Singapore investment company Temasek is steering its strategy towards companies with clear decarbonisation plans and sustainable business models, with a goal to secure long-term profits.

Temasek’s managing director for sustainability Park Kyung-ah said in an exclusive interview with The Straits Times: “The success of our portfolio companies is effectively our success... them being resilient and them creating sustainable value ultimately comes back to our returns.

“Our remit is so every generation prospers, so when we do well, that helps Singapore’s future generations as well.”

While Temasek does not directly interfere with company decisions on a daily basis, it exercises voting rights as a shareholder, and uses those rights to nudge companies in more sustainable directions.

It also engages company boards and sets expectations for companies it has invested in, said Ms Park.

That strategy is vital for Temasek to realise its sustainability goals, as five major companies currently contribute around 80 per cent of the total emissions from its portfolio.

They are Singapore Airlines, energy group Sembcorp Industries, commodities manager Olam Group, port operator PSA International, and ST Telemedia.

Ms Park brought up the example of Sembcorp, which demerged from its rig-building unit Sembcorp Marine in 2020.

The rig builder then merged with its rival Keppel Offshore and Marine, eventually forming offshore and marine engineering company Seatrium.

Ms Park said Temasek had voted for Sembcorp to divest its holdings in Sembcorp Marine because doing so aligned with its values.

The move resulted in Sembcorp recording a net loss of $997 million for the year ended Dec 31, 2020, but Ms Park said that Temasek is also prepared to wait for returns to materialise, as companies take time to realise gains from pivoting towards more sustainable business models.

She said of Sembcorp: “It took a few years, it was not overnight when the value creation happened. But we are ‘patient capital’ and we had conviction that this will generate value for the longer term.”

In 2021, Sembcorp returned to black and posted a net profit of $279 million.

Its share price has more than doubled from $2.32 in January 2020 to $5.51 in October 2024.

Ms Park noted that in some sectors like energy, it is easier to see the path ahead and know where profitability will be.

Coal and fossil-based fuel production, for example, will likely shut down.

Source: Straitstimes

What to do?

JPMorgan Chase & Co is in talks to start trading physical liquefied natural gas again after more than a decade on the sidelines, a move that lines up with chief executive officer Jamie Dimon’s calls for an increase in domestic production and energy exports.

The bank has held talks to secure a longterm LNG supply with at least three projects under development in the Gulf Coast, according to people familiar with the matter. The move is part of a wider push JPMorgan has made in recent years to get back into trading some of the physical commodities it abandoned in 2014.

Discussions are underway between the bank and developers looking to build a project to liquefy and export gas in Louisiana called Commonwealth LNG, Sempra Energy’s expansion of its Port Arthur site under construction in Texas and Energy Transfer LP’s planned Lake Charles LNG facility in Louisiana, the people said, asking not to be identified describing the confidential negotiations.

Spokespeople for JPMorgan, Sempra, and Kimmeridge Energy Management Co, which owns Commonwealth, declined to comment. A representative for Energy Transfer didn’t respond to multiple requests for comment.

Global demand is surging for LNG, with many nations seeking a cleaner-burning alternative to oil and coal as they shift toward renewable energy. The US has emerged as the world’s largest exporter thanks to an abundant supply of gas and the development of huge terminals on the Gulf Coast to liquefy and ship the fuel.

JPMorgan’s effort is the latest twist in what’s been a bumpy saga for top Wall Street firms’ involvement in the physical commodity space over the past two decades. JPMorgan inherited Bear Stearns’s energy-trading platform when it bought the failed bank during the financial crisis, and bulked up through additional acquisitions in 2009 and 2010.

By 2014, JPMorgan agreed to sell much of its physical commodities arm — though the New York-based company hung on to its metals desks — as banks grappled with heightened regulatory scrutiny in the business. But within a decade, the firm was back to trading in the physical natural gas space.

JPMorgan has expanded its physical natural gas trading operation in the US since 2022 and is eyeing US power, as well as gas and power in Europe, where it recently applied for a natural gas shipper license, some of the people said. Still, the firm has no plans to physically move LNG on water themselves, opting to stick to activities such as financing and hedging, two of the people said.Goldman’s Windfall

Russia’s invasion of Ukraine nearly three years ago sparked a massive shift in global energy trade and an ensuing market frenzy. At Goldman Sachs Group Inc, long a dominant force in commodities, that desk pulled in more than US$3 billion (RM13 billion) for 2022 — more than 10 times what it generated in 2017.

Companies in the US have accelerated construction of LNG facilities in recent years, and JPMorgan has long played a financing role for such projects. Furthermore, the build-out of artificial-intelligence infrastructure has sparked heightened client demand for commodities, JPMorgan’s global co-heads of sales and research, Claudia Jury and Scott Hamilton, said in an interview earlier this year.

In his annual letter to shareholders, Dimon wrote about the economic and geopolitical advantages that accompany domestic energy production. That followed earlier dispatches about the need for reliable, affordable energy in conjunction with investments for future efforts to reduce carbon dioxide and other greenhouse gases from the atmosphere.

“The export of LNG is a great economic boon for the United States,” Dimon wrote in April. “But most important is the realpolitik goal: Our allied nations that need secure and affordable energy resources, including critical nations like Japan, Korea and most of our European allies, would like to be able to depend on the United States for energy.”

In the same letter, he decried the Biden Administration’s pause on US LNG permitting, which effectively halted all new export projects from approval — calling the push to stop oil and gas output as “enormously naïve.”

Macquarie Group Ltd, one of North America’s largest energy traders, also has a preliminary agreement for US LNG supply with the project Texas LNG, under development by closely held Glenfarne Group. Macquarie chairman Glenn Stevens echoed Dimon’s remarks at the Australian bank’s annual meeting in July, telling investors that “we do think that natural gas, in particular, is an important part of the transition path for the world.”

Source: The edge markets

Britain's commercial property market is returning to life after its post-pandemic freeze, albeit largely at much lower prices.

Some big-ticket office properties now on sale will show just where the market is likely to bottom out and how briskly UK deal volumes will recover - especially in the hard-hit office market. How that plays out could in turn signal what awaits other countries still gripped by a deeper downturn.

Real estate investor Nuveen has put a 21-storey City of London tower it completed in 2019, informally known as the "Can of Ham" due to its rounded shape, up for sale for 322 million pounds ($419 million), below about 400 million pounds it had sought in 2022, a person familiar with the matter said.

Canada's Brookfield is seeking around 500 million pounds for its nearby Citypoint tower, according to industry data provider CoStar. That compares with its most recent formal valuation of 670 million pounds, and its 560 million price tag when last sold in 2016, according to CoStar.

New office buildings are seeing robust demand, with investor M&G's new office towers at 40 Leadenhall in the City of London more than 80% let.

But a recent tour showed what it needed to do to attract tenants, with the building offering saunas, treatment rooms, a hair salon, a yoga room, Peloton fitness suite, a cinema room and a library - most for the exclusive use of office tenants.

"We had a conviction that tenants would want to upgrade their space," said Martin Towns, deputy global head of M&G Real Estate. Some out-of-favour older offices would have to be converted into other uses like housing, or demolished, he said.

The COVID-19 pandemic pummelled global commercial property markets by driving up inflation and financing costs, while causing a shift to hybrid and remote work that meant most tenants wanted less, but higher quality office space.

The cost of building prime offices in London has risen to more than 500 pounds per square foot now from less than 400 pounds before the pandemic, construction consultancy Turner & Townsend alinea said. Half of that increase was down to inflation, with the rest down to better amenities and green credentials, it said.

While some properties, such as older out-of-town offices, remain near-impossible to sell, the British market is improving for prime offices, rental housing and logistics, investors said.

A global retreat in inflation and interest rates is starting to ease financing costs and improve properties' appeal relative to other investments.

"The mood music has definitely changed in the UK," said James Seppala, head of real estate for Europe at Blackstone, the world's largest commercial property investor.

"There is more robust activity, and more participants are coming off the sidelines."

OFFICES LAG RECOVERY

Deal volumes across UK commercial property - which spans offices, retail, logistics and rental housing - have rebounded 26% annually in the second quarter, according to MSCI data, compared to 45% and 22% declines in France and Germany, respectively.

After plummeting in 2022 and 2023, UK commercial prices are also expected to rise 2% this year, even as they continue to fall in the euro zone and the United States, and to outperform other Western markets over the next four years, Capital Economics said.

But office sale volumes are still down 21% so far this year, MSCI said, lagging the rest of the UK market. There were also no deals over 100 million pounds in the first half of this year, the first such six-month period since 1999, according to CoStar.

Overall office vacancy rates also keep rising, hitting 10.1% in London in the third quarter - the highest for more than 20 years, CoStar said. It is nearly 17% in the city's eastern Docklands area, where Canary Wharf Group is considering converting some empty space into hotels.

FORCED SALES

Property investors and agents say would-be sellers are coming round to accepting today's lower prices. Some may be forced to sell by high refinancing costs, according to bankers, but foreign buyers could be willing to swoop.

"Many investors are saying the UK is a good investment location because of the stable political situation and they are wanting to get in before prices start to rise," said Fiona Voon, head of real estate capital markets UK at BNP Paribas.

Among domestic investors, Schroders plans to spend hundreds of millions of pounds on British commercial properties this year and next, likely including prime offices. The market was attracting increased interest from investors in the Middle East, Asia and Australia, the asset manager said. It said it would soon begin talking to potential tenants about pre-letting its own planned 63-storey City tower at 55 Bishopsgate.

"Offices to some extent has been a bit of a dirty word," said Nick Montgomery, global head of real estate at Schroders. "From the position we're in, it's more of an opportunity than a risk... The pendulum always tends to swing too far."

Source: The edge markets