Singapore Inc gains new figurehead as Temasek appoints next chief

As a top corporate lawyer in Singapore, one of Dilhan Pillay’s favourite maxims was the title of a book by Andy Grove, the computer scientist who became the boss of Intel: Only the Paranoid Survive.

Lee Hsien Loong, Singapore's prime minister, once remarked that it could be the city state’s national motto. Caution and a dose of paranoia have shaped how a territory with limited natural resources and a multi-ethnic, multi-religious population of around 6m people — that finds itself trying to manage strained US-China relations — is run.

The approach will stand Pillay in good stead when he takes the helm of Temasek, Singapore’s state-backed investment company, in October.

An overhaul in how one of the world’s largest institutional investors is run remains unlikely. But Pillay’s appointment still marks a seismic shift in the Asian financial hub, with analysts arguing the changing of the guard is as significant as political leadership changes in the country. 

Pillay is succeeding Ho Ching, a well-known figurehead who has led Temasek since 2004 and is also the wife of the prime minister, whose late father Lee Kuan Yew is credited with founding the modern city state of Singapore.

Temasek’s contribution to Singapore’s government budget makes it a “very important” institution whose “leadership transition is significant . . . particularly in these difficult pandemic times”, said Lawrence Loh, associate professor at the National University of Singapore business school.

Contributions from Temasek, sovereign wealth fund GIC and Singapore’s central bank accounted for 20 per cent of the 2020 budget. Last year it played a critical role in a rescue package for flag carrier Singapore Airlines, in which it is the largest shareholder.

Pillay’s promotion comes at a challenging time for Temasek which is grappling with the economic fallout from the pandemic and global trade tensions. In 2020, it posted its worst shareholder returns in four years while the net value of its portfolio slipped about 2 per cent to S$306bn (US$231bn) in the 12 months to March.

But Ho said the timing was right with Pillay having been tipped for the top job since the Singapore native was appointed head of Temasek International, the group’s investment arm, two years ago. “It is a good juncture to let the younger leadership lead the charge over the next decade,” she said. 

Pillay’s journey to the top began a decade ago when he was recruited by Ho. Although the 57 year old said he was “intrigued” by the initial approach it took her three years to finally poach him from Singaporean law firm WongPartnership, with final discussions taking place over a meal of Pillay’s favourite chai tow kway (stir-fried radish) at Singapore’s Four Seasons hotel. “It was a hard sell,” recalled Ho.

As with many of the world’s biggest investors Temasek is placing greater emphasis on how climate change is addressed within its portfolio. Its strategy through to 2030, which Pillay helped shape, includes a stronger focus on sustainability.

Temasek, which has beefed up its ESG expertise with new hires, said it achieved carbon neutrality last year and aims to slash its portfolio companies’ net emissions to half of 2010 levels by 2030. Pillay has also championed the application of Temasek’s own internal carbon pricing model to current and prospective investments.

Determining how companies incorporate climate change into their business models is “part and parcel of determining what your true cost of capital is,” he said.

Ho added: “That is something which is very bold, that is something that didn’t come from me and that is something that is going to be very different from what we have done in the past when carbon didn’t factor as much.”

Some of Temasek’s investments may pose a challenge to meeting its sustainability goals. As well as Singapore Airlines it has shareholdings in Keppel Corporation, which develops oil rigs and Olam International, which has clashed with NGOs over accusations of deforestation. 

Temasek does not provide a full breakdown of how it allocates its capital but details the fund does provide show it has stakes in some of the region’s biggest groups including Alibaba, China Construction Bank and Singtel, the telecommunications group. The group’s international reach expanded under Ho, with underlying exposure to China surpassing that in its home market for the first time in 2020.

Pillay and Ho signalled that disruption in sectors including life sciences, digital economy and consumer industries — with growing demand for “experiential offerings” — would be interesting to Temasek over the next decade.

“We are always trying to figure out the way in which we can tap into the different societal and economic changes that we are seeing in the world as a whole,” he said.

Alvin Yeo, chairman and senior partner at WongPartnership where he worked with Pillay for more than two decades, said his former colleague “was always urging his colleagues forward and insisting that they kept on improving and never getting complacent”.

“They’re big shoes to fill but I think he has the ability and attitude to fill them,” he added referring to Ho.

Proving he is a diplomat as well as a lawyer as he ascends to the top of Singapore Inc, Pillay said this week: “No one can be like Ho Ching.”