Singapore state-owned investor Temasek has committed to set aside S$100 million ($77.67 million) as concessional capital for Climate Action (CCCA).
The firm said in a statement on Monday that CCCA seeks to support climate action initiatives by providing more flexible, patient, and favorable financing which will address these market barriers.
This will help to accelerate the green transition and open pathways towards the 1.5 degrees goal, in the process crowding in other forms of capital, whether commercial or concessional, to support marginally bankable opportunities.
According to the statement, the S$100 million ($77.67 million) is funded by Temasek’s community gifts, which aim to drive intergenerational impact aligned with our community objectives.
Since 2003, Temasek has been setting aside a portion of its net positive returns above its risk-adjusted cost of capital for gifts that meet the objectives of connecting people, uplifting communities, protecting planet, and advancing capabilities.
These gifts are philanthropic in nature and have the potential to be catalytic in mobilizing other forms of capital.
The success of CCCA would be measured by its ability to scale positive outcomes in the area of climate action, including the ability to avoid, mitigate, and adapt to the impact of climate change; promote biodiversity and enable people to live in harmony with nature; and encourage sustainable living choices and behaviors that promote responsible resource use for better human and environmental health.
Examples of projects include marginally bankable clean infrastructure projects in Asia.
According to the statement, CCCA represents a novel way of advancing Temasek’s deployment of philanthropic capital, going beyond conventional grant-making, and a deepened commitment towards the climate agenda.
It is also the first time that Temasek is contributing concessional capital towards the green transition.
Through CCCA, Temasek hopes to mobilize other forms of capital across the broader climate ecosystem which can help finance marginally bankable projects, and hence amplify the impact of its giving activities in support of its community objective of protecting the planet.
“Climate change is the defining crisis of our time. At Temasek, we have been investing in sustainability across the years, and have deployed commercial capital to scale innovation for the green transition,
“At the same time, we see the criticality of concessional capital to catalyze financing into emerging markets and developing economies,” said Lim Boon Heng, Chairman of Temasek.
According to him, blended finance initiatives like the Monetary Authority of Singapore’s Financing Asia’s Transition Partnership (FAST-P) are key in lining up long term investors and philanthropic entities alongside commercial investors for this purpose.
“Through the Concessional Capital for Climate Action, we hope our community gift can contribute to concessional capital emerging as an asset class, to mobilize the varied forms of capital necessary to bridge the climate financing gap,
“We look forward to partnering other like-minded organizations to advance progress on this front, so that we can Do Well, Do Right, and Do Good together – for the prosperity of current and future generations,” he added.
It is noted that the global community has made notable progress on climate action in the past year, but the pace and scale are still insufficient.
With the annual global climate financing gap for developing countries expected to increase double fold by 2030, Temasek opined that there is a clear and urgent need for more resources to be channeled towards climate action.
“The battle for net zero will be won or lost in Asia, which hosts more than half of the world’s population and contributes more than half of global carbon emissions,
“Yet the region faces unique structural constraints and challenges that hinder the pace of progress,” said the statement.
It also highlighted in Southeast Asia, ambitious plans to decarbonize while building the industries of tomorrow concurrently would require the scaling of catalytic financing.
Through innovative financial mechanisms such as blended finance, it opined the CCCA could address emerging market risks, higher cost of capital, and optimize the economics necessary to accelerate the transition.
Temasek’s journey in building social capital started over 20 years ago, when it adopted a deliberate and structured approach, anchored on the twin pillars of governance and sustainability, to give back to communities.
Since 2003, Temasek has been setting aside a portion of its net positive returns above its risk-adjusted cost of capital for community gifts.
As at March 31, 2024, Temasek’s portfolio value of investments aligned with the sustainable living trend was S$44 billion ($34.18 million), comprising of $38 billion for sustainability-focused investments and $6 billion was climate transition investments.
Temasek taps on opportunities to invest in future growth sectors and business models, in key focus areas such as food, water, waste, energy, materials, clean transportation, and the built environment, and encourage enterprises to transform through efforts in innovation.