Prudential plc has committed up to $150m to a climate-focused strategy managed by global investment firm KKR, which seeks to make infrastructure equity investments in Asia focused on the energy transition, including climate adaptation, climate mitigation and the brown-to-green transition.
In a statement, Mr Ben Bulmer, CFO of Prudential plc, said, “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.”
Prudential is also placing $200m as a founding investor in Brookfield’s Catalytic Transition Fund, their first dedicated fund for transition investing in emerging markets. The fund is a blended finance vehicle focused on directing capital into clean energy and transition assets in emerging economies.
Climate transition financing
Prudential has also launched two whitepapers on climate transition financing.
The first outlines a framework that integrates emerging market considerations when investing in energy transition. Due to the absence of a standardised definition of transition finance, Prudential has developed its own proprietary approach where it has defined transition financing as investments directed into sectors and companies with the explicit intention of enabling and accelerating the net zero transition. Prudential’s approach is principles-based so that it can be applied across asset managers and asset classes.
The second paper, co-authored with Prudential’s asset management arm, Eastspring Investments (Eastspring) explores a practical investment approach that aims to outline how to construct a capital markets climate transition portfolio.
The framework aims to address two challenges that Prudential sees in the market in relation to financing the effort against climate change:
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The need to finance ‘brown to green’ (high carbon to low carbon) projects and the lack of a standardised definition for this
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The need for flexibility with regard to emerging markets in Asia and Africa, recognising that they require a considered and dynamic approach to the low-carbon transition, with greater balance and representation of their challenges
Mr Bulmer said, “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.”
Mr Vis Nayar, chief investment officer of Eastspring Investments, said, "In our research, we have found that climate goals cannot be reached if we ignore transitioning companies (brown-to-green or brown-to-less-brown) — which are committed to emissions reductions and are progressing towards climate-resilient business models.”
He added, "Given that current industry guidance in transition is mainly principles, emissions, or activities focused, our investment team has developed a framework that proactively identifies such companies across markets and sectors; this widens the investible universe and will allow investors to identify potentially mispriced assets. The Eastspring-Prudential Climate Transition framework can be applied to capital market portfolios across asset classes, and we believe this proprietary tool can help unlock the market's full potential in driving meaningful change."
Climate Bonds Initiative, an international not-for-profit organisation working to mobilise global capital for climate action, conducted a technical review of Prudential’s framework and the Eastspring-Prudential approach on climate transition in capital markets and have endorsed both.
To view the 2024 whitepapers, please visit here.