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PGIM Fixed Income

PRI reporting framework 2020

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Innovation

SG 18. Innovative features of approach to RI

18.1. Indicate whether any specific features of your approach to responsible investment are particularly innovative.

18.2. Describe any specific features of your approach to responsible investment that you believe are particularly innovative.

After much planning in 2019 (and into 2020), we will soon be rolling out a proprietary ESG ratings framework. These ESG ratings will be one of the inputs into our internal fundamental ratings determined by our analysts, and subject to the same analytical rigour. Issuers’ ESG ratings will be distributed on a points scale within the context of their respective peer groups, which in turn will have a group level ESG ratings (e.g. an industry rating for corporate issuers).

Analysts rate all bonds and loans including sovereign, corporate, municipal, and structured product to assess each issuer’s alignment with our view of the broad ESG goals that are aligned with UN Principles for Responsible Investing, UN Global Compact, and the UN Sustainable Development Goals.

Our ratings scale ranges from 0 to 100 in increments of 5, with 100 being the best ESG rating. This wider rating range provides a single scale that allows us to distinguish across a wide range of issuers such as a country like Brazil, to a global energy provider like Exxon, to a structured CMBS or CLO product.

These ratings are not an assessment of an issuer’s ability to repay debt and are differentiated from our proprietary credit ratings, however, ESG issues are already an input into our credit ratings process.    Risk/return implications of ESG issues are already being considered when assessing the credit quality of an issuer.


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