Prudential 2021 ESG Report Additionally, we evaluate operational risk exposure to physical assets and The use of arti昀椀cial intelligence (AI) within the 昀椀nancial services industry Environmental, Social and Governance Risks operations in geographies with rising sea levels and more severe weather has led to societal concerns around potential unintentional discrimination Prudential believes that it has a moral and business imperative to and 昀氀ooding. We also study the potential impacts of disease to help or bias against protected classes. Prudential has adopted Ethical Principles understand and manage its ESG risks. To consider the Company’s physical consider all operational outcomes. for AI, which provide the foundation for trust and transparency in our use and social environment is not only the right thing to do, but it is expected of AI and include a commitment to avoiding the creation or reinforcement In January 2021, a senior-level Climate Change Steering Council and by employees, customers, investors, regulators, and rating agencies. of unfair biases, unintended consequences, and unlawful discrimination. supporting Task Force were established to develop, execute and oversee As the speed and pace of change on these issues have increased, so have the Company’s climate change strategy. In addition, the Task Force, which Governance Risks the expectations of our stakeholders. Companies are not only expected to includes representatives from all relevant internal groups, including ERM, do the right thing, but insuf昀椀cient action on these issues can have negative works to coordinate climate-related activities across the Company. ERM is Our corporate governance has always been about promoting the stability of 昀椀nancial implications. For these reasons, we are working to augment developing its approach to climate challenges by devoting increasing time long-term outcomes where risks and 昀椀nancial outcomes unfold over decades. the risk management framework by incorporating the consideration of and resources to climate-related risk, which will enable the organization to Prudential is as committed as ever to effective, consistent, and transparent ESG risks and opportunities. As we look to the future, ESG risks bring better understand the implications of a broad set of climate risk outcomes. corporate governance. This becomes more important during times of stress a high degree of uncertainty in the form of potentially severe disruption and evolution, including the potential disruption that could result from to environmental, 昀椀nancial, and social ecosystems which may create future ESG issues. Prudential’s risk management framework supports this Social Risks rapid and sudden outcomes for stakeholders. Therefore, we work hard to objective with formal processes and governance systems that facilitate open Societal challenges could be exacerbated if there are declines in the understand how these developments may impact the business models of communication and effective challenge, thereby promoting the consideration health of the environmental and 昀椀nancial ecosystems. As pressures build the companies in which we invest and the Prudential business model itself. of diverse views and constructive engagement. around these ecosystems, having a fair society where all participants feel they have a vested and equal interest in societal outcomes is critical. With ERM is committed to integrating ESG risks into our risk management Environmental Risks rising inequality, there is not only increased risk to society but an inability to framework, which will progressively be expanded to accommodate new Historically, we consider environmental risks — especially climate-related solve long-standing challenges. It is, therefore, crucial for the sustainability realities over time. In the future, we will continue to enhance how we risks — and their impacts on cash 昀氀ow and the valuation of our investments. of our society that we continue to work towards inclusion and racial incorporate ESG into our analytical metrics, models, and targets, with an Looking to the future, we must analyze a broader distribution of outcomes equity. Prudential has made nine racial equity commitments, which span emphasis on further integrating climate risk into existing analytical processes. to account for the potential for increasingly severe climate disruptions. talent practices, design and delivery of products, investments and public The potential disruptions from climate change pose investment risks by policy work, and support of community institutions working to remove exposing our investment holdings to both physical damage from climate persistent obstacles to Black economic empowerment. In addition, given change (physical risks) or substantive changes in business models the challenges discussed above, having a diverse talent pool that re昀氀ects amidst the shift to a lower-carbon economy that could result in 昀椀nancial our society is a critical component to 昀椀nding solutions to the problems deterioration or stranded assets (transition risks). These impacts could facing us. Beyond these initiatives, Prudential considers social factors in uniquely affect speci昀椀c companies, sectors, asset classes, and geographies the assessment of investment risks as part of its strategic review process, in which we choose to invest. Climate change also poses market and focusing on how social inequality could impact various sectors, such liquidity risks from sudden changes in the pricing or liquidity of assets that as healthcare. For more information regarding Prudential’s racial equity Prudential holds. Climate change may also affect population health and commitments, please refer to Attracting and Retaining the Best People mortality by triggering events including heat stress, 昀氀oods, wild昀椀res and air section of this report. pollution, and the spread of disease. 13 Home Introduction Governance Sustainable Investing People Community Environment About this Report Appendix 13