Don’t misinterpret Temasek as giving up on its net-zero ambition, say executives

[SINGAPORE] The unlikelihood of Temasek hitting its 2030 decarbonisation targets should not be misinterpreted as an indication that the Singapore investment company is giving up on its net-zero ambitions, said its chief sustainability officer Park Kyung-ah.

“The destination and our ambition have absolutely not changed... If anything, I would argue we’re working even harder. So we’re not taking the foot off the pedal, if at all,” said Park, who was speaking to The Business Times on the sidelines of the recent release of its sustainability report.

“We are pressing down, but you know the speedometer is not moving as fast as we’d like,” she added.

She was responding to a question on whether Temasek’s announcement that it was unlikely to meet its 2030 interim targets could send a wrong signal to other companies and investors pursuing net-zero ambitions.

“The message of giving up or taking a foot off the pedal is the wrong message. But the reality is, even though our destination ambition has not changed, it’s an acknowledgement that the operating context has. And that’s just a pure reality... I’d hate for people to misinterpret it and say Temasek is giving up,” said Park.

Temasek’s chief executive Dilhan Pillay said in May that the low-carbon transition had become more complex and uneven than initially anticipated when it first set its net-zero targets in 2019.

He had highlighted that Singapore Airlines and Sembcorp faced several structural constraints in their respective sectors that impeded their decarbonisation, and were the main reasons Temasek was unlikely to meet its 2030 net-zero targets.

Reiterating Pillay’s point, Park said the low-carbon transition is affected by many external factors beyond Temasek’s control – whether it was policy framework, cost of capital, the enabling infrastructure and getting the ecosystem to work in concert.

Franziska Zimmermann, managing director for sustainability and climate change at Temasek, said that the investment company’s acknowledgement should be more seen as a call to action.

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“Acknowledging that a single company, even if you’re as willing as you are, there’s limitations to what you can do on your own. It really needs the system to move along with you as well,” she added.

Zimmermann also added that Temasek is not just focusing on managing the portfolio emissions target, but also about real-world decarbonisation.

The investor had previously said that it aimed to halve its portfolio emissions from 2010 levels to 11 million tonnes of carbon dioxide equivalent (tCO2e) by 2030, with the eventual goal of reaching net-zero emissions by 2050.

The latest sustainability report showed that its portfolio emissions stood at 21 million tCO2e, unchanged from the previous year.

“What we really care about is the real economy. I think the industry is more and more understanding that pure absolute emissions number at the portfolio level may not be the most effective measure of progress,” said Zimmermann.

Investing in nuclear

As for its investment approach towards energy transition, Nagi Hamiyeh, president of Temasek Global Investments, said that nuclear is expected to play a big role.

“When you look at base load, nuclear is probably the cheapest and most abundant after hydropower... There is limitation in terms of how much hydro you can use. So we do believe that nuclear will play a role.

“You have several technologies from SMRs (small modular reactors) or other reactors whereby we think can be installed faster than used to be the case before,” he added.

Base load refers to the minimum level of power that needs to be supplied constantly to meet the demand a country needs.

Temasek has already invested in nuclear services provider Westinghouse and nuclear fusion startup Commonwealth Fusion Systems.

Energy security considerations, which became more prominent after the Iran war, also mean there is a need to diversify investments in alternative energy sources, and should not just be singularly in solar and wind projects with storage.

Nevertheless, Hamiyeh said Temasek will continue to invest quite heavily in such projects as these are very cost-competitive with no technology risk.

“One, from a commercial returns perspective, we’re very happy with the risk-adjusted returns that come from these. Two, these are highly scalable. So, to meet our targets – and they are very aligned with our long-term target – we can achieve a lot by doing that,” he said.