Mr Lim Boon Heng, Chairman of Temasek, announced Temasek’s commitment to set aside S$100 million as Concessional Capital for Climate Action (CCCA) at Temasek’s 50^th anniversary dinner speech, on Monday, 23 September 2024. 

About Temasek’s Concessional Capital for Climate Action

The global community has made notable progress on climate action in the past year, but the pace and scale are still insufficient. With the annual global climate financing gap for developing countries expected to increase double fold by 2030, there is a clear and urgent need for more resources to be channelled towards climate action.

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.

Particularly in Southeast Asia, ambitious plans to decarbonise while building the industries of tomorrow concurrently would require the scaling of catalytic financing. Through innovative financial mechanisms such as blended finance, these could address emerging market risks, higher cost of capital, and optimise the economics necessary to accelerate the transition.

CCCA seeks to support climate action initiatives by providing more flexible, patient, and favourable financing which will address these market barriers. 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.

The S$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. These gifts are philanthropic in nature and have the potential to be catalytic in mobilising other forms of capital.

The success of CCCA would be measured by its ability to scale positive outcomes in the area of climate action, including the ability to avoid, mitigate, and adapt to the impact of climate change; promote biodiversity and enable people to live in harmony with nature; and encourage sustainable living choices and behaviours that promote responsible resource use for better human and environmental health. Examples of projects include marginally bankable clean infrastructure projects in Asia.

CCCA represents a novel way of advancing Temasek’s deployment of philanthropic capital, going beyond conventional grant-making, and a deepened commitment towards the climate agenda. It is also the first time that Temasek is contributing concessional capital towards the green transition. Through CCCA, Temasek hopes to mobilise other forms of capital across the broader climate ecosystem which can help finance marginally bankable projects, and hence amplify the impact of its giving activities in support of its community objective of protecting the planet.

Mr Lim Boon Heng added:

“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. 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.

Through the Concessional Capital for Climate Action, 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.”

About Temasek’s Community Contributions

Temasek’s journey in building social capital started over 20 years ago, when it adopted a deliberate and structured approach, anchored on the twin pillars of governance and sustainability, to give back to communities. Since 2003, Temasek has been setting aside a portion of its net positive returns above its risk-adjusted cost of capital for community gifts.

These are approved by the Temasek Board and then donated to partners to achieve Temasek’s community objectives of Connecting People, Uplifting Communities, Protecting Planet, and Advancing Capabilities.

About Temasek’s Climate Finance Efforts

Sustainability is at the core of 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.

The transition to a sustainable economy presents Temasek with new and growing opportunities to invest with both returns and impact in mind. Temasek makes use of its flexibility to deploy capital across a wide array of opportunities, enabling companies to transition to a more sustainable future and continuously increasing its investments in line with the Sustainable Living trend.

As at 31 March 2024, Temasek’s portfolio value of investments aligned with the Sustainable Living trend was S$44 billion, comprising of $38 billion for sustainability-focused investments and $6 billion was climate transition investments. Temasek taps on opportunities to invest in future growth sectors and business models, in key focus areas such as food, water, waste, energy, materials, clean transportation, and the built environment, and encourage enterprises to transform through efforts in innovation.

Beyond making direct investments, Temasek seeks out opportunities to collaborate with like-minded partners to contribute to systems-level change required to solve major sustainability challenges. Through strategic partnerships as well as the establishment of dedicated investment platforms, Temasek aims to contribute towards accelerating and scaling the deployment of financial capital across varying growth and maturity stages.

Mobilising capital to drive investments across varying technology and commercial maturity stages 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 MAS' Financing Asia's Transition Partnership (FAST-P), a Singapore blended finance initiative.