Temasek unlikely to meet 2030 climate targets due to exposure to aviation and power sectors: CEO

SINGAPORE – Amid the tough global business environment and current technology constraints in decarbonising aviation and power generation, investment giant Temasek is unlikely to meet its 2030 climate targets, said its chief Dilhan Pillay on May 18.

However, Temasek is not retreating from its 2050 net-zero ambition, added its chief executive at the opening dinner of the annual Ecosperity conference, its flagship sustainability finance event.

Its 2030 targets involve halving planet-warming greenhouse gas emissions across the portfolio of companies it has stakes in to 11 million tonnes, from 22 million tonnes in 2010.

Temasek has, however, reduced the carbon intensity of investments by 52 per cent since 2010 – meaning that its portfolio businesses emit less for every dollar of value.

Its portfolio emissions for the 2025 financial year were 21 million tonnes, while its own operational emissions were about 19,700 tonnes.

More than 80 per cent of its portfolio emissions come from five big corporates: Singapore Airlines (SIA), utilities firm Sembcorp Industries, agri-business giant Olam Group, PSA International, and communications, data centres and IT firm ST Telemedia.

SIA, in which Temasek has a 53 per cent stake, contributed 43 per cent of the total emissions, while 22 per cent came from Sembcorp, which runs natural gas power plants in Singapore.

“Fossil fuels remain entrenched in hard-to-abate sectors such as steel, cement, power, aviation, shipping. And global energy demand continues to rise,” said Mr Pillay.

For Temasek and its portfolio, the transition to net zero “will be far more uneven, contested, and non-linear than previously anticipated”, he said.

Temasek does not plan to revise its 2030 targets. But the target will serve as a directional marker, said Mr Pillay.

Emissions from Temasek’s aviation and power generation portfolios could rise. Aviation is one of the hardest sectors to decarbonise since planes run on pollutive jet fuel.

Artificial intelligence has also resulted in a significantly higher level of energy demand and has attracted massive amounts of capital that would otherwise be used for other purposes, including climate transition opportunities, said Mr Pillay.

Back in 2014 when Ecosperity began, the prevailing view was that while the transition would be challenging and costly, there would be a convergence of policy, innovation and capital that would help accelerate the reduction of carbon abatement costs and pave the way to achieving net zero by 2050, he noted.

But today, the world has fundamentally changed, and net-zero progress has proven vulnerable to global disruptions.

Mr Pillay said: “The global energy transition has entered a far more complex and uncertain phase, with geopolitics reshaping markets. Recent events in the Gulf are a stark reminder that fossil fuel systems remain highly vulnerable to geopolitical shocks and supply disruptions.

“This is not a temporary disruption. It is the operating environment that we are in, and one that we must now base our planning on.”

SIA has the second-lowest emissions among South-east Asian carriers. In cargo operations, its fuel-efficient planes are expected to reduce emissions by about 400,000 tonnes annually.

But replacing jet fuel with sustainable aviation fuel (SAF) will be critical to drastically bring down planes’ emissions, stressed Mr Pillay.

The greener fuel is made from alternative sources such as used cooking oil, animal fat and biofuel.

Today, SAF accounts for less than 1 per cent of the global jet fuel supply. It is also around two to five times more expensive than traditional jet fuel, said Mr Pillay.

Singapore’s target is to have SAF form 1 per cent of all jet fuel used at Changi and Seletar airports in 2026, and 3 per cent to 5 per cent by 2030.

Mr Pillay also noted that while renewables will drive decarbonisation and account for most new energy plants in future, during the transition and ongoing energy crisis, thermal, fossil-based power will continue to play an important role in maintaining grid stability and affordability.

And while AI can be an innovation enabler of decarbonisation, its near- and mid-term energy demand cannot be satisfied by renewable sources alone, he added.

“AI can improve efficiency and sustainability, but it can also significantly increase emissions if not employed in a calibrated manner.”

The four-day Ecosperity conference brings together policymakers, corporations, investors, non-governmental organisations and academics to highlight commercially viable solutions and novel ways to finance the switch to cleaner energies, decarbonisation and adaptation to climate impacts.

Partner events under Ecosperity include the GenZero Climate Summit, which focuses on building up carbon markets, and the Philanthropy Asia Summit, which provides a platform for philanthropic organisations to support causes such as healthcare and sustainable agriculture.

As a long-term investor, Temasek continues to pursue its climate ambition.

The portfolio value of its sustainability-aligned investments stood at $46 billion for FY2025, an increase of $2 billion from the year before.

Temasek continues to engage with its portfolio companies – particularly those in emissions-intensive sectors – to support their work to decarbonise.

The investor also applies an internal carbon price of US$65 (S$83) per tonne to embed the cost of carbon in its investment and operating decisions. The price is expected to increase to US$100 per tonne by 2030.

Mr Pillay said: “In the end, sustaining the transition is not just about multiple pathways. It is also about long-term commitment and the resolve to follow through, even when the path becomes harder.”

Mr Dave Sivaprasad, managing director and partner at Boston Consulting Group, said government policies need to shift to unlock the emissions-reducing solutions that remain nascent. 

“It’s hard for any investor to justify accepting lower returns to meet climate commitments in the short term. Either public policy changes market incentives or advancements in technology improve cost-benefits that allow investors to achieve their returns,” he said.

Ms Leanne Todd, head of horizons, energy expansion and sustainability at S&P Global, said having frameworks such as a carbon mechanism and for capital deployments will be helpful. 

She added: “Projects have to make sense, so a lot of these frameworks are going to help, especially when a region has so many different political pressures happening.”

Following Temasek’s move, other corporates that are active in emissions-intensive sectors might also review their decarbonisation goals and trajectories, said adjunct senior research fellow Ho Hiang Kwee from the NUS Energy Studies Institute.