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Climate change
Introduction
Active ownership
ESG integration
Partnership with Prudential
Community and people
A final word
Compliance teams, who are responsible for ESG compliance monitoring as well as risk monitoring and reporting, make up the second line in our risk management framework. The investment risk function incorporates qualitative and quantitative measures and approaches in the monitoring of financially material ESG factor exposures in portfolios and has in place risk oversight forums to support dialogues with investment teams on financially material ESG risk exposures and factors. In parallel, the investment risk function also has governance processes to periodically report financially material ESG factor exposures to management forums. The investment risk function utilises the same desktop tools and aligns with the investment teams’ approach to monitor portfolio and aggregate-level financially material ESG risk exposures. Third line: The third line refers to the Prudential Groupwide Internal Audit (“GwIA”). The GwIA considers as part of its independent review, the robustness of our risk management framework in managing climate-related risks.
embedded in the third line of risk defense of Eastspring Investments’ ‘Three Lines of Defense’ model. Climate-related risk is a wide-ranging, multifaceted issue spanning both physical and transition aspects of risk. At Eastspring Investments, we are continuing to build our understanding of the implications and materiality of climate-related risks on the assets that we manage. As an asset manager with assets predominantly in Asia and the Emerging Markets, we recognise that we are put in a unique position to navigate the balance between development of these markets and stewarding the impacts of climate change. First line: The investment teams monitor financially material ESG factors, which may include factors identified as proxies for measuring climate-related risk, as part of the research, portfolio construction, and ongoing portfolio risk review processes. Investment teams utilise desktop tools, combining a range of ESG data sources and frameworks, to monitor for changes that may impact the portfolio and apply judgement in assessing the portfolio. At this stage, the identification, assessment, and management of climate risk is driven by expectations set out by clients. In parallel, we are enhancing our capabilities for understanding forward-looking metrics within our portfolios. We fundamentally believe that active ownership is a key part in the marathon towards a net-zero economy. The investments teams use company engagements to monitor for progress and to promote sustainable business practices. The Sustainability team also conducts thematic engagements, including climate change and decarbonisation, under our Central Engagement Programme. For more information on our active ownership initiatives and a wider range of case studies, please refer to page 18.
Make decisions relating to the Eastspring RI policy, including updates and exclusion exemptions Promote the culture and approach to RI across business activities Oversee the implementation and monitoring ongoing compliance with the framework to manage ESG risks Monitor the impact of sustainability and RI developments Review material disclosures in RI reports The Sustainability Committee oversees five Sustainability workstreams, comprising of cross-functional representation across our business, that collaborate to build capacity, make progress in priority areas, and facilitate ongoing continuous improvement towards our sustainability ambitions. These workstreams are tasked with focusing on various key sustainability issues. Risk management The Risk Workstream has been tasked to drive and monitor projects and activities delegated under this workstream by the Sustainability Committee. For example, in 2021, a workgroup reporting into the Risk Committee was set up to review the requirements of MAS EnRM and lead the discussion for meeting these guidelines ahead of the deadline. Subsequently, any significant climate- related risk issues are escalated to the Risk Management Committee (“RMC”) to ensure that appropriate and timely actions are taken. For the avoidance of doubt, any material exceptions are to be further escalated to the Board. Where needed, oversight of the remediation process shall be carried out by the Investment Risk team in collaboration with other relevant stakeholders. In general, the management of risk and risk oversight are embedded in the first and second lines of risk defense respectively, and independent assurance is
Responding to local guidelines
We monitor and actively participate in the ongoing regulatory developments in the markets in which we operate. As part of ongoing conversations with LBUs under the ESG Experts in Asia Workstream, we use the forum as a channel for information sharing on these regulatory and reporting guidelines. It facilitates regional dialogue and allows the various LBUs to support one another through sharing of experiences in tackling requirements. In the second line, LBU Compliance teams also provide updates to Head Office Risk Management and Compliance teams on ESG regulations as well as public consultations.
Second line: Our Risk Management and
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