(FINAL)_Temasek (Phase 3) - Digitalization

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Industry 4.0 technologies like blockchain and artificial intelligence (AI) are recognized as competitive advantages. Successful long-term digital transformation requires a long-term view: identifying the most impactful technologies, developing the right tools and platforms, and prioritizing cybersecurity as a strategic asset.

WHAT

WHY

HOW

Digitization is a megatrend permeating all sectors and companies. While the trend has long been underway, Covid-19 proved an accelerant. Increasingly, foundational technologies including blockchain, AI, 5G, and IoT are giving birth to whole new uses of technology.

Temasek sees the decarbonisation challenge as a powerful opportunity to plot a path towards stability and prosperity – and is placing catalytic investment to address urgent global challenges and reduce emissions

Advances in technology bring risks and complexities including cybersecurity concerns and the growth of a digital divide. In order to harness the power of digitization, Temasek is commited to tackling these critical challenges while driving innovation.

Countries that invested early in digitization have proven especially resilient. During the height of the first global lockdown, 11 in 13 of the world’s most advanced and dynamic digital economies outperformed the year on year average OECD growth rate in Q2 2022 . As Aisha Mohammed Elhassan Hamid, winner of the World Bank’s 2021 Blog4Dev Competition, notes, “integrating technology in all sectors will support sustainable development and economic growth, diversification and resilience.” This marks an exciting new paradigm for digital innovation and technologies. As Chia Song Hwee, Deputy CEO of Temasek, observes, these technologies can potentially disrupt or redefine many current trade and commerce arrangements. With nearly two thirds of the world’s population online today , many digital economies have entered a “post-access” phase, where digital transformation has extended far beyond internet and smartphone penetration, ushering in a structural shift toward more, and deeper, Industry 4.0 technologies.

Breaking New Ground

Global investment companies like Temasek play a key role in advancing digital technologies as a powerful force for good. Recognizing that digital transformation will significantly impact how it functions as an investor and potentially catalyze the growth of companies in its portfolio, Temasek is taking a hands-on approach: investing in digital solutions, and building its own capabilities and solutions where none exist. “In a lot of sectors, investing is the primary way in which we express our view. Here, we have chosen to build ventures instead. Creating new solutions may be a novel approach for an investment firm, but doing so is very much aligned to Temasek’s purpose,” notes Pradyumna Agrawal, Managing Director, Investment (Blockchain) at Temasek. “We are only able to do this because our firm has a deep conviction on the potential of technology. There is no way we would build these platforms if we weren’t convinced about the need for a particular solution.” Since 2019, the company’s AI pod – one of two experimental units formed to create new ventures and take them to market - has catalyzed strategic partnerships and built deep expertise in creating AI products and solutions. “I am convinced that harnessing AI will be key to creating value in the future, but it must be coupled with domain-specific expertise,” explains Sng Ren Yeong, Managing Director, Artificial Intelligence Strategy and Solutions at Temasek. “That will generate better outcomes for businesses, societies, and a better world for all of us.”

AI technology remains heavily underutilized

To address this paradox – that AI is ready for business, but many businesses are not ready for AI ,

digital technologies

The Future of Security

Although manifold, the rewards of the digital revolution are certainly not without risk. As businesses accelerate their digital transformations, the value of enterprise security – and the threat of cyber attacks – is greater than ever. Vulnerabilities in critical information infrastructure come at the cost of heavy reputational damage as well as capital losses, as sharply exemplified by the payment of close to US$5 million from the U.S.’s largest fuel pipeline to ransomware attackers who took down its networks and operations for five days in May 2021, resulting in fuel shortages along the East Coast.

Countries that invested early in digitization have proven especially resilient.

Temasek invests in digital solutions, and builds its own capabilities and solutions where none exist.

Cybersecurity is a requisite for digital competitiveness and sustainability.

To mitigate these pitfalls, governments, businesses, and technologists must work together to build robust digital governance policies and public trust. Cybersecurity is a requisite for digital competitiveness and sustainability – a strategic advantage that innovators like Temasek have reframed from challenge to opportunity. By founding ISTARI, a global platform of leading cybersecurity companies, Temasek helped group top talents to offer customers a one-stop solution to manage digital risks and navigate the ever-shifting challenges of cyber resilience, while advancing cybersecurity as a key business agenda. With ISTARI’s IronNet collective defence mechanism, for example, demand for cybersecurity is aggregated and costs are brought down. It therefore reduces the barrier for companies to adopt good cybersecurity practices by bringing in capabilities and tools at a cost that is easier to accept.

The second pillar of Temasek’s decarbonisation strategy involves enabling carbon negative solutions to reduce emissions. An example of this is Climate Impact X (CIX), a global exchange and marketplace for high-quality carbon credits, jointly established by DBS Bank, Singapore Exchange, Standard Chartered and Temasek. Leveraging on satellite monitoring, machine learning and blockchain technology to enhance the transparency, integrity and quality of carbon credits, CIX provides a near term solution for companies to neutralise unavoidable emissions and set them on the path to net zero. Another example is Canada-based company Svante, which in 2021 raised US$75 million in new financing, led by Temasek, for its efforts to address hard-to-abate emissions from industrial operations such as cement manufacturing, blue hydrogen production and natural gas boilers . Svante’s breakthrough solid sorbent technology allows large-scale capture of CO directly from industrial sources – at half the cost of traditional engineered solutions .

As Chia Song Hwee, Deputy CEO of Temasek, notes, “Investors have a role in driving cybersecurity change, and this is quite similar to Environmental, Social, and Governance (ESG) initiatives. ESG is one of the many areas that we analyze in deciding whether or not we should invest in a company. And cybersecurity risk assessment is another.” The same future-focused approach underscores Temasek’s spirit of innovation in catalyzing new solutions through strategic partnerships. “As we all know, it is challenging for corporates to invest in R&D while meeting expectations to generate profits in the short term. The answer to this problem is collaboration. To fully harness the potential of our R&D ecosystem, we must collaborate and also find alignment in areas with compelling use cases that are critical to building a better future.”

While Asia still faces food production challenges, the region is certainly not without hope. The Asia Sustainable Foods Platform shows what is possible. Anuj Maheshwari, Temasek’s Managing Director for Investment (Agri-Food), notes that hard times provide us the creative challenge that could ultimately help us transform our food supply. “The pandemic has put a spotlight on the resilience of our food and agriculture supply chains. Technology adoption and innovations are key to transforming the sector, advancing sustainability and resilience across the global food system,” he says. “Innovative solutions, new technologies and compatible regulatory systems are needed to strengthen food safety, security and resilience – not only in Asia, but across the globe,” notes Maheshwari. “That’s why agri-food is a crucial and rapidly expanding component of Temasek’s investment portfolio.”

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1. https://www.ipcc.ch/ 2. https://www.bloomberg.com/news/features/2021-08-09/ipcc-report-human-caused-climate-change-unequivocal 3. https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Headline-statements.pdf 4. https://www.temasekreview.com.sg/our-stories/the-race-against-the-clock-to-net-zero.html 5. https://eqtgroup.com/news/2020/eqt-and-temasek-launch-o2-power-a-renewable-energy-platform-in-india 6. https://eqtgroup.com/news/2020/eqt-and-temasek-launch-o2-power-a-renewable-energy-platform-in-india 7. https://svanteinc.com/svante-raises-75-million-to-decarbonize-cement-and-hydrogen-production/ 8. https://svanteinc.com/svante-raises-75-million-to-decarbonize-cement-and-hydrogen-production/ 9. https://www.ecosperity.sg/ 10. https://www.temasek.com.sg/en/news-and-views/news-room/news/2021/temasek-review-2021-bounce-forward 11. https://www.temasekreview.com.sg/our-stories/the-race-against-the-clock-to-net-zero.html

Footnotes

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Access to the Digitization Dream

Innovation in the Digital Economy

*PLACEHOLDER TO INSERT HEAT SPIKE INFOGRAPHICS

1. Google, Temasek and Bain & Company 2. KPMG CEO Outlook 2020 3. Digital Intelligence Index 4. International Telecommunication Union 5. BloombergNEF 6. Bloomberg Green 7. MarketsandMarkets 8. McKinsey Global Institute 9. Bloomberg News 10. Gartner 11. McKinsey 12. EY

In April this year (2021), Temasek combined forces with U.S.-based investment company BlackRock to launch Decarbonization Partners, a series of late stage venture capital and early growth private equity investment funds focused on accelerating decarbonisation solutions. The funds have a sharp focus on catalysing early-stage growth companies that develop proven next-generation decarbonisation technologies – including emerging fuel sources, grid solutions, battery storage, and electric and autonomous vehicle technologies.

Investors aren’t only taking note, but are actively driving the growth in this area. In 2021, startups building technology to advance industrial digitalization raised a record US$17 billion . Foundational technologies, such as blockchain and AI, are enabling pervasive cross-industry disruption in recent years. From improving energy efficiency at cement, steel and chemical companies to automating conventionally labor-intensive activities like farming, AI is transforming business by optimizing machine learning and execution in real time. Blockchain presents similarly horizontal solutions. In a market that’s projected to grow from US$4.9 billion in 2019 to US$67.4 billion by 2026 , blockchain technology and services have moved beyond cryptocurrencies into many facets of business, from reducing shipping logjams to streamlining sharing of medical records and financial information in a secure way.

The COVID-19 pandemic has made the threat of food security more pronounced with disrupted supply chains and rising food prices

Despite this looming crisis, 1.3 billion tonnes of food is wasted each year globally – that is a third of the food produced for consumption

Temasek uses its capital to catalyze impactful ideas and solutions, build a resilient portfolio, and deliver sustainable returns over the long term.

Beyond investing, Temasek contributes by fostering dialogue, building tech capabilities, and strengthening the industry ecosystem as we collectively embrace technologies – including the ones needed for the sustainability of our business models and our planet.

of the world’s most advanced and dynamic digital economies outperformed the year on year average OECD growth rate in Q2 2022 .

Economic Resilience

The market for blockchain technology and services is projected to grow from

blockchain

In 2021, startups building technology to advance industrial digitalization raised a record

Investment in Startups

11 in 13

US$17 billion .

US$4.9 billion

Aicadium

A global technology company that develops and scales AI solutions, empowering businesses to leverage AI for better business outcomes.

An AI platform to generate better insights for financial services as part of the National AI Programme in Finance.

NovA!

A platform that uses blockchain and distributed ledger technology for quicker, more efficient settlement of banking payments.

Partior

US$4 trillion

1% of companies

Through NovA!, Aicadium is also supporting the National AI Programme in Finance, a joint initiative by the Monetary Authority of Singapore (MAS) and the National AI Office (NAIO) at the Smart Nation and Digital Government Office (SNDGO), to leverage AI and machine learning to enable better insight generation for the financial services industry. Likewise, Temasek’s Blockchain pod has helped build game-changing ventures that advance blockchain technology across three focus areas: digital identity and credentials, programmable money and assets, and capital markets infrastructure. For example, Temasek partnered with DBS Bank and J.P. Morgan to form Partior, a platform that uses blockchain and distributed ledger technology for quicker, more efficient settlement of banking payments. With Partior, cross-border transactions are cleared within minutes instead of days – potentially a major disruptor in a market where transactions are expected to reach US$156 trillion this year . Through this joint venture, Temasek and its partners are able to use this technology to bring together the banking ecosystem, increasing currency coverage and enabling global instantaneous value movement with certainty and transparency.

Temasek's Blockchain and AI pods foster solutions for better business outcomes.

Source: The Good Food Institute

For future generations to survive and prosper, sustainable food production needs to be made an urgent global strategic priority. As a recent report from the UN’s Intergovernmental Panel on Climate Change (IPCC) reminds us, humanity is currently undergoing drastic climate change, rising sea levels, rainfall irregularities, droughts, and ocean acidification. We need to act now and with urgency, before the effects of climate change become irreversible and cause catastrophic consequences for our already vulnerable food systems. This unfolding crisis is further heightened by rising food demand. The world’s population is expected to reach almost 10 billion by 2050, further straining our already burdened natural resources. With food production alone contributing to around 30% of global greenhouse gas (GHG) emissions , both climate and non-climate stresses are clear threats to global food security. More recently, disruptions from the COVID-19 pandemic have further exacerbated these challenges, as more countries confront acute food insecurity.

To feed an estimated 10 billion people by 2050, we will require 56% more food which needs an additional 593 million-hectare of land, an area nearly twice the size of India

Climate change is threatening Earth’s already fragile food systems. Rising temperatures have adversely impacted crop yield, with a disproportionate effect on the poor. The Intergovernmental Panel on Climate Change warned that crop yield may drop by up to 30% in 2050, due to climate change

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Investing in Sustainable Solutions

”Technology adoption and innovations are key to transforming the sector, advancing sustainability and resilience across the global food system,”

This year, Temasek partnered with the Economic Development Board, Enterprise Singapore, Singapore Food Agency, and the Singapore Tourism Board, plus event organizers Rethink and Constellar, to launch the inaugural Singapore International Agri-Food Week (SIAW), an annual gathering of global stakeholders from the agri-food industry, to share ideas, showcase new technologies and catalyze innovative solutions.

Innovative solutions, new technologies and compatible regulatory systems

To dive deep into the changing food consumption habits and trends among Asian consumers, Temasek collaborated with PwC and Rabobank to launch the second edition of the Asia Food Challenge Report (2021). This report highlighted that to meet the demands of increasingly affluent and sophisticated Asian consumers, Asia’s agri-food sector will require an estimated US$750 billion – this is on top of existing levels – by 2030. To this end, Temasek has established the Asia Sustainable Foods Platform to accelerate the commercialization of sustainable foods in Asia. The Platform will provide bespoke solutions, as an enabler, operator and investor, to food-tech companies as they go through their life cycle from product development to commercial scale-up. The Asia Sustainable Foods Platform and A*STAR’s Singapore Institute of Food & Biotechnology Innovation (SIFBI) have committed to invest over S$30 million in the Food Tech Innovation Centre (FTIC) over the next three years, to provide tailored infrastructure and service offerings to promising food-tech start-ups. This will provide much-needed pilot scale capabilities for companies to shorten time to market.

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Innovating the Future of Consumption

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Solving Global Food Production Challenges

Investing in Sustainable Solutions

1. Singapore International Agri-Food Week (SIAW) 2. Intergovernmental Panel on Climate Change (IPCC) 3. World Resources Institute 4. State of Food Security and Nutrition in the World 2021 Report 5. UN Environment Programme 6. Intergovernmental Panel on Climate Change (IPCC) 7. 2020 World Population Data Sheet, Population Reference Bureau (PRB) 8. Intergovernmental Panel on Climate Change (IPCC) 9. World Bank, Bloomberg, UN 10. Future Directions 11. World Resources Institute 12. World Resources Institute 13. UN Environment Programme 14. United Nations 15. The Good Food Institute 16. Bloomberg 17. WWF 18. Rivulis 19. UN Environment Programme 20. Temasek

Footnotes

Recognizing that digital transformation impacts all sectors and companies, Temasek is taking a hands-on approach: investing in digital solutions, and building its own capabilities and solutions where none exist.

HOW

Amid rapid behavioral shifts, the Covid-19 upheaval has highlighted the importance of digital technologies in creating new efficiencies, business models and opportunities, many of which will unquestionably last beyond the pandemic.

WHY

The global pandemic has accelerated the digital economy. 60 million new digital consumers in Southeast Asia ; an irreversible shift to remote work ; the rise of telemedicine and educational technology.

WHAT

in 2019 to

by 2026 .

US$67.4 billion

Even as the role of AI shifts from informing analytics and populating dashboards to directly driving business operations, the technology remains heavily underutilized.

AI business value will reach nearly

are leveraging AI strategically to disrupt their industry .

"To fully harness the potential of our R&D ecosystem, we must collaborate and also find alignment in areas with compelling use cases that are critical to building a better future."

Chia Song Hwee

Deputy CEO of Temasek

as a powerful force for good.

Temasek plays a key role in advancing

Temasek founded Aicadium, a global technology company that develops and scales AI solutions, empowering businesses to leverage AI for better business outcomes.

"New technologies can potentially disrupt or redefine many current trade and commerce arrangements."

Chia Song Hwee

Deputy CEO of Temasek

by 2022 .

Yet only

AI technologies could unlock

US$9.5 trillion

in annual business value across sectors .

US$15.4 trillion

Artificial Intelligence

LOOKING AHEAD

Solving Global Food Production Challenges

of the world’s most advanced and dynamic digital economies outperformed the year on year average OECD growth rate in Q2 2022 .

11 in 13

In 2021, startups building technology to advance industrial digitalization raised a record

US$17 billion .

The market for blockchain technology and services is projected to grow from

US$4.9 billion

blockchain

Artificial Intelligence

A global technology company that develops and scales AI solutions, empowering businesses to leverage AI for better business outcomes.

Aicadium

An AI platform to generate insights in financial risks as part of the National AI Programme in Finance.

NovA!

A platform that uses blockchain and distributed ledger technology for quicker, more efficient settlement of banking payments.

Partior

US$4 trillion

1% of companies

Temasek's Blockchain and AI pods foster solutions for better business outcomes.

Temasek invests in digital solutions, and builds its own capabilities and solutions where none exist.

digital technologies