Green investments, climate financing in focus at Temasek's Ecosperity Week

To that end, Indranee unveiled the Singapore Green Bond Framework at Ecosperity Week 2022. Temasek’s annual sustainability event was held from June 7–9 at the Sands Expo & Convention Centre.

The second edition of the Singapore Sustainable Investing and Financing Conference (SSIFC) 2022 — jointly organised by BlackRock, International Finance Corporation (IFC) and Temasek — was held on the last day.

First announced in February, the framework sets the stage for Singapore’s first sovereign green bond to be issued in the coming months. To qualify, projects must first be classified “nationally significant” under the Significant Infrastructure Government Loan Act, or Singa.

Green bond issuances must then meet the criteria stated in the new framework.

See also: A US$12 bil climate fund is readying a rare bond issuance

Speaking at the keynote address of the SSIFC 2022 on June 9, Indranee says green projects will facilitate Singapore’s transition to a low-carbon economy.

“Through these high-quality issuances, we hope to deepen market liquidity for green bonds, attract green issuers, capital and investors, and catalyse sustainable financing in the region,” adds Indranee.

Proceeds from green bonds issued under the framework will be used to finance projects in support of the Singapore Green Plan 2030, say the Ministry of Finance (MOF) and the Monetary Authority of Singapore (MAS).

See also: India aiming to finalise carbon deals with Japan, Singapore

These include projects in renewable energy, energy efficiency, green buildings, clean transportation, sustainable water and wastewater management, pollution prevention, climate change adaptation, biodiversity conservation, and sustainable management of natural resources and land use.

The Singapore government, along with statutory boards, will issue $35 billion in green bonds by 2030 to fund public sector green infrastructure projects, announced then-finance minister Lawrence Wong in Budget 2022.

At least US$980 bil more needed

Eight out of 10 Southeast Asian countries now have a net-zero target. Two new countries — Singapore and Indonesia — are piloting carbon taxes.

According to the 2022 edition of Bain & Company and Temasek’s Southeast Asia’s Green Economy 2022: Investing behind new realities report, US$15 billion ($20.5 billion) in cumulative investments have been deployed since 2020, mostly in renewables and the built environment.

Private equity and venture capital investments into sustainability have also tripled between 2020 and 2021, reads the annual report, authored with contributions from Microsoft.

However, current investments are still far from realising the projected US$1 trillion in economic opportunities within Southeast Asia’s green sector by 2030.

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“Southeast Asia needs to move from promises to action and bridging the gap between opportunities and results will be a key milestone. We remain bullish on the US$1 trillion economic opportunities in Southeast Asia, but we need to step up as a region to strengthen the investable market and increase green capital flows,” says Dale Hardcastle, partner at Bain & Company.

Corporate investors have been the main engine, says the report, driving 70% — or US$11 billion — of total investment.

Of this figure, at least US$6.6 billion went towards solar and wind energy. Yet, a large emissions gap of 2.6–3.2 gigatons (Gt) still exists compared to 2030 targets, based on latest Nationally Determined Contributions (NDCs) and planned policies projections.

Despite bolder new ambitions, most Southeast Asia countries need more concrete roadmaps as well as incentives and climate financing plans, reads the report.

Current investment levels are below US$20 billion, which falls short of the estimated US$1 trillion–US$3 trillion required to close the emissions gap.

“Evolving macro challenges lie ahead for national governments,” notes the report, “as they grapple with competing priorities including energy security amid the Ukraine conflict, Covid-19 recovery and inflationary pressures.”

‘Uncomfortably short’ decades

Climate change is not just an environmental issue, but a capitalist concern, says Larry Fink, CEO of BlackRock.

In his pre-recorded opening address at SSIFC 2022, Fink says it is BlackRock’s fiduciary responsibility to understand how global developments will impact clients’ investment outcomes. “This includes the pandemic, deglobalisation, the war in Ukraine, climate change, and, of course, inflation.”

Nations are fast approaching various goals and targets set for the future. “We need to take a long-term view, thinking not in terms of quarters or even years, but in terms of decades. And as we approach 2030, or even 2050, decades can start to feel uncomfortably short,” says Fink.

“So, I come to this conversation not as an environmentalist, but as a true capitalist,” he adds. “I remain today an optimist; I believe in the power of capitalism and how it can act as a powerful catalyst for change.”

Part of the “dynamism, opportunity and promise of Asia” comes from outperformance, and Fink believes decarbonisation can be a key engine of economic growth. “The pace of change will be very different in the developing and the developed countries. But all markets will require unprecedented investment in decarbonisation technology.”

To that end, Temasek announced on June 6 the launch of GenZero, a wholly-owned company dedicated to decarbonisation investments.

Temasek also committed an initial amount of $5 billion into the subsidiary.

GenZero will invest globally across three focus areas: technology-based solutions, nature-based solutions and carbon ecosystem enablers.

The new company will be led by Frederick Teo, who is currently the managing director of sustainable solutions at Temasek International. Teo will take up the role as CEO of GenZero on July 1.

According to Teo, GenZero currently employs some 20 staff. “We are looking to build to perhaps about 30 or 40 within a year or two,” says Teo. “GenZero is driven by the common purpose to decarbonise for future generations.

Recognising the importance of immediate action, we will focus on investment opportunities that can deliver positive climate impact by 2030,” he says.

Speaking at a media conference on June 6, Teo set out his team’s aim to balance “climate impact with long-term sustainable financial returns”. “In terms of financial returns, we definitely want to exceed our cost of capital, and then try and strike a good double bottom line.”

A ‘45-minute city’

Indeed, companies can no longer solely focus on short-term returns, as shareholders, executives and even employees will demand more sustainable practices.

Companies that refuse to adapt will lose out in the long term, says Teo Chee Hean, senior minister and Singapore’s coordinating minister for national security.

“First-movers will capture upsides while laggards may be written off as doing too little too late… Questions will be asked about your company’s strategies to avoid stranded assets. Some legacy lines of production may be rendered obsolete,” Teo said in his opening address at Temasek’s Ecosperity Week 2022 on June 7.

At home, Singapore aims to phase out all internal combustion engines (ICE) by 2040. But this is just a part of achieving sustainable urban transportation, said Teo. “It’s not just about replacing all internal combustion engine [ICE] vehicles with electric vehicles. If we do that, we will convert our traffic jams with ICE vehicles today to traffic jams with electric vehicles.”

Instead, the more fundamental solution is to minimise the need for cars, said Teo, with a “comprehensive public transport system”. “Since 2018, [we have] implemented a zero-growth policy for [our] vehicle population. We aim to be a 45-minute city in 2040, where nine out of 10 trips between homes and workplaces will take less than 45 minutes on our public transport network, even during peak hours.”

The “45-minute city” was mooted in 2019 as part of the Land Transport Master Plan 2040 by the Land Transport Authority.

“Today, we are already two-thirds there,” said Teo.

Surbana Jurong announced last week that its upcoming global headquarters will house Southeast Asia’s largest electric vehicle (EV) charging hub.

In an agreement with SP Group, the Surbana Jurong Campus will eventually allow up to 250 drivers to park and charge their vehicles.

At launch, Surbana Jurong and SP will install a mix of nine “fast and slow charging points”, which will grow to 36 charging points within 18 months.

Upon completion of the initial 36 charging points, the two parties agree to install more chargers “in tandem with market demand” for EVs.

The campus is designed to meet Singapore’s Building and Construction Authority’s Green Mark Platinum (Super Low Energy) building certification, including onsite photovoltaics generating over 300MWh of solar energy annually. Sustainable transport also extends to the sky.

The Civil Aviation Authority of Singapore (CAAS), Singapore Airlines (SIA) and Temasek announced last week the sale of Sustainable Aviation Fuel (SAF) credits in July 2022.

The sale of the SAF credits is part of a CAAS-SIA-Temasek pilot announced last November. A total of 1,000 SAF credits will be available for sale.

These are generated from the 1,000 tonnes of neat SAF which are blended, delivered and uplifted from Changi Airport and are expected to cut carbon dioxide emission by 2,500 tonnes.

According to the three parties, each credit purchased will help to reduce 2.5 tonnes of carbon dioxide emissions.

From 4Q2022, all SIA customers will be able to purchase a mix of SAF credits and carbon offsets.

SIA will also partner Climate Impact X (CIX) — the carbon exchange established by DBS Bank, Singapore Exchange (SGX), Standard Chartered and Temasek — to introduce a “bundled portfolio” consisting of SAF credits and carbon credits.

Mikkel Larsen, CEO of CIX, says: “The current lack of incentives for the adoption of green fuels has meant that prices continue to remain high and economically unviable. SAF credits can help to spur adoption by enabling competitive price discovery, and channelling finance towards projects that can drive the use of sustainable fuels at the scale necessary to support decarbonisation in the aviation sector.”

Photos: Temasek