In early April, the world’s largest asset manager BlackRock ($ 8.67 trillion AUM) and Singapore’s Temasek Holdings announced they were once again teaming up, establishing new funds to invest in late-stage green startups on the road to market commercialization.
The decarbonisation partners, as the mutual partnership is called, will set up several funds with an initial injection of $ 600 million ($ 795 million) by both companies, raising additional capital from outside investors to reach $ 1 billion for their first fund.
Finally, they aim to reach the expected $ 5 billion ($ 6.63 billion) or more assets under management in the coming years.
This makes great news for all advanced companies looking for significant funds to commercialize their ideas, products or services, contributing to a zero-emission economy.
A look at the impact this could have on Singapore
First of all, it strengthens Singapore’s position on the green investment map, with the government company directly engaged in supporting the commercialization of advanced environmental projects.
Secondly, it is great news for all Southeast Asian countries, because the proximity and understanding of the Temasek area can open the way for regional companies, which would usually be less accessible, because Western investors prefer to stick to what suits them in Europe and America.
Third, it could be a profitable investment for Temasek – whose assets are part of Singapore’s vast national reserves – because target annual returns over one or more years can reach 20 per cent a year. These are bold goals set together with BlackRock (in which Temasek is also one of the largest investors).
Finally, Temasek, which represents state interests and holds stakes in large local companies, has a direct interest in promoting environmentally friendly solutions, which could experience its presence on Singapore soil. This could have an impact on both Temasek-owned companies as well as Singapore’s industries.
You can hint at how this will play out in how Dilhan Pillay, Temasek’s incoming CEO who took over as Ho Ching in October 2021, and BlackRock CEO Larry Fink, have expressed their interest in developing a solution that will enable replacement of fossil fuels with hydrogen.
This is of direct interest to Singapore Airlines (in which Temasek has a major stake) as they are looking for a long-term replacement for jet fuel.
At the same time, hydrogen is showing potential as a substitute for oil in maritime shipping, announcing Royal Dutch Shell and Singapore’s SembCorp Twelve-month fuel cell tests mounted on a ro-ro ship, which should begin next year.
As the city-state is one of the world’s largest petrochemical hubs, it is also perfectly in a position to lead the transition from oil and gas to hydrogen, making its industrial base on Jurong Island sure to bear fruit.
Potential that can help create returns for Singapore
In other words, Temasek is involved in investing in companies whose solutions are directly applicable to supporting Singapore’s large industries – air and maritime shipping, as well as petrochemicals – which are now the backbone of the local economy but are destined to be eventually replaced by new solutions.
It is therefore a critical national interest for Singapore to lead this change, capable of maintaining its favorable position built decades before.
The city-state has already engaged in this prolonged evolution on many fronts.
About ten years ago abandoned oil in favor of cleaner natural gas for local electricity generation. Today it uses its position as the world’s leading charging port LNG shipping solutions for new generations of cleaner fuel vessels.
In the future, this experience and at least part of the infrastructure used for cryogenic LNG can be used to adapt to applications that use liquid hydrogen – especially since today the main source of gas is traditional fossil fuels for which Singapore is extremely competent and well equipped to handle.
Former Canadian ice hockey player Wayne Gretzky recommended that he skate where he went, not where he was. In that spirit, Temasek’s moves show great potential not only to generate significant returns for the company, but for Singapore as a whole.
Credits for featured images: Munshi Ahmed via Bloomberg / Citywire Selector