the right things today with tomorrow in mind. 

Driven by our views of the trends shaping societies, we invest today with tomorrow in mind.

We aim to build a resilient and forward looking portfolio that delivers sustainable returns over the long term. We deploy capital to catalyse solutions that can enable companies to transition to a more sustainable future, tap on opportunities to invest in future growth sectors and business models, and encourage enterprises to transform through efforts in innovation. Our investment activities are aligned to four structural trends that shape our long term portfolio construction. 

Sustainable Living has been identified as one of the megatrends with a pervasive impact across all sectors as well as on the business models of emerging and established businesses. 

We expect to increasingly align our portfolio with the megatrend. This includes investing into companies that directly enable and drive this trend, as well as those that harness the potential of the trend for growth. We also back innovations and technologies at pre-commercial stages to be at the leading edge in relevant areas of decarbonisation and advanced materials. In addition, we engage closely with our portfolio companies on their decarbonisation efforts and identifying sustainability-related opportunities.

The transition towards low-carbon economies and sustainable lifestyles is not only an imperative, but also presents us with new investment opportunities. We have increased our focus on businesses with innovative products, services and business models that drive decarbonisation, resource efficiencies, and material and process innovation. We have also forged partnerships with like-minded investors who are committed to achieving a net zero world to scale feasible and novel solutions in energy, mobility, built environment and manufacturing.

Over the year, we continued investing in climate-aligned opportunities in focus areas such as food, water, waste, energy, materials, clean transportation, and built environment; enabling carbon negative solutions through nature and technology-based solutions; and encouraging decarbonisation efforts in businesses. 

We deployed capital towards companies with pivotal technologies and clean energy solutions that enable the shift away from carbon heavy fossil fuels to support the acceleration towards net zero. 

For example, we invested in BRUSA HyPower, a Switzerland-based designer and manufacturer of power electronics for medium to heavy-duty fuel cell electric vehicles; Neste, a Finnish renewable fuels and circular solutions provider; Ola Electric, India’s largest electric two-wheeler player; and Our Next Energy, a US-based energy storage company focused on battery technologies that will accelerate the adoption of electric vehicles and expand energy storage solutions. 

We also made follow-on investments in Einride, a Sweden-based electric and autonomous freight mobility platform that enables sustainable and cost-efficient operations; Solugen, a US-based specialty chemical manufacturing platform that aims to decarbonise the chemicals industry; and Form Energy, a US-based energy storage company that is developing a low cost and multi-day duration battery for grid applications.

In the area of Carbon Capture, Utilisation and Storage, we invested in Living Carbon, a US-based biotechnology company that enhances CO2 capture and storage in trees through photosynthesis enhancement and shortening tree growing cycles, and also made a follow-on investment in Svante, a Canada-based carbon capture and removal solutions provider.

In addition, we invested in companies in the circular economy. These included investments in Circ, a US-based textile recycling company that chemically recycles polycotton textile waste into recycled polyester and lyocell, and Samsara Eco, an Australia-based company that is developing a novel, low cost, and low energy recycling technology that breaks down PET and other types of plastic.

In the agri-food sector, we invested in Agriconomie, a France-based agritech e-commerce platform, and Brightseed, a US-based biosciences company that uses Artificial Intelligence and machine learning to discover bioactive plant compounds and validate their benefits for human health. We also made a follow-on investment in Rivulis, a micro-irrigation company dual headquartered in Singapore and Israel that provides water-saving technology solutions to farmers worldwide. Rivulis recently completed its merger with Jain Irrigation’s International Irrigation Business to become the world’s second largest drip irrigation player. We also launched Rize, a venture that is jointly incubated with Breakthrough Energy Ventures, GenZero, and Wavemaker Impact. The company aims to reduce greenhouse gas emissions from rice production in South and Southeast Asia in a scalable and profitable way, while increasing productivity and farmer income to drive adoption of sustainable rice cultivation techniques.

We continued to forge partnerships with investors to further scale feasible and novel solutions to drive decarbonisation. 

Together with HSBC, we established Pentagreen Capital, a debt financing platform dedicated to marginally bankable sustainable infrastructure projects with an initial focus on Southeast Asia. The platform also has the support of the Asian Development Bank and Clifford Capital. We are also part of a consortium led by Brookfield Renewable Partners that has signed a binding agreement to acquire Origin Energy’s Energy Markets business, an Australian integrated power generator and energy retailer. The acquisition will accelerate decarbonisation of the energy grid, retire coal generation responsibly, and enable the energy transition in Australia. 

We continued to step up our investments in funds and companies that aim to generate a positive impact for underserved communities while achieving sustainable returns over the long term. Over the year, we committed to a new fund managed by our strategic partner LeapFrog Investments. We also invested in two other impact funds and made a direct investment in SarvaGram, a company that provides financial and productivity enhancing solutions to rural households in India. 

Embedding Responsible Investment Practices

As a responsible investor, we are committed to delivering sustainable value over the long term.

We comply with all obligations under Singapore laws and regulations, including those arising from international treaties and UN sanctions. We comply with the laws and regulations of jurisdictions where we have investments or operations. 

Generating sustainable returns over the long term depends on stable, well-functioning and well-governed social, environmental and economic systems. The decisions we take today, as an asset owner, will impact future generations. Being a responsible investor, we have also integrated an Environmental, Social and Governance (ESG) framework across our investment process from pre-investment due diligence to post-investment engagement. This enables us to better manage material risks and engage our portfolio companies to advance ESG practices to strengthen portfolio resilience and alignment with our sustainability objectives. 

Businesses have a stake in the well-being of our wider community. They will find it hard to thrive if society fails. Hence, businesses must play their part as stewards of our communities, for our common good, alongside governments and society more generally.

We believe companies that manage ESG factors effectively, and recognise their importance, are more likely to create sustainable value over the long term. Thus, we evaluate sustainability-related risks and identify opportunities in investments through our ESG framework, which also supports our target to halve the net carbon emissions of our portfolio over 2010 levels by 2030, and our ambition to achieve net zero carbon emissions by 2050.

People are the most important asset for forward looking and resilient businesses.  It is important to build a future-ready workforce and create an inclusive and enabling workplace which contribute to fair and shared growth, especially as the transition to low carbon and digital economies could bring about fundamental changes to businesses and jobs.

As an engaged shareholder, we promote sound corporate governance in our portfolio companies. This includes the formation of high calibre, experienced and diverse boards to guide and complement management leadership. We do not direct their business decisions or operations. 

The day-to-day management and business decisions of companies in our portfolio are the responsibility of their respective boards and management. Temasek does not direct their business decisions or operations. Just as the Singapore Government does not issue financial guarantees for our obligations, we do not issue financial guarantees for the obligations of our portfolio companies.

Temasek advocates that boards be independent of management in order to provide effective oversight and supervision of management. This includes having mostly non-executive board members with the independence and experience to oversee management. Similarly, Temasek advocates that the Chairman and CEO roles be held by separate persons, independent of each other. This is to ensure a healthy balance of power for independent decision making, and a greater capacity for management supervision by the board. To read more on corporate governance, please see A Trusted Steward in the Temasek Review. 

We apply an Environmental, Social, and Governance (ESG) assessment framework throughout our investment process to ensure that the opportunities we consider align with our sustainability objectives. We also continue to engage investee companies to advance best practices post-investment. Among the objectives are achieving our climate targets, helping to develop diverse, equitable, and inclusive workplaces, and investing in sustainable businesses with good governance.

At deal origination, we increasingly look to deploy capital into our four key structural trends including Sustainable Living, while reducing our exposure to investment targets that lack mitigants to address acute ESG issues, referencing our internal exclusions and other sustainability guidelines. Many of our investment teams have refreshed their market or sector strategies to reflect these considerations.

When evaluating investment opportunities, we conduct due diligence on material ESG issues with the goal of not only putting in place the necessary safeguards to minimise any material negative environmental or social impacts, but also accelerating positive outcomes. ESG analysis and findings are incorporated into our investment considerations and reviewed by Temasek’s investment committee.

Our investment teams employ a broad-based research approach to assess company-level ESG information, as well as relevant industry, thematic and macro-level sustainability considerations. Their analysis is supported by a suite of internal and external ESG tools, as well as a team of dedicated ESG professionals and external advisors (where appropriate). 

We recognise that ESG is a continuous journey. The ability for us to engage and effect positive change is a key consideration in our investment decision-making. We look at how a company has been demonstrating its commitment, over time, to improvement, accountability and change. We also look at how our investment can serve as a catalyst for change.

We continuously evolve ESG integration efforts across our investment process, by applying learnings from our own experiences and incorporating industry requirements and developments.

Overall Philosophy

We work to understand the impact of our investee companies. While we don’t manage their day-to-day business decisions, as an owner, we engage and encourage them to adopt policies and practices that safeguard and enhance long term performance, including ESG-related areas critical to their businesses. 

As part of our portfolio stewardship activities, we monitor relevant ESG factors in our investee companies throughout the life cycle of the investment, to understand changes in a company’s ESG position.  

We engage our investee companies through their boards and management teams, when we have perspectives to share. Temasek values these engagements and conducts them thoughtfully on the basis of factual evidence. Ultimately, a company’s board is accountable to its shareholders for its total performance: business growth and other economic factors, as well as environmental, social and governance issues.  

As an active investor and shareholder, we exercise our shareholder rights fully.

Temasek seeks to identify sustainability-related issues that are of relevance across our portfolio, regardless of industry or geography. On such portfolio level issues, we may take steps to share insights on trends, best practices and opportunities, or articulate our expectations through engagement with our investee companies.

In our efforts to seek sustainable solutions, we keep abreast of the latest developments and regularly discuss sustainability issues with our stakeholders and partners. We do this through a range of engagement sessions with companies in our portfolio, including our annual Ecosperity conference as well as regular portfolio roundtables.

Portfolio Engagement Strategy

As an asset owner, the success of our companies underpins our own success. Investment stewardship builds resilience and value, with sustainability as a value creation lever.

Our long-term investment horizon, which can span decades, puts us in a unique position to support companies to become more sustainable and adopt carbon abatement strategies. 

Our portfolio engagement framework helps us prioritise and target our engagement efforts with companies where we see the highest potential for impact.

• Regular engagements with portfolio companies on ESG matters

We regularly engage our portfolio companies to understand the challenges they face in climate transition, and to convey our expectations. We prioritise and target our engagement efforts with companies where we see the highest potential for impact. 

Our Climate Transition Readiness Framework brings together a holistic set of levers for the net zero transition and sets out a systematic process for dialogue, including setting climate targets in line with science; establishing and advancing compelling transition plans; providing relevant disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures; and preparing for relevant disclosures in line with the imminent International Sustainability Standards Board requirements. 

We have developed an internal portfolio carbon analytics and reporting tool, which enables automated calculation, analysis and reporting of our portfolio emissions. This allows us to take the data into account in our investment decisions, as well as to track and manage progress towards our climate targets.

We also formulated a value creation playbook which guides our investment teams to identify and drive ESG value creation opportunities across our portfolio. It includes key ESG levers where a company's strategy and operations can be strengthened to increase resilience, improve competitiveness, enhance their access to capital, and position them for new growth opportunities. With our portfolio companies, we proactively promote good governance, ethical business practices, and compliance with all laws, as well as support them in building capacity for sustainability leadership and carbon management. 

To address physical climate risk, our ongoing partnership with a leading re-insurance provider provides portfolio companies with a better understanding of their exposure to these risks. This also enables us to have a better grasp of these risks at the portfolio level. In addition, we provide training on carbon measurement and disclosures for relevant operational teams of our portfolio companies.

An example of a portfolio company that we’ve been working closely with on ESG matters is Rivulis, a global micro-irrigation company that can help address water, climate and biodiversity challenges. The company has made strides in their ESG journey, including implementations to reduce the environmental impact of their operations and the launch of their first ESG report showcasing performance highlights such as savings for energy and water, as well as carbon emissions reduction, associated with the deployment of its micro-irrigation solutions. 

We are also encouraged to see the efforts of other portfolio companies in their transition journey. One such example is Topsoe, which has shifted its business model from supplying catalysts for oil and gas industries to developing and supplying technology solutions to the entire value chain for low carbon emissions fuels and chemicals.

• Targeted engagement with selected portfolio companies to accelerate climate transition

Beyond engaging our major portfolio companies on their climate transition plans, we also strive to be a convenor and catalyst within the broader ecosystem by collaborating with them on solutions that support decarbonisation. 

For example, the next phase of a pilot between Singapore Airlines (SIA), Civil Aviation Authority of Singapore, Temasek, and GenZero saw SIA operating its first flights with blended sustainable aviation fuel. This reflected progress in SIA’s own decarbonisation journey, as well as successfully laid the foundation for the broader aviation community to operationalise uptake of sustainable aviation fuel in Singapore. We are also encouraged to see SIA making efforts on other fronts to achieve their net zero targets. This includes purchasing more fuel-efficient aircraft and operating one of the youngest fleets globally.

Temasek has also been collaborating with Singapore’s national grid operator, SP Group, Tampines Group Representative Constituency, and the Ministry of Sustainability and the Environment on Singapore’s first brownfield district cooling system within Tampines, a residential neighbourhood in Singapore. With the solution operational in 2025, Tampines town centre will be able to achieve energy savings of more than 2,800,000 kilowatt-hour annually, which can power more than 900 two-bedroom public housing flats for a year, and a reduction of 1,359 tonnes annually in carbon emissions, equivalent to removing 1,236 cars off our roads.

• Dedicated platforms with programmatic engagements

The Temasek Portfolio Companies Sustainability Council brings together the CEOs and Sustainability Leads of our major portfolio companies periodically to share successful sustainability strategies and forge potential collaborations on sustainability initiatives. Over the past year, the focus was on carbon markets and fostering understanding of dependencies and impact on nature against the backdrop of ecosystem degradation. We further reinforced knowledge in this area by convening a nature-focused workshop for our Temasek Portfolio Companies Sustainability Leaders Network in early 2023.

As a sustainability focused long-term investor, we are committed to working together with various industry stakeholders, including the external fund managers we invest with to advance responsible investment practices.

In assessing external fund managers, we evaluate their ESG approach from an investment lifecycle perspective to understand their ESG commitment, due diligence, stewardship practices, and reporting to investors on ESG. In line with our own climate commitment, we also encourage them to share with us their climate action strategy and plans, in line with TCFD framework.

On an ongoing basis, we engage in conversations with these managers to foster mutual learning and best practice sharing, in the spirit of advancing a common agenda. We expect the external managers to adopt a similar mindset of continuous improvement and to strive to apply best industry practices in managing material ESG issues for their portfolios. We monitor the ESG practices of our key external managers through an annual ESG survey, where they share their latest ESG initiatives and the plans going forward, for the core areas of our assessment. We also have deeper and more regular engagements with external managers for which we have active investment positions in the fund management company, beyond just fund investments.

In 2020, we shared our target to reduce the net carbon emissions attributable to our portfolio to half the 2010 levels by 2030, and our ambition to achieve net zero by 2050. These bold targets demand determined and sustained action. 

To account for progress made on our targets, we have been measuring and disclosing the carbon emissions attributable to our investment portfolio as part of our annual reporting . Our reported Total Portfolio Emissions  encompass 78% of the portfolio as at 31 March 2023.

The portfolio emissions reported include Scope 1 direct emissions and Scope 2 indirect emissions of the underlying companies based on the latest available data sets. We use a combination of company-reported emissions data and modelling approaches to establish our portfolio emissions based on our proportionate shares (i.e. ownership interests) in the assets. We have also engaged consultants and auditors to support our approach and to provide limited assurance.

We adopt the following hierarchy in data sources as we establish our portfolio emissions. The hierarchy takes into account availability and timeliness of reported data, using company-reported data where available:

• Company-reported data: GHG emissions data that is reported by the company, either directly to Temasek or made available through S&P Global Sustainable1.
• Company-specific estimates: GHG emissions for each company modelled or estimated by Temasek or S&P Global Sustainable1 using relevant industry level carbon intensity or carbon efficiency averages as proxies (GHG emissions normalised by revenue/market capitalisation/other relevant operational unit of measurement). In case industry averages do not provide a meaningful proxy for the company, carbon intensity or efficiency data of the company or its comparable peers may be used instead.

Our Total Portfolio Emissions have increased slightly from 26 million tonnes of carbon dioxide equivalent (tCO₂e) for the financial year ended 31 March 2022 to 27 million tCO₂e for the financial year ended 31 March 2023. Our Portfolio Carbon Intensity has increased from 81 tCO₂e/S$M portfolio value for the financial year ended 31 March 2022 to 93 tCO₂e/S$M portfolio value for the financial year ended 31 March 2023. 

These still compare favourably to our pre-COVID emissions levels reported in March 2020, which was 30 million tCO₂e in Total Portfolio Emissions and 130 tCO₂e/S$M portfolio value in Portfolio Carbon Intensity.

The increase in carbon emissions during the year is mainly attributable to our portfolio company Singapore Airlines, which saw its group passenger capacity recovering to 79% of pre-COVID levels, as global air travel resumed. Other factors contributing to the increase include business resumption for various portfolio companies, as well as continuous refinements to their emissions reporting and more accuracy in capturing broader scope of underlying entities. At the same time, these increases were moderated by reductions due to decarbonisation efforts of portfolio companies as well as changes in portfolio composition.

On the other hand, our Portfolio Weighted Average Carbon Intensity has decreased from 119 tCO₂e/S$M revenue for the financial year ended 31 March 2022 to 116 tCO₂e/S$M revenue for the financial year ended 31 March 2023. 

As we continue stepping 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.

Pathways towards Net Zero

In 2019, we shared our target to reduce the net carbon emissions attributable to our portfolio to half the 2010 levels by 2030 and have the ambition to achieve net zero by 2050. We have identified three pathways towards our climate targets:

We established a dedicated Impact Investing team with a mandate to generate positive impact for underserved communities while achieving market rate returns. Beyond our strategic partnerships with ABC Impact and LeapFrog Investments, we committed to a number of impact funds and made a direct investment in SarvaGram, a company that provides financial and productivity enhancing solutions to rural households in India.

We continue to contribute to efforts to catalyse the impact investing ecosystem, especially in Asia. Temasek, together with EQT Foundation and Visa Foundation, committed US$4.5 million to launch the Global Impact Investing Network’s Impact Lab, an industry initiative to create analytic tools for optimising the positive impact of financial investments on people and planet.

Governments, corporations, and investors must work together to define transition roadmaps and drive adoption of new solutions, due to the urgency, scale, and cross-disciplinary nature of the necessary transitions.

We have a role to play and we continue to catalyse solutions and advocate change by adding our voice to international platforms and networks that share our vision of achieving an abc World of active and productive economies, beautiful and inclusive societies, and a clean, cool Earth.

We are a member of the World Economic Forum, the Focusing Capital on the Long Term Initiative, and the Investor Advisory Group of the International Sustainability Standards Board. We also participate in the Integrity Council for the Voluntary Carbon Markets and continue to engage various global industry groups that drive the transformation of the financial industry towards sustainability, including the Glasgow Financial Alliance for Net Zero, the UN-convened Net-Zero Asset Owner Alliance, Principles for Responsible Investment, and others.

As a member of the Green Finance Industry Taskforce under Singapore’s Financial Centre Advisory Panel convened by the Monetary Authority of Singapore, we were involved in shaping recommendations to promote green finance, including transition financing, in Asia. We also participated in the Taskforce for Nature-related Financial Disclosures Asset Owner pilot to better understand the methodologies to assess the portfolio dependency and impact on nature.

In support of an accelerated energy transition, we continue to participate in the Hydrogen Council alongside close to 150 multinational companies representing the entire hydrogen value chain. Our participation has enabled us to stay informed of the latest developments and industry updates, as well as to collaborate with organisations across the value chain.

Our annual Ecosperity conference, first held in 2014, promotes the twinning of ecology and prosperity for sustainable growth. It brings together key decision makers to share insights and best practices on sustainable development. Themed “Accelerating Action at Scale”, Ecosperity Week in 2022 drew over 3,000 delegates in-person and virtually to deep-dive into solutions and levers to accelerate the energy revolution, decarbonise transport and heavy industries, and finance Asia’s green transition. The event also saw the launch of two in-depth reports that provided insights into the green transition of Asia, namely Southeast Asia’s Green Economy Report 2022 and On Thin Ice.

In partnership with the Singapore Government, Temasek also hosted several panel discussions at the inaugural Singapore Pavilion at COP27, as part of our ongoing Ecosperity Conversations series. The sessions provided insights on accelerating the energy transition, effective carbon markets, solutions for carbon capture and storage, and growing healthy, sustainable food.