Temasek Chief Defends Investments in Polluters in Final Speech

(Bloomberg) -- Temasek Holdings Pte Chief Executive Officer Ho Ching defended the company’s continuing investments in carbon emitters, in a final speech capping 17 years running Singapore’s $281 billion state-owned investor.

“We debated and decided not to divest emitters just to tick the box - this does nothing to help the world decarbonize and it isn’t the right thing to do,” she said at the Ecosperity event in Singapore Thursday. “Instead we are prepared to do the hard work - to work with or even invest in emitters who commit to a clear transition plan for carbon reduction.”

The speech -- in which she also called on companies, governments and investors to take urgent action to slash carbon emissions -- ended what’s been an occasionally unconventional career for Ho, the wife of Prime Minister Lee Hsien Loong. Dilhan Pillay Sandrasegara will take over as CEO Friday, and Ho will join the firm’s philanthropic arm that same day before becoming its chair on April 1.

While Temasek has pledged to be an eco-trailblazer, it remains invested in businesses that contribute to global warming -- from Singapore Airlines Ltd. to Sembcorp Marine Ltd., a supplier of offshore rigs. Where peers like Norway’s sovereign wealth fund have used hard targets and the sale of assets to improve their green credentials, Temasek is taking a different path as it attempts to halve the 2010 emissions of its portfolio by 2030.

The changeover at the top comes at a challenging time for Temasek, whose profits help fund the national budget. Almost half of its portfolio is invested in either China or the Americas, making it vulnerable to geopoltical tensions. And many of its assets are in large Singaporean entities whose sales are being battered by Covid-19.

Ho, 68, joined Temasek in May 2002 as executive director before being appointed CEO two years later. She started her career as an engineer and worked at the country’s Ministry of Defence, later becoming the president and CEO of Singapore Technologies Group prior to joining Temasek.

Over that period, the firm has grown from a $77 billion largely domestic portfolio to a global institutional investor backing companies across a wide swathe of industries. Just 24% of its assets are now based in Singapore. It hasn’t been all smooth sailing for Temasek, which suffered a 31% decline after the financial crisis as well as falls in 2016 and 2020.

New Strategies

Diego Lopez, managing director of Global SWF, gave Ho credit for helping push Temasek into a variety of new investment strategies, from venture capital and private equity partnerships to ESG and Impact investing. And while it isn’t ideal to have a sovereign-backed firm run by an executive married to the head of state, he added it also wasn’t unheard of.

“People talk about it in academic circles and in a theoretical way but in the industry if you’re interested in selling an investment or service to Temasek you don’t necessarily care,” Lopez said. “The organization is much more advanced than what it was 17 years ago.”

Ho’s replacement Pillay, is a Singaporean who was pursued by the outgoing CEO for three years before he accepted a role at Temasek in 2010. The Cambridge University-educated lawyer was widely seen as the favored candidate when he was promoted to his current role running Temasek International in 2019. During his time he’s overseen the U.S. and Americas market teams and headed the investment and portfolio management groups.

When quizzed about changing roles at a press conference in February, both executives emphasized the evolutionary - rather than revolutionary - nature of running the firm as well as Pillay’s hand in helping create the existing strategy that will guide it over the next decade. Even so, his latest job will come with substantial pressure and heightened scrutiny.

“I think whenever you take on something new, you are taking a risk - you are taking on a reputational risk as to whether you are going to succeed or not,” he said at the time. “But I think if you don’t try, you never know, right?

While China took over from Singapore as Temasek’s biggest geographic source of deals for the first time in 2020, Temasek still plays a key role propping up local institutions. It recently helped fund 65 Equity Partners Holdings Pte, whose Anchor@65 fund will be tasked with backing high-growth companies willing to list on the local stock exchange.

Few Changes

Lopez predicted few changes at Temasek over the short term and expected an orderly transition. While the company has always claimed to act as a purely commercial investor, it has a track record of providing billions of dollars in support during difficult times to national icons like Singapore Airlines.

“I don’t think Temasek could get away with saying ‘we won’t invest in Singapore Airlines because we don’t think it’s commercially beneficial,’ because that would go against the very origins of the fund and create tensions with the government,” he said.

Angela Cummine, sovereign wealth fund expert and author of Citizens’ Wealth, said Singapore’s use of Temasek had been “impressive.” But she added that it would need to become more transparent - especially around its investment strategies and how it helps fund the national budget - as it grows in size and stature.

Cummine said that losing Ho - and her perceived connections to the Singapore government - could potentially make it harder for Temasek.

“It’s not like you’re getting the word of the state when you’ve got the executives and the senior managers in the room with you from Temasek so that is actually quite a challenge for the incoming CEO,” she said.

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