Temasek to Assess Its 1.8°C Climate Scenario Baseline

Temasek to Assess Its 1.8°C Climate Scenario Baseline

Singapore's Temasek Reviews Climate Scenario as Global Warming Accelerates

Singapore's sovereign wealth fund, Temasek, is revising its baseline climate scenario, which was previously set at 1.8°C, to reflect the faster-than-anticipated rise in global temperatures. This update aims to test the resilience of its investment portfolio amid more rapidly changing climate conditions.

The review indicates that Temasek is adapting its climate risk and resilience assessments to higher physical and transition risks driven by accelerated warming. Acknowledging the challenges in decarbonizing sectors like aviation, the fund has started reporting emissions from Singapore Airlines separately due to their large share (43%) of the portfolio’s total emissions.

Temasek's move aligns with broader investor trends towards preparing for increased physical risks and disorderly transitions in response to rising emissions and evolving socio-political dynamics worldwide. The reassessment is being done alongside the Inevitable Policy Response (IPR), a research consortium backed by the United Nations Principles for Responsible Investment (PRI).

In 2025, Temasek's investments in green and transition-themed holdings increased by US$2 billion, making up 11% of its net portfolio value. The fund's so-called "sustainability living trend" bucket now includes investments in Swedish heat pump-based clean energy firm Aira, United States-based ammonia-to-power solution provider Amogy, low-carbon iron production technology company Electra, and renewable energy developer Neoen.

The fund's 2025 portfolio emissions remained flat at 21 million tonnes of carbon dioxide equivalent (tCO2e), despite seeing a reduction in portfolio emissions against targets set last year. This was due to a surge in emissions from Singapore Airlines and the expansion of emissions reporting boundaries in portfolio companies, offset by energy firm Sembcorp Industries' offloading of fossil-heavy assets.

Temasek's carbon intensity has decreased by 52% since 2010, but operational emissions rose to 19,731 tCO2e in 2025, mainly due to business travel. To mitigate this, business travel emissions were partially offset with SAF certificates purchased from Singapore Airlines in 2025.

The reassessment also includes investments in climate transition solutions such as the United Kingdom's Atlantica Sustainable Infrastructure, Sembcorp, and Denmark's Topsoe. Temasek is also jointly developing carbon capture technology for natural gas-fired turbines with General Electric through its investment in carbon capture developer Svante.

Franziska Zimmermann, managing director for sustainability of Temasek, stated that the group is gathering insights from experts to assess how expected changes to policies and technology adoption might affect temperature outcomes. Aurelia Britsch, global head of climate research at Sustainable Fitch, warned that with climate scientists warning that global temperatures are rising faster than anticipated in most climate scenarios, large, sophisticated financial institutions will begin reassessing the core climate scenarios they rely on to measure their risk exposure.

While 14 out of the 17 portfolio companies engaged by Temasek have set net zero targets by 2050 or earlier, five companies - SIA, Sembcorp, Olam Group, PSA International, and ST Telemedia - contribute over 80% of total emissions. Temasek sold Sembcorp's Indian coal business, Vietnamese gas plant, and coal facility in China in 2022, 2021, and 2020 respectively.

The latest economic studies of the impact of climate change have revealed a systematic underestimation of projected financial losses from climate change, and the PRI recently issued a brief warning that climate risks have been underestimated and now threaten investors' core business. With this in mind, Temasek continues to adapt and adjust its strategies to navigate the challenges posed by climate change.

1. Temasek's updated baseline climate scenario reflects a faster-than-anticipated rise in global temperatures, testing the resilience of its investment portfolio in the face of rapidly changing climate conditions.
2. The increases in physical and transition risks driven by accelerated warming are being considered in Temasek's revised climate risk and resilience assessments.
3. In response to rising emissions and evolving socio-political dynamics, Temasek is aligning with broader investor trends to prepare for increased physical risks and disorderly transitions.
4. In 2025, Temasek saw a growth of US$2 billion in investments targeting green and transition themes, making up 11% of its net portfolio value.
5. Temasek is investing in solutions to combat climate transition, such as carbon capture technology and renewable energy developers.
6. Despite efforts to reduce emissions, Temasek's 2025 portfolio emissions remained flat at 21 million tonnes of carbon dioxide equivalent, with a surge from Singapore Airlines and expanded emissions reporting among portfolio companies partially offsetting energy firm Sembcorp Industries' divestment from fossil-heavy assets.
7. Climate scientists' warnings of faster-than-anticipated global temperature rises have raised concerns, leading large, sophisticated financial institutions like Temasek to reassess their core climate scenarios for measuring risk exposure.
8. Fifteen out of Temasek's portfolio companies have set net zero targets by 2050 or earlier, with five companies contributing over 80% of total emissions, emphasizing the need for continued efforts in the energy transition towards net zero and sustainability.

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