Investing Sustainably

Prudential formalized its Impact Investing unit more than 40 years ago and, in that time, the team has made more than $2.6 billion in investments as of December 31, 2019. The current portfolio has a market value of more than $860 million as of December 31, 2019. The impact investing team is 58% diverse and 33% female. In 2019, Impact Investments originated an additional $171 million of investments, including a first of its kind investment to support the implementation of a cutting-edge stormwater retention technology that will reduce the harmful effects storm water pollution around the Chesapeake Bay in the United States.

Renewable Energy Investments

Prudential invests its own and client assets in renewable power generation. Prudential remains an active renewables investor and continues to put new money to work in the space.

Green Real Estate & FHA

PGIM Real Estate invests across all property sectors throughout the United States. The business’s ESG objectives are to increase operational efficiencies and cost savings, to become a landlord of choice and align values with stakeholders. During 2019, PGIM Real Estate submitted 15 submissions to the 2019 GRESB survey representing more than 75% of PGIM Real Estate’s global AUM as of December 31, 2018. As of December 31, 2019, PGIM Real Estate managed 20.3 million square feet of LEED certified U.S. real estate totaling $10.9 billion (GAV). Global certifications totaled $18.1 billion (GAV) covering 31.9 million square feet.

In 2019, 15% of PGIM Real Estate Finance’s total FHA/ agency multifamily originations have been through green programs, 29% in 2018. The volume continues to decline solely because in 2019, Federal Housing Finance Agency (Fannie Mae and Freddie Mac’s regulator) changed the requirements for green financing by increasing the required energy and water savings to qualify.

Green Bonds

“Green bonds” are debt instruments used to finance environmental initiatives such as renewable energy efficiency projects.

Prudential through PGIM Fixed Income has invested in renewable energy, “green” bonds and “green” real estate. The market value for green bonds (corporates and munis) managed by PGIM Fixed Income is $2.72 billion as of year-end 2019.

In 2020, Prudential issued the firm’s first green bond with a principal amount of $500 million.

Statement on Responsible Investing from the Chief Investment Officer

For more than 140 years, Prudential Financial, Inc. (“Prudential”) has committed to keeping its long-term promise of helping our customers achieve financial security and peace of mind by offering insurance and retirement products and services.

Our commitment requires that we invest the premiums and fees collected from our customers in high-quality assets that effectively hedge the products we sell. This approach is referred to as liability-driven investing. In constructing such portfolios, we take a long-term view of the risks and opportunities across assets and asset classes, a view that considers fundamental financial analysis as well as environmental, social and governance (“ESG”) factors. It requires “Responsible Investing.”

Prudential’s commitment to Responsible Investing is manifest in the investment objectives and strategies that shape our high-quality proprietary portfolios:

Asset Liability Management (“ALM”): Core to Prudential’s overall mission and investment objectives is disciplined ALM: constructing a high-quality investment portfolio comprised of assets that support the liability profiles of the company’s products and obligations. The analysis supporting our ALM discipline requires our portfolio managers to have a deep understanding of the product liabilities they are hedging. They then construct high quality asset portfolios after identifying and evaluating the long-term risks and future opportunities associated with each asset and asset class available in the capital markets. The investment managers that implement Prudential’s ALM strategies incorporate this long-term view, including ESG factors, into their respective, individual security selection and management, including proxy voting, as appropriate.
Impact Investing: The strategy of the Diversity Inclusion and Impact team reflects the historical recognition that the company’s long-term success depends on the vitality of the communities in which we do business and where there are numerous social challenges not being adequately served by traditional capital markets. In 2014 the company set a bold goal to invest $1 billion in assets under management by 2020. It has delivered on that promise by helping find, fund and incubate unconventional solutions to societal and business challenges.

Diversity & Inclusion: The company supports vendor and business partner initiatives that seek collaborative opportunities for high-potential women- and/or minority-owned financial institutions. We focus on active participation by diverse banks in our capital markets transactions. We invest and maintain deposits in minority-owned banks. We further support an investment program dedicated to identifying high-potential emerging investment managers to oversee domestic proprietary assets.
Investing to Mitigate Climate Change: Prudential has found opportunities to help mitigate climate change by pursuing relevant opportunities in a variety of asset classes. Most prominently, the company has invested in renewable energy, ”green” bonds and “green” real estate.

The focus of this statement is exclusive to the company’s proprietary assets – the scope of Responsible Investing at Prudential, however, is enterprise-wide. PGIM, Inc. and its individual asset management units have their own Responsible Investing initiatives. Prudential’s Board of Directors maintains direct oversight of all company investments through its committees, and provides transparency around related initiatives through the annual publication of the company’s “Sustainability Report.”

Providing such transparency is consistent with the overarching belief that how we do business is just as important as the business we do; from the products we sell to the assets we acquire to support them. Responsible Investing reflects this belief, as well as Prudential’s commitment to provide customers long-term financial security and peace of mind.

Although some countries mandate reporting in these areas, in most geographies understanding material ESG dimensions is helped by an organization’s extra-financial reporting. Starting with its first Sustainability Report, Prudential committed to improving transparency of its own performance by subscribing to Global Reporting Initiative guidelines and later by adapting the International Integrated Reporting Framework. ESG information is also included in traditional investor focused documents like the Proxy Statement and Annual Report.

This statement aligns with already established statements issued by divisions of Prudential that are signatories to the Principles for Responsible Investment, including PGIM’s QMA, Real Estate, and
Fixed Income.