In early April, the world's largest asset manager BlackRock ($ 8.67 trillion AUM) and Temasek Holdings in Singapore announced that they were teaming up again and launching new funds that are investing in late-stage environmental startups on their way to commercialization.
Decarbonization Partners, as the joint partnership is called, will set up multiple funds with an initial injection of US $ 600 million (S $ 795 million) from both companies and raise additional capital from outside investors to add US $ 1 billion to their first fund to reach.
Ultimately, they aim to achieve expected assets under management of $ 5 billion (S $ 6.63 billion) or more in the years to come.
This is excellent news for any advanced-stage company that needs significant funding to commercialize their idea, product, or service in order to contribute to the net zero emissions economy.
A look at the potential impact on Singapore
First, it strengthens Singapore's position on the green investment map, with the state-owned company directly involved in helping commercialize advanced environmental projects.
Second, it's good news for all countries in Southeast Asia, as Temasek's proximity and understanding can open up opportunities for regional businesses that are usually less accessible as Western investors prefer to stick with what they're in with Europe and America feel comfortable.
Photo credit: Munshi Ahmed via Bloomberg
Third, Temasek – whose assets are part of Singapore's vast national reserves – can prove to be a profitable investment as targeted annualized returns can reach 20 percent annually for a decade or more. These are the bold goals that were set along with BlackRock (in which Temasek is also one of the largest investors).
Finally, Temasek, who represents government interests and has an interest in large local corporations, has a direct interest in promoting environmentally friendly solutions that could debut on Singaporean soil. This could affect Temasek-owned companies as well as branches of Singaporean industry.
You can find a hint of how this could play out if Dilhan Pillay, Temasek's new CEO, who will replace Ho Ching in October 2021, and BlackRock CEO Larry Fink reiterated their interest in developing solutions that will replace fossil fuels Enable hydrogen.
Photo credit: Edgar Su via Reuters
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 shows potential as a substitute for oil in shipping. Royal Dutch Shell and SembCorp of Singapore announce 12-month trials for fuel cells that are mounted on a RoRo ship and are scheduled to begin next year.
Since the city-state is one of the largest petrochemical hubs in the world, it is also perfectly positioned to be at the forefront of the transition from oil and gas to hydrogen that its industrial base on Jurong Island is sure to benefit from.
Potential to generate returns for Singapore
In other words, Temasek is investing in companies whose solutions have direct applications to support Singapore's major industries – aviation, maritime and petrochemical – which are now the bedrock of the local economy but which will eventually be replaced with novel solutions.
It is therefore a critical national interest that Singapore be at the forefront of this change and maintain its advantageous position built over the decades before.
The city-state has already embraced this protracted development on many fronts.
Photo credit: Riviera Maritime Media
About a decade ago, oil was abandoned in favor of clean natural gas for local power generation. Today it is leveraging its position as the world's leading bunker port to deploy LNG shipping solutions for new generations of ships that run on clean fuel.
This experience and at least part of the infrastructure used for cryogenic LNG can be used in the future to adapt to applications with liquefied hydrogen – especially since the main source of the gas today is still traditional fossil fuels, for which Singapore is highly competent and well equipped to handle.
Former Canadian ice hockey player Wayne Gretzky always recommended going where the puck went, not where it was. With that in mind, Temasek's moves have great potential to deliver significant returns not just for the company but for Singapore as a whole.
Selected image source: Munshi Ahmed via Bloomberg / Citywire Selector