Temasek Review 2020

Investment Update

We continue to position our portfolio for the long term in line with structural trends, whilst also being alert to shorter term risks and opportunities that disruptive events may present.

During the financial year ended 31 March 2020, we invested S$32 billion and divested S$26 billion.

Mainstreaming Sustainability

Environmental, Social and Governance (ESG) considerations have become an integral part in our investment decision-making. We continually evolve and strengthen our ESG framework and have over the past year increased our emphasis on assessing contribution and exposure to climate change at portfolio and asset level.

ESG considerations have become an integral part in our investment

Our approach is customised to fit the specific characteristics of the Temasek portfolio and is based on the principle of materiality. It is designed to enhance existing investment practices, support our investment decision making, safeguard Temasek's reputation, and align with our purpose of generating commercial returns by investing with a long term view. Our approach also guides priorities for our engagement on sustainability issues with our portfolio companies and fund managers. Over the year, our investment professionals participated in mandatory training on our methodologies and processes. Their analyses are supported by a network of ESG champions and a team of dedicated ESG professionals.

Investment Highlights

The technology, financial services and life sciences sectors continued to see significant investment activity.

During the year, we invested in several technology companies that ride on the structural trends we have identified. These included Duck Creek Technologies, a US-based software provider to the property and casualty insurance industry, ManoMano, a European home improvement product online marketplace and MiningLamp, a Chinese big data solutions company.

We continued to increase our exposure to the payments sector and other non-bank financial services companies which stand to benefit from the acceleration in digitisation of financial services, such as Blend, a US-based digital lending platform for mortgages and consumer banking.

Technology, financial services
and life sciences sectors
continued to see significant
investment activity.

Our life sciences investments included AIER Eye Hospital, CareBridge, an integrated healthcare system, and biopharma companies developing new drugs and therapeutic solutions, such as Beam Therapeutics, Coherus BioSciences, Transcenta and Vir Biotechnology.

The sustainable living trend was also reflected in our investment activity. We invested in Sunseap, an Asian solar developer based in Singapore, and partnered EQT Infrastructure to set up O2 Power, a renewable energy platform in India. To ride on growing demand for sustainably produced food, we increased our investments in companies producing alternative and plant-based proteins, such as Impossible Foods, Calysta and Perfect Day, and made new investments in Memphis Meats and Califia Farms.

During the year, our China exposure increased due to the appreciation in the market value of the holdings and net investment, and now represents our single largest country exposure by underlying assets. We continued to invest in Singapore companies, however our Singapore exposure decreased due to lower market values of our Singapore-listed holdings.

In China, we diversified our exposure by investing in Kuaishou Technology, a short video social platform, Beijing-Shanghai High Speed Railway and Ocumension Therapeutics, an ophthalmic pharmaceutical platform company. We also invested in LF Logistics, an integrated logistics service provider which focuses on Asia.

We continue to invest
in Singapore companies.

In Singapore, in addition to our major holdings and Heliconia Capital, which enables small and medium enterprises, we continued to invest in growth companies, including ShopBack, a rewards and discovery platform, and Growthwell Group, a plant-based meat alternative manufacturer.

In the US, we backed a management-led recapitalisation in Eastdil Secured, a commercial real estate brokerage company to accelerate its growth and invested in JAB Consumer Fund to increase our exposure to the consumer sector.

In Europe, we invested in Danish company Haldor Topsoe, a global leader in high-performance catalysts and proprietary technologies, and BenevolentAI, an AI-enabled drug discovery and development platform. We also led a growth funding round for Ceva Santé Animale, a global animal health company based in France, in which we have been invested since 2014.

We stepped up our exposure to Southeast Asia, riding on trends in the region such as a growing middle income population and a thriving Internet economy. Investments in the region included Scommerce, an e-commerce last mile delivery company in Vietnam, Diamond Food, a food manufacturer and distributor in Indonesia, and Ayala Corporation, a diversified conglomerate in the Philippines.

Post 31 March, we made investments in Singapore Airlines and BlackRock, a global asset manager with a diversified product offering and client base.

Nurturing Innovation

Our Agile pods in Blockchain and AI
have made progress.

Formed in 2019, our Agile pods in Blockchain and AI have made progress. Our Blockchain pod has worked with the Monetary Authority of Singapore and J.P. Morgan to develop a blockchain-based prototype for multi-currency payments on the same network. It is also working with HSBC Singapore and Singapore Exchange to trial the use of distributed ledger technology in an end to end digitalisation initiative focusing on Asia's bond markets. Our AI pod collaborated with innovation company StartupX to organise HyperHack, the world's first global sustainability hackcelerator that focused on creating products and services that address the United Nations' Sustainable Development Goals. The event featured a Datathon segment where participants tapped on to Singapore's Infocomm Media Development Authority's regulatory sandbox to explore trusted data sharing to build innovative data-driven solutions focused on bettering health outcomes and financial well-being.

Our Agile pods in Blockchain and AI have made progress.

In May 2020, Temasek joined Libra Association as a member. Libra is an independent member organisation, headquartered in Switzerland, focused on developing a blockchain-based payment system supporting financial inclusion and responsible financial services innovation. Temasek's participation will allow us to explore synergies and contribute meaningfully towards creating a regulated global network for cost effective retail payments.

We continued to develop Xora Innovation, an investment company we established together with the National Research Foundation. Xora seeks out technologies existing within the publicly funded research ecosystem in Singapore, which have strong potential to be commercialised and helps to accelerate their paths to market. The technologies that Xora is focused on include advanced manufacturing, materials science, biotech, space and quantum computing, among others.

Strengthening Enterprises

In June 2019, SeaTown Holdings International merged with ST Asset Management (STAM). This created a larger entity with scale and broader capabilities, bringing together STAM's dedicated global public credit franchise and structured credit expertise with SeaTown's dynamic approach to multi-asset investing. In the same month, CapitaLand completed the acquisition of all the issued shares of Ascendas Pte Ltd and Singbridge Pte Ltd to create one of the largest diversified real estate companies in Asia, with combined total assets under management exceeding S$123 billion.

To overcome the challenges posed by the COVID-19 outbreak, Singapore Airlines (SIA) announced a rights issue to raise up to S$15 billion, comprising S$5.3 billion in new equity and up to a further S$9.7 billion through 10-year mandatory convertible bonds (MCBs). As a long term shareholder, Temasek committed to subscribe for its rights entitlement and any outstanding rights shares and MCBs. The equity issuance of S$5.3 billion was oversubscribed, while the MCBs raised an initial S$3.5 billion. SIA retains the option to raise an additional S$6.2 billion through MCBs by July 2021.

In June this year, Sembcorp Marine (SCM) announced a S$2.1 billion rights issue, which will be followed by a proposed demerger from Sembcorp Industries (SCI). Temasek agreed to sub-underwrite S$0.6 billion of the rights issue. Shareholders of both SCM and SCI approved the transaction at their respective EGMs in August. When the transaction is completed, Temasek will be a direct and significant shareholder of SCM and SCI and will work with their boards and management teams to identify pathways for long term growth.

Building Capabilities

In the digital era, cybersecurity is an urgent issue facing companies, with increasing digitalisation and cyber breaches. Challenges include effectively identifying usable cybersecurity solutions in a crowded cybersecurity product landscape. Responding to these challenges, and in line with our desire to identify and build the next generation of portfolio companies, Temasek established ISTARI, a comprehensive cybersecurity platform that will adopt a customer centric approach and will work with clients to identify and develop solutions that meet their needs.

During the year, ISTARI's headquarters was established in London, and is developing its operational capabilities. It is anchored by Ensign Infosecurity (EIS), the largest pure-play cybersecurity services company in Southeast Asia, and several other leading companies in the sector.

ISTARI actively engages its platform companies to build and strengthen their capabilities. For example, Sygnia, a cybersecurity consulting company, is partnering EIS to conduct cyber assessments in Singapore. ISTARI is also supporting Temasek's engagement with IronNet and EIS to provide collective defense for Temasek's portfolio companies.

An Enabler of Growth Capital

During the year, Heliconia Capital invested in several Singapore-based small and medium enterprises in the consumer and healthcare sectors. This included Secretlab, which designs and produces gaming chairs that are sold directly to consumers. Follow-on investments were made in ICHX, a regulated exchange platform that offers issuance, settlement, custody and secondary trading of digitised securities, and Lucence Diagnostics, a medtech company that provides diagnostic and testing services for cancer.