Temasek shuns hard carbon targets in divestment decisions

SINGAPORE state investor Temasek Holdings does not set hard carbon targets that its portfolio companies must meet to avoid divestment.

As the group doubles down on fresh climate-aligned opportunities, it will, at the same time, work with existing portfolio companies on their decarbonisation journey, said Nagi Hamiyeh, Temasek International's investment group joint head and head of portfolio development.

Speaking at a virtual media conference on Tuesday, he noted that Temasek's carbon-avoidance approach differs from Norway's sovereign wealth fund, which divested from five global coal firms in May 2020 based on stricter coal criteria.

"If our investee companies are trying to decarbonise and we can be helpful, we'd rather do that, because being serious about sustainability is not pushing the problem to somebody else. We'd rather deal with it ourselves," said Mr Hamiyeh.

This comes even as Temasek has set an initial internal carbon price of US$42 per tonne of carbon dioxide equivalent - likely to increase in the coming decade - to guide its investment decisions.

It remains "open" to investing in carbon-emitting firms where appropriate, "as long as we have a clear line of sight to the decarbonisation journey", said Mukul Chawla, Temasek International's joint head of TMT and joint head of North America.

"The journey is in fact what we would like to partner with companies on. We would like to support them there," he added.

For example, a Temasek Portfolio Companies Sustainability Council has been set up to share knowledge and tools for carbon measurement, physical climate risk assessments and climate-related disclosures.

Sustainable living is one of four key trends that are increasingly shaping the group's portfolio, as part of broader ambitions to reduce net carbon emissions of the portfolio to half the 2010 levels by 2030, and ultimately deliver net zero carbon emissions by 2050.

In the financial year ended March 31, 2021, Temasek had invested in Rivulis, an Israel-based company providing water-saving technology solutions to farmers worldwide; and Solugen, a US-based chemicals manufacturing platform that aims to decarbonise the chemicals industry, to name a few.

"We invest globally wherever there are trend-aligned opportunities," said the group, which maintained its carbon neutrality status last year.

While overall numbers were not disclosed, Mr Hamiyeh said Temasek has invested "tremendously" in sustainability across all sectors.

Investments in the agri-food space, for instance, amounted to roughly S$5 billion over the last decade. In the new energy sector, the group had mainly invested in renewables and carbon capture solutions.

It adopts a three-pronged approach on the climate and carbon front: investing in climate-aligned opportunities, enabling carbon negative solutions, and encouraging decarbonisation efforts in businesses.

"When we look forward, in terms of our journey, we see that sustainability is going to be at the core of everything we do. I cannot give a number, but I can assure you that it's going to be trending towards (more) investments in this area," Mr Hamiyeh told reporters.

Temasek made a one-year total shareholder return (TSR) of 24.5 per cent for the 12 months ended March 31, 2021, in an active year of acquisitions and divestments that also had it gaining from investments that went public.

This compared with the -2.3 per cent TSR posted in the previous fiscal year when Temasek's portfolio was hit by the sharp correction in March 2020, with most equity markets tumbling then as a pandemic rippled across the globe.

In its annual review released on Tuesday, Temasek reported that its net portfolio value grew to S$381 billion from S$306 billion in the previous fiscal year on a Sing-dollar conversion basis.

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