As a responsible investor we consider the sustainability risks of all our investments by looking at environmental, social and governance (ESG) factors that could have a material financial impact. Then we incorporate these factors into our general risk management framework. There are different levels of impact on investments, depending on the market conditions, and individual sustainability risks.
Our financial advisers offer clients investment solutions that consider sustainability risks through assessing the likely negative impact of ESG factors on an investment.
Our annual Chief Risk and Resilience Officer’s Risk & Compliance Report will consider the effectiveness of sustainability risk management in investment decisions and advice. We will monitor how well we’ve applied the relevant principles and policies, and will report to the Remuneration Committee as part of this process. If we don’t meet the standards of our principles and policies, this will be reflected in our remuneration outcomes – in line with our 2021 M&G Remuneration Policy.
Some ESG factors can have knock-on effects to the risk and financial returns of individual investments and sectors. These factors can also have an impact on wellbeing more broadly – through their impact on the environment and society. For our investments we consider ESG factors to be part of our investment stewardship: the way we take care of our customers’ assets in line with our fiduciary duty.
We do all we can to collect data to help inform our decisions, where it’s available, measurable and actionable. But we recognise that this isn’t a simple task. ESG factors are often interdependent, so identifying and addressing what directly drives them can be complex. Data can be qualitative, and subjective. With this in mind, we take a pragmatic approach to balance the implications for financial return, the environment, and society in all our investment decision making.
The importance of ESG factors varies across different sectors and around the world. As a firm, we’ve chosen to focus on two ESG priorities that are important for the long-term sustainability of businesses and society – climate change, and diversity & inclusion.
As a group, M&G has a role both as an asset owner, and as an asset manager. We’re an asset owner through our large book of life policies, annuities and savings. As an asset manager, we manage assets on behalf of external third parties, as well as managing a significant portion of the assets we own. We aim to use our influence as an asset owner and asset manager to drive positive change in sustainability policy and corporate standards. And by doing that, we aim to generate long-term investment performance for our customers.
As an asset owner we don’t engage directly with investee companies. We rely on our asset managers. So, we appoint asset managers that employ active ownership practices, such as shareholder voting, to seek to positively influence corporate behaviour where it’s appropriate. We prefer to use these active ownership practices than to restrict investment opportunities by excluding certain kinds of business.
As an asset manager we monitor business strategy, financial performance, capital structure, non-financial performance and any relevant ESG factors that may impact the investment. We take part in shareholder voting on behalf of our customers, in both actively managed and passively managed portfolios. And we report on the results. We do this in line with the Stewardship Code 2020.
Asset Manager ESG Principles Statement
Our financial advisers consider the adverse impact of investment decisions on ESG factors, incorporating sufficient and reliable data where it is available. These inform the portfolios or advice given to clients, which they in turn will choose whether or not to implement. We expect the availability of this data to develop and improve with time to be able to further integrate these considerations into our advice.
Date published: 09/03/2021
Last updated: 09/03/2021
Financial Market Participants: M&G Alternatives Investment Management Limited, M&G Investment Management Limited, M&G Luxembourg S.A., M&G Securities Limited, PGF Management Company Limited, The Prudential Assurance Company Limited, Prudential International Assurance plc.
Financial Advisers: M&G Investment Management Limited, M&G Luxembourg S.A., Prudential Polska sp. z.o.o,