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Active ownership
Introduction
ESG integration
Climate change
Partnership with Prudential
Community and people
A final word
Eastspring Singapore completed our divestment in this category by the end of 2021, and in 2022 continued to exclude such holdings from its investment portfolio. Tobacco These are defined as companies that produce tobacco, which are labelled as ‘Tobacco’ by GICS level 3 (or GICS Sub- Industry). Eastspring Singapore completed our divestment in this category by the end of 2021, and in 2022 continued to exclude such holdings from its investment portfolio. Coal We have decided to divest from all direct investments in businesses which derive more than 30% of their revenue from coal mining, and/or electricity generated from coal. For Eastspring Singapore, in-scope equity investments were fully divested by the end of 2021 and in-scope fixed income investments were full divested at the
end of 2022.
quickly and effectively, as opposed to strict divestment that diverts necessary financing for the transition. Our central engagement programme helps us to strike a balance between hard exclusions as a response to insurmountable ESG risks and harnessing active ownership as part of wider efforts for decarbonisation. In the case for coal exclusions, we have specific criteria for exemptions for certified green bonds for coal, which can be granted on a case-by-case basis. The company should demonstrate a plan that contributes to a transition consistent with its country’s NDC or with (or better than) the Paris Agreement.
Electricity generation through coal is the single largest contributor to global carbon emissions, and companies with a large reliance on coal therefore carry a significant stranded asset risk to our portfolio. On the other hand, we are cognisant of the reliance of our markets on coal and the challenges for switching to renewable sources whilst energy demand is rising as many of our markets show significant economic growth. We believe that the 30% revenue threshold appropriately balances these two perspectives and are continually monitoring this decision. In setting a threshold for divestment, we take great care in balancing our stewardship duties in developing markets, with our dedication to the low-carbon transition. We firmly believe that the foundation for a truly just and inclusive transition lies in the dedication to work with companies to phase coal out more
Exemptions in Action: A utility company in the Philippines When we launched our exclusions policy for coal, applying a 30% revenue threshold, this Philippine utility company had met our criteria for exclusion. In 2021, revenue contribution from thermal coal generation was an unacceptable level of 41%. However, the following year revenue from coal activities decreased to 35%. As part of our ongoing engagement, the company shared that this stream of revenue is estimated to decline to 25% of revenue by 2023. It had also publicly announced that the current coal portfolio would be divested by 2025, paving the way for only renewable energy generating capacity by that time. In light of this, and to support a just and inclusive transition, we have exempted the certified green bonds for this issuer. We will continue engagement with the company as part and keep track of their revenue exposures to coal.
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