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Singapore's Temasek bets on 'skyscraper farms' as growth market

Joint venture with Bayer to develop seeds to boost food security in city-state

Vertical farms use hydroponics to grow crops inside buildings. (Photo courtesy of Unfold)

SINGAPORE -- Singapore's state-backed investment group Temasek Holdings has extended its business portfolio into urban farming, a concept that will aid the city-state in its quest to become more agriculturally self-sufficient.

Temasek and German pharmaceutical major Bayer established Unfold, a 50-50 joint venture, last month. The company will develop and market seeds for vertical farming both in Singapore and at its California headquarters.

Singapore produces less than 10% of the food it consumes. The government plans to raise the ratio to 30% by 2030.

Vertical farming, officials believe, is crucial to attaining that goal. The technique grows agroponic layers of crops under artificial light inside skyscrapers. Because the plants are not dependent on weather, the method is expected to generate large yields in a relatively quickly.

"Temasek is recognized as one of the leading investors in the food and agriculture segment," said Jurgen Eckhardt, head of Leaps by Bayer -- an investment arm of Bayer. "They have investments in, and relationships with, a range of vertical farming companies."

Bayer will provide plant genetic data to Unfold, which will first develop new varieties of lettuce, spinach and tomatoes, among other crops. The company will sell seeds to food producers.

Temasek will introduce companies to the technology and expertise at Unfold and other investment targets. Temasek holds a stake in Sustenir Agriculture, a Singaporean urban farming company, providing a channel for Sustenir to cultivate Unfold's high-yield seeds.

Vertical farming is projected to grow into a $12.77 billion market in 2026, according to Allied Market Research, up from $2.23 billion in 2018.

Temasek invested 3 billion euros ($3.7 billion) into Bayer in 2018 -- funding which helped Bayer complete the acquisition of U.S. seed producer Monsanto.

The company anticipates further investments in the agricultural sector.

"Whether it's in the area of an alternative protein, aquaculture, or crop science, it's an area that requires actually more capital," said Temasek International CEO Dilhan Pillay Sandrasegara. "So far it's done well for us and we're still keen to invest more in it."

Temasek has expanded its portfolio of life sciences and agribusiness investments. Allocation in the domains stood at 8% at the end of March, or five points higher than five years earlier. The size of the holdings is about $17 billion.

The coronavirus pandemic has heightened concerns over food security. Thailand and other trading partners temporarily imposed restrictions on exports. The Singaporean government doled out 30 million Singapore dollars ($22 million) in subsidies this April to help companies produce more eggs, leafy vegetables and fish.

"In Singapore, with less than 0.8% arable land, vertical farming innovation is critical," said Unfold CEO John Purcell.

This year, Temasek has invested in startups that develop meat and fish substitutes, as well as plant-based milk. GIC, another Singaporean state investor, in May picked up shares in Apeel Sciences, a U.S. company that developed an artificial peel for fruits and vegetables to extend shelf life.

The less-than-stellar portfolio performance has also factored in Temasek's investments into agribusiness. For the year ended March, the company reported a return of minus 2.3%, the first negative result in four years. Declining stock values of domestic companies such as the banking group DBS Group Holdings and the conglomerate Sembcorp Industries were behind the setback.

When Singapore Airlines sought to raise up to S$15 billion in rescue funds this March, Temasek was the first to indicate it would sign on in light of its status as a major investor in the carrier. Saddled with its role as a financial provider of last resort, the state investment group's ability to reap returns from investments in agriculture and other growth sectors will sway its performance.

Temasek has also stepped up investment in advanced medical fields such as biopharmaceuticals in the past year, with stakes in 10 companies revealed in 2020 so far.

Vertex Venture Holdings, a Temasek unit that oversees a fund specializing in the medical field, has invested in more than 20 health care-related startups, including American drug developer Elevation Oncology in July.

"COVID-19 has shone a light on the importance of continued R&D investment," said Lori Hu, managing director of Vertex Ventures HC. "It has revealed critical unmet needs in the health care industry. We continue to actively look at new deals."

Leveraging its broad network, Vertex took a stake in Israeli telemedicine platform operator Datos Health in April and invested in India's IVF Access Hospitals, which specializes in infertility treatments, two months later.

Through its investments in the medical field, Temasek is also involved in the global race to develop coronavirus treatments. It was part of a group of investors to pour $250 million into Germany's BioNTech, which is jointly developing a COVID-19 vaccine candidate with Pfizer. South Korean drugmaker Celltrion, in which Temasek holds a roughly 10% stake, has brought a diagnostic kit to market in the U.S. last month.

Investments in biopharmaceutical developers carry high risks, but the payoff can be large when a treatment successfully reaches market. Holdings in unlisted companies accounted for 48% of Temasek's portfolio as of March-end, up six points from a year earlier.

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