Principal Financial Group®: Our Approach to Sustainable Asset Ownership
Originally published in Principal Financial Group 2024 Sustainability Report
Our approach to sustainable asset ownership
As an asset owner through the general account of Principal Life Insurance Company®, sustainability considerations form an important cornerstone of our investments.
Our approach
We’ve incorporated sustainability factors into our investment process without a selection or rejection bias stemming purely from sustainability factors. Considerations of sustainability factors also feed into the analytical frameworks used by our investment teams.
Our fixed income analysts score investments on ESG metrics while our real estate analysts include climate change and emission considerations in their analysis when evaluating deals. We analyze metrics while underwriting new investments, and target continuous improvement in our portfolio’s sustainability metrics. Improved data quality will enable better measurement of sustainability metrics of our portfolio in coming years.
Our portfolio management teams engage with the companies we invest in to encourage responsible sustainability practices aligned with our investment thesis for the company. We also encourage companies to disclose relevant and material metrics through public reporting and describe how these considerations inform the company’s overall business activities. Sustainability factors are considered as an important risk factor in the investment decisions with approval from the Principal Life Insurance investment committee. This includes consideration and management of sustainability risks. These types of engagement, we believe, help encourage greater transparency, which allows us to evaluate paths toward more sustainable portfolios.
Our actions and performance in 2024
During 2023, we established specific sustainability guidelines that apply to our holdings in corporate bonds, commercial mortgage loans, and private real estate equity.
These guidelines lay out targets on a variety of metrics, including internal scoring and scores available from external sources. This reaffirms our belief that sustainable investing is an important component of our goals to optimize returns relative to risks.
We’re pleased to report that we met or exceeded the goals laid out in our sustainability guidelines during the year 2024.
We also report that 62% of the assets managed for the general account by investment managers utilized ESG integration at the end of 2024.
During the year, we invested about $250 million in assets that we believe meet the criteria for inclusion in our sustainable bond portfolio of collateral, based on our Sustainable Financing Framework. Investments made in 2024 included low income housing projects, construction of additional homeless shelters to serve those in need, solar energy projects and facilities to support the production and integration of energy storage, and battery technology. To date, we’ve invested $1.4 billion into assets that we believe meet the criteria.
Read more about our: Sustainability Bond and Sustainable Financing Framework
To learn more, read the Principal Financial Group 2024 Sustainability Report.
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Company®. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392.
