Environmental, Social & Governance range of funds

Access a wide choice of funds including ESG rated funds for clients through Retirement Account.

ESG stands for Environmental, Social and Governance and can mean different things to different people. For example, this investing approach may be suitable for clients concerned about where and how their money is invested and who:

• want to invest based on their values or moral concerns.
• believe both financial and non-financial factors can impact on investment performance.
• want their investments to generate a positive social or environmental impact, as well as a financial return.

The value of an investment can go down as well as up so your clients might get back less than they put in.

More and more asset managers are adopting an ESG approach. They’ll look to select funds and investment solutions which are clear about incorporating ESG and may be labelled with terms such as ‘socially responsible’, ‘SRI’, ‘sustainable’, ‘ethical’ or ‘impact’ investing.

Our ESG range on Retirement Account includes funds that can be classed as ‘Ethical’, ‘Sustainable’ or ‘Impact’, which are not exactly the same as pure ESG funds.

Ethical investing - This generally means prioritising the ‘moral’ return over the ‘financial’ return. To make sure a fund meets the ethical criteria there are exclusions:

• Norms-Based Exclusions: investments based on some form of generally accepted international standards e.g. arms dealing
• Investor-driven subjective screening for specific issues e.g. tobacco, coal, gambling.

Sustainable investing – this approach looks to take advantage of sustainability challenges such as water scarcity, whilst also factoring in risk and return considerations.

Impact investing – this type of investing generates a measurable social or environmental return, alongside a financial return.

ESG investing

• Environmental - considers a firm’s carbon footprint or environmental challenges such as water usage, climate change or deforestation
• Social - is focused on issues such as working conditions like child labour, impact on local communities and workforce diversity
• Governance - concerns how a company is managed and includes issues such as executive pay, diversity, political activities, anti-bribery and corruption policies.

ESG framework

There are different categories of ESG which combine both financial and non-financial factors:

To learn more about ESG investing listen to Ben Constable-Maxwell, Head of Sustainable and Impact Investing at M&G Investments.

We’ve selected these funds because they meet ESG preferences when screened against the Investment Association universe of funds. We’ve also checked the funds’ prospectus to confirm their ESG mandates and used performance, cost and fund size as additional filters.

The range provides access to single and multi-asset funds, active and passive, plus different ESG investment styles. The fund managers are all subject to our Retirement Account governance.

Please note that these funds have been selected based on Prudential's criteria and may not reflect the criteria of the underlying asset managers.