01 Our vision of 02 Sustainable 03 Active 04 Strengthening sustainability 05 Appendices sustainability investing stewardship in our operations 02.6 Sustainable investing categories Principle 4 7 33 The general philosophy and process of • Social: We review the extent of issuers’ KPI-based approach 02.6.2 Sustainability-focused Our sustainability-focused product applying the SRI Best-in-class approach workplace health and safety, dialogue Our KPI-based approach targets o昀昀ering aims to achieve 昀椀nancial returns are identical across listed asset classes with employees and relationships with measurable, monitored and reported for clients while following sustainability globally. Portfolios use our proprietary suppliers. We consider general social KPIs to track ESG results that are objectives and values. Strategies in this ESG ratings to identify outperformers policy when assessing sovereigns, with signi昀椀cant enough to drive sustainability category apply a dual-layer approach: in each industry with regards to a focus on topics such as healthcare within the investment process of a a set of sustainable minimum exclusions, ESG performance. Our proprietary and education. portfolio. This approach can quantify the plus one of the following approaches: sustainability rating methodology spans • Business behaviour: We assess the sustainability feature of a portfolio and the di昀昀erent asset classes and is based relationships between issuers and regularly report outcomes. It allows us Sustainable and Responsible on four pillars: their supply chains, customers and to choose between two objectives. First, Investing (SRI) Best-in-class • Corporate governance: We assess communities along with the impact of to outperform a reference investment Our SRI Best-in-class approach extends corporate issuers’ internal structure their products and services on society universe or benchmark, or a de昀椀ned mainstream fundamental research by and governance to improve risk and respect for market regulations and threshold on at least one environmental analysing 昀椀nancially material and non- management, analyse audit and control fair business practices. These criteria do or social KPI. And second, to achieve material ESG factors. “Best-in-class” is a term mechanisms to prevent abuse and not apply to sovereign bond issuers. an ongoing year-on-year improvement used where investors select from the remaining mitigate risks, and analyse shareholder Speci昀椀c processes are introduced to consider against a chosen environmental or investment universe those corporate issuers rights and anti-takeover measures. For asset class speci昀椀cities. For instance, a social KPI. that perform better within their sector sovereign bond issuers, we evaluate tailored process for certain 昀椀xed income After implementing a GHG intensity with respect to ESG aspects. The portfolio systems used to prevent and fight products assesses sovereign bond issuers KPI, we introduced a sustainable construction is geared towards a superior ESG corruption and government capacity based on a proprietary emerging-markets investment share KPI according to EU quality by applying sustainable minimum to introduce necessary reforms. ESG framework that screens out the SFDR. This requires that products exhibit exclusions (negative screening) and best- • Environment: We assess issuers’ direct bottom 10% of countries on the E, S and a certain and meaningful share of in-class considerations (positive screening) and indirect environmental impacts, G pillars. Multi Asset products can be split sustainable investments while limiting the using scores on the investment universe. risks, approach to environmental into two categories: sustainable advanced exposure to issuers that signi昀椀cantly harm These ESG screens guide security selection responsibility and development (where more than 70% of assets need to environmental and/or social objectives. towards companies with best-in-class or of environmental solutions. We be sustainable) and sustainable complete Our goal is to continuously expand the list improving ESG quality compared with their assess sovereigns’ ability to address (where more than 90% of assets need to of available KPIs. peers, while excluding companies linked to, environmental issues based on their be sustainable). See Section 01.5. for example, coal, tobacco, weapons and political and legal frameworks. controversies that may bring signi昀椀cant 昀椀nancial and/or reputational risks. 33 Note that “sustainability-focused” and “impact-focused” are Allianz GIobal Investors product categories. Reference to a fund being within them does not indicate that fund has a “Sustainability Focus” or “Sustainability Impact” label under the United Kingdom’s Sustainability Disclosure Requirements (SDR). Allianz Global Investors Sustainability and Stewardship Report 2023 34