Four keys that could unlock a better, more sustainable world

In a time of doubt and cynicism, particularly on global climate change efforts, localisation specialist Emma Wong’s steadfast idealism is inspiring.

Like many of her peers, Ms Wong, 25, refuses to buckle under the relentless drumbeat of climate doom, holding fast to the belief that it is not too late to fix our warming planet. She takes small actions in her daily life — like introducing more plant-based protein into her diet — to support the global environmental movement in her own way.

Her passion for the environment has even rubbed off on her family, inspiring them to actively recycle. Ms Wong, who lives with her parents and a younger sister in a condominium, shares: “At home, we have sorting bins in our kitchen, and it is interesting to see how we have all learnt to take apart packaging and sort them appropriately.”

Yet she is grounded by the knowledge that the actions of individuals like her are simply not enough. More needs to be done urgently.

“I think it’s important for those with strong financial influence to stand behind companies that are trying to help solve the world’s sustainability problems,” says Ms Wong.

“The floods in Europe and Asia, the dangerous typhoons, and here, more extremely hot days and heavy downpours with flash floods — these are real reminders of climate change. We can’t afford to ignore the signs anymore.”

The recent surge in the number of companies setting climate targets and committing to secure the future of our planet suggests that the private sector is taking notice, as consumers like Ms Wong increasingly expect them to contribute towards climate action.

The bigger the brush, the broader the impact

In August, the United Nations’ (UN) Intergovernmental Panel on Climate Change (IPCC) released its starkest warning yet about climate change. 

UN secretary-general António Guterres called it a “code red for humanity”, urging governments, businesses and individuals to work together to limit global average warming to 1.5 deg C above pre-industrial levels.

To do so, the world will need to reach net-zero emissions — when the total amount of greenhouse gases produced by humans equals the amount removed.

Experts, however, warn that governments and corporates must have a concrete plan to achieve these targets.

One company that has developed a road map to help it shape a better, more sustainable and liveable future is investment company Temasek. With a net portfolio value of S$381 billion as of 31 March 2021 and an active investment pipeline, Temasek is in a prime position to be a catalyst for meaningful change.

“We must find better ways to inform, educate, persuade, and change mindsets so that people understand we are running out of time,” said Temasek’s Chairman Lim Boon Heng, speaking at the Ecosperity Week sustainability conference in September.

But how can a state investment company make a difference to your real-world lives, your future, your livelihood? 

The answer lies in the four trends that guide its investment activities: Digitisation, Sustainable Living, Future of Consumption and Longer Lifespans. These trends are interconnected and cut across sectors with the same destination in mind — to build a resilient world for future generations.

Take Temasek’s investment in micro-irrigation company Rivulis for example. Its water-saving technologies empower farmers to manage this finite resource more effectively — a digital solution that enables sustainability.

So why is Temasek doing this? “We aim to deliver a more sustainable portfolio, one which can deliver beyond this decade, and one which leans forward for a better and more liveable world, for generations to come,” explains Mr Chia Song Hwee, deputy CEO of Temasek.

The strategy is purposeful: Investing today, with tomorrow in mind.

For Ms Wong, a better tomorrow is one where people are more conscious of how they live and more considerate of their impact on the planet. “We must look after what we have been given for those who come after us to enjoy.”

Temasek shares a similar vision of shaping a liveable world for this and future generations.

Emphasis on ESG considerations

Besides the four structural trends and its risk management framework, Temasek also incorporates environmental, social and governance (ESG) considerations in its investment processes.

This is crucial, as Temasek believes that “generating sustainable returns over the long term depends on stable, well-functioning and well-governed social, environmental and economic systems”.

One recent change to its ESG framework is its increased focus on carbon emissions.

The company has set an initial internal carbon price of US$42 (S$52) per tonne of carbon dioxide equivalent to guide its investment analyses. 

Temasek says it will refine its carbon pricing strategies in the coming years, likely with the carbon cost increasing.

The company is working towards two climate goals: To reduce the net carbon emissions of its portfolio to half the 2010 levels by 2030, and achieve net-zero carbon emissions by 2050.

How did Temasek decide on these four structural trends? How do you personally relate to them?

We actively shape our portfolio around how we see the world in future years: A world that must become more sustainable, and can become so, if we help emitters to change their business models and invest in solutions to transform.

The changes, and opportunities, from these four trends resonate strongly with me because I see these as reasonably secular.

They will continue to drive social and economic progress through cycles and events, because of the fundamental changes that are occurring across the world: Population growth, income distribution, technological innovation and addressing climate change are key drivers of these trends.

What is the growth potential of these trends, and how do you see them converging?

These trends are fundamentally changing the way we live, work and in many cases now, co-exist between the two.

Digitisation and Sustainable Living are cross-sectoral trends that have a pervasive impact across many sectors, as well as on the business models of emerging and established businesses.

Meanwhile, the two other trends, Future of Consumption and Longer Lifespans, reflect structural shifts in consumption patterns and growing needs of longevity arising from our population growth and longer expected lifespans.

I am especially excited to see how the trends interplay with each other in our investments, as we move towards a post-pandemic world.

Besides these four trends, what else is Temasek focusing on?

Sustainability, which is at the core of everything we do at Temasek.

As a company, we have delivered carbon neutrality for the past two years, and have continued to maintain this status this year. We are also committed to reducing the net carbon emissions attributable to our portfolio to half the 2010 levels by 2030, on a path to achieve net-zero carbon emissions by 2050.

We have developed a three-pronged approach towards building a sustainable future: investing in climate-aligned opportunities, enabling carbon negative solutions, and encouraging decarbonisation efforts in businesses.

Examples include various partnerships we form to catalyse and multiply our efforts on our journey to decarbonisation, such as our joint venture with DBS Bank, Standard Chartered and the Singapore Exchange (SGX) to establish Climate Impact X, a global exchange and marketplace for high quality carbon credits.

Can Singapore companies benefit from these four trends?

Yes, but the benefits will require work on their part to build their own business models that align to the relevant future trends.

For instance, building a more sustainable business, or developing products and services that help meet the needs of an ageing population.

These will drive benefits similar to those we are seeking to unlock by investing around these trends.

What motivates Temasek to invest today, with tomorrow in mind?

We do things today, with tomorrow in mind, because we want to remain relevant and alive to future challenges beyond our own generation.

This means we are very mindful about creating flexibility and options for our successors to thrive, even as we deliver today.

We are more than just an investor; we are a provider of catalytic capital.

We catalyse a sustainable future, for future generations, by investing using four kinds of capital: Financial capital to stimulate innovations and spur sustainable growth; human capital, to build people, capabilities, and human resilience beyond the Workforce 4.0 goals; social capital to transform lives for a more inclusive and resilient society; and natural capital for a more liveable world.

This is the first of a four-part series brought to you by Temasek.

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