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Decarbonisation solutions
Investing Sustainably
Sustainability is integral to GIC’s mandate, which is to preserve and enhance the international purchasing power of the reserves under our management. GIC is committed to enabling the global transition to a net-zero economy through our investments and operations. To do this, we incorporate analysis of sustainability risks and opportunities into our portfolios, allocate capital to green and transition investments, and engage with portfolio companies on their climate transition plans.
Sustainability is an enterprise priority at GIC.
As we strive to integrate sustainability across all levels of investment decision-making, we are guided by our framework for sustainability: capturing opportunities, protecting our portfolio, and developing enterprise excellence and partnerships.
GIC will continue to advance our sustainable investment approach and asset allocations in light of three key drivers:
Policy signals
Economic viability of technologies
Pace of change in global warming
4.2 Our Approach
Climate change presents a collective opportunity
for governments, corporations, and investors to participate in multi-decade investments across three broad categories to transform and increase the resilience of economies:
Transition
Adaptation
4.3 Capturing Opportunities
Read Chapter 4
4.1 Our Beliefs
We believe that companies with strong sustainability practices offer prospects of better returns over the long term, and that this relationship will strengthen over time as market externalities get priced in and are incorporated into the decisions of regulators, businesses, and consumers.
At the same time, we must also integrate sustainability considerations into investment decisions in a way that recognises the diversity of industries and markets in which we invest and operate, as well as the trade-offs and time needed for companies to make the transition. We believe this bottom-up nuanced approach is more effective to help companies in their transition towards sustainability, as compared to a top-down, one-size-fits-all approach of mechanically divesting from entire industries.
To support sustainability outcomes, we are committed to enabling real-world decarbonisation rather than primarily focusing on portfolio decarbonisation. This involves directing capital to green solutions providers to enable a transition towards a low carbon economy and, in addition, supporting credible transition strategies from companies in relatively carbon-intensive industries. By focusing on real-world outcomes rather than portfolio emissions, we believe our efforts can have a greater impact in ensuring our actions contribute to lasting positive change in the real-world.
4.2 Our Approach
Sustainability is an enterprise priority at GIC. As we strive to integrate sustainability across all levels of investment decision-making, we are guided by our framework for sustainability: capturing opportunities, protecting our portfolio, and developing enterprise excellence and partnerships.
Preparing for Long-term Risks and Opportunities of Climate Change Amidst Near-Term Uncertainties (Box 1)
Over the past year, investors have faced new challenges such as rising business and living costs, increasing geopolitical risks, and an evolving policy landscape, creating divergent near-term priorities across regions. These factors have led some countries to reassess their near-term sustainability policies, and in certain instances, reduce support for decarbonisation. Meanwhile, other countries have increasingly linked decarbonisation objectives with energy security and industrial competitiveness, driving further progress and creating new investment opportunities.
Despite these uncertainties, climate change is real, and GIC remains steadfast in our belief that sustainability is fundamental to the long-term health of the global economy, which is key to our mandate of preserving and enhancing the international purchasing power of the reserves under our management. GIC will continue to advance our sustainable investment approach and asset allocation in light of three key drivers:
Policy signals
- Despite pullback in some markets, others are seeing enduring policy support or new developments that are conducive to green investments.
- Shifting policy priorities in a deglobalising world demands investor attention to how climate policy momentum and direction vary across regions.
Economic viability of technologies
- Global energy demand will likely remain robust, driven by electrification and increased digitalisation, including the proliferation of artificial intelligence.
- As renewables continue to become more cost-competitive with traditional energy, the fundamentals will continue to attract further investment into green energy and supportive infrastructure to respond to an energy-hungry world.
Pace of change in global warming
- Based on greenhouse gases already emitted, global warming will inevitably continue, raising climate-related physical risks.
- As demand for climate adaptation solutions accelerates, investors will play a crucial role in providing capital for essential solutions that make the world more resilient.
Addressing the opportunities and risks of climate change requires a holistic and multifaceted approach, as no single strategy can serve as a panacea given the complexity of the challenges involved. We believe long-term investors could employ one or more of the following measures:
- Top-down measures: These focus on integrating sustainability factors across the organisation, such as considering climate change in asset allocation, managing assets with significant long-term stranding risks through enhanced due diligence, and using climate- or sustainability-adjusted benchmarks.
- Bottom-up measures: These involve integrating sustainability into investment decisions, enhancing long-term returns through engaging companies, and establishing climate- or sustainability-focused alpha investment strategies. We would consider divesting assets if repeated engagements with company management fail to yield results.
The two approaches each have their trade-offs. For example, while top-down measures can manage macro risks and create impact at a larger scale, bottom-up portfolio actions provide greater flexibility to act on practical realities when navigating complex investment risks and opportunities arising from climate change. By balancing and blending these approaches, long-term investors can enhance the portfolio’s climate resilience and capture long-term climate opportunities.
4.3 Capturing Opportunities
New investment opportunities will emerge as regulators, consumers, and businesses increasingly act on sustainability issues. We aim to capture these opportunities by:
- Investing thematically in opportunities arising from climate change and other sustainability trends; and
- Actively engaging our portfolio companies on sustainability issues that are material to their long-term business prospects.
Investing Thematically
Climate change presents a collective opportunity for governments, corporations, and investors to participate in multi-decade investments across three broad categories to transform and increase the resilience of economies:
Decarbonisation Solutions
Investors can drive decarbonisation by directing capital to green solution providers. These range from more mature technologies such as solar and wind power, to early-stage innovations such as long duration energy storage.
Transition
Investors can enable real world decarbonisation by supporting and financing transition strategies from traditionally high-emitting sectors, such as fossil fuel reliant power utilities that are shifting to low-carbon energy.
Adaptation
With climate change set to continue, investing in adaptation solutions will safeguard assets and ensure their resilience. This includes investing in companies that provide weather analytics or climate-resilient building components, for example.
We have several investment platforms to seize opportunities across these themes, such as:
- The Climate Change Opportunities Portfolio (CCOP) deploys long-term, public equity capital towards investments aligned with the themes of climate mitigation and climate adaptation.
- The Sustainability Solutions Group (SSG) invests in early-stage energy transition opportunities in private equity. In addition, we launched an investment programme for green assets, which aims to bridge the funding gap of decarbonisation investment opportunities that have been overlooked by financial markets. The programme focuses on real assets that have successfully demonstrated technology and “first-of-a-kind” projects that require additional capital to scale up.
- The Transition and Sustainable Finance Group (TSFG) invests capital in sustainability-related opportunities across the fixed income and multi-asset universe.
Investing in Climate Adaptation (Box 2)
According to the World Meteorological Organization, 2024 was the warmest year on record, with temperatures rising above 1.5°C on average against pre-industrial levels. At the same time, the importance of climate adaptation is rising on the agenda for governments, corporations, and investors. Despite the increasing urgency to adapt to a warmer world, investments in adaptation have historically been significantly lower compared to investments in decarbonisation: only 5% of global climate finance mobilised globally in 2022 was dedicated to climate adaptation. As the impacts of climate change continue to increase, we anticipate growing emphasis on investing in adaptation as the world seeks to enhance climate resilience.
To assess the investment potential in climate adaptation, GIC evaluated the total addressable market for critical adaptation solutions, focusing on revenue growth opportunities across various climate scenarios over the coming decades. While the breadth and variety of adaptation solutions are expansive — impacting all sectors across more than 1,400 potential solution categories — we streamlined our assessments to focus on 14 adaptation solution groups, which were further refined into 21 discrete climate adaptation products and services with higher market potential.
Our research suggests that the investment opportunity from a select set of climate adaptation solutions across public and private debt and equity is expected to increase from US$2 trillion today to US$9 trillion by 2050, with US$3 trillion of this increase driven by further global warming. The inevitable need for climate adaptation will fuel growth across both established and emerging solutions. Some opportunities will drive the need for technological innovation (e.g. weather intelligence), while others will boost adoption of mature technologies (e.g. weather-resilient building materials). Together, these dynamics create investment opportunities across traditional and emerging industries. We will continue to work to identify more investment opportunities within each adaptation solution category.
Figure 1. Base Case Scenario Investment Value and Revenue Growth by 2050 across Adaptation Solution Groups
Hover to view adaptation solutions
General
Flood
Storm
Wildfire
Heat/Water Stress
Note: Bubbles represent 2050 enterprise value. Charts are not to scale. X axis compares Base Case revenues against the “Stable Temperature” Reference Scenario which models demand for climate adaptation solutions assuming no further global warming beyond current conditions.
Source: GIC Sustainability Office analysis, Bain & Company
Harnessing data for climate adaptation
Data is the backbone of climate adaptation as it empowers precise risk assessment, informed decision-making, and the creation of robust strategies to combat climate change impacts. With powerful data analytics, stakeholders can anticipate risks and bolster resilience to protect assets. GIC is invested in a leading data analytics and risk assessment provider that focuses on data analytics and predictive modelling to help the insurance industry, corporates, and governments understand and appropriately manage and price the risks associated with climate change. The company’s solutions include assessing the impact of extreme weather events, forecasting climate-related risks, and providing actionable insights to enhance resilience.
Building resilience through water management
Effective water management is essential to address the challenges posed by climate change, including altered precipitation patterns, increased frequency of extreme weather events, and stress on water resources. As such, water conservation and efficiency support the development of adaptive strategies that mitigate the impacts of climate change, ensuring long-term environmental and economic benefits. GIC is invested in a company that specialises in water and hygiene solutions for a wide range of different industries. Its technologies and services enable clients to ultimately reduce water consumption, manage wastewater, and improve energy efficiency. These efforts not only help industries comply with regulatory standards but also promote the adoption of best practices in water stewardship.
Engagement
GIC teams regularly engage with portfolio companies and vote responsibly on sustainability risks and opportunities that are financially material. We also engage with external fund managers and general partners on their sustainability policies and practices to ensure our investments with them are managed in a manner consistent with GIC’s sustainability approach.
Active Ownership through Voting and Engagement (Box 3)
Augmenting disclosures of sustainability attributes in cable products
Cable networks are the backbone of global power grids and data infrastructure. By facilitating the efficient transmission of energy and data, the industry plays a critical role in enabling decarbonisation and digital connectivity.
GIC is invested in a Europe-based company that designs and manufactures cable systems for energy and telecommunications. The company’s product portfolio includes solutions that enable greater integration of renewables, enhance grid resiliency, reduce transmission losses per cable, and accelerate digitalisation. The company also commits to various operational sustainability initiatives, including its targets to reduce its Scope 1-2 carbon footprint by 60% by 2030 relative to a 2019 baseline, and reducing its Scope 3 value chain emissions by approximately 65% by 2030. These goals will be achieved through increased usage of renewable energy, higher uptake of recycled materials, and supply chain optimisation in a way that is value-adding to its cost drivers. In addition to monitoring and supporting the company’s existing commitments, GIC encouraged the company to augment disclosures and sustainability communications so that customers and investors can appreciate its peer-leading efforts and contribution to the energy transition. We believe the company’s sustainability credentials enhance its competitive edge given that a growing share of its clients embed sustainability clauses in their contracts.
Supporting transition towards green energy
GIC is invested in a utilities company that specialises in power generation across several markets in Asia Pacific. Historically, the company was predominantly a coal power producer, but it has gradually transitioned to lower carbon emitting sources through recent investments. Following a holistic review of its decarbonisation strategy in 2024, the company strengthened its 2030 decarbonisation target, committing to reduce GHG emissions per kWh of power sold by 59% by 2030 against a 2019 baseline. While recent macroeconomic challenges and geopolitical risks have heightened near-term uncertainties in the global energy transition, we believe the company's long-term commitment to energy transition will help drive further decarbonisation while creating long-term value for investors as green energy becomes increasingly cost-competitive. GIC has consistently engaged the company to assess and support its decarbonisation progress. In addition, we encouraged the company to enhance its market communications on key sustainability milestones for investors to better appreciate how these initiatives increase the company's business resilience and mitigate asset stranding risks.
4.4 Protecting our Portfolio
Sustainability issues across environmental, social, and governance issues pose investment risks.
We protect our investments by:
- Regularly screening our existing portfolios for material sustainability risks;
- Conducting additional due diligence for companies and assets exposed to greater sustainability risks and adjusting our long-term valuation and risk models accordingly; and
- Stress-testing our portfolio and significant holdings against a range of climate scenarios and carbon price projections.
GIC Climate Signpost (Box 4)
Recent macroeconomic uncertainties and rising geopolitical tensions have raised concerns about the pace of global decarbonisation. Despite significant efforts to transform our energy systems, temperatures continue to rise, leading to extreme weather events, which have a profound global impact.
To better prepare for climate-related uncertainties, we regularly assess the likelihood of different climate scenarios through the GIC Climate Signposts - a tool designed to track climate transition progress and support GIC in navigating the complexities of evolving scenarios. Our latest assessment indicates an increasing likelihood of disorderly transitions and elevated physical risks based on the socioeconomic and geopolitical backdrop, and actual global emissions. Specifically, drawing from GIC’s in-house proprietary climate scenarios, the Too Little Too Late scenario and the Delayed Disorderly Transition scenario are becoming more probable than the two scenarios on either extreme of Net Zero or Failed Transition. This reinforces our view that investors need to prepare for greater uncertainties and heightened physical risks from climate change.
Figure 2. Probability Distribution of Climate Signpost Scenarios
Hover to view more
Transition Risks
High
Low
High
Physical Risks
Net Zero
Too Little Too Late
Delayed Disorderly Transition
Failed Transition
Source: GIC Sustainability Office, Ortec Finance
4.5 Developing Enterprise Excellence and Partnerships
How we operate sustainably as an organisation is as important as the way we invest.
We monitor and manage our operational footprint by avoiding and reducing unnecessary carbon emissions. We do this by:
- Managing our operational resource use and emissions by locating our global offices and data centres in buildings certified under leading green building certification programmes and by designing our offices to adhere to the strictest environmental sustainability standards;
- Switching to renewable energy sources where available;
- Communicating clear expectations for sustainable behaviour in our business partners; and
- Encouraging employees to adopt more sustainable behaviours at the workplace and beyond.
As we continue our efforts to reduce our carbon emissions, we also support high-quality carbon avoidance and removal projects.
Concurrently, we have also taken efforts to enhance the integration of sustainability data for our investment teams. This includes taking further steps to enhance the sustainability data and analytics infrastructure within GIC by streamlining sustainability data sources, harmonising analytical methodologies, and integrating them across our investment teams’ investment dashboards. These tools support our sustainability integration efforts by providing richer analyses and deeper insights to our investment teams and the broader organisation.
Partnerships
Sustainable investing is a field that continues to evolve. All organisations, including GIC, can benefit from learning from one another as new methodologies and standards are developed. GIC collaborates with fellow asset owners and investor peers through platforms such as the Asia Investor Group on Climate Change (AIGCC), CDP, Focusing Capital on the Long Term (FCLT), and Climate Action 100+. To advance the understanding of sustainability issues, GIC also engages in research, content, and event partnerships with organisations such as the Investment Management Association of Singapore (IMAS), the World Economic Forum, the Milken Institute, Wellington Climate Leadership Coalition (WCLC), Singapore Sustainable Finance Association, among others.
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“First-of-a-kind” projects in the context of climate tech typically refer to early pilot or demonstration projects, where technologies are past the laboratory stage, but have yet to be scaled up for commercial demand.
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World Meteorological Organization (2025). WMO confirms 2024 as warmest year on record at about 1.55°C above pre-industrial level
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Climate Policy Initiative (2024). Global Landscape of Climate Finance 2024
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Climate Bonds Initiative. Climate Bonds Resilience Taxonomy (CBRT)
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Analysis is based on a Base Case that reflects global warming outcomes based on current climate policies, with warming projected to reach 2.7°C by end of century. Aligns with Intergovernmental Panel on Climate Change (IPCC’s) SSP2-4.5 scenario.
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At GIC, we have developed the GIC Climate Signposts to provide a holistic and balanced appraisal of the likelihood of GIC’s four main climate scenarios: Net Zero (NZ), Delayed Disorderly Transition (DDT), Too Little Too Late (TLTL), and Failed Transition (FT). The GIC Climate Signposts: An Investor Tool for Navigating an Uncertain Future.
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World Economic Forum (2023). How climate scenarios can help investors build portfolio resilience.
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In 2022, GIC joined the Wellington Climate Leadership Coalition (WCLC) to deepen understanding of the physical and transition risks associated with climate change and to enhance the integration of climate science to address the world’s climate investment needs.