23 Sep 2024

SINGAPORE (23 September 2024) - Eastspring Investments (“Eastspring”), the USD247 billion1 asset management business of Prudential plc (Prudential), has launched a whitepaper on climate transition financing, co-authored with parent company Prudential, today.

Titled “Framework for investing in climate transition in the capital markets”, the whitepaper explores a practical investment approach that aims to outline how to construct a capital markets climate transition portfolio. 

The framework addresses two main challenges that our parent sees in the market in relation to financing the effort against climate change:

  • The need to finance ‘brown to green’ companies in addition to activities and the lack of a standardised definition as well as associated data for this in the capital markets;
  • The need for flexibility globally, and especially with regard to emerging markets in Asia and Africa. This is in recognition that they require a considered and dynamic approach to the low-carbon transition, with greater balance and representation of their challenges in accordance with the common but differentiated responsibility under the Paris Agreement.

The whitepaper is designed to guide asset owners navigating investments in corporates that are taking concrete action towards climate transition. This can be applied to construct a climate transition portfolio across public fund strategies, given the focus on a quantitative screen with added monitoring that is aligned with transition principles of international frameworks from industry bodies such as the Climate Bonds’ Initiative (CBI), and Sustainable Finance Taxonomies with transition components.

The whitepaper also includes a case study illustrating how an actively managed Asia Pacific-focused equity portfolio of transitioning companies in high emission sectors can implement the framework.

"As Prudential’s asset manager, Eastspring has been given a unique opportunity to contribute to a just and inclusive transition. In our research, we have found that climate goals cannot be reached if we ignore transitioning companies - which are committed to emissions reductions and are progressing towards climate-resilient business models,” said Vis Nayar, Chief Investment Officer, Eastspring Investments.

He continued, "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."

Dr Joanne Khew, Director, ESG Specialist, Eastspring Investments, and a co-author of the whitepaper, added: “The mobilisation of capital within the public markets to bridge the transition financing gap is crucial for meeting the Paris Agreement goals. We must go beyond focusing mainly on emissions reduction and already green solutions in constructing a holistic approach to transition. Eastspring’s proprietary approach is designed to screen companies for action in both transition opportunities and emissions reduction, and features ongoing monitoring against international frameworks. Our approach aims to result in a more market-and-sector-inclusive investible universe and includes companies taking early action in the climate transition journey.”

The Eastspring-Prudential framework is endorsed by Climate Bonds Initiative2, an international not-for-profit organisation working to mobilise global capital for climate action. This framework, along with CBI’s endorsement, is not specific to bond investments only.

Prudential has previously pledged their commitment to financing the transition and announced investments into several climate transition funds. Similarly, Eastspring is working on a practical solution that will focus on transition opportunities in the listed equity space in Asia Pacific.

More information and the full “Framework for investing in climate transition in the capital markets” whitepaper can be found at www.eastspring.com/insights/whitepapers/framework-for-investing-in-climate-transition-in-the-capital-markets  

An abbreviated version of the whitepaper is also available on our Insights page

1As of 30 June 2024.
2Climate Bonds Initiative, an international not-for-profit organisation working to mobilise global capital for climate action, conducted a technical review of the Eastspring-Prudential approach on climate transition in capital markets and has endorsed the framework. They confirm that the transition category alignment and composite transition screen developed by Eastspring and Prudential were guided by the core principles of the Climate Bonds Initiative to ensure credibility of transition finance.

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