Forum: Temasek's portfolio positioned to provide sustainable, long-term returns

We note Mr Alfred Chan Hock Yuen's comments on Temasek's performance compared with the MSCI World Index (How has Temasek done compared with others?, July 17).

There are various ways of putting money to work.

Theoretically, one could invest all of one's assets in an index, or hop from index to index for best returns, if one has the foresight and agility to do so.

Temasek could conceivably liquidate all its assets to become an index investor.

With the MSCI World Index, we would be overweight USA and other developed markets, with less than 10 per cent exposure to the Asian economies; less than half a per cent to Singapore.

Temasek has chosen not to do so. Fundamentally, we have confidence in the long-term potential of Asia.

At the same time, we have been deliberately reshaping our portfolio towards longer term structural or secular trends like digitisation, sustainable living, the future of consumption, and longer lifespans.

Temasek's current portfolio is the aggregate result of our bottom-up investment approach. We believe this is a resilient portfolio that can provide sustainable, long-term returns. Our portfolio value has quadrupled over the last 17 years, excluding any net new capital.

More importantly, Temasek aims to do well, do right, and do good, as an active investor, a forward-looking institution and a trusted steward.

We are a provider of catalytic capital. We deploy financial capital to stimulate innovation and growth; develop human capital to uplift capabilities and enhance potential; enable natural capital to foster sustainable solutions; and seed social capital to transform lives for a more inclusive and resilient world.

An example: Various key markets will likely see marginally better returns during the next decade or so if the world chooses to do nothing to abate carbon. However, the trade-off is an unliveable planet within our lifetime, and lower returns beyond the next 15 to 20 years.

Going for high climate ambition may dent returns marginally for the next 10 to 15 years, but the payoff is a more liveable planet for all - alongside higher long-term returns.

The choice is clear. Temasek has chosen to lean in on carbon abatement and other goals for planet, people and prosperity.

Divesting emitters, or investing only in low-emission businesses, does nothing to speed up the carbon abatement journey or help the planet.

That's why Temasek chooses to work with companies on their carbon transition journey.

More information on Temasek's performance may be found at temasekreview.com.sg

Nagi Hamiyeh

Joint Head, Investment Group

Head, Portfolio Development

Temasek