Temasek is standing behind its portfolio companies in 'hard-to-abate' sectors, by supporting their carbon abatement actions.
Singapore’s state-owned investment giant will bring relevant stakeholders, identify opportunities and technologies to aid decarbonisation and also look into monetising the emissions avoided.
Hard-to-abate sectors refers to sectors or businesses in which the transition to net-zero is not nearly so straightforward, because it either lacks the technology or its cost remains prohibitive.
Kyung-Ah Park head of ESG investment management and managing director of sustainability explained this approach by taking the example of a pilot partnership in the aviation industry.
“Temasek is firstly working with Singapore Airlines (SIA) and the Civil Aviation Authority of Singapore to bring blended Sustainable Aviation Fuel (SAF) into Changi airport. It is then also working with the other stakeholders including GenZero, Climate Impact X, and banks like DBS and Standard Chartered to get this SAF certified and monetised on a marketplace for high-quality carbon credit. This monetisation will bring down the green premium of SAF which is around 3-5 times and meet the scale-up requirements of this sector,” Park said.
“Given the flexibility we have with our investment approach, Temasek is looking to deploy capital in very early emerging technologies all the way to late stage to help growth," added Park.
"However, given as an asset owner we don’t do fundraising, Temasek is bringing in capabilities together through partners like Pentagreen Capital and Decarbonisation Partners, crowding in capital and looking to catalyse changes at a faster pace and larger scale.”
Park noted the idea that financial returns and positive environmental outcomes are mutually exclusive is an outdated one.
“Partnerships are happening at various levels to meet the challenges in hard-to-abate sectors. It is a massive challenge but also a great opportunity with economic benefits to be seized,” said Park.
Brookfield's Teskey echoed Park’s views, saying that a fundamental of its energy transition investment strategy is – let’s not pick opportunities that have a conflict on whether we prioritise returns or prioritise decarbonisations.
"We only seek out those opportunities where these two things are aligned.”
Fundraising has, however, become challenging as global central banks hiked interest rates to record highs.
Decarbonisation Partners’ Sharp said that while it is an “extremely challenging fundraising environment that exists, as an investor it is also a great time to be building a portfolio and investing. Companies are looking for great partners in this environment who do not provide just fast cheque but help the companies scale and grow their business.”
Some things are working in favour of decarbonisation.
“There is a recognition that the path to net zero is not just investing in what is perfectly clean and green but using large-scale dollars to help critical but carbon-intensive industries transition to more sustainable models," said Brookfield's Teskey.
There is a recognition that we will not get to net zero by 2025 or 2030 but let's use the capital to make a big impact today and figure out perfection over the coming 20 years."
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This story has been updated in para 5 to reflect Park's quote accurately.