Temasek marks 50th anniversary by setting aside SGD 100 million in Concessional Capital for Climate Action

Temasek, the global investment company, has marked its 50th anniversary this week by setting aside SGD 100 million in Concessional Capital for Climate Action (CCCA). This is capital meant for providing climate finance that will help countries reach the goal of Net Zero, a state that means “removing an equal amount of CO2 from the atmosphere as we release into it”, as defined by the World Economic Forum (WEF).

The global goal alongside achieving Net Zero is the “1.5ºC” target, which means limiting the rise in global warming to no more than 1.5ºC above the pre-industrial baseline. This is a tough goal to reach, unless all or most countries work together.

Lim Boon Heng, Chairman of Temasek, announced the CCCA on September 23, 2024, in his speech at the company’s 50th anniversary celebrations in Singapore.

Temasek said in a media release: “The battle for net zero will be won or lost in Asia, which hosts more than half of the world’s population and contributes more than half of global carbon emissions. Yet the region faces unique structural constraints and challenges that hinder the pace of progress.”

Temasek added: “Particularly in Southeast Asia, ambitious plans to decarbonise while building the industries of tomorrow concurrently would require the scaling of catalytic financing.”

It is a well-known fact that climate finance — the financing of projects that can help achieve the Net Zero goal — is often hard to come by. Market lenders may not have enough confidence in the returns generated by investments in green projects. A WEF blog dated June 25, 2024, explained: “Despite ambitious commitments, the global financial system has fallen short of providing the estimated $125 trillion needed to finance the climate transition to net zero by 2050.”

The blog added: “Breakthrough technologies like hydrogen and biofuels remain severely underfunded. Their high costs and associated risks significantly deter the mobilization of capital at the scale and speed needed — but their commercialization is crucial for the post-2030 emissions abatement.”

In this scenario, the Temasek CCCA “seeks to support climate action initiatives by providing more flexible, patient, and favourable financing…”, said the release.

“This will help to accelerate the green transition and open pathways towards the 1.5 degrees goal, in the process crowding in other forms of capital, whether commercial or concessional, to support marginally bankable opportunities,” it added.

According to the release, the CCCA corpus of SGD 100 million is “funded by Temasek’s community gifts, which aim to drive intergenerational impact aligned with our community objectives”.

“Since 2003, Temasek has been setting aside a portion of its net positive returns above its risk-adjusted cost of capital for gifts that meet the objectives of connecting people, uplifting communities, protecting planet, and advancing capabilities,” it said.

Climate change is the defining crisis of our time. At Temasek, we have been investing in sustainability across the years, and have deployed commercial capital to scale innovation for the green transition. At the same time, we see the criticality of concessional capital to catalyse financing into emerging markets and developing economies.

Lim Boon Heng, Chairman of Temasek

The media release quoted the Temasek chairman as saying, “Blended finance initiatives like the Monetary Authority of Singapore’s Financing Asia’s Transition Partnership (FAST-P) are key in lining up long-term investors and philanthropic entities alongside commercial investors for this purpose.”

He said that through the CCCA, “we hope our community gift can contribute to concessional capital emerging as an asset class, to mobilise the varied forms of capital necessary to bridge the climate financing gap. We look forward to partnering other like-minded organisations to advance progress on this front, so that we can Do Well, Do Right, and Do Good together — for the prosperity of current and future generations.”

Mobilising capital to drive investments for green and inclusive growth

● BEV Select Fund (venture stage): Temasek took part in the Select Fund, under Breakthrough Energy Ventures, to help late-stage clean-tech startups and build new facilities in key markets, including Asia.

● Decarbonization Partners (growth stage): Temasek partnered BlackRock to establish Decarbonization Partners, which invests in late-stage venture capital and early-stage growth equity companies targeting de-risked technologies across clean energy, electrification, green materials, and a circular, digital economy.

● Partnerships with Brookfield (late growth and mature/established stage): Temasek invested in Brookfield Global Transition Funds (BGTF I and BGTF II) to expand clean energy production, provide decarbonisation solutions to transform carbon-intensive businesses, and scale decarbonisation solutions.

● GenZero (late-venture and late growth stage): Temasek established GenZero, an investment platform focused on accelerating decarbonisation globally, deploying capital across nature-based solutions, technology-based solutions, and carbon ecosystem enablers.

Examples of GenZero’s investments include a land restoration project in Ghana; sustainable aviation fuel-related technology companies such as Velocys; carbon removal technology companies like CarboCulture; and a carbon marketplace and exchange, Climate Impact X (CIX).

● LeapFrog Investments: Temasek committed to the LeapFrog Climate Fund, which focuses on investments in companies that provide green tools and technologies such as 2-wheeler EVs, rooftop solar providers, and smart farming businesses. The fund targets the energy, mobility, built environment and agricultural sectors. It aims to provide growth equity and distinctive expertise to fast-scaling consumer companies.

Mobilising capital to increase bankability of sustainable projects in Asia

● Pentagreen Capital: Temasek’s joint venture with HSBC, Pentagreen Capital, focuses on debt financing dedicated to accelerate the development of sustainable infrastructure in Asia. It aims to catalyse financing for marginally bankable clean infrastructure projects.

● Green Investments Partnership: Temasek collaborated with Allied Climate Partners, International Finance Corporation, and the Monetary Authority of Singapore (MAS) to establish the Green Investments Partnership, which aims to increase bankability of green and sustainable projects in Asia. This is part of FAST-P, a Singapore blended finance initiative.