Temasek launches GenZero

The climate crisis is intensifying and the latest report by the Intergovernmental Panel on Climate Change has warned that the world is not on track to limit global temperature rise to 1.5 degrees Celsius above pre-industrial levels. There is an urgent need to accelerate decarbonisation across all sectors to avoid irreversible damage to the planet by reducing global carbon emissions and address the emissions gap, which is estimated between 19 and 26 gigatonnes of carbon in 2030 for a 1.5 degrees Celsius scenario^[1].

GenZero looks to catalyse decarbonisation solutions with its ability to deploy long-term and flexible capital. It invests in opportunities ranging from early-stage companies and solutions that require patient capital to commercialise and grow, to more mature ones that are ready to scale.

It has three investment focus areas: (i) technology-based solutions that deliver deep decarbonisation impact through climate-driven technologies; (ii) nature-based solutions that help protect and restore our natural ecosystems to generate climate impact while benefiting local communities and biodiversity; (iii) carbon ecosystem enablers which refer to companies and solutions that support the development of an effective, efficient, and credible carbon ecosystem.

Together, these focus areas present a holistic and integrated approach to address the emissions gap, with solutions across both the near- and longer-term horizons. GenZero seeks to deliver positive climate impact alongside long-term sustainable financial returns

Commenting on its establishment, Dr Steve Howard, Chief Sustainability Officer, Temasek International, said “GenZero expands Temasek’s focus on deploying capital to catalyse solutions for a better world. Achieving net zero globally will require deployment of around US$5 trillion annually by 2030^[2], to rapidly adopt and commercialise sustainable energy solutions. Its flexible approach will enable it to catalyse near- and long-term solutions to support ongoing efforts to achieve net zero globally. GenZero will not only support Temasek’s efforts as we strive towards halving our portfolio’s net emissions by 2030 and working towards a net zero portfolio by 2050, but also those of the wider ecosystem.”

GenZero will be managed by a dedicated team of professionals with deep expertise in the investment and sustainability space, led by its CEO-designate, Frederick Teo, who is currently the Managing Director of Sustainable Solutions at Temasek International. Mr Teo has served nearly 12 years in Temasek in leadership positions across a broad range of roles such as sustainability, portfolio management, business continuity and strategic stakeholder engagement. He will fully transition to his role at GenZero on 1 July 2022.

“GenZero is driven by the common purpose to decarbonise for future generations. Recognising the importance of immediate action, we will focus on investment opportunities that can deliver positive climate impact by 2030 while ensuring sustainable financial returns. Besides deploying capital, we will work with our investee companies to address operational challenges and accelerate the deployment of their solutions to achieve our shared net zero target,” said Frederick Teo, CEO-designate, GenZero.

Investing ahead in technology-based solutions

While many decarbonisation technologies and innovations currently exist, they require capital to further advance commercial viability and deployment to scale. GenZero will invest in carbon reduction and carbon removal technologies such as low-carbon materials, Carbon Capture, Utilisation and Sequestration (CCUS), and advanced biofuels such as Sustainable Aviation Fuel (SAF). These opportunities will help deliver fundamental decarbonisation impact in sectors such as power and energy, transport and building, industry and manufacturing.

GenZero has invested in Newlight, a US-based manufacturer of biomaterial produced from methane to displace plastics. Through a joint investment with C-Quest Capital, GenZero is funding deployment of clean, energy efficient cookstoves to rural households in Southeast Asia to reduce carbon emissions. GenZero will also invest with third-party funds to expand its networks and collaborate with like-minded partners. It is currently working with Decarbonization Partners, a Temasek-BlackRock partnership launching a series of funds that focus on late-stage venture capital and early growth private equity decarbonisation solutions investments; and Brookfield Global Transition Fund, which aims to accelerate the global transition to a net zero carbon economy by targeting investment opportunities relating to reducing emissions and energy consumption, as well as increasing low-carbon energy capacity and supporting sustainable solutions.

Protecting and restoring natural ecosystems with nature-based solutions

Nature-based solutions are climate solutions such as the protection, restoration, and management of natural ecosystems to avoid, reduce, or remove carbon emissions, while empowering local communities and enhancing biodiversity. They are a crucial factor in climate action as they can provide over one-third^[3] of cost-effective climate mitigation needed to achieve net zero emissions by 2050. Yet, less than 3% of global climate finance is going into supporting nature-based solutions^[4], signalling a clear mismatch between its climate mitigation potential and the investments towards that potential.

GenZero will support and scale the deployment of nature-based solutions through investments and project co-development with partners in forestry and agriculture sectors, and leverage carbon credits as a market mechanism to accelerate funding into these solutions.

GenZero has partnered with Global EverGreening Alliance to support farming communities in Kenya to improve their livelihoods through land restoration and tree planting. It has also invested in the New Forests Tropical Asia Forest Fund 2, which aims to develop a diversified portfolio of sustainable forest plantation assets in Southeast Asia and support the region’s transition towards responsible forestry management.

Building an effective and credible carbon ecosystem

Carbon markets can play a critical part in delivering real emissions reduction and driving climate ambition, but only when it is done right. An effective and trusted carbon market will help accelerate decarbonisation by providing a mechanism to fund decarbonisation technologies and projects; while a credible ecosystem and market will be critical to enhance transparency and confidence.

To support this, GenZero will invest in carbon ecosystem enablers including areas such as climate advisory services, carbon trading infrastructure, Monitoring, Reporting & Verification (MRV) technologies and rating providers.

GenZero has invested in global climate solutions firm South Pole, which develops and implements emission reduction projects and strategies for companies, governments and organisations around the world. GenZero is also working with Climate Impact X, a global carbon marketplace and exchange, which aims to establish a credible carbon trading infrastructure based in Asia. In addition, GenZero has made an investment in Perennial, a US-based early-stage start-up using artificial intelligence and remote sensing to accurately quantify soil organic carbon sequestration on agricultural lands.

Operational governance

GenZero is also pleased to announce the formation of its Board of Directors, which brings together experienced leaders with collective expertise spanning sustainability, finance, energy and technology, and nature-related sectors. The Board will be chaired by Mr Sunny Verghese, Co-founder & Group CEO of Olam, and former Chairman of the World Business Council for Sustainable Development.

Members of the Board also include Ms Goh Swee Chen, President, Global Compact Network Singapore; Dr Steve Howard, Chief Sustainability Officer, Temasek International; Dr Ruth Nussbaum, Group Director, Proforest; and Mr Alan Thompson, Operating Partner, Temasek International.