Climate

Prudential Financial
An Integrated Climate Change Strategy

As a global insurer and one of the largest asset managers in the world1, Prudential recognizes the magnitude of climate change and the urgent need for action. We also realize that we have a significant opportunity to make a positive impact. Our integrated climate strategy focuses on reducing greenhouse gas (GHG) emissions across our primary domestic and international home office operations2, addressing climate-related risk, incorporating climate change considerations into Prudential’s owned assets, including those within our General Account portfolio, and promoting environmental sustainability throughout our stakeholder community.  

Board Oversight

Prudential’s Corporate Governance and Business Ethics Committee provides oversight of the Company’s environmental, social and governance (ESG) strategy. The Committee is briefed several times a year on Prudential’s environmental sustainability practices, including Company initiatives to address climate change.  

The Corporate Governance and Business Ethics Committee oversees the Company’s environmental risk, which includes climate risk.   The Risk Committee is also briefed on climate-related matters.

In January 2021, a senior-level Climate Change Steering Council and supporting Task Force were established to develop, execute and oversee the Company’s climate change strategy. The policy recommendations stemming from these internal groups are reviewed and approved by the Corporate Governance and Business Ethics Committee.

The entire Board receives environmental sustainability training addressing climate science, climate change policy, reporting frameworks including the Task Force on Climate-related Financial Disclosures, and the General Account’s ESG framework.

Reducing Our Carbon Footprint   

Prudential is committed to supporting efforts that will achieve the Paris Climate Accord’s goals of limiting global warming to 1.5 degrees Celsius or less and adapting our business model to support the transition to a low-carbon economy.  

We revised our 2019 Global Environmental Commitment to set a more ambitious goal of achieving net zero GHG emissions for our primary domestic and international home office operations by 2050.  As part of our new commitment, we established an interim goal of being carbon neutral by 2040 and interim targets for GHG emission reductions of 55% by 2030 and 97% by 2040, compared to a 2017 baseline. These science-based targets reflect a long-term commitment by the Company to monitor and implement best practices to reduce emissions across our businesses and drive operational energy efficiency.

Additionally, Prudential plans to assess and establish steps to reduce Scope 3 emissions related to the investment of the Company’s owned assets, including those within our General Account portfolio.

PGIM Real Estate

In May 2021, PGIM Real Estate, the real estate investment business of PGIM, our global investment management business, committed to reduce operational carbon emissions of its global portfolio of managed properties to net zero by the year 2050. PGIM Real Estate’s commitment aligns with the Urban Land Institute’s (ULI) Greenprint Center for Building Performance Net Zero Carbon goal. 

Managing Climate-related Risk  

Climate change is transforming the global economy, reshaping markets and altering the investment landscape.  Our risk management framework ensures that the organization is following established best practices for identifying, analyzing and reporting risks, including climate-related risks. Enterprise Risk Management conducts strategic analysis of certain key sectors (e.g. oil and gas) to determine the potential impact on our investment portfolio. In addition, we study the physical risks associated with rising temperatures and sea levels on our real estate portfolios. We also consider transition risk and how we, as a society, can move towards a greener economy. Prudential is exploring how to build tools and models that better quantify how climate-related scenarios like these would impact the risks we face. The Company is collaborating across the financial services industry to develop and apply this expertise.

Transparent Disclosure 

Prudential follows best practice climate-related reporting and disclosure which includes guidance provided by the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD).  Our TCFD Index  provides an overview of our strategy and approach to climate-related risks and opportunities, including how the Company’s oversight of climate change is integrated across our global businesses.

Prudential scored an A- on the 2020 CDP Climate Survey, the world’s leading environmental disclosure platform.   

Responsible Investing

Our Chief Investment Office (CIO) recognizes the risks posed by climate change and takes a holistic approach by incorporating climate-related impacts into investment decisions. The CIO assesses investees’ current emission profile while evaluating issuers’ transition plans, recognizing that sector-specific climate considerations are likely to evolve over time.

Recognizing that select investment restrictions may be appropriate due to fundamental misalignment with Prudential’s sustainability objectives, the CIO developed restrictions on new direct investments in mining and utility companies with greater than 25% of revenue from thermal coal. This restriction is included in Prudential’s Responsible Investing Policy. Exceptions may apply for issuers with a low carbon transition strategy and green bonds of restricted issuers.

Please see Prudential’s Chief Investment Office Responsible Investing Policy to for more information regarding how the General Account integrates and monitors investment decisions made on its behalf.

Sustainable Finance

Prudential is an industry leader in sustainable finance transactions. Our Company was the first U.S. life insurer to issue a green bond. The eligible categories for the use of the net proceeds— renewable energy, green buildings, energy efficiency, clean transport, sustainable water and wastewater management, and pollution prevention, advance and align with the U.N. Sustainable Development Goals (SDGs).  For more information, please see our Green Bond Report.

We integrated our environmental, social and governance (ESG) commitments into our liquidity framework through the renewal of our five-year $4 billion credit facility. The credit facility, the first for a major U.S. insurer, includes a pricing structure which adjusts Prudential’s borrowing cost based on our success of two key performance indicators, including the reduction of GHG emissions.  

Supply Chain Management

We are committed to adopting more sustainable procurement and supply chain practices. In 2021, 168 of our suppliers disclosed climate-related risks, GHG emissions and other environmental data to us through the CDP’s Supply Chain Program, a 66% response rate.

Advocating and Engaging 

Each year, our Board and management team engages with a cross section of shareholders owning a majority of our outstanding shares. Our consistent and active dialogue with shareholders enables us to develop a climate policy that is consist with our investors’ perspectives. 

PGIM’s asset managers, PGIM Quant Solutions, PGIM Real Estate, PGIM Fixed Income and Jennison Associates are Principles for Responsible Investment (PRI) signatories.  As signatories, these asset managers are obligated to report on their responsible investment activities and ESG integration practices annually.

PGIM’s Megatrends paper Weathering Climate Change: Elements of Actionable Investment Agenda, proposes an actionable climate change agenda that addresses both hidden portfolio vulnerabilities and potential opportunities in the transition to a lower-carbon world.

 

1 Prudential Financial is the 10th-largest investment manager (out of 477) in terms of global AUM based on the Pensions & Investments Top Money Managers list published on 5/31/2021. This ranking represents assets managed by Prudential Financial as of 12/31/2020.

2 Home office operations include owned and leased office space, data centers and garages in the U.S., Japan, and Brazil.