Temasek likely to miss 2030 climate goal amid aviation, energy emissions

Singapore’s Temasek warned it may miss its 2030 climate target as aviation and power sector emissions continue rising despite the sovereign investor’s commitment to achieving net-zero emissions by 2050.

Dilhan Pillay, chief executive of Temasek, said the S$434 billion ($339 billion) Singaporean sovereign investor is likely to miss its 2030 interim climate target as exposure to the aviation and power generation sectors hampers efforts to cut portfolio emissions.

He stressed that the fund remains committed to achieving net zero by 2050 but said the slower-than-expected decarbonisation pace merely “reflects the realities of the broader global economy”, where technologies and solutions needed to cut emissions in hard-to-abate sectors are still not economically viable.

Temasek set a target to halve its portfolio emissions to 11 million tonnes of carbon dioxide equivalent (tCO2e) by 2030 from the 2010 level of 22 million tonnes.

“What we committed to achieving by 2030 still serves as an important directional marker befitting our ambition and we will continue to press forward on every available lever, but our pace must reflect today’s realities,” Pillay said during the opening ceremony of Ecosperity, the fund’s annual sustainability event.

“The prevailing view was that while the transition would be challenging and costly, there would be a convergence of policy, innovation and capital that would help accelerate the reduction of carbon abatement costs, particularly in hard-to-abate sectors, and allow us to have a chance of achieving net zero by 2050,” he said, citing the US Inflation Reduction Act as an example of such support.

“But today, the world has fundamentally changed.”

In the year to 2025, national carrier Singapore Airlines contributed 43 per cent of Temasek’s total portfolio emissions while Singaporean power company Sembcorp Industries contributed 22 per cent.

Temasek is the largest shareholder in Singapore Airlines, with the investment valued at S$20.2 billion ($15.7 billion) at the end of March 2025.

The Singapore Airlines Group is targeting net-zero carbon emissions by 2050 through investments in next-generation aircraft and the adoption of sustainable aviation fuel, but the economics remain difficult. Pillay said sustainable aviation fuel accounts for less than 1 per cent of global jet fuel supply and remains two to five times more expensive than conventional fuel.

The company reported earnings above analysts’ expectations last Friday. Its profit was boosted by a 7.7 per cent rise in annual passenger numbers to nearly 43 million as travellers opted for direct flights between Asia and Europe instead of layovers in Gulf countries because of the Iran war.

“As a shareholder, we are, of course, pleased with this, but on the other hand, with our sustainability cap on, we lament the increase in emissions arising from this,” Pillay said.

“But if SIA does not do well, it will be weakened from doing the right thing in terms of fleet renewal and SAF adoption.”

Temasek also holds a controlling stake worth S$11.3 billion ($8.8 billion) in Sembcorp. The company acquired Australia’s Alinta Energy last December, resulting in a “short-term” rise in emission intensity due to Alinta’s coal plants.

“This is what a just transition looks like in practice. The reality is that the world cannot transition overnight,” Pillay said.

“A credible transition is not simply about shutting assets down quickly. It is about replacing them responsibly while preserving energy security, affordability and grid reliability along the way.”

Other sectors in Temasek’s portfolio that are difficult to decarbonise include agriculture, port operations and data centres, according to its website. Holdings include agri-food business Olam Group, port operator PSA International and communications company ST Telemedia.

Transport and industrials, along with financials, are the largest sectors in Temasek’s portfolio, each representing 22 per cent of total allocation at the end of March 2025. Life sciences and agri-food account for 7 per cent.

Meanwhile, the fund has S$46 billion ($35 billion), or 11 per cent of its portfolio, invested in “sustainable living”-aligned assets, one of its core ESG themes focused on companies and technologies that support environmental protection and climate transition.

Pillay said the issue of the green premium must be addressed to enable more scalable deployment of capital from investors, calling for greater subsidies, concessional capital and innovative financing structures.

Concessional capital, to which Temasek allocated S$100 million ($78 million), can provide more favourable financing terms for ESG-aligned projects and plays an important role in de-risking investments and attracting larger pools of commercial capital, he added.

“Many economies in Asia remain reliant on imported fossil fuels and are highly exposed to climate risks. This sharpens the trade-offs between growth, energy security, affordability and decarbonisation,” Pillay said.

“The journey will be harder and less linear, but it is one we must continue because the cost of inaction is far higher.

“In this new reality, what matters is not perfection but progress at scale across real assets, real markets and real-world impact,” he said.