Temasek is reviewing its baseline 1.8°C climate scenario as global temperatures rise faster than previously anticipated. Temasek's 2025 portfolio emissions stayed flat. An increase in emissions from Singapore Airlines and the expansion of some investees' carbon accounting boundaries were offset by Sembcorp Industries, which offloaded its fossil-heavy assets. Franziska Zimmermann, managing director for sustainability of Temasek, revealed that the state investor is re-examining the 1.8°C warming assumption used in its climate scenario analysis since 2023, alongside the Inevitable Policy Response (IPR), a research consortium backed by the United Nations Principles for Responsible Investment (PRI). Zimmermann said that the group is in the midst of gathering insights from experts to assess how expected changes to policies and technology adoption might affect temperature outcomes. While details remain confidential, she noted that Temasek is “trying [its] best to in-source the expertise” to ensure a resilient portfolio. The reassessment follows a recent PRI brief that warned that “climate risks have been underestimated and now threaten investors’ core business.” The latest climate science now raises the prospect of an acceleration in warming if 1.5°C is passed, with permanent changes in the Earth system posing systemic threats to the continued viability of the financial sector and the global economy more broadly. It cited how the latest economic studies of the impact of climate change have revealed a systematic underestimation of projected financial losses from climate change. For instance, while a 2024 analysis by the Network for Greening the Financial System (NGFS) – a coalition of central banks and financial supervisors examining the financial sector’s role in managing climate risks – estimated that climate impacts could slash global gross domestic product (GDP) by 30 per cent by 2100, it did not account for tipping points. Tipping points refer to planetary thresholds that once passed, will trigger dramatic and irreversible changes, like the loss of the Greenland and West Antarctic ice sheets and the Amazon rainforest. Temasek uses NGFS’s “hot house world’ scenario – which assumes over 4°C warming by the end of this century – as its low-ambition stress test. Its high-ambition scenario models a net zero pathway aligned with the Paris Agreement’s 1.5°C goal. A spokesperson for IPR said the group actively tracks global policy changes against its 1.8°C climate scenario each quarter. Its latest tracker noted that while 67 per cent of emissions are addressed by policies that are supportive in advanced economies, they are not yet sufficient to meet its 1.8°C forecast policy scenario. While the spokesperson was not privy to developments at Temasek, he added that “it is not uncommon for large investors to review their internal assessments of the pace of transition against [IPR’s] forecasts, particularly given the volatility of the last six months.” Aurelia Britsch, global head of climate research, Sustainable Fitch, concurred that with climate scientists warning that global temperatures are rising faster than anticipated in most climate scenarios, “it is likely that large, sophisticated financial institutions will begin reassessing the core climate scenarios they rely on to measure their risk exposure.” “As we gain greater precision in identifying geographic vulnerabilities, especially for specific areas and associated assets, the pricing of physical climate risks will become more accurate,” said Britsch. “This could start to affect asset valuations – particularly in the real estate sector – and may produce ripple effects across related industries, from insurance to banking.” In its latest report, the Asia Investor Group on Climate Change (AIGCC), a network of institutional investors with over US$36 trillion in assets under management, found that while 230 of the region’s largest asset owners and managers have stepped up in climate action in the past year, the improvements are not happening at the speed and scale needed to limit global warming to levels that have the greatest net economic benefit for Asia. The introduction and enforcement of deforestation and fossil fuel financing policies remain nascent among the largest investors in the region, said AIGCC’s director of investor practice Monica Bae. “Physical risk impacts due to climate change will only continue to exacerbate. We urge investors to account for physical risks in their baseline climate scenarios to ensure resiliency in their portfolios in the long term,” she added. In the meantime, Temasek’s 2025 portfolio emissions remained flat at 21 million tonnes of carbon dioxide equivalent (tCO2e), after the investor saw its first reduction in portfolio emissions against targets it set last year. A surge in emissions from Singapore Airlines (SIA) – driven by strong demand for air travel and cargo transportation – and the expansion of emissions reporting boundaries in portfolio companies were offset by energy firm Sembcorp Industries’ offloading of fossil-heavy assets. Sembcorp’s emissions reductions in the past few years have been driven by asset disposals – including its Indian coal business in 2022, a Vietnamese gas plant which was handed over to the government last February and a coal facility sale in China last December. Kyung-Ah Park, Temasek’s chief sustainability officer, said progress toward net zero is unlikely to be linear. “We have a concentration of hard-to-abate sectors and many decarbonisation solutions are not yet commercially viable today given the headwinds,” she said. “But we remain committed to our targets and are not taking our foot off the pedal.” Decarbonising the aviation industry remains a major challenge, due to the high costs of sustainable aviation fuel (SAF), said Jasmine Teo, director of sustainability strategy at Temasek. The investment firm has started representing SIA’s emissions – which accounted for 43 per cent of total portfolio emissions – separately in this year’s report. Excluding SIA, Temasek’s overall portfolio emissions fell by 1 million tCO2e in 2025. Temasek separately accounted for Singapore Airlines’ emissions this year, to recognise that the aviation sector “follows a different decarbonisation trajectory from the rest of the portfolio”. Source: Temasek’s Sustainability Report 2025. Temasek engaged 17 portfolio companies last year, covering 91 per cent of its portfolio emissions. Of these, 14 have set net zero targets by 2050 or earlier. Five companies – SIA, Sembcorp, Olam Group, PSA International and ST Telemedia – contribute over 80 per cent of total emissions. Despite a growing portfolio, Temasek’s carbon intensity – or emissions per dollar of portfolio value – has fallen by 52 per cent since 2010. Operational emissions, however, rose to 19,731 tCO2e, largely due to business travel. Some Scope 2 emissions were reduced via the buying of renewable energy certificates (RECs) by its Singapore and China offices, while around 1 per cent of business travel emissions were offset with SAF certificates purchased from SIA. On the investment front, Temasek grew its green and transition-themed holdings by US$2 billion. Its so-called “sustainability living trend” bucket now makes up 11 per cent of its net portfolio value – a 1 percentage point dip from last year. Of those holdings, S$39 billion (US$30.5 billion) was in sustainability-focused investments, including 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. Meanwhile, S$7 billion (US$5.5 billion) was allocated to climate transition solutions, such as United Kingdom’s Atlantica Sustainable Infrastructure, Sembcorp and Denmark’s Topsoe. Under its sustainability-focused investments, Teo also pointed out that Temasek is invested in carbon capture developer Svante, which is jointly developing carbon capture technology for natural gas-fired turbines with General Electric. She said that the investment was made keeping in mind natural gas’ continued role in the energy mix for the foreseeable future. “But it’s critical to avoid lock-in effects and methane emissions leakage,” she added.

Temasek to review its baseline 1.8°C climate scenario

Temasek is re-evaluating its 1.8°C climate scenario due to accelerated global warming, with 2025 portfolio emissions remaining flat. Key factors include Sembcorp Industries offloading fossil-heavy assets, Singapore Airlines' increased emissions, and the impact of climate science on policy and technology adoption. The review follows warnings about underestimated climate risks and the need for updated climate scenarios to align with Paris Agreement goals.