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PGIM Fixed Income

PRI reporting framework 2020

You are in Strategy and Governance » Governance and human resources

Governance and human resources

SG 07. RI roles and responsibilities

07.1. Indicate the internal and/or external roles used by your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for responsible investment.

Roles

Select from the below internal roles

          ESG Committee Members
        

Other description (1)

          ESG Dedicated Analyst
        

07.2. For the roles for which you have RI oversight/accountability or implementation responsibilities, indicate how you execute these responsibilities.

Our ESG Committee, established in 2014, acts as a governing body to oversee our ESG integration. The committee is responsible for establishing best practice policy, reviewing ESG integrated issues and engagement across all credit sectors, and facilitating dialogue between investment groups to support debate and share ideas in an evolving and often subjective area. Recent committee meetings have been open and honest, on the basis that diversity of views and debate leads to the most robust considerations and end decisions.

Our investment process begins with the senior investment team assessing the global market environment. This includes the review of any ESG issues by our credit research analysts or global economists. The majority of our ESG analysis would be conducted at this stage.  While we conduct our own ESG research, our credit research team and economists also utilise third-party ESG research models.

With respect to corporate credit research, we have a five-step process which integrates ESG factors into our fundamental opinions.

1      Identifying material ESG issues that may have an impact on an issuer and documenting those items into our internal research database, Aladdin® Research.  This enables our analysts to monitor these issues over time and provide updates to the companies’ progress in addressing them.

2      Our analysts will engage with issuers when we believe the potential ESG items highlighted are material. The objective here is to get a better understanding of how management will address these issues.  Our opinion of management’s credibility on ESG issues helps to inform our fundamental credit opinion.

3      Our analysts will document all material ESG issues in a specific section within our in-depth credit research reports. Here the analyst highlights the issues and explains how the issues are considered with respect to their fundamental credit opinions.

4      Our newest step is the pending launch of our internal proprietary ESG ratings. After considering potential ESG issues and our engagement with management, our analysts will be assigning an internal ESG rating. We expect to launch these internal ratings on January 1, 2020. 

5      Our final step integrates the analysts and the portfolios managers.  The portfolio managers maintain ESG relative value journals which capture all discussions between portfolio managers and analysts regarding ESG issues and our relative value opinion on those issues. 

The senior portfolio managers then construct the portfolio along with the team of sector specialists and analysts. The portfolio management team reviews the research before deciding whether or not the issuer has any material ESG concerns. The portfolio managers also ensure that the issuer would not violate any guidelines of the portfolio (including any SRI screens or restrictions).

Portfolio managers and risk managers oversee risk positioning daily, which includes the review of any material ESG issues that would either cause the portfolio to exceed its risk budget or result in a violation of ESG restrictions.

ESG Broad Factors for Consideration

Environmental

  • Overall Environmental Policies
  • Greenhouse Gas (GHG) Reduction Program, Reporting & Trend
  • Water and Wastewater Management Programs
  • Energy Efficiency ad Renewable Energy Programs
  • Waste & Hazardous Materials Program
  • Environmental Fines & Penalties

Social

  • Human Rights Policies
  • Working Conditions & Employee Incidents
  • Supply Chain Monitoring
  • Diversity & Inclusion Programmes
  • Data Security & Privacy Breaches
  • Product Safety and Consumer Protections

Governance

  • Board Independence, Diversity, Transparency, Experience, Leadership
  • Global Compact Signatory
  • ESG Reporting: Disclosure, Performance Targets
  • Financial Reporting: Disclosure, Timeliness, Transparency
  • Incidents: Business Ethics, Governance, Accounting, Tax Bribery, etc.

Screening

Given the regional diversity and sensitivities of PGIM Fixed Income global client base, many of our clients are keen for us to select credits across as broad a universe of investment opportunities as is appropriate for the strategy. We have adopted an approach and allow the use of SRI screens in each separately managed mandate based on client requirements in the investment management agreement.

07.3. Indicate the number of dedicated responsible investment staff your organisation has.

1 Number

07.4. Additional information. [Optional]

PGIM Fixed Income has chosen to integrate our ESG analysis into our portfolio management and credit research teams rather than employ a dedicated ESG team. In 2018, we also hired an ESG analyst who sits on the credit research team whose sole focus is assisting with the firm's ESG efforts.

Although we have a dedicated analyst, our entire Credit Research Team takes ESG issues into account in its analysis of the creditworthiness of investments it makes on behalf of clients and recommends certain credits to the portfolio management team. On a team level, senior portfolio managers are ultimately responsible for all portfolio decisions in his or her respective strategy, including ESG issues.

As mentioned earlier, we are also in the process of hiring a dedicated Head of ESG Research who will be supported by a team of dedicated ESG specialists to assist credit analysts with their ESG integration, internal ratings and issuer engagement activities. 

ESG factors are one of several criteria that affect the fundamental internal credit rating (AA/A/BBB etc.) and outlook (Positive, Negative and Stable) our credit analysis assigns to each of the issuers within our credit research coverage universe.

While PGIM Fixed Income does not currently apply a separate proprietary RI/ESG score to individual issuers we review, our third party ESG research provider, Sustainalytics, provides us with an overall issuer ESG score, relative peer position and percentile as well as ratings on Environment, Social, and Governance.


SG 07 CC. Climate-issues roles and responsibilities

07.5 CC. Indicate the roles in the organisation that have oversight, accountability and/or management responsibilities for climate-related issues.

Chief Executive Officer (CEO), Chief Investment Officer (CIO), Chief Risk Officer (CRO), Investment Committee

Other Chief-level staff or heads of departments

Portfolio managers

Investment analysts

Dedicated responsible investment staff

External managers or service providers

Other role, specify (1)

          ESG Dedicated Analyst
        

SG 08. RI in performance management, reward and/or personal development (Private)


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