ESG is incorporated into our credit research processes. Through issuer analysis, we are able to identify credit material ESG factors for each industry, as well as the negative and positive impacts that this industry can have on the environment and society. With this information in mind, we can better engage with issuers, developing a constructive dialogue where our assessment and analysis is provided to the issuer, pertinent issues are raised, and the economic and reputational implications are discussed.
*It is important to note that unlike equity investors, fixed income investors have a contractual relationship with a company. Whereas equity holders, as owners, have more direct influence over management.
Within securitized products, consideration of social and governance ESG factors is core to PGIM’s evaluation of all consumer lenders, especially in the unsecured subprime consumer lending subsector. In our issuer engagements we focus on how the loan product design affords good utility for the borrower, the lender and the securitisation investor. In assessing responsible lending, we conduct due diligence on the lender’s consideration of a borrower’s ability to pay relative to their income, other debts and living expenses, and the lender’s servicing practices.
Source: PGIM Fixed Income. Note: An Issue may have a different ESG Impact Rating from an Issuer in the case of ESG labeled bond issuance. ESG labeled bonds are assessed under PGIM Fixed Income’s Green, Social and Sustainable Bond frameworks. For illustrative purposes only. Subject to change. Not indicative of future expectations. In the case of both credit material ESG factors and negative & positive impacts, the lists shown are illustrative. Actual topics considered will vary depending on the issuer and its circumstances and may not include all of the topics listed here and/or may include other topics not shown.
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