Singapore’s Temasek Holdings has launched a new investment subsidiary GenZero with a start-up capital of S$5 billion ($3.64 billion) and the mandate to invest in projects and companies that will accelerate the process globally.
GenZero, wholly-owned by Temasek, will seek opportunities under three headings: technology-based solutions that aim to deliver decarbonisation outcomes; nature-based solutions that protect and restore natural ecosystems; and companies and solutions that support the development of an efficient, credible carbon ecosystem.
“GenZero expands Temasek’s focus on deploying capital to catalyse solutions for a better world,” said Steve Howard, chief sustainability officer at Temasek International at a media briefing to announce the launch yesterday (June 6).
He said achieving net-zero globally will require investments of around $5 trillion annually by 2030 to commercialise sustainable energy solutions, adding that GenZero will support Temasek’s efforts to halve its portfolio’s net emissions by 2030 and achieve a net-zero portfolio by 2050.
Frederick Teo, managing director of sustainable solutions at Temasek International, will become chief executive of the new company from July 1.
“GenZero is driven by the common purpose to decarbonise for future generations. Besides deploying capital, we will work with our investee companies to address operational challenges and accelerate the deployment of their solutions to achieve our shared net-zero target,” said Teo at the launch.
He said the answer to decarbonisation is likely to be a combination of approaches to meet the needs of different companies, industries, and economies.
“And that is the reason why GenZero is adopting a holistic approach to the way that we invest across the three focus areas - technology based solutions, nature-based solutions, as well as carbon ecosystem enablers,’ he said.
GenZero's mandate requires it to take a broad outlook in its investment strategy and allows flexibility to invest in companies at different lifestages, from startups to growth firms, across different industries, Teo told AsianInvestor.
The firm is also expected to invest in initiatives that aim to enhance the carbon ecosystem, such as the development of a reliable carbon credit trading system.
Teo said that sustainable aviation fuel (SAF) is a good example of a technology that is costly to develop and lacks the scale to be a viable energy alternative, but which could be used with other solutions to achieve results.
“If we are able to creditise SAF by selling carbon credits on the back of this, to be able to crowd in other sources of funding, and lower the cost of adoption itself, then, what we will see is we can accelerate the deployment of the solution sooner rather than later,” he said.
GENZERO'S FLEXIBLE INVESTMENT APPROACH
Genzero is likely to skew its asset allocation towards private equity initially because many potential tech-based and nature-based companies are new and unlisted though the field will open up to more opportunities with time.
“We are also able to deploy our capital flexibly. So that basically means that we are not just an early-stage investor or late-stage investor. We are able to do fund as well as direct. We can support projects, not necessarily just a company. So, there is actually a lot of flexibility in how we do this,” Teo said.
A portion of GenZero’s capital will be invested in technology-based carbon reduction and removal solutions such as low-carbon materials, carbon capture, utilisation and sequestration (CCUS), and advanced biofuels such as SAF, the company said in a press release, which detailed some of the investments it has already made.
The company has a stake in Newlight, a US-based manufacturer of biomaterial produced from methane to displace plastics and a joint venture with C-Quest Capital to deploy clean energy cookstoves to rural families in Southeast Asia to reduce carbon emissions.
On nature-based solutions, GenZero has partnered with Global EverGreening Alliance to improve the livelihoods of farming communities in Kenya through land restoration and tree planting. It has also invested in the New Forests Tropical Asia Forest Fund 2, which aims to develop sustainable forest plantation assets in Southeast Asia and support the region’s transition towards responsible forestry management.
To support carbon ecosystem enablers, GenZero has invested in global firm South Pole, which develops and implements emission reduction solutions for companies and governments. It is also working with Climate Impact X, a global carbon marketplace and exchange, which aims to establish a credible trading system in Asia.
GenZero, which has 20 employees, will look to build a team of between 30 and 40 people within a year, including secondments from Temasek and new hires with sustainability and policy regulation and standards expertise.