Temasek-owned investor GenZero said that its financing has helped cut 3 million tonnes of carbon dioxide equivalent (MtCO2e) since its launch in 2022, bringing it nearly halfway to its target of abating 7 MtCO2e by 2028.
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The milestone was announced in the firm’s inaugural sustainability report, which set out how the platform is measuring its climate impact. GenZero is among the first financiers globally to have publicly set absolute targets for realised emissions reductions and removals that reflect an investor’s ownership share – a move it said is meant to advance the industry’s accounting of its impact on the climate.
“We see a lot of net zero targets, emissions reduction targets, but not so much on the achievement of climate impact,” said Sofia Galanek, senior associate of institutional strategy and carbon business at GenZero. “[Some] comparable climate funds are currently publicly disclosing their climate impacts, but very few distinguish between stake- and non stake-adjusted, and even less, if any, set hard targets.”
Currently, GenZero’s target only covers its investments in climate solutions that directly reduce or remove emissions, such as Aurora Sustainable Lands, a portfolio company issuing removal credits through improved forest management in the United States.
The investor also quantifies its indirect climate impact from enabling infrastructure or technologies that reduce or remove emissions, which stands at 9.8 MtCO2e. Examples include Velocys, a United Kingdom-based sustainable aviation fuel producer, and Singapore-based carbon credits marketplace Climate Impact X.
But GenZero noted in its report that the lack of standardised methodologies to measure the value that such solutions add to the generation of direct climate impact, there is a risk of “oversimplying nuanced value chains and misrepresenting the true drivers of impact.”
GenZero does not currently measure its climate impact from investments in nascent climate technologies that have the potential to catalyse decarbonisation in the long term, but are not currently yielding immediate emissions reductions or removals, such as BeZero, a UK carbon credit rating platform.
The financier has made 24 investments to date, including three in the past year, spanning nature-based and technology-based solutions as well as carbon ecosystem platforms. The majority of Temasek’s initial S$5 billion (US$3.9 billion) capital injection into GenZero has not been deployed yet, its chief executive Frederick Teo revealed at the media briefing.
While the firm has exposure to 17 countries, much of its investees’ projects are currently in the Americas, Europe and Africa. Within Southeast Asia, its portfolio includes sustainable rice farming projects being piloted in Vietnam and Indonesia through Singapore-based agritech startup Rize. It is “very likely” that the next few projects in the pipeline will be focused on the region, said Teo.
Integrity challenges
In response to media queries, GenZero confirmed that it is no longer invested in cookstove projects developed by United States-based C-Quest Capital (CQC), after the firm’s former head was indicted on fraud charges for manipulating the number of credits generated from reducing wood consumption and deforestation by switching to more fuel-efficient cookstoves.
In 2022, GenZero – alongside former Temasek subsidiary Pavilion Energy – invested US$14 million into a programme with CQC to distribute clean cookstoves to 650,000 rural households in Southeast Asia. The initiative was expected to generate around 48 million carbon credits over its lifetime.
But last October, the carbon credits certifier Verra cancelled 22 of CQC’s cookstove projects, including four that were located in the region.
Teo told Eco-Business that GenZero has decided not to account for the impact from these cookstove projects, though he believes that the new entity CQC is operating under, Bridge Carbon, is trying to get some of them re-verified under Verra.
He did not rule out future investments into cookstove projects, despite critics warning that many are at a high-risk of overstating their climate benefits.
“Going forward, does it mean that we will never touch cookstove projects again? Not really. In fact, we are quite constructive on the impact that actually cook stove projects can actually have in transforming lives,” said Teo.
Carbon market headwinds
At the media briefing, GenZero’s managing director and head of investments Kimberly Tan highlighted that while improvements to carbon credit methodologies are raising the integrity of projects, the volatility in issuance volumes and demand for offsets has made it challenging for institutional investors to assess and underwrite such risks.
“When we look at cookstove or even afforestation, reforestation and revegetation (ARR) methodologies, some of these revisions have as much as a 50 per cent impact in terms of the volumes of credits you can issue over a project’s lifetime,” she said.
Tan also warned that a growing interest in carbon removals and jurisdictional projects, which require longer gestation periods and more intensive verification processes respectively, will lead to delays in issuances and longer payback times. This is especially so for technology-based removal projects, due to the weak and uncertain macroeconomic environment.
Additionally, exit options have dwindled for climate technologies over the past 18 months, given that investors are still waiting for initial investments to yield returns before injecting more capital into initial public offerings (IPOs) and acquisitions, GenZero’s report noted.
However, Tan said that GenZero remains committed to nascent project types, such as transition credits, but concessional capital and offtake agreements would be essential to realising commercial pilots.
Last year, GenZero partnered Filipino energy firm ACEN and Singaporean conglomerate Keppel to accelerate the retirement of coal plants in the Philippines through transition credits, a novel class of offsets to incentivise earlier coal phase-outs.
ACEN is planning to decommission and transition its 246-megawatt South Luzon Thermal Energy Corporation (SLTEC) coal plant to renewables by 2030 – a decade earlier than planned – through the use of transition credits. It was one of the two pilot projects chosen by Singapore’s central bank to trial the emerging credit type.
Teo told Eco-Business that unless the coal plant is shuttered by 2028, the project will not be counted towards its current climate impact targets.
Correction note: Paragraphs 2 and 8 have been updated to clarify that GenZero is not a fund as it does not manage external capital.
