As non-public fairness and enterprise capital corporations present much less urge for food for dangerous local weather tech bets in comparison with a number of years in the past, Singapore sovereign wealth fund GIC is bucking the market pattern.
In its newest annual report launched on Wednesday, the state-owned investor revealed a brand new funding scheme for inexperienced belongings, focused at scaling early-stage local weather applied sciences, similar to in inexperienced metal and battery storage, that neither meet the returns that enterprise capital expects nor has the observe file to draw extra risk-averse infrastructure financiers.
“Traders are actually seeing that financing the transition might contain short-term alternative prices that they don’t seem to be able to bear,” mentioned GIC chief government Lim Chow Kiat in his letter to stakeholders.
“Affected person capital like ours is well-suited to navigate local weather tech’s potential J-curve,” Lim added, referring to the everyday trajectory noticed in non-public fairness investments, the place vital positive aspects are solely realised after an preliminary dip in returns.
The funding initiative was launched by GIC’s sustainability options group – which was shaped by its non-public fairness division final yr – following its “early success” in investing in local weather applied sciences, mentioned Lim.
GIC has two different funding platforms to seize local weather and sustainability-related alternatives: its local weather change alternatives portfolio, which allocates public fairness capital to local weather mitigation and adaptation, in addition to its transition and sustainable finance group, which invests in sustainability-related alternatives throughout bonds, equities and different asset courses.
The fund, which manages about US$770 billion belongings by some estimates, has invested in quite a lot of local weather tech corporations lately. In 2023, GIC co-invested in Swedish startup H2 Inexperienced Metal, which secured near €6.5 billion (US$7 billion) in January 2024 to construct the world’s first large-scale inexperienced metal plant in northern Sweden.
In 2022, it participated within the US$450 million funding spherical for Kind Power, a United States-based agency aiming to push down the price of multi-day vitality storage programs to underneath US$20 per kilowatt-hour within the subsequent decade, in addition to the CHG 600 million (US$650 million) fairness spherical for Swiss direct air seize startup Climeworks – one of many a number of carbon dioxide elimination options that GIC has invested in.
Nonetheless no internet zero goal
Of the three entities tasked with managing the Singapore authorities’s reserves, GIC stays the one one with out an emissions discount goal.
In 2020, state investor Temasek, which launched its inaugural sustainability report earlier this month, pledged to halve its portfolio emissions by 2030 and to realize internet zero emissions by 2050. In 2022, the city-state’s central financial institution, the Financial Authority of Singapore, additionally dedicated to chop the emissions depth of its equities portfolio by as much as half by 2030.
Nonetheless, GIC said in its report that it repeatedly screens its present portfolios for financially materials sustainability dangers, conducts extra due diligence for belongings uncovered to better transition and bodily local weather dangers, and stress-tests its portfolio in opposition to a variety of local weather eventualities and carbon worth projections.
Although GIC didn’t specify the carbon worth projections it makes use of, its Singapore counterpart Temasek just lately raised its inner carbon worth to US$65 per tonne, with plans to succeed in US$100 per tonne by 2030.
Final month, GIC appointed a brand new sustainability head, practically after a yr the function was vacated, to steer the fund’s sustainability workplace, which was arrange in 2022.
Although cyclical inflation has fallen from its 2021-22 peaks, GIC said in its report that it expects inflation to remain structurally larger in comparison with the pre-Covid interval, pushed by the net-zero vitality transition, alongside the legacy of Covid-19 and an ageing inhabitants.
An period of cussed inflation means an growing shift in the direction of “inflation-resilient belongings”, GIC mentioned in its report, although it didn’t specify how inexperienced belongings would issue into this new route, in response to Eco-Enterprise queries.
After accounting for world inflation, the sovereign wealth fund posted its weakest funding returns in 4 years, at 3.9 per cent in annualised actual return, in comparison with 4.6 per cent final yr.
