Sustainability on the verge of becoming ‘very economically impactful’: GIC group CIO

SUSTAINABILITY investments are on the cusp of becoming “very economically impactful” as the effects of climate change are becoming more obvious, GIC’s group chief investment officer Dr Jeffrey Jaensubhakij said.

He cited the heat waves sweeping Europe currently, and said they are “no longer a sort of once-in-a-century type of event” and have rather become an annual occurrence.

Such shifts are going to push governments to react and take regulatory measures to force certain climate mitigation behaviours, he said, as he noted that the Singapore sovereign wealth fund is ensuring that its portfolio is able to withstand such regulatory uncertainties. 

To this end, GIC is actively investing in new technologies such as green hydrogen, carbon removal, and even nuclear fusion. 

Dr Jaensubhakij was speaking at a briefing held in conjunction with the release of GIC’s latest annual report on Wednesday (Jul 27). The report shows its annual return averaging at 4.2 per cent — above global inflation rate — over the 20-year period to Mar 31 this year. 

GIC’s sustainability investments include Climeworks, a Swiss company specialising in carbon dioxide air-capture technology, and InterContinental Energy, which is pioneering green hydrogen production at scale in Western Australia, Oman and Saudi Arabia.

It also has a stake in Miotech, a China-focused sustainability data and analytics platform that provides subscription-based ESG (environmental, social and governance) data to financial institutions and corporations.

Also in the mix are Duke Energy Indiana, a subsidiary of Duke Energy, one of the largest US utility holding companies; AC Energy, the renewable energy platform of Ayala Group, the oldest conglomerate in the Philippines; and zero-carbon building 100 Liverpool Street.

Given that some technologies these companies are involved in are still new, many of these investments are “relatively small”, Dr Jaensubhakij said. 

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In driving the low-carbon transition, GIC’s broader effort is in engaging its wider pool of investees and supporting their transition efforts. 

Guiding this is a goal to accelerate the decarbonisation of the real economy, GIC chief executive officer Lim Chow Kiat said, but said that GIC divests only as a last resort.

“As an investor, you could… change the composition of your portfolio to reduce the carbon intensity. We don’t find that particularly helpful if that is your first resort, because you are just passing the high carbon-intensive assets to other investors,” he said. 

“Maybe over time at the margin, that would help, but that’s really not the best solution.”

Asked if GIC gives its investees specific timelines to transit, Lim said it depends.  “Every business in every jurisdiction has different kinds of challenges. But we certainly engage with them, at least the selected ones…especially those that we have a higher shareholding. We would explain to them the importance of this,” he said.

Meanwhile, GIC announced that it set up a dedicated sustainability office in June to deepen its research into key sustainability issues and push to integrate sustainability into all its investment and corporate processes. 

“As we enter the next phase of our sustainability journey, integration work is set to become far more complex, and will require deeper and broader coordination across GIC,” a spokesperson said.

The unit was set up to meet this challenge. It is led by Rachel Teo, who is both head of sustainability and head of total portfolio sustainable investing in the economics and investment strategy department at GIC.