RCS - Prudential PLC - Launch of climate transition investment framework

PrudentialAnnouncement

23/09/2024 07:00

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RNS Number : 1407F  Prudential PLC  23 September 2024

23 September 2024

 

Prudential launches framework for climate transition investment

with a focus on emerging markets

 

New whitepapers highlight critical role of financing a just and inclusive
transition

in achieving sustainable economic growth

 

Prudential plc (Prudential) has today launched two whitepapers on climate
transition financing. The first outlines a framework that integrates emerging
market considerations when investing in energy transition. Due to the absence
of a standardised definition of transition finance, Prudential has developed
its own proprietary approach where it has defined transition financing as
investments directed into sectors and companies with the explicit intention of
enabling and accelerating the net zero transition. Prudential's approach is
principles-based, so that it can be applied across asset managers and asset
classes. The second paper, co-authored with Prudential's asset management arm,
Eastspring Investments (Eastspring) explores a practical investment approach
that aims to outline how to construct a capital markets climate transition
portfolio.

 

The framework aims to address two challenges that Prudential sees in the
market in relation to financing the effort against climate change:

·    The need to finance 'brown to green' (high carbon to low carbon)
projects and the lack of a standardised definition for this

·    The need for flexibility with regards to emerging markets in Asia and
Africa, recognising that they require a considered and dynamic approach to the
low-carbon transition, with greater balance and representation of their
challenges

 

Ben Bulmer, Chief Financial Officer, Prudential plc, said, "Our responsible
investment strategy leverages our unique position as a large asset owner in
Asia and Africa. Our presence in emerging markets in these regions gives us a
unique voice on responsible investment. We use this opportunity to influence
industry, peers and investee companies to consider the role that emerging
markets must play in the global energy transition."

 

"As Prudential's asset manager, Eastspring has been given a unique opportunity
to contribute to a just and inclusive transition. In our research, we have
found that climate goals cannot be reached if we ignore transitioning
companies (brown-to-green or brown to less-brown) - which are committed to
emissions reductions and are progressing towards climate-resilient business
models," said Vis Nayar, Chief Investment Officer, Eastspring Investments.

 

He added, "Given that current industry guidance in transition is mainly
principles, emissions or activities focused, our Investment team has developed
a framework that proactively identifies such companies across markets and
sectors; this widens the investible universe and will allow investors to
identify potentially mispriced assets. The Eastspring-Prudential Climate
Transition framework can be applied to capital market portfolios across asset
classes, and we believe this proprietary tool can help unlock the market's
full potential in driving meaningful change."

 

Climate Bonds Initiative, an international not-for-profit organisation working
to mobilise global capital for climate action, conducted a technical review of
Prudential's framework and the Eastspring-Prudential approach on climate
transition in capital markets and have endorsed both. They confirm that the
transition category alignment and composite transition screen developed by
Eastspring and Prudential were guided by the core principles of Climate Bonds
Initiative to ensure credibility of transition finance and endorses them on
that basis.

 

Sean Kidney, CEO and Founder, Climate Bonds Initiative, said, "If we're going
to leave our children a liveable and prosperous world, the global transition
needs to be credible, ambitious, and rapid. By using clear robust investment
frameworks and guidance like this, asset owners and asset managers can play a
significant role in aligning economies with net zero pathways and avoid
portfolio risks like emissions lock-ins, while growing and thriving in a net
zero economy."

 

In line with the launch of the financing the transition framework, Prudential
are announcing investments in the following climate transition funds:

1.    Investment of US$200 million as a founding investor in Brookfield's
Catalytic Transition Fund, their first dedicated fund for transition investing
in emerging markets. The fund is a blended finance vehicle focused on
directing capital into clean energy and transition assets in emerging
economies.

2.    Committed up to US$150 million to a climate-focused strategy managed
by global investment firm KKR, which seeks to make infrastructure equity
investments in Asia focused on the energy transition, including climate
adaptation, climate mitigation and the brown-to-green transition.

 

Commenting on these investments, Mr Bulmer said, "Our investments in these
funds show our commitment in demonstrating climate transition leadership and
our support for blended finance. We recognise the importance of this type of
financing in facilitating energy transition, as solely investing in green
activities may not be sufficient. Given that Asia is responsible for over 50
percent of carbon emissions(( 1  (#_ftn1) )), Prudential sees significant
opportunities emerging in the region."

 

He added, "We are very pleased that Climate Bonds Initiative have endorsed our
frameworks as we aim to align to industry standards and frameworks to
encourage standardisation in the market."

 

The just and inclusive approach forms a core part of Prudential's responsible
investment strategy and underpins its approach on climate transition within
emerging markets. In 2022, Prudential launched a whitepaper
(https://www.prudentialplc.com/en/news-and-insights/insights/just-and-inclusive-transition-paper)
outlining the case for achieving a just and inclusive transition. The new
framework delves deeper into the implementation of its just and inclusive
strategy with respect to Financing the Transition. To view the 2024
whitepapers, please visit here
(https://prudentialplc.com/en/news-and-insights/insights/financing-the-transition)
.

 

 

 

 Media Contacts
 Prudential plc                                                                              Eastspring Investments

 Hui-Yi Kho      k (mailto:kho.hui.yi@prudential.com.hk) ho.hui.yi@prudential.com.hk         Ena Yow      Ena.Yow@eastspring.com
                 (mailto:kho.hui.yi@prudential.com.hk)
 Sonia Tsang     sonia.ok.tsang@prudential.com.hk (mailto:sonia.ok.tsang@prudential.com.hk)
 Simon Kutner    simon.kutner@prudentialplc.com (mailto:simon.kutner@prudentialplc.com)

 

About Prudential plc:

Prudential plc provides life and health insurance and asset management in 24
markets across Asia and Africa. Prudential's mission is to be the most trusted
partner and protector for this generation and generations to come, by
providing simple and accessible financial and health solutions. The business
has dual primary listings on the Stock Exchange of Hong Kong (2378) and the
London Stock Exchange (PRU). It also has a secondary listing on the Singapore
Stock Exchange (K6S) and a listing on the New York Stock Exchange (PUK) in the
form of American Depositary Receipts. It is a constituent of the Hang Seng
Composite Index and is also included for trading in the Shenzhen-Hong Kong
Stock Connect programme and the Shanghai-Hong Kong Stock Connect programme.

 

Prudential is not affiliated in any manner with Prudential Financial, Inc. a
company whose principal place of business is in the United States of America,
nor with The Prudential Assurance Company Limited, a subsidiary of M&G
plc, a company incorporated in the United Kingdom.

 

https://www.prudentialplc.com/ (https://www.prudentialplc.com/)

 

About Eastspring Investments:

Eastspring Investments, part of Prudential plc, is a leading Asia-based asset
manager that manages USD 247 billion (as of 30 June 2024) of assets on behalf
of institutional and retail clients. Operating since 1994, Eastspring
Investments has one of the widest footprints among asset management companies
across Asia*. We provide investment solutions across a broad range of
strategies including equities, fixed income, multi asset, quantitative and
alternatives and are committed to delivering high quality investment outcomes
for our clients over the long term.

 

We incorporate ESG factors into our investment process and are aligned with a
number of global sustainability initiatives including the United
Nations-supported Principles for Responsible Investments (PRI) and the Asia
Investor Group on Climate Change (AIGCC). We collaborate alongside industry
peers to harness a collective investor voice to influence and drive change
with investee companies.

 

For more information on Eastspring Investments, please visit:
www.eastspring.com (http://www.eastspring.com)

*Eastspring Investments companies (excluding joint venture companies) are
ultimately wholly owned/indirect subsidiaries of Prudential plc of the United
Kingdom. Eastspring Investments companies (including joint venture companies)
and Prudential plc are not affiliated in any manner with Prudential Financial,
Inc., a company whose principal place of business is in the United States of
America or with the Prudential Assurance Company Limited, a subsidiary of
M&G plc (a company incorporated in the United Kingdom).

 

 

 

(( 1  (#_ftnref1) )) Source: Global energy-related CO₂ emissions by region
2023 | Statista

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