Responding to continued uncertainties
Transitions are difficult to forecast and attempts to predict a specific outcome are not always helpful. A scenario where the global economy experiences a hard landing that pushes us back to a low-growth and low-inflation world is not beyond the realm of possibility. Likewise, the cumulative effect of technological progress and recent advances in digitalisation could boost productivity and improve profitability, so a world of high-growth and low-inflation can also materialise. The outlook is exceptionally uncertain.
How is GIC responding to these challenges? We have doubled down on our core investment principles – a continued commitment to portfolio diversification, taking the long view, and the ability to prepare, not predict. As we navigate a world in flux, we remain clear about our strengths and limitations, and are ready to pivot as new challenges and opportunities arise. Engaging in alternative scenario planning is one example of how we proactively identify and mitigate our exposure to market vulnerabilities. In addition, we continue to step up active management to maximise our value-add, increase our investments in inflation-resilient real assets, and deepen our partnerships.
To drive the low-carbon transition, we not only actively invest in new technologies, such as green hydrogen, carbon removal and even nuclear fusion, but also engage with and support our investees’ transition efforts. We divest as a last resort. Ultimately, we seek to accelerate the decarbonisation of the real economy.
We are also strengthening partnerships with like-minded actors across both the public and private sectors to catalyse meaningful climate action and collaboration, and address challenges related to climate finance and regulation, as well as ESG data and standards. As an example, GIC, together with 12 members of the Asia Investor Group on Climate Change (AIGCC), joined the Asian Utilities Engagement Program in 2021 to support utility companies in Asia in their decarbonisation journeys. This is a crucial initiative given that Asian utilities account for almost a quarter of the world’s total carbon emissions.
In addition, we have established a dedicated Sustainability Office to continue advancing the holistic integration of ESG across our investment and corporate processes, and strengthen our research on critical sustainability issues.
Strategy, however, matters little without effective execution, and in execution, human talent is the key ingredient. We recognise the importance of developing a diverse and capable pool of talent that is committed to our purpose and aligned with our values, and we have dedicated the feature article of this year’s annual report to this topic.