Sustainability Strategy and Governance
Sustainability Strategy
We need to take urgent and sustained action against the climate crisis, reverse nature loss, and build a more inclusive and equitable society.
At Temasek, sustainability is an ongoing journey and resolute commitment for us. We embed it in all that we do — from our mandate to deliver sustainable value over the long term, to our strategy of how we operate as an institution, shape our portfolio, and engage our portfolio companies to build sustainable businesses.
We recognise the long tail effects of climate change on the resilience and commercial viability of our portfolios. The Synthesis Report of the Intergovernmental Panel on Climate Change Sixth Assessment Report, released in March 2023, underscored the urgent need to limit global warming to 1.5°C with rapid, equitable, and inclusive decarbonisation of global systems to reduce the negative impact on ecosystems, biodiversity, and human societies. Collective awareness and collaboration by countries and businesses on climate action can therefore support the development of a liveable and sustainable future by the end of the century.
Our Temasek Geometric Expected Return Model, or T-GEM, simulates the range of possible returns for our portfolio over the next 20 years. These simulations indicate that a High Ambition Climate Change agenda will deliver environmental and social benefits. Our T-GEM model highlights that the High Ambition scenario is compatible with our aim of doing well, doing right, and doing good, to deliver better and more sustainable returns over the longer term horizon even as we benefit people and planet with ambitious carbon abatement actions. In contrast, the Low Ambition scenario of no further mitigation efforts will result in huge irreversible damages which will depress longer term returns in all markets.
As an active investor and shareholder
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. 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.
Temasek also evaluates sustainability-related risks and identifies opportunities in investments through our Environment, Social and Governance (ESG) framework. We incorporate sustainability-related assessments when evaluating all investment opportunities.
As a shareholder, Temasek works to understand issues that may impact our portfolio companies and how they might navigate them. We also engage our major portfolio companies regularly on their climate transition plans, as part of our efforts to achieve a decarbonised and carbon-efficient portfolio.
As a forward looking
institution
Temasek is committed to reducing carbon emissions and our overall environmental impact in the way we operate as a firm. Since 2020, we have delivered on our pledge to achieve carbon neutrality in our operations.
Temasek views its staff as its most important asset, and values diversity and the cross-fertilisation of experiences and ideas. We seek to create an inclusive and cohesive work environment that celebrates and values unique personalities, diverse perspectives, skill sets and experiences.
As a trusted
steward
Temasek fosters community partnerships and provides philanthropic gifts to Temasek Trust to support programmes that connect people, uplift lives, protect our planet and advance capabilities. Temasek supports the sharing of insights and best practices on sustainable development, with the aim of building a sustainable ecosystem across our portfolio with partners from business, government and civil society.
Sustainability Perspectives
Temasek regularly engages distinguished industry, policy, and thought leaders through our advisory panels and our network of corporate advisors for insights on business, financial markets, and global affairs. We also exchange ideas and share knowledge on a variety of topics with our partners and portfolio companies.
Temasek Sustainability Advisory Panel
The Temasek Sustainability Advisory Panel (TSAP) supports the sustainability strategy development of Temasek by bringing together eminent leaders with relevant policy, academic, and industry expertise. The advisors provide market insights, foster strong linkages with global sustainability networks, and engage with members of the Temasek ecosystem on sustainability-related challenges, such as climate change, nature conservation, social inclusion, and responsible technology.
Clean Energy Advisory Group
This group, which comprises eminent leaders in the clean energy space, engages members of the Temasek ecosystem on topics such as Carbon Capture, Utilisation and Storage; hydrogen; nuclear energy; fusion; and next-generation grids. Their discussions also focus on building an ecosystem centred around technology, policy, operations, safety regulations, and human capital development.
Sustainability Governance
At Temasek, part of our corporate governance framework ensures that we embed sustainability in all that we do — from our mandate to deliver sustainable value over the long term, to our strategy of how we operate as an institution, shape our portfolio, and engage our portfolio companies to build sustainable businesses.
Board Oversight
We operate in a complex global environment influenced by multiple geopolitical and socio-economic forces. Our Board Risk & Sustainability Committee (RSC) was established in January 2022 to enhance focus on opportunities and risks arising from sustainability trends, including climate change, and other financial, reputational, operational and cyber risks.
The RSC supports the Board in its oversight of our sustainability strategy, governance, policies, goals and targets, disclosures, and stakeholder management. The RSC also provides guidance on topical sustainability-related matters. The RSC coordinates with other standing Committees of the Board, such as the Audit Committee (AC) and the Leadership Development & Compensation Committee (LDCC), in its oversight of risk and sustainability matters, where relevant. For the financial year ended 31 March 2023, the RSC met six times during the year.
Senior Management Oversight
The senior management sets the tone and culture of our institution, leading the delivery of Temasek’s vision and mission. They oversee our team and portfolio with the support of the Senior Management Committee (SMC), Senior Divestment and Investment Committee (SDIC) and Strategy, Portfolio and Risk Committee (SPRC).
- The SMC reviews and sets overall management and organisational policies. They also developed the Temasek Code of Ethics and Conduct (T-Code) and constituted the Ethics Committee to assist in its implementation. All employees are required to observe and comply with the T-Code.
- The SDIC takes into account climate-related risks and opportunities as they decide on investments and divestments and make other decisions to manage and shape our portfolio.
- The SPRC oversees our ESG policy and the integration of ESG considerations, including climate change, in the firm’s strategy, investment, risk and operational management processes.
Functional Oversight & Partnership
Our Sustainability Group partners different parts of Temasek and our ecosystem to embed sustainability into everything that we do, as an active investor and shareholder, a forward-looking institution, and a trusted steward. The group initiates, develops and implements strategies to address climate change, and support Temasek to work towards a climate resilient net zero portfolio. It also works with both internal and external stakeholders to catalyse and invest for long-term climate positive impact, collaborate for global progress, and build a sustainable organisation for the future.
A dedicated ESG Investment Management function supports the integration of sustainability considerations in our investment activities. This function serves as a centre of knowledge for research, data and expertise on ESG issues, partners with investment teams to analyse material ESG issues, and engage with companies with the goal of future proofing our portfolio and uplifting ESG best practices.