Temasek commits S$5b of capital to new investment company focusing on decarbonisation
Janice Lim
IN LINE with its focus on sustainability investing in the last few years, state investment company Temasek has launched a separate investment company dedicated to decarbonisation solutions, and committed an initial amount of S$5 billion as its startup capital.
Called GenZero, the new investment platform will deploy this capital across 3 investment focus areas: technology-based solutions that seek to help organisations decarbonise, nature-based solutions that aim to protect and restore the Earth’s ecology, and solutions that support the development of a carbon ecosystem.
Speaking at its launch on Monday (Jun 6), GenZero’s chief executive officer designate Frederick Teo said that the investment platform will adopt a flexible investment approach and look at viable solutions from early-stage companies, as well as commercially-ready technologies from mature companies.
Companies developing solutions that could potentially have a climate impact, are commercially scalable to ensure financial returns or are in need of catalytic capital, are GenZero’s broad investing parameters.
“We have a slightly broader sweet spot. But clearly, we’re not going to be investing in solutions that are currently in the lab that is not yet ready, or we cannot see a pathway to creating climate impact. Similarly with extremely mature, and in some cases, already well funded (projects), then there may not be a need for GenZero to provide that kind of catalytic capital that we want to accelerate the deployment and development of solutions,” said Teo.
This flexible approach also means that GenZero does not have a target on the number of companies it plans to invest in nor a set amount of capital it needs to deploy over a certain time period, said Teo, who was speaking with The Business Times (BT) after the launch event. There is also no definitive time horizon for any particular investment, as these companies are in a nascent field where time is needed for their solutions to develop and mature.
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“We really cannot very clearly pick winners today. We don’t know what will be the solution that will make a difference, so we need to be open-minded,” said Teo, who is currently serving as the managing director of sustainable solutions at Temasek, before assuming his new role on Jul 1 this year.
Nevertheless, the climate crisis also means that “there is no time to do small stuff”, he said, and solutions that can achieve climate impact at scale will be what they are looking into.
“We are asking ourselves, for every tonne of climate impact I can achieve, how much money does it cost to do this? Is it scalable in a cost-effective way that there is a market for it that others are willing to pay?” said Teo.
Some of GenZero’s portfolio companies include bio-material manufacturer Newlight, non-governmental organisation Global EverGreening Alliance that supports farming communities in Kenya, as well as climate solutions company South Pole.
Teo said that “a good amount” of the S$5 billion capital has been deployed, but declined to elaborate further when probed by BT.
While there is a wide range of other climate-focused solutions in the market, such as water and waste management, Teo said that GenZero will focus on those that have a direct carbon impact.
Decarbonisation is gradually developing into a specialist investment discipline as carbon becomes a defining part of business models, said Temasek chief sustainability officer Steve Howard at the launch event. This is also why it has decided to set up GenZero as a specialist investment platform, even though sustainable investing is already on Temasek’s agenda in the last few years.
“In the last 2 years, capital markets have really woken up on climate change... We are now in a world where net-zero (carbon emissions) is becoming the new normal,” said Howard.
Challenging the longstanding idea that sustainability and financial returns are trade-offs against each other, he said that there isn’t a choice to be made between delivering climate impact or achieving financial returns, and that GenZero seeks to achieve both in its investments over the long term.
“If I look at it from that time horizon, 10, 15 years up, I may be able to get up financial returns, and I certainly can get my climate impact. So it’s a question of perspective on time horizons. If you take a very short-term view, nothing will get done,” he said.
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