Temasek, the investment company of Singapore, has committed S$100 million to the Concessional Capital for Climate Action, which is a new initiative in attempting to close the gap in climate financing to developing countries, primarily Asia. Temasek sought to support sustainable projects that would contain carbon emissions and speed up lasting economic opportunities in emerging markets.
Emerging from the company’s 50th anniversary marking a century along the route towards sustainable development, it was revealed that Temasek had sunk millions of dollars into CCCA. While observing that climate change needed to be dealt with urgently by focused financial efforts in line with regional and global climate goals, CCCA initiative marks Temasek’s first major commitment of concessional capital to climate action and one of the drivers in mobilising capital for green growth in developing countries.
Climate-related gap filling: Concessional Capital for Climate Action (CCCA) CCCA has the goal of filling significant gaps in climate-related investments in developing countries. There is projected to be a doubling gap in global climate finance by 2030, particularly in Southeast Asia-like regions, so there is growing need for concessional funding to bridge the divide between highly impactful projects and the capital needed for these to become feasible.
Asia is significant in this climate change battle because more than half of the world’s population lives within the region and emits more than 50% of world emissions. In so doing, the region must address specific barriers to a low-carbon economy, which include problems of balancing industrial development with the challenges of sustainability. Financial innovation, such as that promoted by CCCA, will play an important role in helping to achieve these objectives and to accelerate decarbonization.
Financing Sustainable Development in Asia
Contribution of S$100 million to CCCA by Temasek. Impact will come in concessionary, flexible, and patient financing supporting the green transition in developing markets. Blended finance models will reduce market risks so that low-cost capital can make sustainable projects attractive for investors in the private sector. It is one way to scale up investments in renewable energy, clean infrastructure, and climate-resilient technologies-all needed for Asia’s decarbonization.
Projects funded by CCCA will include a range of climate actions, such as mitigation of carbon emissions, biodiversity conservation, and sustainable development practices for both local communities and the environment. One of its key objectives is to mobilize commercial as well as concessional capital for funding projects that would otherwise find financial support hard to come by because of high perceived risks or low returns.
A New Model for Philanthropy
This marked a shift in tack in the manner of Temasek’s philanthropy approach. No longer to be held in the traditional form of grant-making, the company is now beginning to treat concessionary capital as a strategic asset class that leverages diverse capital for climate action. This new resource mobilization will trigger more investment from both public and private sectors, creating a ripple effect that enhances the bankability of sustainable projects across Asia.
Temasek’s chairman, Lim Boon Heng, reiterated the firm commitment that the company had reiterated its use of concessional capital to spur climate financing in emerging markets and added that efforts such as the MAS’ Financing Asia’s Transition Partnership would be vital in aligning investors toward long-term climate goals. CCCA, for its part, wants Temasek to play a key role in global efforts to limit temperature rise to 1.5 degrees Celsius and help promote sustainable, inclusive economic growth.
Climate Finance Initiatives
Supporting climate finance is central to Temasek’s long-term business strategy, portfolio management, and efforts to drive sustainability practices among its portfolio companies. At March 2024, sustainable living investments totalled S$44 billion. Of these, S$38 billion was channelled toward sustainability-focused projects while S$6 billion targeted climate transition initiatives. The investments cut across the gamut of renewable energy, clean transportation, and circular economy technologies, among others.
The company has developed a number of partnerships and investment platforms focused on deploying financial capital at all stages of technological and commercial maturity. These include, among others, the following initiatives:
BEV Select Fund: Breakthrough Energy Ventures’ Select Fund, in which Temasek has invested in support of Asia’s late-stage clean technology startups.
Decarbonization Partners: Temasek founded Decarbonization Partners with BlackRock, where it will focus its growth equity investments in clean energy and the circular economy.
Partnership with Brookfield: Temasek has invested in Brookfield Global Transition Funds through a partnership with Brookfield as part of decarbonization efforts within carbon-intensive industries.
GenZero: Temasek established GenZero, an investment platform focused on accelerating decarbonization through nature-based solutions and technological innovations, including sustainable aviation fuel technologies.
LeapFrog Investments: Temasek supports electric vehicles and smart farming solutions in the energy and agriculture sectors through its commitment to the LeapFrog Climate Fund.
Making Sustainable Projects More Bankable
The bankability of sustainable projects in Asia is being further enhanced through strategic ventures by Temasek, including a joint venture with HSBC called Pentagreen Capital, where they will focus on debt financing of sustainable infrastructure development across Asia. The firm has also formed the Green Investments Partnership with Allied Climate Partners, IFC, and MAS, which will mobilize more funds for green projects-part of the MAS FAST-P initiative.
This commitment of mobilizing capital for climate action underpins the commitment to pushing systemic change in sustainability and fostering inclusive growth in the region. Initiative CCCA will be vital in the region as more climate risks escalate so that developing countries are in a position to use financial resources to transition toward a more sustainable future.
Source: Temasek