Temasek's GenZero: How to deliver big wins with decarbonisation

Transportation, carbon capture technologies and building and construction have the potential to generate large decarbonisation gains with targeted efforts, according to a senior company executive at GenZero.

“One area we are looking at is advanced biofuels, in particular sustainable aviation fuel,” Frederick Teo, CEO of GenZero, told AsianInvestor.

“In the case of the aviation industry, changing the fuel could account for more than 50% of the decarbonisation.”

Other parts of the decarbonisation will come from improved airframes, more efficient engines and the reduction of fuel consumption through operational efficiencies, Teo said.

Still, “fuel is a big part of the equation."

Aviation accounts for 2% of global carbon emissions but is considered challenging to decarbonise.

GenZero is the decarbonisation investment arm of Singaporean state investor Temasek.

It invests via funds and directly with project developers.

FUELLING SUSTAINABILITY

GenZero has been very active in promoting sustainable aviation fuel. In partnership with Singapore Airlines and the Civil Aviation Authority of Singapore, the Temasek unit completed  a 20-month pilot on testing sustainable aviation fuel in November 2023.

The government in February also announced a slew of initiatives, including that all flights departing Singapore will be required to use 1% SAF from 2026, subject to certain conditions.

That share of sustainable fuel is expected to rise to 3-5% by 2030.

GenZero was also among the investors in a $50 million funding round by US startup CleanJoule in May 2023 to produce high performance sustainable aviation fuel from agriculture residues and other waste biomass more cost effectively.

While the current focus is on aviation, the next target will likely be maritime, said Teo.

“These are the two major hard-to-abate transport sectors, because land transport is more or less economically viable to some extent.”

In the case of land transport, electric vehicles (EVs) will be important in the decarbonisation journey, he added.

SPOTTING MORE OPPORTUNITIES  

Another area of focus for GenZero is carbon capture and utilisation technologies.

“At some point, we will need to think about negative emission technologies that can take in carbon from the atmosphere,” noted Teo.

Negative emission methods include engineered solutions such as direct-air capture technology (capturing carbon dioxide at location) and natural solutions such as reforestation.

“I think the jury is still out on whether direct air capture makes sense in the long run,” he said, adding that in the near term, there are other technology solutions that can help with carbon reduction.

Biochar, for example, can sequester carbon from biomass waste in the soil and offers one possible solution, according to GenZero.

Biochar, a form of charcoal, is considered more efficient at converting carbon into a stable form and is cleaner than other forms of charcoal.

“We are also invested in a company dealing with bioplastics – they take captured methane from used coal mines and apply a microorganism to it which then turns it into a bioplastic that can replace conventional fossil fuel-based plastics,” Teo said.

Another area is materials for the built environment.

“For instance, exploring the use of green steel or green cement to replace conventional materials [is another decarbonisation solution],” he added.

“There is no limit to the number of interesting decarbonisation technologies and solutions.”

The buildings and construction sector is by far the largest emitter of greenhouse gases, accounting for 37% of global emissions.

The production and use of materials such as cement, steel and aluminium have a significant carbon footprint, according to several research reports.

ENGINEERING INNOVATION NEEDED

GenZero typically invests in novel ideas when they become scalable.  “We invest in ideas that are bit more tangible, where the total addressable market, in theory can be huge.”

“We are not investors that look solely at financial returns – we are also assessed by the kind of climate impact we can create and deliver.”

Each investment project goes through methodological assessments to effectively measure their climate impact.

"Every step of the way, we try our best to come up with an answer that is perhaps more conservative but robust for the purpose of performance testing,” Teo added.

While decarbonisation has become a buzzword among investors, the focus of decarbonisation solutions has for the large part, focused on the consumer end, usually in the form of smart heating and cooling systems or devices that improve energy efficiency.

“In our part of the world, a lot of early-stage unicorns tend to be consumer facing e-commerce platforms while many of the core engineering companies tend to come from the US or Europe,” said Teo.

“Digital and software solutions tend to refine and optimise existing processes for greater efficiency. But we also need core fundamental changes driven by new engineering solutions.”

Teo noted that the impact from digital solutions tend to be indirect in relation to decarbonisation.

“This region lacks core engineering projects with more direct climate impact, for example projects that are focused on carbon capture and utilisation. We need to think of how to catalyse the generation of such solutions in Asia,” said Teo.

One way of promoting innovative engineering and technological solutions in Asia is to improve the way technology is translated from universities to practical applications.

“Asia has excellent research and technology institutions. We need to foster more collaboration between industry and academia to better define the challenges faced by industries and direct research towards solving them,” he said, noting that this ensures academia is supporting research that yields concrete results.

“I would encourage young Asian people and companies to focus on engineering solutions,” Teo added.