Temasek Holdings on Tuesday (Jul 12) reported a record net portfolio value that crossed S$400 billion for the first time, while predicting a slower investment pace ahead.
In the financial year ended Mar 31, its net portfolio was valued at S$403 billion, an increase of S$22 billion from the S$381 billion it achieved a year ago, according to its latest annual review.
This is a smaller growth than in the previous financial year of 2020/2021, when Temasek reported a S$75 billion increase, or nearly 25 per cent spike in its net portfolio value. It was a turnaround from the financial year of 2019/2020, which saw a 2.2 per cent drop in net portfolio value due to the COVID-19 pandemic.
Its one-year total shareholder return, which takes into account all dividends distributed to the shareholder minus any capital injections, stayed positive at 5.81 per cent, lower than the 24.53 per cent a year ago.
The 10-year and 20-year total shareholder returns came in at 7 per cent and 8 per cent respectively, similar to figures in the previous year.
“Amid the uncertainty in global markets, we steadily invested and divested to capture opportunities aligned with long-term structural trends,” Temasek Holdings said in a media release.
“We aim to construct a resilient and forward-looking portfolio, with sustainability at the core of all that we do.”
INCREASED INVESTMENTS, LOWER DIVESTMENTS
Temasek said it invested S$61 billion and divested S$37 billion in the last financial year, investing more but divesting less than the year before.
In the 2020/2021 financial year, Temasek invested S$49 billion and divested S$39 billion.
Overall, Asia remained the anchor of Temasek’s portfolio at 63 per cent, with Singapore (27 per cent) and China (22 per cent) remaining the top two markets.
“For China, our exposure has decreased and this is due to the drop in the market value of our China portfolio. But China has consistently performed well for us over the decade, and we remain confident in its fundamentals and longer-term outlook,” said managing director of Temasek International’s strategy office and deputy head of organisation and people Lim Ming Pey.
Alongside the financial services (23 per cent) and telecommunications, media and technology (18 per cent) sectors, transportation and industrials, which includes investments in energy and resources emerged as one of the biggest sectors in Temasek Holdings’ portfolio.
Temasek Holdings will continue to focus on consumer, media and technology, life sciences and agri-food as well as non-bank financial services companies, guided by its view of trends and that opportunities in sectors are “converging”.
Investments in these sectors made up 33 per cent of Temasek Holdings’ overall portfolio in the last financial year.
“We have reshaped our portfolio over the last decade to be more resilient, especially as we anticipated intersections across sectors, and an increasing pace of disruption,” said Temasek’s head of west coast and deputy head of technology and consumer Martin Fichtner.
“Seeing opportunities through the lens of structural trends allows Temasek to bring together the expertise of our sector and market teams, as well as the connectivity of our partnerships and platforms.”
According to the investment firm, its unlisted assets, which make up 52 per cent of its portfolio, outperformed its listed assets. Temasek Holdings’ unlisted assets saw a 16.2 per cent internal rate of return over the last 20 years, compared to 6.7 per cent from its listed assets.
Its unlisted portfolio comprises investments in Singapore companies (36 per cent), other private companies including early-stage companies (26 per cent), Temasek’s asset management business (20 per cent) as well as private equity and credit funds (18 per cent).
Temasek said this portfolio offers “liquidity” from steady dividends from mature companies like Mapletree, SP Group and PSA, the distributions from the portfolio of funds built up over the years, as well as returns from when these unlisted assets are listed or sold.
“We have significantly scaled our asset management business, which was initially conceived to catalyse Singapore’s ecosystem, augmenting the capabilities we have within Temasek to navigate an increasingly complex world,” it added in its media release.
OVERALL OUTLOOK AHEAD
Looking ahead, Temasek Holdings noted that the global economy is in a “fragile state”.
“Ongoing geopolitical uncertainties, rising inflation, surging commodity prices and severe supply chain bottlenecks have uncovered further fault lines in the global marketplace,” it said in the media release.
“Central banks have tightened their monetary policies to curb strong inflationary pressures. Against the backdrop of an increasingly fractious geopolitical environment and a looming climate crisis, economies are now more vulnerable, with key developed markets potentially facing a risk of recession.”
“Overall we remain focused on constructing a resilient portfolio underpinned by our structural trends, while keeping a close eye on geopolitical developments,” said Ms Lim.
Temasek’s chief investment officer Rohit Sipahimalani said that despite slowing growth prospects and the uncertain outlook, the investment firm remains guided by its “investment philosophy” to generate risk-adjusted returns over the long term.
“We will prudently manage the risks and opportunities arising from macroeconomic and market events,” he added.
“Taking into account the reasonable likelihood of a recession in developed markets over the next year, we maintain a cautious investment stance while staying focused on constructing a resilient portfolio underpinned by the structural trends we have identified.”
Sustainability “remains at the core” at Temasek, it said in its press release, noting that it is aiming to reduce the net carbon emissions of its portfolio to half of 2010 levels by 2030. It hopes to reach net zero carbon emissions by 2050.
Temasek Holdings has lifted its internal carbon price of US$42 per tonne of carbon dioxide equivalent, to US$50 per tonne this year.
An internal carbon price places a monetary value on carbon dioxide emissions or the equivalent. Temasek said it uses this to assess a company’s impact on the climate and guide its investment decisions.
The firm expects to increase this price progressively to US$100 by the end of this decade, and a portion of its employees’ long-term incentives will be “aligned” with its 10-year carbon targets.
“Given the urgency, scale and breadth of the necessary transitions, governments, corporations and investors need to work together to define transition road maps as well as promote and drive adoption of new solutions,” said Temasek’s chief sustainability officer Dr Steve Howard.
“We are making good progress with our decarbonisation initiatives to help safeguard the future of humanity and contribute to a bright future for current and future generations.”
Temasek has accelerated its efforts to invest in “climate-aligned” opportunities, enable carbon-negative solutions and encourage decarbonisation efforts in businesses, it said.
For example, it invested in Ambercycle, a textile recycling company that uses novel molecular separation technologies, and increased its exposure in Solugen, a speciality chemicals manufacturing platform working to decarbonise the chemicals industry.
It also formed a joint venture called Sydrogen Energy, in partnership with Nanofilm Technologies, to provide nanotechnology capabilities and solutions that enable the mass adoption of hydrogen fuel systems.
In June this year, Temasek set up GenZero, a wholly owned investment platform company dedicated to accelerating decarbonisation globally through technology-based solutions, nature-based solutions and carbon ecosystem enablers.