In a panel “Shaping our Digital Future” at the Singapore FinTech Festival, Chia Song Hwee, Deputy General Manager of Temasek International, addressed a topic that is not commonly discussed: the area of ethics and governance towards innovation. .
He spoke about it while sharing Temasek’s views on technology and digitization trends. This is so, as technology-enabled inflections are altering industries faster than ever, accelerated by the Covid-19, and governance and innovation often find themselves at the crossroads in this rapidly changing environment.
“As you know, with the use of decentralized, autonomous technology, if it’s not careful, it can create a lot of problems (if it’s not regulated),” Chia said.
“So the knee-jerk reaction to that is, well, we regulate. I believe more in: regulation is appropriate, but we don’t have to over-regulate technology. Because that will stifle innovation. It’s a balance. I think if a company does more to build trust, then we self-govern. But if we don’t behave, we deserve to be regulated more, ”Chia said.
Chia added that he “personally believes” that there is no need to have more new laws to deal with the effects of the evolution of technology. “Some of the implementation and enforcement of laws and rules, should be updated and updated because, for example, the antitrust issues of 20 years ago are quite different from the antitrust issues of today. But the principles do not change. … The spirit is the same. “
“But I insist that we must also be careful while developing solutions and services. It is our responsibility to make sure it is safe, that we are protecting the assets of others,” he added.
“Tremendous opportunity” with Web 3.0 and digitization
At the table, Chia explained how digitization is a very important part of Temasek’s investment direction, although he acknowledged its disruptive aspects. “We believe that the technology generated by digitization has a very widespread impact in sectors, countries and geographies.”
“On the one hand, it can offer many investment opportunities. but on the other hand, it could disrupt many existing businesses, which we own today. So it’s very important for Temasek to take this seriously in terms of where we want to deploy our capital in the future and also help companies in our portfolio navigate change, ”he said.
“Web 3.0, we believe, is a very important element of digitization,” Chia said. “The evolution of Web 3.0 is very powerful. Compared to Internet 2.0, it is smarter, more autonomous and open. “
“We believe that these elements are very difficult to stop by nature and also by design. Therefore, it is a very fertile ground for innovation, for new business and for creating value. So I think the opportunity is huge. “
Don’t be afraid of change, be afraid of being irrelevant
Staying in the comfort zone and not embracing new things is something that doesn’t seem to be okay in Temasek, according to Chia.
Chia said adapting to change is “something we talk about very internally in Temasek.”
“What we are afraid of is that we will stop changing. What we feel is that we stop changing, we stop embracing new things. Because we believe that if we do it and we are pleased, we will be irrelevant in the future. “
“So change is difficult for anyone, but we must learn to face change, because it will come to you even if you try to avoid it. So what we’re trying to do is make small changes to the steps, experiment, create pilots, and slowly build confidence. “
One thing that keeps Temasek’s senior management as Chia awake at night is to ensure that “our portfolio remains relevant in the future and is future-proof. So over the last decade, we’ve been reshaping our wallet”.
Chia notes that Temasek’s portfolio has undergone significant changes in its underlying assets.
For example, he noted that the portfolio of the company’s financial services sector was 34% of the value of the portfolio at the end of last year. “10 years ago, more than 90 percent of our assets were banks, traditional banks. Today, more than half are engaged in FinTech and payment companies. It’s very, very different.”
“Regarding our segment of technology, means and telecommunications: 10 years ago, 90% of the portfolio was formed by companies of telecommunications. Today, more than half are found in companies with intense digital technology, such as e-commerce, social commerce, and so on. The portfolios of the underlying lines have been transformed a lot and, in fact, it continues as the economy has evolved to be more digital. “
Digitization is one of the main trends identified by Temasek as a guide for its investment approach. The other three main trends identified by the company are longer life, sustainable life and the future of consumption.
Put your hands together
In 2018, Temasek created two portfolios: AI and blockchain. Tasks include building skills on the talent front, such as engineers.
Chia shared that Temasek had discovered that horizontal technologies, such as artificial intelligence and the blockchain, are so powerful and so widespread that no single market or sector can cover them, and this reshaped the way it works.
“Because it is horizontal and depends on how we are structured, we believe we will lose many opportunities. We also believe that the value of investing in facilitators of this technology will be much lower than those opportunities where technologies are applied to business situations, ”Chia explained.
“Because of these two understandings or hypotheses, we felt we had to learn the technology ourselves. We had to get our hands dirty,” he said.
“With these capabilities (building a talent base) we can work on use cases with our companies or portfolio partners to unlock value or create value. They also have the mandate to create new businesses by creating companies and also of building a network or ecosystem to enable early stage investments so we can know what’s going on around the world. ”
The reshaping of the strategy has helped Temasek build capacity and adopt an “agile methodology” way of working, a term with which the world of technology is very familiar.
“More than two years have passed, but really a lot of things have happened in the past in the last year and a half,” Chia said.
Under the AI area, Temasek has formed a company called Aicadium. Chia mentioned AI’s latest national program, the NovA! Project, and said Acadium, along with local banks, are working to create a utility platform that will address the challenges of the financial services industry. This could create solutions, such as tools to track loans to which banks are exposed.
Another effort Partior, a company that Temasek has with DBS and JPMorgan, is to build a network for cross-border digital payment settlements. It is currently in the process of joining other banks and has plans to facilitate the transfer or settlement of digital funds, in the future.
“I wouldn’t call them all success, but they are the first signs of the first results. And they have been quite encouraging,” he said.
Mismatch of skills and jobs, other problems caused by technological disruption
The pandemic has driven the need for Internet services, and now it seems almost unthinkable to imagine a world without food sharing and e-commerce.
“Without online. Without e-commerce, without receiving our food at the push of a button, how we could have survived the pandemic or during confinement. Therefore, we can all understand the importance and impact that technology can bring us “But, as I said, technology can also create a lot of disruptions,” Chia said.
“According to a series of reports, including Wealth, more than 85 million jobs will be displaced by 2025. Therefore, it is a big problem. However, more than 100 million jobs will be created. So it’s exciting, ”he said.
“The problem is that there will be a mismatch between skill sets and needs. So it is up to all of us, people, businesses and the public sector, to address this problem of the skills gap in terms of retraining. and recycling our existing resources “.
Chia was pleased that within Temasek’s portfolio of companies there are people who are already on the path of digital digitization and are tackling change. For example, he mentioned traditional banks, in which many are closing their branches but are deploying their ATMs to newer parts of the business.
“So this can be done with planning, with deliberate efforts. With the support of the government. We can handle this transition much better,” he said.
Another problem caused by this shift in digitization is threats to cybersecurity. He said cyber attacks have multiplied by six during the pandemic compared to times before Covid-19.
“Individual companies cannot address the threat. It is moving too fast, it is very complex and no company can handle it. Therefore, a smarter approach that can give better results is collaboration, such as we can all unite and work to defend ourselves. “
No magic wand for climate change
On the hot topic of climate change, Chia said a collective effort is needed. “Governments, companies and individuals must do our part. No country or company can do it alone. Only collectively can we make an impact. “
“At Temasek we are committed to our zero net goal for 2025 and we will halve our footprint by 2030. This is a very challenging goal for ourselves, but we believe we will be able to achieve it. Because many of our portfolio companies have also made the same commitment to do so. ”
“We could have reached our net zero goal sooner if we had decided to sell our stake in the polluting assets we have today. But we don’t believe in passing the money on to another owner, we believe in working with our existing portfolio companies and helping them be greener, ”Chia said.
The deputy general manager shared three ways in which Temasek will maintain its ecological goals.
“First, whenever we are investing now, we need to align with our climate goals so that we can continue to reduce emissions from our portfolio. Second, we need to invest in companies that have a positive impact on “carbon emissions, for example, natural solutions, carbon capture or carbon storage. These are the new technologies we want to introduce and invest in, so that we can bring it to market.”
“We also need to contribute to how the global system works in terms of carbon tax and carbon trade, especially for borders. As a country we may not be producing carbon, but we may be buying things for our benefit and another country is taking the consequences. “
“If we don’t work together, then there are a lot of things we can’t achieve, such as the possible industry 4.0, the web 3.0 and the climate change agenda. If we don’t work together, we will be far from what all this can offer us. “
Featured Image Credit: Getty Images, Reuters
