Temasek increases internal carbon price to US$50 per tonne of emissions amid net-zero push
Janice Lim
TEMASEK will be increasing its internal carbon price from US$42 per tonne of carbon dioxide to US$50 this year to inform its investment decisions, with plans to raise it to US$100 per tonne by the end of this decade.
An internal carbon price creates a theoretical or assumed cost for every tonne of carbon emissions, to better understand the potential impact of any future external carbon pricing on the profitability of an investment.
The state investment company also reiterated on Tuesday (Jul 12) that a portion of their staff’s long-term incentives will be aligned with their 10-year carbon targets, which is to halve its net carbon emissions among its portfolio companies by 2030 from its levels in 2010, and achieve net-zero emissions by 2050.
This means that by 2030, its total net portfolio emissions have to be reduced to 11 million tonnes of carbon dioxide equivalent, said Lim Ming Pey, managing director of Temasek’s strategy office, at a media conference on the same day.
Temasek’s total portfolio emissions stand at 26 million tonnes as at Mar 31 this year.
Temasek’s plan to increase its internal carbon price was announced alongside its net portfolio value for the financial year ending Mar 31 this year. Its net portfolio value increased to S$403 billion, crossing the S$400 billion threshold for the first time.
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The S$22 billion increase in portfolio value from S$381 billion in the previous financial year ended March 2021 comes after the state investment firm posted a 1-year total shareholder return (TSR) of 5.8 per cent.
Elaborating on Temasek’s plans to meet its climate targets, Lim said Temasek will look to investing in companies focusing on climate change, enabling carbon-negative technologies and encouraging the ongoing decarbonisation efforts of its portfolio companies.
Russell Tham, head of strategic development at Temasek, also said the state investor has been actively advocating for better disclosure standards globally.
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Environmental, social and governance (ESG) considerations are also incorporated into Temasek’s due diligence in all its investments, noted Lim.
Despite these initiatives, Temasek had previously said that it will not set hard carbon targets for its portfolio companies, unlike the Norwegian state fund, which divested from five global coal firms in May 2020 based on stricter coal criteria.
When asked whether Temasek would adopt a harder stance towards carbon-intensive sectors for its new investments, Tham said that as a long-term investor, it assesses specific value chains when looking to construct a sustainable portfolio, instead of opting to cut out certain sectors.
However, Temasek’s chief investment officer Rohit Sipahimlani acknowledged that its new investments would have to be of lower carbon intensity for Temasek to achieve its climate goals. The 4 long-term structural trends — digitisation, future of consumption, sustainable living and longer life spans — Temasek relies on to make its investments are low-carbon intensive to begin with.
Nevertheless, Sipahimlani said that Temasek also wants to invest in some sectors or companies that are currently carbon-emitters today, but are working on a transition to be low-carbon emitters.
This is why Temasek’s carbon emission levels will not decline steadily, but may see an increase over certain periods in the future.
“We may invest in carbon-emitters today which could see emissions go up, with the idea of reducing it further,” he added.
Dr Steve Howard, Temasek’s chief sustainability officer, said in a press release on Tuesday that it is making “good progress” with its decarbonisation initiatives.
“Given the urgency, scale and breadth of the necessary transitions, governments, corporations and investors need to work together to define transition roadmaps as well as promote and drive adoption of new solutions,” he added.
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