The Motley Fool

Temasek Holdings: Impact Investing and Betting on China

Temasek Holdings is a commercial investment company that is wholly-owned by Singapore’s Ministry of Finance and it has total assets of S$313 billion (US$226 billion) (as at 31 March 2019). Given its mandate of managing money for the government, it’s natural that Temasek has a long-term investment horizon with the aim of sustainably investing in the future as an active investor.

The numbers also back it up as it has registered an impressive 30-year annualised total shareholder return (TSR) of 12% as compared to the MSCI Singapore Index’s annualised TSR of 6% over the same period.

Focus on ABC

With a view of aligning Environmental, Social and Governance (ESG) strategies among countries globally, Singapore has signed up, along with 192 other members of the United Nations (UN), to deliver the UN’s Sustainable Development Goals (SDGs) by 2030. As a result, the framework of Active Economies, Beautiful Societies and Clean Earth (ABC) was created.

Development of impact investing combined with China

Under the ABC framework, Temasek, as a responsible investor, has been promoting the coupling of ecology and prosperity as a sustainable path for growth.

The Temasek Trust, the philanthropic arm of Temasek, established the ABC World aiming to invest in regions it believes will drive a measurable and beneficial social impact. It has committed 26% of its underlying exposure to China as of March 2019 and supported research in science and technology.

Other than the major investments in Chinese financials, Temasek invests in life sciences including in Hangzhou Tigermed Consulting Co Ltd (SHE: 300347), a Chinese company listed on the Shenzhen Stock Exchange. It is principally engaged in the provision of contract research activities to domestic and overseas healthcare and drug market regulators.

Temasek views China as one of its most crucial investment destinations and remains optimistic on the middle class’s growing demand for pharmaceutical products over the next decade. Longer life spans, rising affluence, and sustainable living, all enabled by technological solutions, have been identified as major trends Temasek is focusing on in China.

The development of innovative pharmaceutical products in China will bring more commercialised products to the market and contribute to the health and wellbeing of the broader population.

Where to next for Temasek?

China remains the top country in terms of investment holdings for Temasek, even amid the escalation of the US-China trade tensions. It adheres to an investment strategy of capturing new macroeconomic trends to create a lasting positive impact rather than focusing solely on financial returns.

Looking at Temasek’s recent annual investment review in 2019, Chinese investments are on par with Singaporean investments for the first time. It reflects its confidence in China’s ongoing transformation to an economy focused more on domestic consumption and services, rather than exports, while also aligning its investments with the commitments to the UN’s SDGs.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Miles Wu doesn’t own shares in any companies mentioned.