01 Our vision of 02 Sustainable 03 Active 04 Strengthening sustainability 05 Appendices sustainability investing stewardship in our operations 03.2 How we engage Principle 7 9 03.2.2 Emerging ESG outcomes in a speci昀椀c sovereign. We believe that EM sovereign In 2023, our ESG-related contacts with EM market sovereigns Over time, we have found that the EM engagement must adopt a long-term sovereign delegations included country Our Emerging Markets (EM) Fixed Income ESG framework helps us engage in more approach. Raising issues and monitoring visits to Central and Latin America, where team follows a speci昀椀c engagement tailored and deeper discussions with change or, at a minimum, establishing a we travelled to Guatemala, Panama, approach that uses an integrated the EM sovereigns in which we invest. rapport over ESG issues with sovereigns Costa Rica and El Salvador, and held calls risk factor modelling framework to Centring these discussions around reliable are worthwhile endeavours and in line with Uruguay and Jamaica. In the Middle assess non-昀椀nancial risks that may public data from reputable institutions with our 昀椀duciary duty towards our clients. East, we travelled to Saudi Arabia, Dubai, impair counterparty creditworthiness. helps us to conduct more meaningful For example, in areas such as 昀椀scal and Sharjah, Oman, Bahrain and Kuwait. Engagement with EM sovereigns is a key and objective engagement discussions. debt transparency, we often engage with We also held London-based roadshows and pillar of our investment process. Our EM In emerging markets, these discussions 昀椀nance ministries to better assess the virtual meetings with 昀椀nance ministries, debt Fixed Income (EMFI) investment process can otherwise be fraught with political 昀椀scal balance risks. management o昀케ces and central banks. fully integrates ESG considerations and economic uncertainties and lack of as set out in our EM ESG sovereign data access. It also allows us to raise ESG framework. This uses 20 publicly available issues that our clients care about and to Case study: Meeting with Brazil’s Sustainable Government team indicators across the three E, S and G clarify the standards that we consider essential for investing in a certain issuer In September 2023, we hosted Brazil’s government, since the Lula administration pillars from a variety of international in our sustainability-focused portfolios. Sustainable Government team. The Brazilian took o昀케ce. The target is zero illegal institutions and think tanks, including Finally, engagement also helps us, as team presented an ambitious transformation deforestation by the end of the decade. the World Development Indicators, investors, to gain insight into both the plan towards higher ESG standards Key measures to achieve this include World Resources Institute, United Nations, mechanics and the incentives systems at following the election of President Lula da 昀椀ning corporations that carry out illegal UNESCO, World Bank, Freedom House play in speci昀椀c sovereign policy areas. Silva. Its six pillars are sustainable 昀椀nance, activities, destroying equipment used and Transparency International, to We 昀椀nd that a collective and long-term research and development, bioeconomy, for deforestation and increasing the quantitively assess EM sovereigns. This is approach to EM sovereign engagement energy transition, circular economy and number of law enforcement personnel. complemented by qualitative analysis. is both important and rewarding. This has adaptation. Delegates also discussed the The government is also working on an Our EM ESG framework is public, with been our second year as a member of creation of a carbon-regulated market bill, agenda to improve living conditions updates periodically shared on our the Emerging Markets Investors Alliance which is expected to be approved in 2024. for indigenous populations who live in website. It is maintained and updated (EMIA), a pro-bono industry association During a discussion about Amazonian the Amazon. In November 2023, Brazil every six months by our Sustainability that gathers EM investors, NGOs and deforestation, the Brazilian launched its 昀椀rst sustainability-linked Methodologies & Analytics (SMA) team. think tanks to advocate for better ESG representatives stated that illegal bond. AllianzGI took part in the initial The EMFI team meets regularly with outcomes in the EM sovereign and deforestation had been reduced by bond tender. sovereign issuers and raises ESG corporate issuers that we invest in. more than 50%, relative to the previous topics for engagement, which helps us to understand the factors driving Allianz Global Investors Sustainability and Stewardship Report 2023 44