Transcript: Opening Address by Dilhan Pillay at the Ecosperity 2023 Opening Dinner

Executive Director and CEO, Temasek Holdings, Dilhan Pillay, speaking at the Ecosperity 2023 Opening Dinner on 5 June 2023

Our Special Guest, His Excellency, Luhut Binsar Pandjaitan, Coordinating Minister for Maritime and Investment Affairs of the Republic of Indonesia,

Excellencies,

Distinguished guests,

Ladies and Gentlemen,

Good evening, everyone. And thank you for joining us at Ecosperity Week.

Introduction

We are all aware that climate change remains the existential crisis of our generation and the next. It is one that continues threatening our homes, livelihoods, and future. It does not discriminate, nor can be solved by a single nation or a handful of individuals. As Mark Carney, UN Special Envoy for Climate Action and Finance, puts it in his book "Values", "in climate change, we are not just in the same storm, we are in the same boat".

I am glad to see different groups represented today. Whether you are here in an individual capacity, or representing governments, multilateral development agencies, companies, private investors, or philanthropic organisations, we need to collectively own the issue and take immediate action using the resources we each have, in partnership with each other. That is the basis of Ecosperity Week - to exchange views, push the agenda amongst different stakeholders, and bring together varied viewpoints for a common purpose of protecting our ecology while enabling prosperity for current and future generations.

International Collaboration Towards a Common Goal

The urgency to find effective sustainable solutions has never been greater. While there are many innovative solutions out there, only widespread adoption can deliver meaningful climate impact. Unfortunately, we are often met with a cul-de-sac: high costs, and lack of scalability. The real question we need to ask ourselves is: how do we mobilise the necessary resources and foster strategic collaborations to lower costs faster so as to scale and mainstream these solutions?

Governments play a pivotal role in setting the stage for change, by establishing frameworks and implementing incentives, or disincentives, that advance their climate agenda and commitments. Many countries have been taking bold steps to confront the climate crisis head-on, and we have seen several breakthroughs on this front.

On a multilateral stage, one example is the progress made on Article 6 of the Paris Agreement to advance the implementation of high integrity carbon markets. Singapore has played a role in signing agreements with several countries to foster international partnerships in this area.

Indonesia is playing a pivotal leadership role in our region's quest for energy transition. I look forward to Minister Luhut's sharing later on Indonesia's key initiatives as he has been at the forefront of advocating new ideas and approaches as well as financing models for a just transition. This includes the important role of blended financing structures.

With substantial subsidies and grants, solutions can come faster to the market. Think about how harnessing solar and wind have, just over the past decade, become some of the cheapest ways to produce electricity.

We have also witnessed the power of incentives to accelerate the development and adoption of decarbonisation solutions. In advanced economies, green policy has turned into industrial policy, through examples like the Inflation Reduction Act in the United States and the EU Green Deal Industrial Plan. While we hear concerns on protectionism and distortions to the market, we cannot deny the potential to catalyse and direct capital flows towards accelerating the journey-to-market of tech-based and other solutions that address hard-to-abate sectors. These solutions, in turn, create new value and supply chains, and many new jobs which can support a just transition.

While national industrial policies are important, there is a greater need for nations to collaborate. The climate crisis does not discriminate based on borders. Neither should our pursuit of solutions. We should harness the potential of cross-border collaborations, so that these solutions can also be deployed globally, including in emerging economies where the willingness to adopt such solutions is hampered by accessibility and affordability.

The role of business and capital providers

The corporate world, encompassing established companies, innovative companies with nascent solutions, and providers of finance and investment capital, also have a role to play, in partnership with each other.

The economic and employment opportunities presented by a shift to a greener economy can be massive. Many high-income countries are making progress in their ambition to significantly reduce emissions in the foreseeable future to attain net zero by 2050.

However, many emerging economies, especially in Asia, still rely heavily on fossil fuels as they battle the twin forces of economic development and uplifting their communities, against the costs of a just transition. They often find it challenging to adopt a greener economy due to fiscal constraints, limited access to private capital, and having many of their transition projects marginally bankable. This is even though many have the potential to shift their energy production towards renewable sources.

That is where the opportunity lies. With appropriate structuring and adoption of frameworks between governments, multilateral development agencies, providers of finance and concessionary capital, these projects can transition from being unbankable or marginally bankable, to bankability. Transition financing is key to bridging these gaps.

Ajay Banga, the newly appointed President of the World Bank Group, recently shared how bankability is crucial in crowding in much-needed capital for sustainable solutions, especially for emerging markets. He advocated the use of blended finance, and the taking of first-loss positions by multilateral development banks for marginally bankable projects. By de-risking projects in the early stages, and eventually transferring them to private sector investors, risk can be reduced and private capital can be attracted at scale. This frees up more capital for further investments.

This is why HSBC and Temasek established Pentagreen Capital. Our ambition is to unlock marginally bankable projects for sustainable infrastructure by deploying blended finance at scale, creating a tradable asset class that crowds in private and institutional investors.

I hope that more multilateral development banks, concessionary and philanthropic capital providerswill come forward to provide first-loss capital to fund critical development needs. This will help catalyse capital and make other parts of the financing structure accessible for many breakthrough sustainable solutions.

The viability of these solutions relies on the private sector stepping forward, partnering with governments and each other, and trialing them. We need to take calibrated risks to pioneer the transition to a greener economy. Ultimately, everyone needs to pull their weight to make it work.

How we see things at Temasek

So how do we see things at Temasek? Temasek's approach to sustainability is not any different. It shapes how we operate, allocate capital, and engage our portfolio companies. It enables us to unlock asset value, and achieve sustainable returns over the long term.

We have maintained carbon neutrality as a company over the years, and remain committed to reducing carbon emissions attributable to our shareholding interests across our entire portfolio by 2030, to half of what it was in 2010. The ambition is to reach net zero by 2050. It is a significant challenge, because we have, in our portfolio, major companies from hard-to-abate sectors such as power generation, the built environment, aviation, and the maritime sector. But we are committed to doing so.

To account for potential exposure to transition risk for investments, we have set an internal carbon price of US$50 per tonne of carbon dioxide equivalent in our investment evaluations. This informs us of the true cost of capital, especially for the long term value of investments that we are making.

Beyond our institutional targets, we aspire to build pathways to a sustainable future. We are making decisive efforts towards investing in climate-aligned opportunities. Examples include companies producing sustainable building materials and next-generation clean energy solutions, such as hydrogen and the future of nuclear fusion, as we see these as major emerging drivers of change in the decades ahead in our quest to achieve net zero by 2050.

At the same time, we also enable carbon negative solutions. This was why we set up GenZero, a S$5 billion dollar platform to invest in technology-based and nature-based solutions. Recognising that carbon markets have the potential to deliver real emissions reduction and drive climate impact especially for hard-to-abate sectors, we also set up Climate Impact X, with three other partners, as a marketplace for effective trading of carbon credits. We hope that this would bring in capital to support decarbonising projects in the region and beyond. We aim to foster trust and integrity to accelerate the deployment of capital for climate impact projects.

In addition, we encourage our businesses to decarbonise. It is a journey. Beyond investing in low carbon businesses, we are prepared to do the hard work and work with carbon-intensive businesses who commit to a clear transition plan for carbon reduction. Our partnership with the Civil Aviation Authority Singapore and Singapore Airlines to pilot the use of sustainable aviation fuel is one such example. Not only does it help reduce the carbon footprint of airlines who are subject to CORSIA commitments, it also serves as a testbed for infrastructural and logistical capabilities required for wider adoption of sustainable aviation fuel.

We recognise that in our journey, partnerships are crucial for us to catalyse capital for our initiatives and also pool resources and capabilities that are complementary. So we look forward to partnering more institutions to further our quest to achieve our goal of halving emissions by 2030 to what it was in 2010, and also achieve net zero.

In the years ahead, we aim to form more such collaborations that contribute to tackling climate change.

Conclusion

Let me conclude. Being in the same boat, we need to work together, collaboratively, so that our collective efforts are stronger, and our impact is amplified. This is key to hastening the pace of change, and accelerating "Breakthroughs for Net Zero". As UN Secretary-General Antonio Guterres aptly puts, "We have never been better equipped to solve the climate challenge, but we must move into warp speed climate action now. We don't have a moment to lose".

I wish all delegates a fruitful week of insightful discussions and exchanges ahead. Together, let's shape a sustainable future for generations to come. Thank you.