Responsible investing at Prudential Assurance Company Ltd

The Prudential Assurance Company (PAC), the asset owner of M&G Plc, looks after the money of Prudential Customers with a primary objective to help people manage and grow their savings and investments, responsibly.

Here you will find detail on our approach to responsible investments articulated across our most up-to-date reports, policies, disclosures and commitments which showcase our focus towards Stewardship and Sustainability. Please note the policies and positions described here apply to PAC only, although other parts of the M&G Retail & Savings business division may use elements of PAC policies in their own responsible investing activities. For further details on M&G plc governance structure please see the latest M&G plc Annual Reports and Accounts here.

Please note information on our website will be updated to reflect material changes to our policies, strategies and to report on progress.

Responsible Investment

Stewardship

Reports

Responsible Investment

We take our responsibilities as an investor seriously. PAC delegates most of the key investment activity to the M&G’s Treasury & Investment Office (T&IO). Within our Treasury & Investment Office, a number of teams collaborate together to support clients and policyholders receive investment outcomes in line with their expectations.

We believe a well governed business, run in a sustainable way delivers stronger, more resilient returns for clients and shareholders, and better outcomes for society and the environment. Therefore, considering the material impacts of Environmental, Social and Governance (ESG) factors on the economy, society and the environment as a whole remains a key priority for our business.

This page sets out our approach to responsible investments, as articulated in our Investment Policies and Principles.

PAC ESG Investment Policy
Our Prudential Assurance Company’s (PAC) sets out the ESG investment principles which we use to inform and guide every investment practice. These principles are consistent with M&G plc’s ESG principles, and reflect the firm’s purpose and core values of Care and Integrity. It enables us to take into consideration ESG factors that have the potential to have a material financial impact and incorporate them into our investment analysis and decision-making process. The Policy is updated annually or when material changes are required.

PAC ESG Investment Policy

Climate Change
Climate change is a global problem characterised by huge complexity, uncertain timing and economy-wide impacts. Adding to the urgency, there are signs that we are moving closer to planetary tipping points – thresholds beyond which change to the natural environment and climate could become irreversible.

We have set a target to achieve net zero emissions across our investments by 2050 at the latest. Our aim is to target real-world emissions reductions, and contribution towards climate solutions, whilst supporting a just transition and advocating for positive change. The M&G plc Just Transition Position Statement can be found here.

As part of these commitments, in 2021, PAC joined the UN-convened Net Zero Asset Owners Alliance (NZAOA), a member-led initiative of institutional investors committed to net-zero GHG emissions by 2050. Our initial interim targets in 2022, can be found here. These have been set under the NZAOA Target Setting Protocol, which is reviewed and updated annually, increasing the scope of target setting requirements. The NZAOA has a similar focus on real-world emissions reductions and engagement to enact necessary, economy-wide changes to avoid the worst effects of climate change.

Thermal Coal
M&G plc approach to thermal coal provides the foundation for dealing with other high-carbon investments. Coal is a priority because of its major global emissions impact, and the significant risk of stranded assets.

In line with M&G plc’s position on Thermal coal, in March 2021 PAC has committed to phase out thermal Coal by 2030 in OECD & EU countries and by 2040 in developing countries – a forward-looking approach to enable real-world, positive change.

A number of thermal coal divestments were first considered in 2020, resulting in exclusions across our shareholder annuity and With-Profits Funds that were implemented throughout 2021.

If you wish to find out more about M&G plc's approach to phasing out investment in thermal coal, kindly refer to the M&G's plc Position on Thermal Coal here.

UN Global Compact
In 2021, as part of M&G plc, PAC became a signatory of the UN Global Compact (UNGC), a commitment to ten principles of good practice in human rights, labour, the environment, and anti-corruption, which M&G plc reports on annually. The first Communication of Progress (COP) on the UNGC submission explains the current position from which M&G plc (as a corporate entity, an asset manager, and a long-term savings & annuity business) is seeking to play its part as a UNGC signatory.

Tobacco Disposal
PAC excludes or restricts companies involved in the production of tobacco, or companies with an ownership in these companies, as tobacco investment is inconsistent with our values and purpose, and negatively impacts society as a whole.

Stewardship

As an asset owner, PAC does not engage directly with investee companies on stewardship and sustainability issues. However, PAC’s Treasury and Investment Office does take strategic decisions about the kind of investments the asset owner funds make for the long term, and how long-term risks like climate change should be approached. Our investment managers are expected to engage on our behalf in accordance with our stewardship and sustainability-related policies.

This section covers reports highlighting the stewardship activities undertaken on behalf of our clients, and our stewardship policies and disclosures.

PAC Stewardship Report

The Financial Reporting Council’s (FRC) UK Stewardship Code sets the standards for institutions in responsibly managing and owning assets on behalf of UK investors. Our annual PAC Stewardship Report sets out in detail how we have applied the 12 principles of the UK Stewardship Code in our activities, and the outcomes of these activities.For the past three years, starting 2020, we have successfully applied to become a signatory of the FRC’s UK Stewardship Code. Signatories are re-evaluated on an annual basis by the UK’s Financial Reporting Council.”

See below the links to our reports:

2022 PAC Stewardship Report

2021 PAC Stewardship Report

2020 PAC Stewardship Report

PAC Stewardship Report – Executive Summary
The executive summary is intended to provide clients with an overview of the 2022 PAC Stewardship Report. It covers a high level description of what’s covered in the main report, a selection of mini case study summaries and all links included in the report, that routes to the sources of further information.

PAC Stewardship Report - Executive Summary

PAC With-Profits Fund Stewardship Report

Our aim of the With-Profits Fund Stewardship Report is to give clients an insight into how we are looking after their money, who is managing it, where and how it is being invested.

PAC With-Profits Fund Stewardship Report

PAC Shareholder Engagement Policy

Our Prudential Assurance Company’s (PAC) Shareholder Engagement Policy sets out the PAC shareholder engagement principles and incentivisation arrangements relating to all aspects of the M&G plc asset owner business (PAC). The Policy is updated annually or when material changes are required.

PAC Shareholder Engagement Policy

PAC Voting Standard

Our Prudential Assurance Company’s (PAC) voting standard sets out how PAC should approach shareholder voting. The Standard is updated annually or when material changes are required.

PAC Voting Standard

PAC Shareholder Rights Directive Statement (SRD-II)

The Shareholder Rights Directive II has the objective of improving corporate governance in companies whose securities are traded on EU regulated markets by requiring certain disclosures from asset managers and asset owners. This is to improve transparency regarding their investment strategy, voting processes during general meetings, and director’s remuneration.

In the below document, we have summarised the key findings of our 2022 engagement review, and detailed how PAC meets its Shareholder Rights Directive requirements, and implements its PAC Shareholder Engagement Policy.

PAC Shareholder Rights Directive Statement (SRD-II)

Reports

United Nations-backed Principles for Responsible Investment (PRI) is an international investor Initiative in partnership with UNEP Finance Initiative and UN Global Compact. The PRI publishes an annual assessment report of individual signatories, which evaluates investors’ progress in implementing and articulating their Responsible Investment activities.

The asset owner has been a signatory of PRI since 2021. The first year for the PRI assessment will be 2023. The PRI Strategy and Governance score will be available publicly in 2024.

With-Profits Fund Stewardship Report

PAC ESG Investment Policy

Our PAC Environmental, Social and Governance (ESG) Investment Policy relates to all aspects of business implemented by the Treasury & Investment Office on behalf of the Prudential Assurance Company. The Policy helps ensure our decisions and behaviours are consistent with our values of care and integrity, our sustainability priorities, and enable us to deliver sustainable long term outcomes for customers and policyholders in the With-Profits Fund

PAC ESG Investment Policy

Prudential Assurance Company

FRC UK Stewardship Code

The Financial Reporting Council’s (FRC) UK Stewardship Code sets the standards for institutions in responsibly managing and owning assets on behalf of UK investors. Our annual PAC Stewardship Reports set out in detail how we have applied the 12 principles of the UK Stewardship Code in our activities, and the outcomes of these activities. For the past two years PAC has successfully applied to become a signatory of the FRC’s UK Stewardship Code. See below the 2020 and 2021 reports.

Prudential Assurance Company 2021 FRC Stewardship Code Report

Prudential Assurance Company

Prudential Assurance Company 2020 FRC Stewardship Code Report

Climate

Climate change is one of the most pressing issues facing the planet, and will have an increasing impact on the environment, the economy and the way we live our lives. As part of M&G plc, PAC is committed to achieving net zero carbon emissions by 2050 across all our investment portfolios, in line with the UK Government’s targets to help limit global warming.

In 2021, PAC participated in The Bank of England’s Biennial Exploratory Scenario (CBES) exercise which aims to help organisations in the financial system plan for the impact of climate change. We looked at how different climate scenarios may affect our investments, including physical risks like flood and fire, and also transition risks as companies change their business models to reduce carbon emissions. This work will help us better manage these risks, and to identify investment opportunities which are less likely to be impacted by the physical risks of climate change.

Net Zero Asset Owners Alliance

In 2021, PAC joined the UN-convened Net Zero Asset Owners Alliance (NZAOA), a group of 74 global institutions who have committed to transition their combined $10.6 trillion in assets under management to net zero by 2050. As part of its membership, PAC has committed to publish details of its Paris-aligned interim net zero targets every five years. The first interim targets it has set in line with the NZAOA target setting protocol are available here.

Current carbon emissions data for With-Profits Fund customers is available here.

UN Global Compact

In 2021, as part of M&G plc, PAC became a signatory of the UN Global Compact, which commits us to ten principles of good practice in human rights, labour, the environment, and anti-corruption, which we will report on annually.

Coal disposal

One of the most important things we can do to tackle climate change is to accelerate the phase out of thermal coal, which is a major source of carbon emissions. PAC, as part of M&G plc, committed in March 2021 to phase out thermal coal from its public listed investments by 2030 for OECD and EU countries, and 2040 for other countries and has already started the process of disposing of coal assets held by the With-Profits Fund.

Tobacco disposal

In 2021, PAC took the decision to exclude tobacco companies from all its portfolios, and the process of disposing of these assets has begun.

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M&G plc, incorporated and registered in England and Wales. Registered office: 10 Fenchurch Avenue, London EC3M 5AG. Registered number 11444019. M&G plc is a holding company, some of whose subsidiaries are authorised and regulated, as applicable, by the Prudential Regulation Authority and the Financial Conduct Authority. M&G plc is a company incorporated and with its principal place of business in England, and its affiliated companies constitute a leading savings and investments business. M&G plc is the direct parent company of The Prudential Assurance Company Limited. The Prudential Assurance Company Limited is not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in England and Wales.