Prudential Financial Launches Green Bond with $500 Million

Prudential Financial has launched its first green bond with a principal amount of $500 million, becoming the first US life insurance company to do so.

Prudential said the net proceeds from the green bond will be allocated exclusively to existing or future investments that provide environmental benefits, including reduced greenhouse gas emissions and improved resource efficiency. The eligible categories for the use of the net proceeds include renewable energy, green buildings, energy efficiency, clean transport, sustainable water and wastewater management, pollution prevention and control, and environmentally sustainable management of living natural resources and land use.

“Our green bond is an important next step in our efforts to ensure that environmental stewardship is reflected across Prudential’s business activities and operations,” Charles Lowrey, chairman and CEO of Prudential, said in a statement.

According to the Climate Bonds Initiative, a UK-based investor-focused not-for-profit group, worldwide sales of green bonds were $257.5 billion in 2019 and are expected to grow to $350 billion in 2020.

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“Green infrastructure presents a huge investment opportunity globally, with an estimated $100 trillion worth of climate-compatible infrastructure required between now and 2030 in order to meet Paris Agreement emissions reduction targets,” the Climate Bonds Initiative said.

Prudential has also established a “Green Bond Council” that is made up of members of its treasury, chief investment office, and corporate governance/sustainability teams. The council will be responsible for reviewing and validating eligible projects as well as relevant reporting to investors.

The insurance giant said Sustainalytics, an independent provider of environmental, social, and governance (ESG) and corporate governance research and ratings, has reviewed and verified that Prudential’s Green Bond Framework is consistent with the International Capital Market Association’s Green Bond Principles, which are voluntary process guidelines that recommend transparency and disclosure.

An October commentary by credit rating agency AM Best said the impact of increasing weather volatility seen in insurers’ income statements makes environmental and climate change a direct consideration in the underwriting process. It also said the increasing public interest in sustainable investing is spurring companies and investors to consider ESG risks and opportunities in their operations.

“To match the duration of their long-dated liabilities, life insurers need to invest in correspondingly long-duration assets,” AM Best said. “And allocations to green and sustainability-related infrastructure projects satisfy insurers’ needs for duration-matching and diversification in their portfolios.”

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Tags: AM Best, Charles Lowrey, Climate Bonds Initiative, ESG, Green Bonds, Paris agreement, Prudential, Sustainalytics

Art by Nigel Buchanan

After admitting he underestimated the impact of the coronavirus, hedge fund honcho Ray Dalio said Thursday that he thinks US corporations will lose $4 trillion because of the disease.

The founder of Bridgewater Associates said the economic impact of COVID-19 is greater than most people are conveying. Globally, the amount of money needed for businesses could notch up to $12 trillion, he said.

“What’s happening has not happened in our lifetime before,” Dalio said on CNBC’s “Squawk Box.” “There’s a need for the government to spend more money, a lot more money,” he added.

How much more money? About $1.5 to $2 trillion at a minimum, Dalio said. This week, US lawmakers are scrambling to put together a $1 trillion economic stimulus plan that will include aid for companies, as well as direct payments to millions of Americans.

Already, Americans in retail, food service, entertainment, and travel industries have been hit hard by the economic impact. In a LinkedIn post Wednesday, Dalio said the amount of money needed to protect individuals affected by the pandemic also would be “enormous.”

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On Thursday, Goldman Sachs released an apocalyptic figure: About 2.25 million Americans are projected to have filed jobless claims this week. That’s up from 281,000 last week.

Dalio changed his tone about the coronavirus just as his own hedge fund reportedly declined about 20% last week from the economic effects of the virus. It’s a missed opportunity, Dalio says, for Bridgewater, which is known for posting gains during the financial crisis.

“We’re kicking ourselves for missing that move,” Dalio told CNBC. “What happened was it didn’t come from the usual places, it came from not the usual ways that downturns come.”

On Friday, stock futures in the US ticked upward about 1%, thanks to massive stimulus packages rolled out around the world in response to the pandemic. In Norway, lawmakers have proposed a bill giving the government emergency powers during the crisis.