Responsible Investment Report 2022

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ESG integration

Introduction

Active ownership

Climate change

Partnership with Prudential

Community and people

A final word

Integration in action: Harnessing active monitoring and company engagement for evaluation Eastspring Singapore had assessed a financial institution as having a slightly higher risk and preparedness exposure relative to its peers in the “social” aspect of human capital development. This issue was also picked up through the ESG Controversies Active Monitoring system, that was created and operationalised within our portfolio monitoring systems. This prompted ongoing engagement with the financial institution on social issues on manpower, employee satisfaction, and compensation. As a result of this targeted engagement, we were able to gain a better understanding on the issues raised. The company had taken mitigating actions, such as the establishment of a dedicated entitlement compliance team with the requisite expertise to better resolve and pre-empt labour related issues with internal and external parties, including the regulator. This also demonstrates how our analysts identify material ESG issues in the ESG integration process, resulting in a proprietary assessment on the ESG risk and preparedness of any holding in this portfolio. Quantitative strategies ESG is incorporated as a formal stream in our quantitative research program, where we conduct significant research on alpha signals, including those related to material ESG issues, using available historical data. We look to identify and validate ESG alpha factors that improve the returns of our strategies and ESG risk factors that may mitigate risk in our strategies. We aim to enhance our data-driven approaches over time to strengthen our environmental and broader ESG capabilities, with a goal to effect meaningful and tangible change and generate alpha or reduce proven risks for clients.

Custom WACI benchmarks As an example, Eastspring Singapore has the capability to design and implement

with part of its strategic allocation being directed towards impact investments. In February 2023, Eastspring completed a commitment to an impact-focused fund, ARCHIMED MED Platform II, which makes mid-market investments in healthcare companies in Europe and North America. ARCHIMED has fully integrated impact and ESG into its investment process and strategy, with regular reviews of progress achieved against impact objectives at each of its underlying companies. ARCHIMED’s fund is classified as SFDR Article 9 and the manager has set up a charitable foundation that receives 5% of its performance fees. Going forward, Eastspring expects to make further impact-focused investments as part of its fund’s strategy.

customised low-WACI benchmark variants of current strategies. This

employs quantitative approaches, such as optimisation-based portfolio construction, which are well suited for balancing a low carbon emissions intensity preference against other objectives, including the pursuit of alpha. Private assets Within our private asset strategies, ESG factors for any prospective investment are assessed during due diligence and at each stage of the investment process, from origination to exit. It is the fiduciary duty of the Alternatives investment team to seek to maximise returns on investments and ESG factors are intrinsic to that objective. To ensure the integration of ESG issues in the pre-investment phase, the investment team assigns an appropriate ESG rating to each prospective opportunity based on an assessment against certain criteria within a proprietary ESG Risk Assessment process. Where it is determined that a prospective investment has an excessive ESG risk, or where there is no ESG policy or limited procedures in place, the investment team will decline the opportunity. During the investment phase, and until exit, the investment team engages with underlying managers to promote ESG best practices, to manage and monitor ESG risks and address any material ESG issues.

Launch of new global private equity fund

In October 2022, a new global private equity fund, managed by Eastspring Singapore, was launched with USD 1 billion of committed capital from Prudential Singapore. This fund makes commitments to private equity funds and co-investments

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