Prudential has launched two whitepapers on climate transition financing.
The first white paper outlines a framework that integrates emerging market considerations when investing in energy transition. The framework is developed with Prudential’s proprietary principle-based approach, where transition financing is defined as investments directed into sectors and companies with the clear intention of enabling and accelerating the net zero transition.
The second paper, co-authored with Prudential’s asset management arm, Eastspring Investments (Eastspring), is focused on a practical investment approach aimed at clarifying the process of constructing a capital markets climate transition portfolio.
It will address the need to finance high to low carbon projects and the lack of a standardised definition for this task, as well as the need for flexibility for emerging markets. Specifically, Asia and Africa, require a more dynamic approach to low-carbon transition, with greater balance in regards to their challenges.
Ben Bulmer, chief financial officer (CFO), says: “Our responsible investment strategy leverages our unique position as a large asset owner in Asia and Africa. Our presence in emerging markets in these regions gives us a unique voice on responsible investment. We use this opportunity to influence industry, peers and investee companies to consider the role that emerging markets must play in the global energy transition.”
“As Prudential’s asset manager, Eastspring has been given a unique opportunity to contribute to a just and inclusive transition. In our research, we have found that climate goals cannot be reached if we ignore transitioning companies, which are committed to emissions reductions and are progressing towards climate-resilient business models,” adds Vis Nayar, chief investment officer (CIO), Eastspring Investments.
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Climate Bonds Initiative, an international not-for-profit organisation working to mobilise global capital for climate action, conducted a technical review of the white papers and endorsed both.
Sean Kidney, chief executive officer (CEO) and founder, Climate Bonds Initiative, says, “If we're going to leave our children a liveable and prosperous world, the global transition needs to be credible, ambitious, and rapid. By using clear robust investment frameworks and guidance like this, asset owners and asset managers can play a significant role in aligning economies with net zero pathways and avoid portfolio risks like emissions lock-ins, while growing and thriving in a net zero economy.”
In line with the launch, Prudential is announcing investments in two climate transition funds.
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The first is a US$200 million ($258.6 million) investment as a founding investor in Brookfield’s Catalytic Transition Fund. The fund is a blended finance instrument focused on directing capital into clean energy and transition assets in emerging economies.
The second, a US$150 million to a climate-focused strategy managed by global investment firm KKR, seeks to make infrastructure equity investments in Asia focused on energy transition, including climate adaptation, climate mitigation and the brown-to-green transition.
On this, Bulmer says: “We recognise the importance of this type of financing in facilitating energy transition, as solely investing in green activities may not be sufficient. Given that Asia is responsible for over 50% of carbon emissions, Prudential sees significant opportunities emerging in the region.”
