GIC Report on the Management of the Government's Portfolio for the Year 2025/26

4.1 Our Beliefs

GIC’s approach for sustainable investing is rooted in our mandate. We believe sustainable business practices are key to the long-term health of the global economy.

We believe that companies with strong sustainability practices offer prospects of better returns over the long term. This will be more evident over time as market externalities are priced in and incorporated into the decisions of regulators, businesses, and consumers.

At the same time, we must also integrate sustainability considerations in a way that recognises the diversity of industries and markets in which we 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 support companies in their transition towards sustainability, compared to a top-down, rules-driven approach.

GIC is committed to enabling real-world decarbonisation and the global transition towards a net-zero economy through our investments and operations. By focusing on real-world outcomes rather than portfolio metrics, we believe our efforts can make a greater contribution to lasting positive change.

4.2 Our Response to the Evolving Sustainability Landscape

Progress in the sustainability journeys of companies and sectors will not be linear. Over the past few years, we have seen: shifting sentiment and policies on sustainability across many countries; intensified focus on energy security and resilience amid geopolitical shifts; and a surge in energy demand driven by artificial intelligence (AI) development. Each has significant implications for the sustainability investment landscape (see Box 1).

As a long-term investor, we recognise that progress in sustainable investing will be uneven and volatile, even as the physical realities of climate change accelerate. At the same time, it is widely accepted that the world is unlikely to achieve the Paris Agreement goal of limiting temperature rise to below 1.5 or 2 degrees Celsius. Therefore, investors must pay closer attention to physical risks, and the global economy needs to accelerate adaptation to ongoing climate change.

For GIC, these developments give rise to three strategic priorities:

We invest in the energy transition: We invest in decarbonisation solutions and credible transition opportunities where the economics are sound and where the investment thesis is resilient amid policy shifts. In practice, this means we monitor different opportunity sets related to the energy transition, assessing for attractive relative value and durability. See more in the section ‘Capturing Opportunities’.
We seek out adaptation and resilience opportunities: There is a growing opportunity set in climate adaptation and resilience as solution providers emerge to help manage the impacts of higher temperatures and a more volatile climate. We actively track and adjust our exposures to these opportunities as they emerge. See more in the section ‘Capturing Opportunities’.
We proactively manage increasing physical risks: Given recent adjustments and reversals on policies related to decarbonisation, the global transition towards a net-zero economy will not happen fast enough to avoid significant physical changes in the climate and environment. This creates real, near-term physical risks for the companies and assets we invest in. We seek to understand and underwrite these appropriately. See more in the section ‘Protecting Our Portfolio’.

A Changing Sustainability Investment Landscape (Box 1)

Sustainable investing remains an enduring driver of long-term value creation, even amid shifting sentiment and geopolitical headwinds. Three interconnected forces are reshaping the global energy system: evolving sustainability policies, a heightened focus on energy security and resilience, and rising AI-driven electricity demand. Together, these are accelerating the energy transition and expanding the investment universe. Our approach to sustainable investing is grounded in long-term value creation and focused on capturing opportunities arising from the global shift toward a more secure, efficient, and low-carbon economy.

Shifting Sentiment and Sustainability Policies

Global sustainability policy frameworks have meaningfully recalibrated over the past year. Across major economies, policy focus is shifting from setting ambitious climate targets to a more balanced approach that considers energy security, industrial competitiveness, and self-reliance. Countries and regions are taking different paths. Some have scaled back or delayed emissions commitments, while others have simplified rules to ease near-term pressures but kept long-term goals. Increasingly, governments are reframing decarbonisation targets as drivers of domestic competitiveness and growth.

The previous regime of broadly converging policy tailwinds is now giving way to a more fragmented landscape. Sustainability-related strategies now require closer alignment with local policy conditions and market fundamentals. Even as public rhetoric around sustainability moderates, investments related to the energy transition continued to outpace fossil fuel investments by 88% in 2025. The outperformance of global clean technology equities compared to the MSCI All Country World Index by 45 percentage points between January 2025 and March 2026 similarly highlights that there are still attractive opportunities for investors who take a pragmatic approach and focus on strong fundamentals and valuations.

Increasing Focus on Energy Security and Resilience

Alongside these policy shifts, concerns over energy security and supply chain resilience are increasingly central to how countries approach energy transition. Across major economies, dependence on imported fossil fuels and concentrated supply chains for key materials and clean technology components are regarded as national security concerns, rather than just economic or environmental. This shift will speed up the transition towards cleaner and more reliable energy systems. Where climate ambitions have faced headwinds, focus on energy security and resilience has gained traction. Governments and companies are recognising that a more diversified and locally anchored energy system has strategic value.

Energy security is reshaping value chains by speeding up supply chain diversification and local production of clean energy technologies. This creates new opportunities for investors as companies look to build domestic supply chains, supported by measures like subsidies and tariffs. However, not all companies that benefit from policy support will deliver long-term returns as these incentives are often temporary and reduced or removed over time. Investors will need to distinguish between businesses with strong underlying economics and those that are overly reliant on subsidies.

Rapid Growth of AI

The rapid growth of AI is one of the important forces shaping global electricity demand and, in turn, the outlook for investments in energy transition. The International Energy Agency estimates that global electricity consumption by data centres will more than double by 2030, accounting for ~10% of the expected increase in global power demand. This surge is driving efforts to diversify energy supply through greater investment in nuclear power, renewables, and natural gas.

Higher electricity demand from data centres has been especially supportive of renewable energy, driven by favourable economics and faster deployment cycles to meet urgent power needs. Our research shows that expanding renewable capacity remains the quickest way to add electricity supply, while modernising power grids is essential to integrate low-carbon sources and maintain reliability.

Beyond its impact on power demand, AI is emerging as a catalyst for innovation across the sustainability landscape. Advances in AI are enabling more efficient energy management, predictive maintenance for renewable assets, and optimisation of grid operations, reducing waste and improving reliability. AI is also accelerating breakthroughs in materials science, carbon capture technologies, and climate modelling that could lower the cost and complexity of decarbonisation. In this way, AI’s influence is twofold: it is driving new investment across power generation technologies while simultaneously unlocking innovation that enhances efficiency and sustainability. This dual dynamic is creating both opportunities and risks for investors as the technology scales globally.

4.3 Our Approach

We are guided by our framework for sustainability: capturing opportunities, protecting our portfolio, and developing enterprise excellence and partnerships.

We evolved from early experimentation with a cross-asset Sustainable Investment Fund to the formation of focused sustainability teams within investment departments to capture emerging opportunities. In parallel, we deepened our research into sustainability issues and progressively incorporated sustainability considerations into core investment processes across all asset classes.

We are entering a new phase of our journey where investment departments will further integrate sustainability. Teams within investment departments will work more closely together, combining investment and sustainability expertise to better capture opportunities arising from climate change and broader sustainability trends. This closer collaboration will also strengthen each team’s ability to identify and manage sustainability risks, including physical risks, regulatory developments, and evolving stakeholder expectations. We remain focused on deepening our understanding of how sustainability issues impact our portfolio over the long term.

4.4 Capturing Opportunities

GIC captures investment opportunities arising from sustainability trends by investing thematically and engaging portfolio companies on material sustainability issues.

Investing Thematically

We focus on three climate-related opportunity sets that will shape the global economy over the long term:

Decarbonisation solutions

Directing capital to providers of green solutions, including mature technologies in energy generation, such as solar and wind, as well as solutions in the industrial and manufacturing sectors.

Transition

Supporting and financing credible transition strategies adopted by companies in traditionally high-emitting sectors. For example, fossil fuel-reliant power utilities that are shifting to low-carbon energy.

Adaptation

Investing in solutions that build resilience and help assets, businesses, and communities adapt to higher temperatures. For example, investing in companies that provide weather intelligence or climate-resilient building materials.

Investing in Decarbonisation Solutions (Box 2)

Given its low cost and ability to provide dependable baseload power, fossil fuels, and particularly natural gas, will continue to play a role in the global energy mix in the medium term. However, the economics and momentum of energy transition are shifting rapidly. Mature clean technologies are now far more cost-competitive in most regions, and their role in meeting rising power demand is expanding. In the near term, pressures for a faster energy transition driven by international agreements have been overtaken by real-world imperatives to meet energy demand and ensure energy security. The recent Middle East oil crisis has reinforced that, in most regions, renewables are the most affordable source of energy (see Figure 1). Over 90% of new utility-scale projects worldwide deliver renewable power at lower cost than the cheapest new source of fossil fuel alternatives, cementing their role as the leading source of incremental supply.

Figure 1. Average Cost of Electricity Generation by Fuel Type and Region from July to December 2025

Natural Gas

Coal

Offshore Wind

Onshore Wind

Solar

Source: BloombergNEF

Hover to view stats

Investing in Adaptation (Box 3)

Adaptation solutions are products and services that help companies and communities prevent or mitigate damage from increasingly severe weather events and patterns. For example, companies that provide weather-resilient building materials.

Our research shows that investment opportunities in climate adaptation across public and private markets could grow from US$2 trillion in 2025 to US$9 trillion by 2050, with about US$3 trillion of that driven by further global warming. Around 60% of this potential remains untapped as markets have yet to fully reflect climate risks and opportunities.

We expect investment in climate adaptation to grow as businesses act to prevent losses. Key drivers include stricter policies, greater awareness of physical risks, and changes such as updated building codes, insurance pricing, and corporate resilience rules. GIC has identified investment opportunities in companies focused on strengthening the built environment to track their performance and guide future investments.

Figure 2. EBIT Margins and Operating Cash Flow to Assets Ratio: Climate Adaptation Companies vs. MSCI ACWI Capital Goods Peers

EBIT Margin

Operating Cash Flow to Assets

Climate Adaptation

MSCI ACWI Capital Goods

Source: FactSet, GIC calculations

Hover to view stats

Engagement

Our investment teams regularly engage with portfolio companies and vote responsibly on financially material sustainability risks and opportunities. We also engage with external fund managers and general partners on their sustainability policies and practices to ensure consistency with GIC’s sustainability approach.

4.5 Protecting Our Portfolio

We protect our portfolio from sustainability-related risks through enterprise and bottom-up risk management processes.

Enterprise Processes

We protect the total portfolio by:

Conducting climate scenario analyses to assess potential impact on long-term returns and earnings-at-risk for our portfolio. Our Climate Signposts tool, designed to track climate transition progress, monitors the likelihoods of disorderly transitions and elevated physical risks;
Stress-testing our portfolio to evaluate potential impact under adverse market conditions associated with climate-related factors such as carbon taxes, policy developments, and more; and
Regularly screening our portfolio for material sustainability risks.

We are also creating our own metrics and using third‑party data to track key features of our portfolio, including:

Emissions intensity of our portfolio, complemented by a transition metric that tracks progress towards decarbonisation;
Exposure to growth potential from the climate transition. For example, assets that contribute to climate mitigation; and
Exposure to both acute (e.g., wildfires and hurricanes) and chronic (e.g., rises in temperature and sea level) climate hazards.

We will continue to refine the measurements of sustainability-related characteristics of our portfolio as methodologies in the industry are still evolving.

Bottom-Up Processes

From the bottom-up, our investment teams:

Conduct additional, sustainability-specific due diligence and adjust our long-term valuation and risk models accordingly; and
Practise active ownership to manage asset-level transition risks. For example, by supporting credible plans such as those to improve efficiency, substitute renewable energy, or accelerate the retirement of high-emissions assets.

GIC’s Climate-Related Physical Risks Management Framework (Box 4)

For many investors, managing physical risks emerging from climate change has become a near-term priority as damages and insurance costs rise. GIC assesses the financial impact of physical risks holistically across the investment universe, equally attentive to mitigating downside risk, managing adaptation strategy, and identifying the solutions providers (see Figure 3).

While our immediate focus remains on managing our exposure to assets with high physical risks, we are also working with our investment teams to evaluate and support companies implementing credible adaptation strategies, and to take strategic positions in proven solutions with durable demand and attractive valuations.

Figure 3. GIC’s Approach to Managing Climate-Related Physical Risks

4.6 Developing Enterprise Excellence and Partnerships

Operating Sustainably

We monitor and manage our operational footprint by avoiding and reducing unnecessary carbon emissions. This includes:

Locating global offices and data centres in buildings certified under leading green building programmes and designing workplaces to high environmental standards;
Switching to renewable energy sources where available;
Communicating clear expectations for sustainable practices to our business partners; and
Encouraging employees to adopt more sustainable practices at work and beyond.

As we continue our efforts to reduce emissions, we also support high-quality carbon avoidance and removal projects.

Sustainability Data Integration and Analytics

We have enhanced our sustainability data and analytics infrastructure by streamlining data sources, harmonising methodologies, and integrating them into investment dashboards to provide richer, investment-relevant insights. In addition, we have established an internal repository to improve enterprise-wide access to sustainability-related research, data, and investment insights.

Partnerships

We collaborate with other asset owners and investors to advance sustainable investing practices and shared learning. We also participate in research, content, and event partnerships with organisations such as the Investment Management Association of Singapore, the World Economic Forum, the Milken Institute, and the Singapore Sustainable Finance Association.

Investing Sustainably

Investing in an Evolving Sustainability Landscape

For GIC, these developments emphasise three priorities:

We invest in the energy transition;

We seek out adaptation and resilience opportunities; and

We proactively manage increasing physical risks.

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