For Singapore’s GIC, net-zero targets aren’t helpful in climate-change fight

SINGAPORE (BLOOMBERG) – Singapore sovereign wealth fund GIC says net-zero targets are not much help in its climate change fight, preferring to invest its billions in green technology while supporting energy companies in their drive to cut emissions.

“We will not be authentic if we just make a pledge without this ability in the real world to see the transition happen,” said Mr Lim Chow Kiat, chief executive officer of GIC, which is among the world’s largest sovereign funds.

The “easiest” way to hit net-zero targets would be to invest in tech firms and other companies with low emissions, Mr Lim said in an interview discussing the fund’s annual report released on Wednesday (July 26).

“We are not so sure how that is helpful,” he said, adding that it would mean passing assets on to others to hold high-carbon assets.

“That does not seem like a good way for us,” he said.

While many global managers, including BlackRock and Amundi, have set net-zero targets by 2050 or sooner, many sovereign wealth funds such as Norges Bank Investment Management, the world’s biggest, have not done so. 

A former United Nations climate chief last year said these funds – running a combined US$10 trillion (S$13.9 trillion) in assets – will end up on the wrong side of history if they cling to this strategy.

Mr Lim said his fund prefers to tackle climate change by engaging with portfolio companies as they transition to more sustainable practices, recognising that the shift from fossil fuels will not happen over night. In GIC’s view, dumping energy stocks is not the answer either.

GIC chief investment officer Jeffrey Jaensubhakij said: “You cannot live without fossil fuels until you have the renewable capacity. Divestment alone does not drive the transition plan to where it needs to go.”

GIC is also boosting its investments in green technology, backing companies like Climeworks, a Swiss carbon removal firm, and MioTech, a start-up that tracks environmental, social and governance practices in China.

“Our aim is to be helpful to the real world moving to net zero,” said Mr Lim. “We like to see sustainability as a mainstream thing, not a side hustle.”

GIC, which does not publish its assets under management, is estimated to run about US$799 billion, according to research company Global SWF. A competing firm, SWFI, pegs the assets at US$690 billion.