Singapore Markets closed

Temasek boosts portfolio, will do more on climate change

Temasek International CEO, Dilhan Pillay, speaking at the 2019 Ecosperity Dinner on 6 June 2019. (PHOTO: Temasek)

By Nishant Kumar, David Ramli and Haslinda Amin

(Bloomberg) -- Temasek Holdings Pte has “significantly” increased the number of companies it’s bought into while boosting the value of its portfolio by about 3%, Temasek International Chief Executive Officer Dilhan Pillay said.

The Singapore state investor’s portfolio value as of March 31, 2019 was S$313 billion ($232 billion) -- up 1.49% from the year prior. When asked how it has done since then, Pillay said it was on the rise, with environment, social and governance considerations playing a key role.

“The portfolio value has gone up by about 3-odd percent,” he said in a Bloomberg Television interview on the sidelines of the World Economic Forum in Davos. “But the number of companies that we’ve invested in over the past 12 months has increased significantly.”

A 3% rise in Temasek’s portfolio value would be the biggest annual increase since 2018. But the figure could still change because the firm’s reporting year doesn’t end until March 31, 2020.

That period will represent Pillay’s first full year at the helm of the Singaporean institution. He oversaw various key roles at the company before taking over from April 1, 2019. Now he’s responsible for trying to help the company meet its key green goals.

“We may have to be more aggressive,” Pillay said. “We are thinking about how we can expand a number of sustainability investments that we can do.”

Temasek has pledged to become carbon neutral by year-end and aims to halve the emissions of its portfolio companies by 2030. Pillay said the company would take a pro-rata approach to the emissions of businesses that it only owns a minority stake in.

Environmental concerns are understood to be part of the reason it chose not to participate in Saudi Aramco’s IPO last year. The firm’s climate-conscious investments include a $500 million joint venture with Swedish private equity firm EQT AB to acquire renewable energy generators in India.

“If you can focus on principled governance, that should have a direct impact on your performance,” Pillay said. “We felt that ESG would be a bridge to better performance.”

Legacy Challenge

Temasek, however, has struggled to balance its new green goals with legacy assets and the need to generate a decent rate of return. In October, it announced a S$4 billion ($3 billion) plan to buy a majority stake in Keppel, which many analysts believe is a prelude to a broader consolidation of Singapore’s shipyard and servicing sector.

It also owns a majority stake in Olam International Ltd., an agricultural supplier whose interests include palm oil, and national carrier Singapore Airlines Ltd., all of which make its carbon emissions goals a challenge to hit.

Temasek Holdings Pte, the parent of Temasek International, is helmed by Ho Ching, the wife of Singapore’s Prime Minister. About 42% of its assets are held in unlisted businesses, ranging from alternative meat-maker Impossible Foods to WeWork’s Chinese operations.

“We are thinking about how we can get our companies to work with us on sustainable solutions,” said Pillay. “We are thinking about how we can bring sustainable financing to bring sustainable solutions to emerging markets in particular.”

© 2020 Bloomberg L.P.