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    Investing Sustainably

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    How we invest

    Investing Sustainably

    Investing sustainably is core to our mandate as a long-term investor managing Singapore's reserves. Companies with good sustainability practices will offer prospects of better risk-adjusted investment returns over the long term.

    Our beliefs

    Sustainability is integral to GIC’s mandate: to preserve and enhance the international purchasing power of the reserves under our management. We believe that companies with strong sustainability practices offer prospects of better risk-adjusted returns over the long term, and that this relationship will strengthen over time as market externalities are priced in. Sustainability issues such as climate change have a material impact on companies, affecting their operations and financial performance, and shaping their long-term value.

    We take a holistic and long-term approach towards sustainability across our investment and corporate processes. Investments may entail trade-offs between different sustainability objectives, especially in the shorter term. GIC integrates sustainability into our investment and corporate processes in a way that recognises the diversity of the industries and markets in which we operate, and the trade-offs and time needed for companies to make the transition.

    We believe that it is more constructive to actively engage and support companies in their transition towards long-term sustainability, rather than to mechanically divest from certain industry sectors. By directly engaging with company management on how to operate more sustainably, we can create more value and more beneficial outcomes for our stakeholders over the long term.

    Our holistic approach

    Sustainability is a key investment consideration and top management priority at GIC. The GIC Board, along with its supporting committees – the Investment Strategies Committee, the Investment Board, and the Risk Committee – have oversight of GIC’s sustainability approach and considerations on climate change.

    GIC’s Sustainability Committee, comprising senior leaders from our investment, risk and corporate functions, is tasked to implement the sustainability framework, and monitor and respond to Environmental, Social and Governance (ESG) issues. The Committee routinely engages management and the Board Committees on broad trends and emerging issues, as well as potential investment opportunities.

    Our sustainability efforts across investment and corporate processes today are aligned with GIC’s Offence-Defence-Enterprise Excellence (ODE) Framework.

    GIC’s mandate is to preserve and enhance the international purchasing power of Singapore’s reserves. As this is a fund for the current and future generations of Singapore, by design sustainability is core to our mandate. Sustainability is an investment issue, and climate risk is an investment risk.

    — Liew Tzu Mi, CIO, Fixed Income & Chair, Sustainability Committee

    Offence

    GIC recognises that new investment opportunities will open up as regulators, consumers, and businesses increasingly act on sustainability issues.

    We aim to capture these opportunities by:

    • Integrating sustainability into our investment processes, for example, considering sustainability factors in due diligence, risk assessment, and monitoring;
    • Actively engaging our portfolio companies on corporate governance best practices and advocating for positive environmental and social outcomes;
    • Investing in thematic opportunities arising from climate change and other sustainability topics, for example, renewable energy assets, “green” buildings, and technologies that support the low carbon transition;
    • Taking active steps to develop or retrofit our assets to be environmentally sustainable, and to strengthen the assets’ resilience to future climate change risk for long-term value enhancement; and
    • Incorporating sustainability signals into quantitative strategies, for example, using proprietary data and analyses.

    Below are some examples of our efforts:

    Defence

    Sustainability issues across the domains of the environment, social, and business governance pose investment risks. We protect our investments by:

    • Regularly screening our existing portfolios for a variety of sustainability issues;
    • Conducting additional due diligence for companies exposed to greater sustainability risks and adjusting our long-term valuation and risk models accordingly; and
    • Developing a set of climate scenarios to stress-test our portfolio.

    Enterprise excellence

    How we operate sustainably as an organization is as important as the way we invest. We do this by:

    • Communicating clear expectations for sustainable behaviour by our business partners;
    • Managing our resource use through environmentally conscious office design and smart technology to monitor and improve our energy efficiency;
    • Achieving carbon neutrality in our operations by FY 2020/21 across our 10 global offices; and
    • Fostering a culture that embraces diversity of skills and views, and promotes respect and active contribution, for greater collective impact.

    Learn more about:

    Collaborations & Partnerships

    Sustainability is core to GIC’s mandate as a long-term investor managing Singapore’s reserves. We collaborate with like-minded organizations to inform market approaches and discourse, and as part of our strategy to increase engagement and disclosure.

    GIC’s Application of TCFD’s Recommendations

    The TCFD provides a practical framework for companies to disclose their climate-related strategies, and for investors to incorporate climate change considerations into long-term investment decisions.

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