Research into the data, measurement and methodologies of ESG rating agencies has resulted in the Aggregate Confusion Project, a research project led by academics at MIT to develop a set of ESG tools and methodologies that will become best practice.

A paper by the Society of Sloan Fellows Professor of Management, Roberto Rigobon, called Aggregate Confusion: The divergence of ESG ratings, that examined ESG ratings based on data from six rating agencies, characterised the problem by bringing to light the fact ESG data is noisy and unreliable. This in turn, means investors don’t trust the data which often leads to inaction. And perhaps more worryingly, it also means that corporates can game the system.

Director of the MIT Sloan Sustainability Initiative, Jason Jay, who leads the project with Rigobon, says the aim of the consortium is to make ESG integration more defensible and more workable for the industry. MIT is looking for asset managers and asset owners to join the research-led consortium, with MassPRIM signing as a founding member.

Executive director and chief investment officer of MassPRIM, Michael Trotsky, says having robust tools was an important evolution for the fund’s ESG journey.

“We’re in the infancy of ESG and the data we rely on is not robust and so it is hard to have robust investments. There is a proliferation of products and we have analysed a lot but we haven’t been particularly happy with their robustness,” Trotsky says. “We like the intent and want to do ESG investing. But we want to do it better than anyone. As it stands we don’t think ESG investing is having a big impact. We want to impactful and want to form robust portfolios that reflect our views.”

In order to develop tools for the industry the consortium first explored the state of play with regard to the quality of measurement. Rigobon’s paper found that correlation among prominent ratings agencies was 0.62 which compares to 0.92 for credit rating agencies.

“It depends on what you think the correct comparison is, if you think it is to credit rating agencies, then this looks really bad. If you think ESG ratings agencies are more like stock analysts which are supposed to have a variety of perspectives then it makes sense to have an array of different viewpoints. Our view is that variety would be ok if it was transparent,” Jay says. “The issue is ratings agencies diverge and people don’t trust the information and become inactive and don’t know what to do with it.”

Jay points to the exponential growth in assets under management that claim to have an ESG tilt, which has grown by 34 per cent since 2016.

“We are building a skyscraper as fast as we can, but it’s being built on a shaky foundation full of gaps and holes. That foundation is the quality of measurement – it’s foundational because it’s the basis of any ESG strategy and if we can’t trust the data then we have a problem,” he says.

Rigobon’s paper revealed the main sources of divergence were that different agencies have different indicators for the same underlying attribute; and that agencies have different scope in what they include in their ESG ratings.

But the problems don’t stop at divergence, for example the data is also very noisy Jay says.

“Multiple measurements of the same firm at the same time yield different results. So we have to do some things to increase the signal to noise ratio and that’s one of our key projects here – to get a better signal to measure returns and other outcomes,” he says.

Another problem is that ratings agencies use weighted linear averaging, and Jay says corporates know this and are gaming the system. He points to tobacco firms as an example.

“Firms who are always going to do poorly on certain indicators such as tobacco companies have learned if they are good at all the other factors then they can be top of the class on ESG. Or they’ve learnt that indicators are related to disclosure so they disclose everything to get a good rating,” he says. “Tobacco companies are the most vulnerable to be screened out in ESG, so they are the companies that have learned to find their way in however they can, which means making this weighted linear average work for them. The industry needs to get more complex and richer in the functional forms of the index construction.”

In addition the agencies vary on their weightings of various factors, with very few paying any attention to investor preferences. This is an area the MIT researchers believe needs attention.

“We think that no one is understanding the preferences of investors and using those preferences to assign the weights, we are pushing for ratings to become more customised.”

So the paper points out the measurement problem and the consortium aims to fix the problem, and has developed four work streams to focus on:

  • Improving the signal to noise ratio
  • Fixing the functional form of aggregation
  • Assessing preferences and weights and customisation
  • Understanding how capital flows effect return on investment to sustainability.

In addition to MassPRIM the consortium is looking for three or four investors to join the intellectual partnership with Jay describing the attributes of partners as people: who are deeply committed to ESG as their roadmap as an institution: are critical thinkers who are willing to explore the limitations as well as the possibilities of different strategies; have patience in the research process; and have humility.

“People who are up for collaboration and up for learning together and don’t think they’ve got it all figured out.”

Finance needs to be based on “real world economics” not the unrealistic and rational assumptions of traditional finance argue co-editors Herman Bril, Georg Kell and Andreas Rasche in their book Sustainable Investing: A path to a New Horizon.

“The world is becoming increasingly volatile, uncertain, complex and ambiguous and that is having a profound impact on business and the world,” says Bril who has been head of investments at the United Nations Joint Staff Pension Fund since 2016. “In this book we challenge the traditional theories of economics based on neoclassicism. We need to move into real world economics, from efficient markets theory to adaptive markets.”

The book, which Bril worked on in his personal capacity, is also being promoted to universities as a teaching aid that gives a unique and different perspective to “traditional learning which is not fit for purpose”.

“This is quite striking, my son is studying politics, philosophy and economics and the books he is learning from for economics is the same stuff as I had in the 1980s. It’s not related to reality and we need to move on. We need to face reality as it is. Models are helpful and useful but economics being represented only by mathematical models is not reality,” he says.

Instead the co-editors argue that finance needs to be more connected with Darwinian thinking and evolutionary economics which identifies robustness, resilience, cooperation and coping strategies as the winning attributes in a radically uncertain world.

Breaking down silos, this investment book takes contributions from thought leaders in the corporate, finance, academic and not-for-profit worlds, and takes a holistic view to sustainable investing across 18 chapters with contributions from 35 authors.

It covers four main themes: the changing context of sustainable investing; rethinking sustainable finance and leadership; sustainable investing technology and data; and accelerating transformational change.

By taking a broader approach and looking from different perspectives Bril says three key lessons emerged from the writings, which included contributions from Paul Polman, Keith Ambachtsheer, John Ruggie, Ashby Monk, and Karen Karniol-Tambour to name a few.

  • There is a shared understanding that what frames the conditions for market success has been changing at an accelerating pace and this impacts businesses and their investors
  • There is emerging consensus that technology and digitalisation are key drivers shaping the future of sustainable investing, for example AI and machine learning shape how ESG is practiced
  • Sustainable investing promotes business resilience but in itself is a resilient strategy; and the COVID-19 pandemic validates that.

But while change is necessary Bril, who has had a diverse career in finance over 25 years, acknowledges that change is also difficult.

“It’s really hard to let go of the old world and start thinking of new things. We are working with something that is comfortable and known and have to let go and do something else, it’s not easy. But we have to be open minded, take a step back and let go of our mental models,” he says. “This is a pivotal moment.”

He points to the momentum around sustainability from consumers, regulators and governments with more concern for planetary boundaries, plastic, water and climate change, as well as more acknowledgement of the inter-connectedness of the world.

“We believe we are in a paradigm shift, that has been accelerated by the COVID crisis. We can’t say these are externalities, what does that mean? Externalities are not a free lunch, you can’t create private profits and create a lot of public harm, price signals need to change.”

The book warns that the models and processes used in the past are no longer sufficient to navigate the future, and while this may sound like an enormous disruption, it also points out that history shows that nothing is more consistent than the “the adoption by successful rebels of the methods they were accustomed to condemn in the forces they deposed”.

In the final paragraphs of the book the authors call for action from asset owners and other finance players.

“Social evolution is preceded mostly by economic, political, intellectual, and moral innovation. New situations require novel responses; development requires experiment and innovation… Non-equilibrium is the natural state of the economy, and therefore it is always open to change.”

 

The ESG journey at UNJSPF

The UNJSPF has changed significantly with regard to sustainability in the past five years under Herman Bril’s investment leadership (Bril has announced his resignation and will step down in March 2021.)

Before 2016, when he joined the fund, there were a number of ESG activities the fund participated in – such as the World Bank issuance of green bonds, a founding signatory of PRI, and the launch of low carbon ETFs – but there was no coherent strategy, ESG was not embedded in the investment policy statement, and it wasn’t part of the investment conversation.

Within a year the team developed an ESG strategy and started implementing it, which Bril describes as complex and difficult and “it’s really a journey” (and is outlined in his chapter in the book).

The fund, which manages 85 per cent of assets internally, has created many partnerships with climate specialists and alternative data providers to supplement its internal resources and build ESG technology.

“You need a culture of innovation in a pension fund to build this. If something fails it is part of learning, so fail quickly and move on,” he says. “Most pension funds don’t have a strong focus on technology and data and don’t have a culture of innovation as they are not competing and have resource constraints. Culture and change management is critical, but it is not easy, it is hard work.”

The fund developed sustainability technology and dashboards have been built internally, with a lot of time and energy spent to build a workable platform which is based more around tools for portfolio managers rather than rules.

“We needed to have it all in-house because we manage so much money inhouse and using active management, which has much more complexity than just choosing external managers.”

The fund’s 2019 sustainable investing report shows a big change in the past five years and Bril says: “We are getting closer to being a global leader in sustainable investing and have made significant improvement.”

More recently the fund has become a member of the Net Zero Asset Owner Alliance, led by the UN,; and aims to be TCFD compliant in 2021.

 

 

 

 

How private corporate debt can help pensions schemes meet their long term goals

Pension funds with current cashflow requirements depend on a steady stream of payouts, but face a number of unique challenges in their search for income against a backdrop of lower-for-longer yields and volatile investment conditions brought on by the COVID-19 pandemic. Building strategic exposure to private corporate debt could help to boost income at a time when it is most needed, and help investors in their quest for diversification.

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For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. This guide reflects M&G’s present opinions reflecting current market conditions. They are subject to change without notice and involve a number of assumptions which may not prove valid. The distribution of this guide does not constitute an offer of, or solicitation for, a purchase or sale of any investment product or class of investment products, or to provide discretionary investment management services. These materials are not, and under no circumstances are to be construed as, an advertisement or a public offering of any securities or a solicitation of any offer to buy securities. It has been written for informational and educational purposes only and should not be considered as investment advice, a forecast or guarantee of future results, or as a recommendation of any security, strategy or investment product. Reference in this document to individual companies is included solely for the purpose of illustration and should not be construed as a recommendation to buy or sell the same. Information is derived from proprietary and non-proprietary sources which have not been independently verified for accuracy or completeness. While M&G Investments believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions which may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. All forms of investments carry risks. Such investments may not be suitable for everyone. United States: M&G Investment Management Limited is registered as an investment adviser with the Securities and Exchange Commission of the United States of America under US laws, which differ from UK and FCA laws. Canada: upon receipt of these materials, each Canadian recipient will be deemed to have represented to M&G Investment Management Limited, that the investor is a ‘permitted client’ as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Australia: M&G Investment Management Limited (MAGIM) and M&G Alternatives Investment Management Limited (MAGAIM) have received notification from the Australian Securities & Investments Commission that they can rely on the ASIC Class Order [CO 03/1099] exemption and are therefore permitted to market their investment strategies (including the offering and provision of discretionary investment management services) to wholesale clients in Australia without the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth). MAGIM and MAGAIM are authorised and regulated by the Financial Conduct Authority under laws of the United Kingdom, which differ from Australian laws. Singapore: For Institutional Investors and Accredited Investors only. In Singapore, this financial promotion is issued by M&G Real Estate Asia Pte. Ltd. (Co. Reg. No. 200610218G) and/or M&G Investments (Singapore) Pte. Ltd. (Co. Reg. No. 201131425R), both regulated by the Monetary Authority of Singapore. Hong Kong: For Professional Investors only. In Hong Kong, this financial promotion is issued by M&G Investments (Hong Kong) Limited. Office: Unit 1002, LHT Tower, 31 Queen’s Road Central, Hong Kong. South Korea: For Qualified Professional Investors. China: on a cross-border basis only. Japan: M&G Investments Japan Co., Ltd., Investment Management Business Operator, Investment Advisory and Agency Business Operator, Type II Financial Instruments Business Operator, Director-General of the Kanto Local Finance Bureau (Kinsho) No. 2942, Membership to Associations: Japan Investment Advisers Association, Type II Financial Instruments Firms Association. This document is provided to you for the purpose of providing information with respect to investment management by Company’s offshore group affiliates and neither provided for the purpose of solicitation of any securities nor intended for such solicitation of any securities. Pursuant to such the registrations above, the Company may: (1) provide agency and intermediary services for clients to enter into a discretionary investment management agreement or investment advisory agreement with any of the Offshore Group Affiliates; (2) directly enter into a discretionary investment management agreement with clients; or (3) solicit clients for investment into offshore collective investment scheme(s) managed by the Offshore Group Affiliate. Please refer to materials separately provided to you for specific risks and any fees relating to the discretionary investment management agreement and the investment into the offshore collective investment scheme(s). The Company will not charge any fees to clients with respect to ‘(1) and ‘(3) above. M&G Investments is a direct subsidiary of M&G plc, a company incorporated in the United Kingdom. M&G plc and its affiliated companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential Plc, an international group incorporated in the United Kingdom. This financial promotion is issued by M&G International Investments S.A. in the EU and M&G Investment Management Limited elsewhere (unless otherwise stated). The registered office of M&G International Investments S.A. is 16, boulevard Royal, L-2449, Luxembourg. M&G Investment Management Limited is registered in England and Wales under number 936683, registered office 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. M&G Real Estate Limited is registered in England and Wales under number 3852763 and is not authorised or regulated by the Financial Conduct Authority. M&G Real Estate Limited forms part of the M&G Group of companies.

As ESG continues to develop its role in society, we evaluate the awakening of the real estate industry to ESG issues and how things might look in 2050. What are the net zero commitments? Will the real estate sector conform to a standardised approach to certification? Are social issues being overlooked in real estate? Or is this an aspect of ESG that is a growing trend? Hear from Jose Pellicer and Nina Reid who shed light on these relevant topics.

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Disclosures and important information

For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. This guide reflects M&G’s present opinions reflecting current market conditions. They are subject to change without notice and involve a number of assumptions which may not prove valid. The distribution of this guide does not constitute an offer of, or solicitation for, a purchase or sale of any investment product or class of investment products, or to provide discretionary investment management services. These materials are not, and under no circumstances are to be construed as, an advertisement or a public offering of any securities or a solicitation of any offer to buy securities. It has been written for informational and educational purposes only and should not be considered as investment advice, a forecast or guarantee of future results, or as a recommendation of any security, strategy or investment product. Reference in this document to individual companies is included solely for the purpose of illustration and should not be construed as a recommendation to buy or sell the same. Information is derived from proprietary and non-proprietary sources which have not been independently verified for accuracy or completeness. While M&G Investments believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions which may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. All forms of investments carry risks. Such investments may not be suitable for everyone. United States: M&G Investment Management Limited is registered as an investment adviser with the Securities and Exchange Commission of the United States of America under US laws, which differ from UK and FCA laws. Canada: upon receipt of these materials, each Canadian recipient will be deemed to have represented to M&G Investment Management Limited, that the investor is a ‘permitted client’ as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Australia: M&G Investment Management Limited (MAGIM) and M&G Alternatives Investment Management Limited (MAGAIM) have received notification from the Australian Securities & Investments Commission that they can rely on the ASIC Class Order [CO 03/1099] exemption and are therefore permitted to market their investment strategies (including the offering and provision of discretionary investment management services) to wholesale clients in Australia without the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth). MAGIM and MAGAIM are authorised and regulated by the Financial Conduct Authority under laws of the United Kingdom, which differ from Australian laws. Singapore: For Institutional Investors and Accredited Investors only. In Singapore, this financial promotion is issued by M&G Real Estate Asia Pte. Ltd. (Co. Reg. No. 200610218G) and/or M&G Investments (Singapore) Pte. Ltd. (Co. Reg. No. 201131425R), both regulated by the Monetary Authority of Singapore. Hong Kong: For Professional Investors only. In Hong Kong, this financial promotion is issued by M&G Investments (Hong Kong) Limited. Office: Unit 1002, LHT Tower, 31 Queen’s Road Central, Hong Kong. South Korea: For Qualified Professional Investors. China: on a cross-border basis only. Japan: M&G Investments Japan Co., Ltd., Investment Management Business Operator, Investment Advisory and Agency Business Operator, Type II Financial Instruments Business Operator, Director-General of the Kanto Local Finance Bureau (Kinsho) No. 2942, Membership to Associations: Japan Investment Advisers Association, Type II Financial Instruments Firms Association. This document is provided to you for the purpose of providing information with respect to investment management by Company’s offshore group affiliates and neither provided for the purpose of solicitation of any securities nor intended for such solicitation of any securities. Pursuant to such the registrations above, the Company may: (1) provide agency and intermediary services for clients to enter into a discretionary investment management agreement or investment advisory agreement with any of the Offshore Group Affiliates; (2) directly enter into a discretionary investment management agreement with clients; or (3) solicit clients for investment into offshore collective investment scheme(s) managed by the Offshore Group Affiliate. Please refer to materials separately provided to you for specific risks and any fees relating to the discretionary investment management agreement and the investment into the offshore collective investment scheme(s). The Company will not charge any fees to clients with respect to ‘(1) and ‘(3) above. M&G Investments is a direct subsidiary of M&G plc, a company incorporated in the United Kingdom. M&G plc and its affiliated companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential Plc, an international group incorporated in the United Kingdom. This financial promotion is issued by M&G International Investments S.A. in the EU and M&G Investment Management Limited elsewhere (unless otherwise stated). The registered office of M&G International Investments S.A. is 16, boulevard Royal, L-2449, Luxembourg. M&G Investment Management Limited is registered in England and Wales under number 936683, registered office 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. M&G Real Estate Limited is registered in England and Wales under number 3852763 and is not authorised or regulated by the Financial Conduct Authority. M&G Real Estate Limited forms part of the M&G Group of companies.

The 3D investment framework is a game-changer for all of us

In 1995 a Goldman Sachs research report provocatively suggested that 20 to 25 global super firms would come to dominate the asset management industry, leaving some room for niche specialists but not much for mid-sized firms. It struck a loud chord at the time, particularly as investment firms were pretty local and fragmented – for example BlackRock, Mercury Asset Management, Merrill Lynch and BGI were all separate. Asset owners were not dissimilar in this respect too.

As it turned out, it was a strategic inflection point when a number of asset management firms embarked on a global transition, but the change proved not quite as dramatic in the concentration and consolidation forecast. That was largely because the asset owners, retail clients and regulators weren’t on the same journey.

But the era of truly global firms emerging was a game-changer where such firms became multi-faceted global organisations in location, strategy, culture and reach and usually shaped by the effective combination of four factors:

  • Similar global product around the world
  • Equal instantaneous access to quality research
  • Leverage of global talent to service local clients
  • Global culture that rewards global teamwork.

This combination has been a big growth engine for those firms that ticked these boxes.

Roll forward 25 years and I believe we are at another strategic inflection point of at least the same significance.

This time it’s about the sustainability transitions of both investment firms and asset owners. This transformational change is being driven by the slow moving but unstoppable ESG train, which is now rapidly picking up pace because of climate issues and the Paris Agreement. Sustainability is effectively funnelling together ESG, impacts and longer-time-horizon thinking to challenge our existing investment models.

And while mindsets are shifting faster than I have seen in my career so far, most investment organisations are struggling to know how to adapt.

The so-called Race to Zero is an example, where big investors are the latest to join this global campaign to support a healthy, resilient, zero-carbon economy and build momentum around the shift to a decarbonized economy ahead of COP26.

These asset owners and asset managers are doing so largely to align with nationally determined contributions from governments responding to the Paris Agreement. These net-zero-transition commitments require significant and transformational pivots by investment organisations. But a number of both asset owners and asset managers such as BTPS, HESTA, PGGM, AXA, Generation IM and Robeco are part of a growing band that have heeded the call using focused investor groups like Net-Zero Asset Owner Alliance and Net Zero Asset Managers initiative.

In the short term this ratchetted pressure will support low carbon transitions, but the game-changer will come when institutional investing morphs into three-dimensional (3D) investment frameworks and mandates, that integrate impact with risk and return.

Traditionally impact, within the ESG approach, was linked to better investment outcomes. Where investors aim for the financial benefits of tilts into the ‘good’ companies while society and the planet get only difficult-to-define, second-order gains. This approach to impact gives end investors some reassurance that what they hold is better than the alternative and may be making a small societal contribution but probably won’t change the world.

In the context of increasing ESG ambition, this approach looks ‘lite’ compared to emerging ‘full’ impact strategies which intentionally target positive societal and environmental effects with the associated measurement to demonstrate the additional real-world effects. This approach is referred to as the universal-investor strategy and can be traced back to big asset owners like GPIF. These highly innovative strategies emphasise building better beta through active ownership and engagement as much as allocation strategies to achieve the real-world impacts without sacrificing risk-adjusted returns.

So how will this strategic transition be different to the last? This time the scale advantages are bigger (with more beta emphasis over alpha) so the emergence of 20-25 ‘truly sustainable firms’ and a similar number of asset owners that are quite dominant in their universal-investor strategies seems more likely.

This is premised on three-dimensional thinking and mandates becoming a source of growth for the industry, led by retail and wealth, with a narrower base in institutional broadening out with trickle-down to other funds over time. The Race to Zero will accelerate take up of these mandates as will the smouldering platform for sustainability change, which is shifting mindsets all the time.

Which investment organisations will become the truly sustainable super firms of the future? I think it will favour organisations that are collaborative – with research relationships across wider fields (like climate change), data relationships, distribution relationships and index provider relationships (with index strategies embedding a bigger slice of the industry intellectual capital). It will certainly also favour those organisations that manage to evolve the highly imperfect ESG data sources into decision-useful forms via effective data governance and culture.

Similar to the globalisation transition of yesteryear, the sustainability transition will also depend on the excellence of organisations in their product innovation, research, talent and brand, and culture with these likely features:

  • 3D frameworks – strategies and mandates that convincingly balance risk, return and impact
  • Innovative research, thought leadership and effective engagement on ESG and impact
  • Leverage of talent and brand to connect and engage key stakeholders
  • Culture that rewards purpose and sustainability thinking

Where product innovation was the lead factor in the globalisation transition, the sustainability transition will depend most on organisational culture. We see it not only as the key catalyst to launch the sustainability transition, given its link to purpose, innovation, collaboration, resilience, integrity and transparency but also the most logical change lever for leadership to use. The quantum of change needed to become the truly sustainable firm is large, which is also why only the strong-cultured seem likely to make the transition successfully.

In a world looking for stronger leadership and from an industry striving for greater purpose the 3D investment framework is game-changing for the world, the investment industry, and each of us personally. At a time when we need silver linings here is one.

Roger Urwin is co-founder of the Thinking Ahead Institute

 

Interesting and varied investment opportunities are emerging in private credit

In private credit there is a renewed interest in entering into negotiations on new investments and getting deals done as markets re-open following a period of relative stability and reduced volatility in publicly-traded markets. This bodes well for the pipeline of private assets. But investors must also realise that while interesting and varied investment opportunities are emerging across the spectrum, selectivity remains key to operating in this new deal environment.

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For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. This guide reflects M&G’s present opinions reflecting current market conditions. They are subject to change without notice and involve a number of assumptions which may not prove valid. The distribution of this guide does not constitute an offer of, or solicitation for, a purchase or sale of any investment product or class of investment products, or to provide discretionary investment management services. These materials are not, and under no circumstances are to be construed as, an advertisement or a public offering of any securities or a solicitation of any offer to buy securities. It has been written for informational and educational purposes only and should not be considered as investment advice, a forecast or guarantee of future results, or as a recommendation of any security, strategy or investment product. Reference in this document to individual companies is included solely for the purpose of illustration and should not be construed as a recommendation to buy or sell the same. Information is derived from proprietary and non-proprietary sources which have not been independently verified for accuracy or completeness. While M&G Investments believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions which may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. All forms of investments carry risks. Such investments may not be suitable for everyone. United States: M&G Investment Management Limited is registered as an investment adviser with the Securities and Exchange Commission of the United States of America under US laws, which differ from UK and FCA laws. Canada: upon receipt of these materials, each Canadian recipient will be deemed to have represented to M&G Investment Management Limited, that the investor is a ‘permitted client’ as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Australia: M&G Investment Management Limited (MAGIM) and M&G Alternatives Investment Management Limited (MAGAIM) have received notification from the Australian Securities & Investments Commission that they can rely on the ASIC Class Order [CO 03/1099] exemption and are therefore permitted to market their investment strategies (including the offering and provision of discretionary investment management services) to wholesale clients in Australia without the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth). MAGIM and MAGAIM are authorised and regulated by the Financial Conduct Authority under laws of the United Kingdom, which differ from Australian laws. Singapore: For Institutional Investors and Accredited Investors only. In Singapore, this financial promotion is issued by M&G Real Estate Asia Pte. Ltd. (Co. Reg. No. 200610218G) and/or M&G Investments (Singapore) Pte. Ltd. (Co. Reg. No. 201131425R), both regulated by the Monetary Authority of Singapore. Hong Kong: For Professional Investors only. In Hong Kong, this financial promotion is issued by M&G Investments (Hong Kong) Limited. Office: Unit 1002, LHT Tower, 31 Queen’s Road Central, Hong Kong. South Korea: For Qualified Professional Investors. China: on a cross-border basis only. Japan: M&G Investments Japan Co., Ltd., Investment Management Business Operator, Investment Advisory and Agency Business Operator, Type II Financial Instruments Business Operator, Director-General of the Kanto Local Finance Bureau (Kinsho) No. 2942, Membership to Associations: Japan Investment Advisers Association, Type II Financial Instruments Firms Association. This document is provided to you for the purpose of providing information with respect to investment management by Company’s offshore group affiliates and neither provided for the purpose of solicitation of any securities nor intended for such solicitation of any securities. Pursuant to such the registrations above, the Company may: (1) provide agency and intermediary services for clients to enter into a discretionary investment management agreement or investment advisory agreement with any of the Offshore Group Affiliates; (2) directly enter into a discretionary investment management agreement with clients; or (3) solicit clients for investment into offshore collective investment scheme(s) managed by the Offshore Group Affiliate. Please refer to materials separately provided to you for specific risks and any fees relating to the discretionary investment management agreement and the investment into the offshore collective investment scheme(s). The Company will not charge any fees to clients with respect to ‘(1) and ‘(3) above. M&G Investments is a direct subsidiary of M&G plc, a company incorporated in the United Kingdom. M&G plc and its affiliated companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential Plc, an international group incorporated in the United Kingdom. This financial promotion is issued by M&G International Investments S.A. in the EU and M&G Investment Management Limited elsewhere (unless otherwise stated). The registered office of M&G International Investments S.A. is 16, boulevard Royal, L-2449, Luxembourg. M&G Investment Management Limited is registered in England and Wales under number 936683, registered office 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority. M&G Real Estate Limited is registered in England and Wales under number 3852763 and is not authorised or regulated by the Financial Conduct Authority. M&G Real Estate Limited forms part of the M&G Group of companies.