Prudential is engaging a mixture of advocacy and blended finance in its ESG framework in what it hopes will be a just and inclusivie transition towards a low-carbon economy across Asia's emerging markets, according to its latest ESG report .
The UK-based insurance giant believes it has a distinctive role to play in the move towards net zero particularly across the emerging markets of Asia and Africa in which Prudential operates.
“Our decarbonisation strategy acknowledges the nature of the markets in which we operate and seeks to ensure the financial and social burden of the transition is just and inclusive,” Anil Wadhwani, chief executive officer at Prudential said in the report.
“More broadly, through our investments, we seek to play a role in the growth of robust capital markets across Asia and Africa. This is critical to sustainable economic development,” he added.
Higher reliance on fossil fuels, a lack of resources to finance the shift to renewable energy, as well as under-funded basic development were all common factors in these markets, the report said.
Asia, the report said - while it had historically contributed less to the levels of carbon emissions in the atmosphere - was also being excluded from mainstream climate conversations .
As a member of the UN-convened Net-Zero Asset Owner Alliance, the insurer says it uses its voice to help shape evolving regulations and protocols around sustainability so that they can be developed in a way that takes into account the needs of the societies within the emerging markets of Africa and Asia.
Prudential’s global advocacy on behalf of emerging markets has developed across a number of themes, such as regulatory reform, blended finance, harmonisation of standards and taxonomies, and a growing emphasis on nature, Kerry Adams-Strump the insurer’s director of group ESG said at AsianInvestor’s Insurance Investment briefing Hong Kong on March 10.
“We work in 15 markets in Asia and eight markets in Africa and so we're constantly monitoring the policy landscape,” said Adams-Strump.
While the increasing trend towards regulation in the emerging market space is positive, there is also a growing understanding that the social challenges of these markets are interrelated, she said.
“You can't solve a climate problem without thinking about the social impact - there's links with health, with gender equity, with poverty. You can’t solve these problems in isolation, you have to think of them as a holistic ecosystem,” said Adams-Strump.
Factors such as biodiversity, nature and deforestation are increasingly becoming the focus of climate change conversations in Europe, but Adams-Strump believes these considerations are more crucial for Asia’s emerging markets.
“As part of our responsible investment and climate mission, we have to bring those topics into these major conversations as well,” she said.
The insurer’s ESG report underscored that “blended finance” would be a point of increasing interest to Asian policymakers in 2023, and Prudential was seeking to build out its own work in this area.
Blended finance is essentially the strategic use of public development finance for the mobilisation of private sector capital to improve the risk/return profile on projects in developing economies.
The Just Energy Transition Partnerships (JETPs), launched in 2021 at COP 21, is an example of blended finance.
“We became the first asset owner to sign up to the Just Energy Transition Partnerships for Vietnam, which is just getting off the ground,” said Adams-Strump.
The Vietnam JETP provides one avenue for Prudential to invest its policyholders' money in a way that respects its fiduciary responsibilities, but also allows the insurer to finance the country’s transition and support its growth.
“It's very early days, but part of the reason we wanted to take part is because we're going to need to have local currency projects on the ground in Vietnam that we can buy into, so that we can then match our liabilities,” she said.