Investing in sustainability offers long-term opportunities: GIC

It sees prospects for market growth, better returns even as climate change risks rise

- Kang Wan Chern

Sovereign wealth fund GIC continues to see long-term opportunities from investing in sustainable assets and helping the world reduce carbon dioxide emissions.

This comes as extreme weather events like floods, cyclones and wildfires linked to rising temperatures and sea levels are becoming more frequent, and despite greater risks from potential physical damage to the assets in its portfolio, among others.

“It is a rich opportunity for us because the total addressable market from this area is expected to grow as we do more and require more capital expenditure,” Ms Liew Tzu Mi, head of the sustainability committee and chief investment officer for fixed income at GIC, told The Straits Times in an interview.

Still, the returns are expected to vary, with the risks from climate change running high.

For one thing, rising greenhouse gas emissions have led to 2023 being the hottest year on record, and there is a greater chance that at least one in the next five years will be hotter than that, a United Nations agency said in June.

Supporting evidence presented by the European Union’s climate change monitoring service showed that each of the past 12 months has set a new global temperature record for that time of year, with the global average temperature from June 2023 to May rising to around 1.6 deg C above the pre-industrial average.

That is higher than the threshold of 1.5 deg C, above which the planet could begin to see more extreme weather events linked to climate change, such as the recent heatwave in Asia and flash floods in parts of the United Arab Emirates, Germany and Brazil in 2024.

The consequent damage to farming, infrastructure, productivity and public health could cost the world an estimated US$38 trillion (S$51 trillion) per year by 2050, and this will only grow, German-backed research has shown.