Temasek sees decarbonisation shaping its investment approach

Decarbonisation and digitalisation are the fundamental trends that will reshape the business and investment landscape for the foreseeable future, according to Singapore’s state-owned investor Temasek, which is taking steps to ensure it capitalises on these trends.

“We are investors in new emerging technologies and providing risk capital where needed to support these transitions," Steve Howard, vice chairman of sustainability at Temasek, told AsianInvestor.

Howard spoke to AsianInvestor on the sidelines of its annual sustainability event Ecosperity Week, held in Singapore on April 15 -17. 

Steve Howard
Temasek

Howard said the shift towards sustainability and decarbonisation is not limited to the energy sector alone. It also includes industries like mobility (transportation), food and agriculture, and the built environment (construction and infrastructure).

Each of these sectors is at a different stage of transitioning to more sustainable practices, and their progress varies.

ALSO READ: SE Asia decarbonisation to create up to $150bn in investment plays 

FOCUSED ATTENTION

The state investor is building internal knowledge and capabilities, realigning its investment priorities, and setting up dedicated teams and platforms to invest in these areas.

The teams are also forming key partnerships to bring in external capabilities, shared Howard.

Temasek has set up GenZero, its decarbonisation investment platform, and together with DBS, SGX, and Stanchart, it also set up Climate Impact X, a marketplace for trading carbon credits.

The sovereign investor has also partnered with BlackRock for Decarbonization Partners to invest in proven decarbonisation technologies through late-stage venture capital.

ALSO READ: How Temasek's GenZero invests in nature-based solutions

“In a rapidly changing world driven by these megatrends, the future is becoming increasingly different from the past. This means leaning into new risks and embracing change is imperative,” Howard said. 

NEED FOR CARBON MARKET

Achieving long-term net zero is not possible without a functioning carbon market, according to Howard. 

Voluntary carbon markets are platforms where individuals and organisations can purchase carbon credits to offset their carbon footprints voluntarily.

These markets aim to encompass sectors not covered by compliance markets, creating a broader scope for carbon pricing and finance.

"Carbon markets are incredibly helpful for us to get to the lowest cost of tackling climate change. Carbon finance is a critical part of the capital stack. Even a modest carbon price can significantly impact the viability of projects or investments."

Despite its logical foundation, carbon finance remains challenging to implement, he added.

This is due to a variety of factors, including the complexity of carbon markets, regulatory uncertainties, and the need for standardised methodologies for measuring and verifying emissions reductions.

Additionally, the carbon finance landscape is constantly evolving, requiring continuous adaptation and expertise to navigate effectively.

BUILDING ECOSYSTEMS

Temasek is not just creating carbon markets — it is also focusing on the businesses that support them.

This includes technologies that need a carbon price to drive decarbonisation, such as sustainable aviation fuel.

“We're building ecosystems around project developers, verification technologies, and trading approaches, especially within nature-based solutions. These ecosystems are essential for the success of carbon markets and the broader goal of reducing emissions,” said Howard.

“We are investing in carbon capture storage technology, green hydrogen, green steel, and advanced batteries,” he added, elaborating on deploying capital in emerging technologies with explicit technology risk.

AsianInvestor will explore Temasek's views on digitalisation in an upcoming story.