ESG principles

ESG and responsible investment encompasses much more than our stated priorities, and our ultimate ambition is to embed the consideration of ESG factors in all of our thinking, processes and products.

Climate Emergency

Of particular importance to Prudential is the Climate Emergency, which we recognise to be an existential threat to our planet, clients and business. In line with the Paris Agreement, M&G plc as a firm are aiming to achieve carbon Net Zero investment portfolios by 2050 across our aggregate investments, at the latest, and we are actively formulating a emissions-reduction investment strategy for our asset book.

Diversity and Inclusion

We’re also advocates of diversity and inclusion within corporate settings, with a strong belief that diverse and inclusive companies deliver financially and are better at managing risks. As a company, M&G plc have therefore committed to annual improvements in representation of gender and ethnicity/nationality diversity within our senior leadership, aiming for 40% women and 20% ethnicity/nationality by 2025. As part of our manager selection and monitoring process, we’re committed to evaluating each investment manager’s diversity policies and practices, which includes how an investment manager challenges its investee companies to improve and maintain diversity in their business models.

Modern Slavery

Another key aspect of our ESG policy is our Modern Slavery Statement. This outlines our commitment to ensuring that slavery, human trafficking, child labour and any other form of human rights abuse has no place in our organisation or supply chain. We  recognise that the breadth and depth of our investments, together with the complexity and opaqueness of supply chains, increases the risk that modern slavery may be encountered within our investee companies.

Our preference is to invest in the solution and to actively steer our investee companies towards more sustainable practices. We work with Asset Managers who share our beliefs and principles, and rely on them to actively engage with our investee companies on our behalf to protect and enhance the long term value of our assets. As part of our manager selection and ongoing monitoring processes, we assess manager engagement processes and ensure they comply with the standards set out in Shareholder Rights Directive II and the UK Stewardship Code. However, we recognise that we can’t always affect the change we wish to see, and there are certain behaviours with which we do not wish to be associated. In such instances, we may exclude particular companies or industries from our portfolios. There are some funds for which we have no look through to underlying holdings, or where we are co-investors and thus have no influence over investee company engagement. Our ability to exclude extends to mandates where we own 100% of the fund, or a majority of the fund in some instances, and currently only applied to publicly issued debt and equity.

Our policies evolve from initial screening to recommending companies for either engagement or exclusion, with reliance on our asset managers to discuss with and request from us exemptions for companies for which there is greater nuance to their stories, e.g. coal companies that plan to exit coal or United Nations Global Compact (UNGC) violators who have committed to remediation. With both our values of ‘Care & Integrity’ and our priorities in mind, we’ve already implemented an exclusions list for companies linked to the manufacture and distribution of controversial weapons such as cluster munitions, anti-personnel landmines, and other weapons either banned by international treaties or considered to be disproportionately or indiscriminately cruel or harmful.

Further work is underway to improve on our ESG performance and reporting, while we may introduce additional policy positions with respect to other ESG-sensitive themes such as biodiversity depletion, water scarcity, oil and gas. These policies will be developed conscientiously and rigorously, accounting for relevant science, ESG and investment factors. We’ll also periodically review our existing positions to account for the latest research, and monitor our portfolios holdings to identify and address areas of concern.

We’ve also signed up to the UN Principles of Responsible Investment (UNPRI), which comes with specific reporting requirements around our investment processes, decision making and monitoring. Our membership will require us to report, demonstrate and attest to our commitment and adherence to the Principles of Responsible Investment.

These changes and workstreams represent important steps in incorporating ESG into all that we do, but will help enable us to meet the challenges facing our company and planet, so that we’ll be able to help meet our customers’ needs for generations to come.