Jovi Ho Mon, Jun 06, 2022
Temasek announced today the launch of GenZero, a wholly-owned investment platform company dedicated to accelerating decarbonisation globally. The state investment company also committed an initial amount of $5 billion into the subsidiary.
GenZero will invest globally across three focus areas: technology-based solutions, nature-based solutions and carbon ecosystem enablers.
On technology-based solutions, 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 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 targets investment opportunities relating to reducing emissions and energy consumption.
On nature-based 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.
On supporting the carbon ecosystem, GenZero has invested in global climate solutions firm South Pole, which develops and implements emission reduction projects and strategies for organisations and governments.
GenZero is also working with Climate Impact X, a global carbon marketplace and exchange co-founded by Temasek, 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.
Leadership and hires
The new company will be led by Frederick Teo, who is currently the managing director of sustainable solutions at Temasek International. Teo will move into his role as CEO of GenZero on July 1.
“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,” says Teo.
According to Teo, GenZero currently employs some 20 staff. “We are looking to build to perhaps about 30 or 40 within a year or two,” says Teo.
While some staff have been transferred from Temasek, GenZero has also made new hires externally. “We want to invest in a model of building up human capital and expertise in areas of sustainability and carbon investments. But it’s also equally important for us to also build domain expertise in the policy, regulation and standards. So these are the areas that we will be focusing on building up our capabilities.”
GenZero’s board of directors will be chaired by Sunny Verghese, co-founder and group CEO of Olam. Verghese was formerly the chairman of the World Business Council for Sustainable Development.
Members of the board include Goh Swee Chen, president of the Global Compact Network Singapore; Steve Howard, chief sustainability officer, Temasek International; Ruth Nussbaum, group director, Proforest; and Alan Thompson, operating partner, Temasek International.
Profit and purpose
Speaking at a media conference on June 6, Teo set out his team’s aim to balance “climate impact with long-term sustainable financial returns”.
Says Teo: “In terms of financial returns, we definitely want to exceed our cost of capital, and then try and strike a good double bottom line.”
In response to questions by The Edge Singapore, Teo says there is no fixed allocation of the $5 billion sum among the three target areas. “We do not have a definite investment allocation between the three sectors; we will look at the different opportunities that present themselves because it’s a very dynamic space.”
GenZero complements Temasek’s recent investments in the sustainability space, says Steve Howard, chief sustainability officer, Temasek International.
Temasek has been “increasingly looking at sustainability as a megatrend”, with climate change as the “dominant factor” within that megatrend, says Howard.
He adds: “When carbon becomes a defining part of business models, how do we go deep enough across the three areas so they connect together? How do we have a highly functioning carbon ecosystem that delivers the best climate and commercial outcomes for decarbonising the world? And how do we look across the full array of business services and technologies as a connected set of activities? I think that’s really important for us to do that.”
On whether GenZero might consider local start-ups for future investments, and if Singapore-based sustainability companies face constraints in scalability, Teo points to the big picture.
“On CIX [Climate Impact X] and whether there are also others within this ecosystem that we are interested in, I think the main point I would make is, while we are trying to build an ecosystem, we do not see ourselves building a closed ecosystem,” says Teo in response to The Edge Singapore.
He adds: “I think it is not about just picking winners, but about providing broad support for the growth of this ecosystem. There is so much to do, right? It will never be sufficient for any one company or service provider to do everything in this race to net zero. So, I think we remain very open to the collaboration that is needed in order to push this decarbonisation agenda.”