SINGAPORE (BLOOMBERG) – Singapore’s Temasek Holdings has decided against investing in Saudi Aramco’s initial public offering, in part over environmental concerns, according to people familiar with the matter.

The Saudi state oil giant first flagged a public share sale in 2016 and is expected to list with a valuation of between US$1.1 trillion (S$1.6 trillion) to US$2 trillion later this year. It’s been courting funds globally to act as cornerstone investors, including Temasek, which had a net portfolio value of S$313 billion as of March 31.

But Temasek’s focus on sustainability and environmental, social and governance principles made it more difficult to support Aramco’s share sale, the people said, asking not to be identified because the discussions are private. Temasek has a 2030 goal to reduce the carbon emissions of its portfolio companies by 50 per cent.

A Temasek spokesman declined to comment on talks the firm may have had with individual companies, or the outcomes of any of those discussions. Temasek has highlighted ESG assessments are a key factor in its decision making, alongside commercial considerations, he said via e-mail.

Representatives for Aramco didn’t immediately respond to a request for comment.

Temasek International chief executive officer Dilhan Pillay was more direct last month when asked by Bloomberg Radio about which investment areas Temasek was avoiding as part of its focus on sustainability.

“I don’t think we’re going to be investing in fossil fuels,” he said, without referencing Aramco.

Temasek’s stance highlights a growing risk facing fossil-fuel producers. An increasing number of developed-market funds are under pressure to avoid investments that directly contribute to climate change. This could limit firms’ sources of capital, making funding more expensive.

The move not to back Aramco doesn’t preclude Temasek from making other potentially contentious investments in the future. It’s also a legacy investor in Keppel Corp, which constructs oil and gas rigs.