Temasek Review 2020

From Our Chairman

Last year, we delivered a carbon neutral Temasek at the company level, and committed to reducing net emissions attributable to our portfolio to half the 2010 levels by 2030.

A promising 2019 was cut short by the arrival of the COVID-19 pandemic in the last quarter of our financial year ended 31 March 2020. The resilience of our portfolio cushioned its worst effects.

COVID-19 is arguably the worst pandemic in a century, and the biggest global crisis since World War Two. It is a timely reminder to stay prepared for the unknown and the unexpected.

Policymakers worldwide have responded with expansionary fiscal and monetary policies, deeper and more comprehensive than those taken during the Global Financial Crisis.

Net portfolio value
as at 31 March 2020

However, the outlook for economic recovery remains clouded. The uneven pandemic responses are exacerbating the risk of further outbreaks, adding to the toll on lives, and the soaring costs to business.

Net portfolio value
as at 31 March 2020

COVID-19 has chilled consumer confidence, and lowered longer term expected returns. The ongoing US-China strategic rivalry and trade tensions, heightened by the impending US presidential election, will create more uncertainties for long term investors and asset owners.

Nonetheless, we remain committed to our ambitious T2030 goals, even as we press on in the face of short term adversity and work together in partnership to keep everyone safe.

Portfolio Performance

for the year

for the year

for the year

It was an active year – we invested S$32 billion and divested S$26 billion.

for the year

As at 31 March 2020, our net portfolio value was S$306 billion.

One-year Total Shareholder Return (TSR) was -2.28%, impacted by the emerging COVID-19 pandemic in March 2020. Our longer term 10-year and 20-year TSRs were 5% and 6% respectively. TSR since inception in 1974 was 14%.

We maintained a resilient balance sheet. This gives us the flexibility to invest for the longer term, take advantage of market dislocations, and work to reposition our portfolio, or portfolio companies, for the longer term.

Doing Things Today with Tomorrow in Mind

In this pandemic, no one is safe until everyone is safe.

We took an early decision in January to join the fight against COVID-19 in Singapore, around the region, and elsewhere in the world, covering some 35 countries in these extraordinary times.

In 2003, we had committed to set aside a portion of our positive Wealth Added returns for community purposes. Our disciplined execution ever since, has given us the wherewithal to fund various COVID-19 related initiatives at this time.

Over 400 of our staff stepped up to support various COVID-19 initiatives in support of Temasek Foundation and other partners across five key focus areas: diagnosis, containment & contact tracing, treatment, protection & prevention, and enablement.

Temasek announced wage restraint measures in February 2020, to lend moral support to the community and our portfolio companies hard hit by COVID-19. These included a salary freeze across our entire workforce and pay sacrifices at the senior management level. These amounts were channelled towards coronavirus-related community causes. This act of solidarity in the face of adversity is no different from what we had done during past crises, like SARS and the Global Financial Crisis.

In March this year, Temasek Foundation launched #BYOBclean, a nationwide programme to offer free hand sanitisers to all households in Singapore. Families brought their own recycled plastic bottles, to collect hand sanitisers prepared by over 20,000 corporate, community and university volunteers.

In conjunction with our Community Day on 25 June, Temasek worked with Temasek Foundation to provide every Singapore resident with a free pair of reusable antimicrobial masks, usable for 60 days with daily washing. This, again, is part of our contribution to reduce plastic waste coming from millions of single use surgical masks.

Over 400 of our staff
stepped up to support
various COVID-19 initiatives.

I am heartened by the generous spirit of our Temasek staff, who stepped forward to assist in so many ways — from setting up community care facilities for mild COVID-19 patients, to planning and joining swabbing operations for essential and migrant workers; from distributing hand sanitisers to the community, to the piloting and implementation of test, sort and segregation operations; and from trials for various test sample collection modes, or disinfecting solutions, to supporting multinational efforts for drug and treatment discovery.

Our staff worked with our portfolio companies and partners, big and small, local and international, who have improvised, experimented and innovated to find solutions to the COVID-19 challenges. These efforts range from protective solutions like hand sanitisers and masks, to the COMET negative pressure transporters for safe transport; from safe swabbing booths, to the development and production of test kits; from international donations, to increasing private test lab capacities; and more.

Leading through Uncertainty

The global economic outlook remains uncertain. We may yet see more, or bigger, second waves of the pandemic around the world in the months ahead.

In China, work has resumed steadily. Recent data has suggested that domestic economic recovery is underway. However, recovery is uneven, with some sectors more severely impacted, such as hospitality and transport.

In the US, the economy has contracted sharply on the back of uncoordinated lockdowns across the country and layoffs at unprecedented levels. The swift and aggressive response from the Federal Reserve has helped to reduce tail risks by easing liquidity and funding pressures. However, the pandemic is worsening in several states and the human toll is staggering.

Europe entered a recession in the first half of 2020. Activity has started to recover at a gradual pace as lockdown measures eased. The proposed European Union recovery fund, which has a shared system of funding, is a positive development that may lead to cohesion and debt mutualisation within the bloc.

In Singapore, deterioration in external demand, disappearance of tourism, and the impact from circuit breaker measures have led to a severe contraction. Economic sectors showing resilience include biomedical, electronics and e-commerce, with some local businesses accelerating technology adoption. Fiscal support has been substantial, especially to alleviate pressures on employment and businesses.

Despite the significant uncertainty and complexity ahead, we continue to maintain course for our T2030 goals. This means strengthening our capabilities and introducing new strategies to enable Temasek and our portfolio companies to weather the storm and emerge future ready.

Strengthening the Institution

We continue to evolve and adapt as always, to strengthen the firm, our portfolio, and ecosystem.

We are deepening our scenario planning framework to help us understand and navigate the increasing complexities in our operating environment. Our newly established Portfolio Development function works actively with key portfolio companies to reshape their businesses, protect the core, and position themselves for growth.

We are launching a Strategic Development initiative to make targeted investments in upstream research and development, as well as disruptive innovations.

We have been building new capabilities in areas such as Artificial Intelligence (AI), Blockchain and Cybersecurity. These are new business opportunities, which can provide our portfolio companies and ecosystem partners with a pool of talent and suite of services.

By leveraging our various connections and collective skillsets, we seek to achieve greater impact through collaboration. We will continue to invest in our network to add value to others, even as we derive greater value from working together.

To bolster our bench strength, Chia Song Hwee was appointed Deputy Chief Executive Officer of Temasek International (TI) in January this year. Song Hwee continues to work closely with Dilhan Pillay, CEO of TI, to drive our strategic and institutional initiatives. He also oversees activities relating to our portfolio, investments, and technology.

Building a Sustainable World

Sustainability is at the core of everything we do.

Our ambition is to deliver
a net zero emissions portfolio
by 2050.

Apart from delivering carbon neutrality in our last financial year, we have intensified our efforts to translate the Sustainable Development Goals (SDGs) into the reality of an abc World, of active economies, beautiful societies and a clean Earth. We have mainstreamed sustainability considerations in our investment and portfolio management processes. In addition, we strengthened our Environmental, Social and Governance framework. This included enhancing emphasis on climate analysis.

As an investor, we plan to accelerate investment into businesses that support the transition to low-emission and resource-efficient economies, including in the areas of energy, food, waste, water, mobility and urban development.

As we work to further align our investment activity with sustainability outcomes, we look beyond our traditional investment approaches, and engage with other partners to catalyse high impact solutions, such as carbon markets, carbon abatement technologies, and nature-based solutions.

Last year, we played a leading role in the establishment of ABC World Asia, a private equity fund for impact investing. This underscored our belief that investment can be the conduit for creating social or environmental benefits, while at the same time achieving financial returns.

We have mainstreamed
sustainability considerations in
our investment and portfolio
management processes.

As an owner, we strive to build a forward looking and resilient portfolio of companies that contribute to the progress of society. By 2030, we aim to reduce net emissions attributable to our portfolio to seven million tonnes of CO2 equivalent, which represents half the estimated carbon emissions in 2010 and approximately a quarter of current emissions. This will be a decade long journey, working with our portfolio companies on their carbon reduction plans.

We will invest in negative emissions technologies and nature-based solutions. Meanwhile, climate risk analysis, including an internal carbon price, will guide decisions on our new investments.

Our ambition is to deliver a net zero emissions portfolio by 2050. To this end, we have just become an official supporter of the recommendations of the Task Force on Climate-related Financial Disclosures, to underscore the importance of understanding climate risks and opportunities.

In Appreciation

I am amazed at the spirit of Temasek’s people in these difficult times. Our staff sacrificed salary and time, adapted to working from home, and took on volunteer efforts in the COVID-19 fight all over the world. They do this while continuing to maintain their job responsibilities.

Some of our portfolio companies, like Singapore Airlines, have been hit especially hard. Yet, their staff rallied, with many volunteering to take up support services in hospitals and the community. Others worked hard to continue delivering essential services, especially providing humanitarian air freight connections between countries. We shared experiences and business continuity learnings across the portfolio. Most importantly, I thank everyone involved for their emphasis on keeping our workers safe.

Governance of companies, and leadership during difficult times, require extraordinary commitment. I thank the boards, management and staff of Temasek, and our entire portfolio of companies, for their efforts this past year.

As always, I remain grateful to our international and regional advisors for their insights and advice. I have enjoyed interacting with them, and while I miss the face to face interactions, their advice via video conference links is no less appreciated, including at odd hours of the day!

I give special thanks to Marcus Wallenberg, who retired from our Board on 30 June 2020, after 12 years of service. His guidance and insightful views on global markets and diverse industries have enriched our deliberations. We are pleased to be able to tap on his counsel as he joins the Temasek International Panel (TIP) following his retirement.

I also express our deepest appreciation to our TIP Emeritus Members, Dr Jacob A. Frenkel and Dame DeAnne Julius DCMG, who have retired from the Panel. We have benefitted immeasurably from their wisdom and advice over the years.

Today’s world is volatile and uncertain. It may, indeed, seem that complexity has been supplanted by chaos, and there may be much to fear about the impact of COVID-19. However, I am confident we will survive this test, because we are committed, resilient, and will work together to come through it.

Sign Lim Boon Heng



September 2020