We have expanded the list of climate policies we assess company engagement with to incorporate land-use related policy, referring to legislative or regulatory measures to enhance and protect ecosystems and land where carbon is being stored. Assessments under this category are currently underweighted in terms of their contribution to the overall company metrics. This weighting will be progressively increased over the next 6 months.
We adjusted the terminology used to describe the queries running down the left-hand side of our scoring matrix and added additional explanatory text to the info-boxes. This has no impact on the scores and methodology. It has been done following user feedback to improve clarity.
In this section, we depict graphically the relationships the corporation has with trade associations, federations, advocacy groups and other third parties who may be acting on their behalf to influence climate change policy. Each of the columns above represents one relationship the corporation appears to have with such a third party. In these columns, the top, dark section represents the strength of the relationship the corporation has with the influencer. For example if a corporation's senior executive also held a key role in the trade association, we would deem this to be a strong relationship and it would be on the far left of the chart above, with the weaker ones to the right. Click on these grey shaded upper sections for details of these relationships. The middle section contains a link to the organization score details of the influencer concerned, so you can see the details of its climate change policy influence. Click on the middle sections for for details of the trade associations. The lower section contains the organization score of that influencer, the lower the more negatively it is influencing climate policy.
Governance: Prudential Financial Inc. (Prudential) is partially aligned with the TCFD’s recommendations regarding the governance of climate-related risk. Board committees have regular oversight of the organization’s climate-related risks, and it's sustainability strategy. However, it does not appear to communicate the processes by which the committee oversees climate-related issues, goals, and targets. Management-level positions are assigned various climate-related responsibilities.
Strategy: Prudential considers climate-related risks and opportunities on its underwriting and investment business activities and discloses a process used to determine which risks could have a material financial impact on the organization. Moreover, it has referenced some climate-related risks and opportunities it considers relevant over different time horizons in its sustainability reporting, TCFD index, and CDP response.
The organization has provided several examples of how it has considered the impact of climate-related risks and opportunities on its corporate strategy planning in its sustainability report and CDP response. For example, identified climate risks and opportunities have influenced corporate strategy planning within operations, investing, and products and services.
Prudential has not yet tested the resilience of its business strategy to climate-related risks and opportunities using climate scenarios. It appears the organization has used science-based target setting methods to inform its business strategy and update its Global Environmental Commitment. Prudential has not referenced its ambitions to conduct climate-scenario testing in future reporting.
Risk Management: The organization outlines some processes in place to identify and assess climate-related risks, including a Risk Appetite Framework (RAF) that consists of models, metrics, and stress scenarios to help measure and evaluate risks. Additionally, Prudential appears to incorporate climate-related risks into assessments of various risk categories.
Prudential highlights some processes to manage climate-related risks. For example, the Chief Risk Officer role was established to work with management to deliver a more streamlined and integrated approach to risk management. Additionally, Prudential utilizes findings from stress testing to determine whether to eliminate, minimize, or accept risks. However, it is unclear how Prudential prioritizes, transfers, or controls climate-related risks within these processes.
Prudential states climate-related risks are integrated into its overall risk management via application of the RAF, and climate-related risks have been integrated into some business areas, including investment, but it is unclear if it is integrated across all business areas.
Metrics and Targets: Prudential discloses some metrics used to measure and manage climate-related risks, including emissions and domestic water, waste, and recycling. However, only emissions metrics are described in detail, and methodologies for the other metrics are not provided.
The organization is transparent about Scope 1 and Scope 2 emissions data, but its Scope 3 emissions data is limited to business travel and fuel and energy-related activities not included in Scope 1 and Scope 2. Prudential does not currently disclose around financed emissions but states it plans to do so in the next two years.
Prudential has set various operational and investment targets to measure and manage climate-related risks and opportunities, including targets for environmental reporting, responsible use of natural resources, resiliency preparation, and education and engagement. However, it has not set a net-zero target across its investment portfolios, bar its real estate investment subsidiary.
Technology Positions: PGIM Fixed Income ESG Investment Policy Statement states it offers negative screens or restrictive lists to certain clients upon request. Within this, it offers screens on coal, Arctic oil and tar sands investments. Otherwise, it does not appear to have made public statements around fossil fuel exclusion or reducing its investments in fossil fuels in line with IPCC conclusions.
Prudential is increasing its financing of renewables and has invested $4.2 billion as of year-end 2019. However, it is unclear how this relates to the wider energy transition.