In early April, the world’s largest asset manager BlackRock ($8.67 trillion AUM) and Singapore’s Temasek Holdings announced that they are joining forces yet again, establishing new funds investing in late-stage environmental startups on their road to market commercialisation.
Decarbonization Partners, as the joint partnership is called, is going to establish several funds with the initial injection of US$600 million (S$795 million) by both companies, raising additional capital from external investors to reach US$1 billion for their first fund.
Eventually, they aim to hit the anticipated US$5 billion (S$6.63 billion) or more in assets under management in the coming years.
This makes for excellent news for all advanced-stage companies that are seeking significant funding to commercialise their ideas, products or services, contributing to the net-zero emissions economy.
A look at the impact it may have on Singapore
First of all, it reinforces Singapore’s position on the green investment map, with the government-owned company directly engaged in supporting commercialisation of advanced environmental projects.
Secondly, it’s great news for all countries in Southeast Asia, as Temasek’s proximity and understanding of the area can open avenues for regional companies, which would normally be less accessible as Western investors may prefer to stick to what they are comfortable with in Europe and America.
Thirdly, it can prove a profitable investment for Temasek — whose assets are a part of Singapore’s vast national reserves — as the targeted annualised returns over a decade or longer can reach 20 per cent per annum. These are the bold goals set together with BlackRock (which Temasek is one of the largest investors in as well).
Finally, Temasek, representing government interests and holding a stake in major local companies, has direct interest in promoting environmentally-friendly solutions, which could see their debut on Singaporean soil. This could have an impact on both Temasek-owned businesses as well as on branches of Singaporean industry.
You can find a hint of how it may play out in how Dilhan Pillay, Temasek’s incoming CEO taking over from Ho Ching in October 2021, and BlackRock CEO Larry Fink, highlighted their interest in developing solutions which would enable replacement of fossil fuels with hydrogen.
This is of direct interest to Singapore Airlines (which Temasek has a major stake in) as they seek a long-term replacement for jet fuel.
At the same time, hydrogen is showing potential as a replacement for oil in sea shipping, with Royal Dutch Shell and Singaporean SembCorp announcing 12-month trials for fuel cells mounted on a ro-ro vessel, which are set to commence next year.
Since the city-state is one of the world’s largest petrochemical hubs, it is also perfectly positioned to be at the forefront of the transition away from oil and gas to hydrogen, which its industrial base at Jurong Island is bound to reap benefits of.
A potential to help generate returns for Singapore
In other words, Temasek is getting engaged in investing in companies whose solutions have direct applications in support of Singapore’s major industries — air and sea shipping, as well as petrochemicals — which today are the bedrocks of the local economy but which are destined to be replaced eventually by novel solutions.
It is therefore a critical national interest that Singapore is at the forefront of this change, able to retain its advantageous position built in the decades prior.
The city-state has already engaged in this prolonged evolution on many fronts.
About a decade ago, it abandoned oil in favour of cleaner natural gas for local electricity generation. Today, it is using its position as the leading bunkering port in the world to deploy LNG shipping solutions for new generations of vessels running on the cleaner fuel.
In the future, this experience, and at least some of the infrastructure used for cryogenic LNG, can be used to adapt for applications using liquified hydrogen — especially as the main source of the gas today are still traditional fossil fuels that Singapore is highly competent and well-equipped to handle.
Former Canadian ice hockey player Wayne Gretzky used to recommend to skate to where the puck was going, not where it has been. In this spirit, Temasek’s moves show great potential not only to generate substantial returns for the company, but for Singapore as a whole.
Featured Image Credit: Munshi Ahmed via Bloomberg / Citywire Selector