Portfolio Metrics and Targets
We target to reduce the net carbon emissions attributable to our portfolio to half the 2010 levels by 2030, as we aim for net zero portfolio emissions by 2050.
Portfolio GHG Emissions Target
We established our target in 2020 with reference to the Intergovernmental Panel on Climate Change Fifth Assessment Report (IPCC AR5), which detailed the science-based pathways to limit global warming to 1.5°C, in alignment with The Paris Agreement. Whilst our target has not been independently verified, we keep abreast of and regularly evaluate methodologies and best practices in target setting to ensure that the target underpinning our net zero commitment remains ambitious and current.
Our net zero target, announced in 2020, was set through an internal process which ultimately culminated in Board sign off. Tasked with supporting the Board in oversight of our sustainability goals and targets, the Board Risk & Sustainability Committee (RSC) is responsible for reviewing the appropriateness of our emissions target and providing guidance where needed.
Due to the nature of our business as an asset owner and the diversified makeup of our portfolio, our emissions target does not disaggregate between the different greenhouse gases (GHGs). Instead, we quantify all emissions using tonnes of carbon dioxide equivalent (tCO2e)1.
The target is based on Total Carbon Emissions (tCO2e) as defined within the Task Force on Climate-related Financial Disclosures (TCFD) Supplemental Guidance for the Financial Sector. It reflects the absolute GHG emissions (Scope 1 and Scope 2) associated with our investment portfolio.
1 tCO2e refers to tonnes of carbon dioxide equivalent, a standard unit of measurement used in greenhouse gas emissions accounting and reporting.
Portfolio GHG Emissions Performance
We measure and disclose the carbon emissions attributable to our investment portfolio as part of our annual reporting1 and track progress towards our climate targets.
We report portfolio emissions metrics with reference to the Greenhouse Gas (GHG) Protocol, as well as recommendations of the TCFD for Asset Owners:
- Total Portfolio Emissions2
Absolute GHG emissions (Scope 1 and Scope 2) associated with our portfolio, expressed in tCO2e.
- Portfolio Carbon Intensity3
GHG emissions associated with our portfolio normalised by the market value of the portfolio, expressed in tCO2e/S$M portfolio value.
- Portfolio Weighted Average Carbon Intensity4
Sum of each asset’s carbon intensity (tCO2e/S$M revenue) multiplied by the weight of that asset in the portfolio (the market value of that asset relative to the market value of the portfolio).
To date, we have not used carbon credits to offset Total Portfolio Emissions. We focus our attention on engaging with companies to support reduction efforts. However, the achievement of our net zero target will be dependent on the decarbonisation progress of our portfolio companies. We continue to monitor the ongoing global discussion around the use of carbon credits, particularly where asset owners are concerned.
Total Portfolio Emissions encompass Temasek’s direct investments in public and private equities which account for 77% of our investment portfolio. Our investment positions in private equity funds, credit, and other assets are excluded, given the current limitations in the availability of data. The portfolio emissions reported include Scope 1 and Scope 2 emissions of the underlying companies based on the latest available data sets.
We use a combination of company-reported emissions data and modelling approaches to establish Total Portfolio Emissions based on our proportionate shares (i.e. ownership interests) in the assets.
We adopt the following hierarchy in data sources, taking into account availability and timeliness of reported data:
- Company-Reported Data
GHG emissions data reported by the company, either directly to Temasek or made available through S&P Global Sustainable1.
- Company-Specific Estimates
GHG emissions for each company modelled or estimated by Temasek or S&P Global Sustainable1 using relevant industry level carbon intensity or carbon efficiency averages as proxies (GHG emissions normalised by revenue/market capitalisation/other relevant operational unit of measurement). In case industry averages do not provide a meaningful proxy for the company, carbon intensity or efficiency data of comparable peers may be used instead.
This measurement approach has remained unchanged since the last reporting period.
Towards Net Zero
(for year ending 31 March)
The reported Total Portfolio Emissions account for 77% of our investment portfolio as of 31 March 2024. Total Portfolio Emissions have decreased from 27 million tCO2e for the year ended 31 March 2023 to 21 million tCO2e for the year ended 31 March 2024. Carbon Intensity of our portfolio has decreased from 93 tCO2e/S$M portfolio value for the year ended 31 March 2023 to 73 tCO2e/S$M portfolio value for the year ended 31 March 2024. Similarly, the Weighted Average Carbon Intensity of our portfolio has decreased from 116 tCO2e/S$M revenue for the year ended 31 March 2023 to 92 tCO2e/S$M revenue for the year ended 31 March 2024.
The overall decrease in carbon emissions during the year is mainly attributable to our portfolio company, Sembcorp Industries, which completed the sale of Sembcorp Energy India Limited (SEIL). Post-transaction, the proportional emissions of SEIL are accounted for under Sembcorp Industries’ Scope 3 (Category 15 – Investments). In addition, we are also seeing emissions reductions due to decarbonisation efforts of portfolio companies, as well as changes in portfolio composition. These decreases have been moderated by an increase in emissions attributable to Singapore Airlines as global air travel continued to resume post-pandemic, as well as expansion of the emissions reporting boundaries of some portfolio companies.
As we continue stepping up efforts to encourage decarbonisation across our portfolio and to invest in less carbon-intensive businesses, we expect a non-linear decline in portfolio emissions over time.
As an asset owner, the achievement of our net zero target depends on the decarbonisation outcomes of our portfolio companies. Each sector, especially the hard-to-abate sectors, comes with its inherent decarbonisation challenges. Systems-level changes are required to enable us to reach net zero.
1 PricewaterhouseCoopers LLP, an independent third party, has undertaken a limited assurance engagement on the selected portfolio emission metrics for the year ended 31 March 2024. Their assurance report can be found here.
2 This metric is also known as Total Carbon Emissions (tCO2e) within the TCFD Supplemental Guidance for the Financial Sector.
3 This metric is also known as Carbon Footprint (tCO2e/$M invested) within the TCFD Supplemental Guidance for the Financial Sector.
4 This metric is also known as Weighted Average Carbon Intensity (tCO2e/$M revenue) within the TCFD Supplemental Guidance for the Financial Sector.
5 tCO2e refers to tonnes of carbon dioxide equivalent, a standard unit of measurement used in greenhouse gas emissions accounting and reporting.
6 Total Portfolio Emissions reflect the absolute emissions (Scope 1 and Scope 2) associated with our investment portfolio, expressed in tCO2e. Our investment positions in private equity funds, credit, and other assets are excluded.
7 Negative emissions acquired through investments and high quality carbon offsets.
High Trust, High Liquidity Carbon Markets: Key Lever to Address Twin Crises of Climate and Nature
More than 140 countries have set a net zero target, covering about 88% of global emissions. However, a large emissions gap of 15–23 GtCO2e still needs to be urgently addressed by 20301. Concurrently, we also face a significant financing gap to address the climate2 and nature3 crises, amounting to over a trillion US dollars a year.
To avert the worst impacts of climate change, carbon pricing is a critical lever to internalise the negative externalities of climate change. The global average carbon price today remains too low compared to the estimated price needed for us to stay on track to reach the goals of the Paris Agreement by 2030, namely US$90–140 per tCO2e4. Carbon finance plays a complementary role in accelerating the scale up of nature- and technology-based solutions, and supporting a just transition, particularly in the Global South. For instance, in May 2024, Breakthrough Energy Ventures, GenZero, Temasek, and Wavemaker Impact co-led the funding round for Rize to boost the technology-enabled platform for sustainable rice farming. This platform reduces methane emissions in rice cultivation in Southeast Asia and the rest of Asia. These sustainable rice farming practices create other benefits such as water savings and soil health improvements. Revenues generated from the carbon credits can also help to improve the livelihoods of the smallholder farmers.
Carbon markets can play a constructive role in channelling needed carbon finance towards the most deserving and impactful decarbonisation projects globally. However, carbon markets have been the subject of heightened scrutiny over the past year with questions around their integrity, especially in terms of the quality of carbon credits and their legitimate use as part of corporate decarbonisation efforts. To realise the full potential of carbon markets and develop a robust high-quality ecosystem, we will need collective efforts across governments, policymakers, industry bodies, corporates, and consumers. GenZero released a whitepaper, ‘Carbon Markets 2.0 – Addressing Pain Points, Scaling Impact’, at COP28 to address common misconceptions around carbon markets and highlight key levers to unlock their potential and drive climate mitigation at scale.
Carbon markets, in the form of high-integrity transition credits, can also be a viable complementary financing solution to accelerate the early phaseout of coal-fired power plants (CFPPs), which requires significant financing due to lost revenues and the cost of replacing the CFPPs with renewal energy capacity. Temasek is a knowledge partner to the Transition Credits Coalition (TRACTION) to explore the use of transition credits to support the early retirement of CFPPs across Asia Pacific.
