Inclusive Capitalism Case Study: Temasek

Temasek Overview

Incorporated in 1974, Temasek is a global investment company headquartered in Singapore and a Steering Committee member of the Council for Inclusive Capitalism. Supported by 13 offices across 9 countries, Temasek owns a S$389 billion (US$288 billion) portfolio as of March 31, 2024, mainly in Singapore and the rest of Asia.

Temasek is a Purpose-driven organisation, and its Purpose – “So Every Generation Prospers” – articulates its aspiration to help every generation thrive by empowering the well-being of its people, portfolio companies, partners, communities and the planet that we share as a common home.

Sustainability is a core pillar of Temasek’s strategy and is embedded in everything that Temasek does – from its mandate to deliver sustainable returns over the long term, to its strategy of how it operates as an institution, shape its portfolio, and engage its portfolio companies to build sustainable businesses.

Inclusive Capitalism in Action: Temasek’s Approach

Temasek sees sustainability-focused investments as essential for long-term value creation and continues to expand in this space.

Rohit Sipahimalani, Chief Investment Officer, emphasizes this shift:

“Our exposure to the Sustainable Living trend is steadily growing as we see more innovation and significant opportunities in this space. There is no doubt that if we don’t invest in businesses that are aligned with sustainability principles, it is going to be very difficult to sustain returns because there are no long-term trade-offs between the two.”

Temasek’s approach demonstrates how sustainability and financial performance can be mutually reinforcing, setting a model for institutional investors. Its commitment to investments and partnerships highlights the importance of capital and collaboration as powerful drivers of systemic change.

In 2024, the Council for Inclusive Capitalism highlighted Temasek’s Sustainable Living portfolio as a prime example of operationalizing Inclusive Capitalism. This case study illustrates how strategic investments can drive both financial returns and measurable environmental and social impact, reinforcing the importance reporting and transparency play in today’s investment landscape.

Case Study Overview: Temasek’s S$44 Billion Sustainable Living Portfolio

“The climate and nature emergency is real. And it is the race of our lives to tackle it. Fortunately, it is a solvable problem. But it’s on our watch. It’s our generation. It’s our best efforts. And with radical collaboration, we can do it.”

These urgent words from Steve Howard, Vice Chairman of Sustainability at Temasek, set the stage for one of the most significant developments in sustainable finance this past year. In 2024, Temasek unveiled its S$44 billion (US$32.6 billion) Sustainable Living portfolio, constructed based on a trend-aligned investment strategy focusing on future growth sectors and business models in key areas such as food, water, waste, energy, materials, clean transportation, and the built environment. This portfolio, announced as part of Temasek’s annual review and inaugural sustainability report, underscores how large institutional investors can integrate inclusive capitalism principles while tackling global climate challenges.

While wholly owned by the Singapore Government, Temasek operates independently on commercial principles, managing its assets with full discretion. This structure allows Temasek to make long-term, patient capital investments in high-impact sectors, demonstrating that sustainability and financial growth are not mutually exclusive.

By leveraging its unique position and resources, Temasek is setting a new benchmark for climate-focused investing, mobilizing capital at scale to accelerate the global transition to a more sustainable economy.

Temasek’s Sustainable Living Trend-Aligned Portfolio

Temasek’s investments span a diverse range of companies at the forefront of climate solutions, such as in areas supporting clean energy, electrification, and industrial transition.

• Mahindra Electric Automobile: Supporting the expansion of its electric vehicle portfolio and accelerating EV adoption globally, while also stimulating job creation in the sustainable transport sector.
• Electric Hydrogen: Providing crucial funding to scale up clean energy technologies, bridging the gap between promising innovations and commercial viability—a key challenge in the clean energy transition.
• Neoen: Advancing renewable energy projects through cross-border collaborations, combining Temasek’s long-term investment horizon with Neoen’s operational expertise.
• Sembcorp Industries and Topsoe: Supporting the transition of hard-to-abate sectors, demonstrating how engaged shareholders can help high-emitting industries pivot toward more sustainable business models.

Beyond financial returns, these efforts enable job creation, foster community resilience, and contribute to global climate goals, reinforcing Temasek’s commitment to tackling climate challenges and creating a more sustainable future.

Q&A with Temasek

From investments in climate tech innovations and impact-focused solutions, to engaging its portfolio companies to encourage sustainable transformation and decarbonization, Temasek continues to set new benchmarks in sustainable finance.

How does a global investor like Temasek translate sustainability commitments into measurable impact?

In this Q&A, Temasek shares how it seeks to drive real-world change — through its investment activities, strategic partnerships, ecosystem contributions, and stakeholder and community engagements.

Read on to understand how the company’s efforts are in line with Inclusive Capitalism, ensuring that capital deployment is also in support of long-term climate and social progress.

Q: Can you share more about your S$44 billion Sustainable Living portfolio, and how that has evolved over the years?

A: Since 2016, we align our investment activities to four structural trends, to construct a portfolio that is resilient. One such trend is Sustainable Living (SL trend), which focuses on companies that seek to fulfill environmental and/or social objectives, as well as those that will benefit from sustainability tailwinds.

We have been consistently stepping up on investments that are aligned to this trend – we deployed S$3 billion into companies aligned with this trend over the last financial year.

We also refined our proprietary classification framework for SL trend investments by referencing global taxonomies and industry practices during the last financial year. The framework lays out the criteria for:

• Sustainability-focused investments – Companies with products and services that contribute positively towards our long-term vision of net zero, nature positive, and inclusive growth.
• Climate Transition investments – Companies in high-emitting sectors that are looking to transition to products and services that contribute positively to climate objectives.Temasek’s Sustainability-aligned investments worth $44 billion

Over the years, the energy transition has given rise to new industries and markets. We have therefore been steadily deploying capital to catalyze solutions that seek to accelerate the energy transition and enable decarbonization across key sectors, be it through the advancement of hydrogen technologies, energy-efficient solutions, or alternative production processes in hard-to-abate sectors.

Some examples include companies across the hydrogen value chain, such as:

• Caelux – A US-based perovskite solar technology company developing low-cost solar power
• Form Energy – An iron-air battery technology developer building cost-effective multi-day storage solutions to address intermittency of renewable energy
• Topsoe – A global provider of catalysts and advanced technologies, that is developing high-temperature electrolyzers suited for integration with a variety of downstream processes so green hydrogen can be utilized more efficiently
• Electric Hydrogen and Verdagy – US-based companies that manufacture, deliver, and commission electrolyzers for critical industries to produce low-cost green hydrogen
• Stegra (formerly known as H2 Green Steel) – A Sweden-based company that aims to accelerate the decarbonization of the steel industry using green hydrogen
• Amogy – A US-based technology company that offers miniaturized ammonia cracking systems and integrated ammonia-to-power solutions for maritime and distributed clean power applications

We also invested in electrification solutions across the battery value chain, as well as electric mobility and EVs, including:

• BYD – A pioneer EV and battery manufacturer in China
• Mahindra Electric Automobile – An India-based company that manufactures four-wheeler passenger EVs
• Ola Electric – An India-based electric two-wheeler manufacturer

Q: What specific standards, frameworks, benchmarks, or methodologies does Temasek reference for reporting and disclosures? How do these practices enhance stakeholder trust and engagement?

A: As an exempt private company, Temasek is not required to disclose financial information. However, since 2004, we have published our annual Temasek Review, which serves as a public scoreboard of our business and performance. Our efforts on sustainability were previously shared through the Temasek Review.

We launched our inaugural Sustainability Report last financial year, as a reflection of our commitment to transparency and accountability. Our Sustainability Report takes into consideration, where possible, the disclosure requirements of the IFRS Sustainability Disclosure Standards S1 and S2 (ISSB Standards) issued by the International Sustainability Standards Board (ISSB). We remain committed to advancing the ISSB’s global baseline standards on climate and will look to progressively expand our sustainability disclosures to achieve further alignment to the ISSB Standards and other relevant standards in the coming years.

We also integrate an Environmental, Social and Governance (ESG) framework across our investment process, from pre-investment due diligence to post-investment engagement. This enables us to:

• Better manage material risks
• Engage our portfolio companies to advance ESG practices
• Strengthen portfolio resilience and alignment with our sustainability objectives

This includes:

• Internal carbon pricing: We embed the cost of carbon in our investment and operating decisions to further align our portfolio and business to our net zero target. In 2024, we increased our internal carbon price by 30%, to US$65 per tonne of carbon dioxide equivalent, and we expect to progressively increase this to US$100 per tonne by the end of the decade. Our internal carbon price is reviewed every two years and takes into account the carbon price projections by international bodies.
• Measurement tools and frameworks: Third-party climate modeling tool – Used to monitor climate-related risk at the asset level for our listed portfolio and significant unlisted holdings. In-house measurement, reporting, and analytics tool – Provides sector and market dashboards for portfolio carbon analytics and reporting.

Q: How else does Temasek invest for inclusive growth?

A: Guided by our commitment towards sustainable and inclusive growth, we have a dedicated Impact Investing team, whose mandate is to generate positive impact for underserved communities in emerging markets in Africa, Asia, and Latin America, whilst also achieving sustainable returns over the long term.

Our investments in impact funds and businesses aim to address basic needs, improve livelihoods, and build resilience of underserved communities.

We have invested in various impact funds, including LeapFrog’s Climate Fund, which addresses climate change in Africa and emerging markets in Asia; ABC Impact’s Fund II, which strives to generate positive social or environmental outcomes in Asia; and other impact funds managed by Elevar Equity, Quona Capital, and AXA IM Alternatives.

We are also invested in SarvaGram, a company providing financial and productivity-enhancing solutions to rural households in India.

Q: How else does Temasek support the wider community, to foster inclusivity and resilience?

A: Temasek believes that building social capital can help foster a more inclusive and resilient world, so that every generation prospers.

Temasek Trust, our philanthropic arm and the primary beneficiary of Temasek’s community gifts, disburses grants for programs to be developed and delivered by our non-profit ecosystem, including Temasek Foundation; Temasek Life Sciences Laboratory; Stewardship Asia Centre; and Mandai Nature. To date, Temasek’s gifts to Temasek Trust have impacted about 3.7 million lives across Singapore and beyond.

Beyond the efforts of Temasek Trust, Temasek also works with partners from the public, private and people sectors to advance our community objectives.

Key community initiatives include:

• Pilot funding scheme for impact enterprises: We have launched a pilot funding scheme to support impact enterprises that seek to achieve social objectives while operating in a financially sustainable manner. This highlights our belief that social and financial outcomes need not be mutually exclusive.Under this scheme, we will provide recoverable grants to help impact enterprises scale their impact and operations, and our staff will also provide mentorship to empower these enterprises to achieve self-sufficiency.
• T-Spring: S$150 million workforce development gift: We have also gifted S$150 million to the community to advance capabilities and prepare Singapore’s workforce and organizations for the future. The gift supports:
  
  • Skills development
  • Scholarships and fellowships

  This initiative acknowledges human capital as the driver of our journey and its role in Singapore’s success.

Conclusion: Inclusive Capitalism in Practice, Driving Sustainable Impact for Future Generations

Temasek’s approach aligns with the principles of Inclusive Capitalism, demonstrating how long-term value creation, environmental responsibility, and social impact can be integrated into investment strategies. Through sustainability-focused and climate transition investments, Temasek contributes to addressing global challenges such as climate change, resource scarcity, and economic inequality. Its focus on a net-zero future, social equity, and transparent reporting reflects a broader movement toward aligning profitability with positive societal outcomes.

Footnotes:

¹ As reported in Temasek’s 2024 Sustainability Report: https://www.temasek.com.sg/content/dam/temasek-corporate/sustainability/temasek-sustainability-report-2024.pdf

² The quote from Lynn Forester de Rothschild is taken from her remarks at the 2023 B20 India event, during a panel discussion on ‘Financing the Climate Transition’. The recording can be viewed here: https://www.youtube.com/live/zRvt_fgbQR0

³ This estimate is from BloombergNEF: https://about.bnef.com/blog/the-7-trillion-a-year-needed-to-hit-net-zero-goal/

⁴ As reported in Temasek’s July 9 2024 Media Release: https://www.temasek.com.sg/en/news-and-resources/news-room/news/2024/temasek-review-2024-389-billion-net-portfolio-value

⁵ The comparisons provided are estimated using the US Environmental Protection Agency’s Greenhouse Gas Equivalencies Calculator Calculations & References. These figures are based on US averages and are intended to provide relatable context for the emissions reduction. They are not part of Temasek’s official reporting.