Put Your Money Where Your Heart Is: What is Responsible Investing All About?

This post was written in collaboration with Prudential. While we are financially compensated by them, we nonetheless strive to maintain our editorial integrity and review products with the same objective lens. We are committed to providing the best information in order for you to make personal financial decisions with confidence. You can view our Editorial Guidelines here.


This is the first article in Put Your Money Where Your Heart Is, a series of five articles written in collaboration with Prudential that tackles the topic of Environmental, Social and Governance (ESG) and takes a closer look at responsible insurance and investment.

You make sure to recycle as much as you can, consume less energy by switching off all your standby appliances… you’ve started growing your own produce (thanks, NParks for the seeds!) and you’re even saving up for an electric car.

However, despite your best efforts to lead a sustainable and socially responsible lifestyle, have you thought about how your investments could be indirectly funding the climate crisis?

Yup, the company you’re investing in might not be environmentally conscious or may have unsustainable practices such as irresponsibly draining the earth of its precious resources or being biased when it comes to hiring.

As a consumer, you have the power to put your money where your heart is. Let’s look at how financial institutions are contributing to sustainable development by incorporating ESG — short for Environmental, Social and Governance — factors into not just their investment decisions, but also the business operations itself.

One of these companies is Prudential.

Here are 4 ways Prudential has chosen to get on board with ESG:

 

1. Investments are made with ESG factors in mind

When it comes to their investment portfolios and offerings, Prudential offers ESG-focused fund options. This is to create a more sustainable economy through responsible investment.

These ESG-focused fund options include the PRULink Global Climate Change Equity Fund, which focuses on companies that benefit from acting on climate change. Launched in September 2021, the PRULink Global Climate Change Equity Fund feeds into the GMO Climate Change Investment Fund, which is the underlying fund.

The investment objective is to seek to generate high total return by investing primarily in equities of companies that GMO believes are positioned to benefit, directly or indirectly, from efforts to curb or mitigate the long term effects of global climate change, to address the environmental challenges presented by global climate change, or to improve the efficiency of resource consumption.

You’ll be investing in companies that are considered to be involved in industries relating to clean energy, batteries and storage, electric grid, energy efficiency, recycling and pollution control, agriculture, water, and businesses that service such industries.

Similarly, there’s also the PRULink Global Impact ESG Equity Fund, which feeds into the Wellington Global Impact Fund. The focus is on life essentials, human empowerment and environmental sustainability, as well as generating positive social impact in underserved communities.

 

2. Moving away from investments that are deemed to be contributing to environmental decline

On 7 May 2021, Prudential pledged to achieve net-zero carbon emissions by 2050. One of the insurer’s first actions was to divest from all companies that derive more than 30% of their revenue from coal by the end of 2022.

This is a move in the right direction, given that the combustion of coal generates a bigger carbon footprint than that of other fossil fuels.

Prudential is not stopping there. The responsible insurer is going the extra mile to minimise fossil fuel pollution by planning a buy-out and shut-down of coal-fired power plants in Asia within the next 15 years.

 

3. Taking steps to reduce its operational carbon footprint

It’s easier said than done, but Prudential ensures it walks the talk. The insurer has also turned its ESG lens internally and manages the environmental impact of its operations.

The goal: To become net carbon neutral across the emissions directly produced in its daily operations and electricity usage. Prudential has also established progressive targets for water and waste and has improved the efficiency in how it uses these resources.

 

4. Building social capital by embracing greater diversity, inclusion, and belonging in our workplace 

Social capital refers to the social relationships and networks that not only influence the effective function of the society, but also correlate and complement the economy of that society.

Read more: Put Your Money Where Your Heart Is: What is Building Social Capital & Why This is Important to Investors

One of the ways Prudential is building social capital is embracing greater diversity and inclusion. To achieve this, the insurer actively promotes gender equality and age-inclusivity across all working levels to support a multi-generational workforce and a diverse talent pipeline within the organisation.

To promote equity, Prudential has in place a holistic approach to ensure equitable compensation through regular reviews of its employees.

The proof is indeed in the pudding. By having clear ESG measures for gender diversity and equality across Prudential’s business structure, the company managed to reach a female participation rate of 50% for senior managers and above, and a gender pay gap of only 1.3%.

All clued in on the basics of ESG and responsible investing? Remember, you have the power to make a positive impact on the world and put your money where your heart is.

Find out more about Prudential’s ESG initiatives.

 

This article is for your information only and does not have regard to the specific investment objectives, financial situation and particular needs of any persons. Please seek advice from a qualified Financial Consultant for a financial analysis before purchasing a policy suitable to meet your needs.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

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