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 Increasing the transparency of • The second binding element consists approach that adds another risk analysis SFDR Article 8 funds of one of our qualifying approaches dimension to existing investment Fund naming guidelines While SFDR is a key pillar of the EU for our sustainability-focused or impact- processes and can be applied to any At the end of 2023, the European Securities sustainable 昀椀nance agenda, there are focused product categories. asset class. and Markets Authority (ESMA) outlined diverging perceptions among asset See chart on page 33 on our The portfolio manager is free to either new guidelines for fund names using ESG managers and regulators as to what “two binding elements” approach. divest or continue to hold “risky ESG” or sustainability-related terms. The aim is triggers the classi昀椀cation of Article 8. We apply the two binding elements to our companies in a portfolio, if the expected to ensure that speci昀椀c minimum standards We seek to go beyond the minimum sustainability-focused and impact-focused return justi昀椀es the risk. Active stewardship are adhered to when using terms such as regulatory requirements for our Article funds. They ensure credible sustainability activities (dialogue with investee “sustainable” or “sustainability”; in particular, 8 classi昀椀ed product range as part of delivery, which we take seriously in our companies and proxy voting) may products require a speci昀椀c link to sustainable our commitment to o昀昀ering investors a role as a sustainability shaper. This also also be considered to mitigate risks. investments. While we have taken action high standard of sustainable investment means the materiality of our harmonised Our investment professionals managing to ensure our products are in line with the products. The investment strategies we approach is in line with regulatory these strategies have access to an supervisory brie昀椀ng, the terms “sustainable” classify as Article 8 that are distributed objectives, and allows measurability increasing depth and breadth of ESG or “sustainability” encompass a broad range to retail clients will generally have and reportability for a high level risk perspectives for investee companies of funds across the industry with various two binding elements: our sustainable of transparency. through SusIE to identify and o昀昀er degrees of ambition level. Ahead of the minimum exclusion policy and one of our opinions on possible idiosyncratic risks. introduction of these guidelines, we have sustainable investment approaches. 02.6.1 ESG risk-focused32 initiated a strategic project to review our Each binding element is measurable ESG in private markets fund names. Within our ESG risk-focused category, we ESG is an increasing factor in all of our and reportable, providing transparency o昀昀er strategies that apply the integrated clients’ decisions. In private markets, our and clarity to our clients. We believe this ESG investment approach.This integrates focus remains on further enhancing our approach reduces the gap between what material ESG risk considerations into ESG practices in this area. Our Private sustainable products can achieve and the mainstream investment analysis, without Markets teams have delivered ESG expectations of clients. constraining the investment universe, and frameworks that set out their approach • The first binding element enforces requires the portfolio manager to provide to integrating ESG, and they continue to exclusion criteria related to weapons, a rationale for holding companies that make use of the tools provided by the coal, international norms and standards have been 昀氀agged for possible material Sustainability team, including sector (including the UN Global Compact) E, S and G risks. It is viewed across the frameworks. We also supported industry and tobacco. industry as an enhanced risk management initiatives to improve ESG standards. 32 ESG risk-focused category (also known as the integrated ESG investment approach) is not considered sustainable according to EU Sustainable Finance Disclosure Regulation. Allianz Global Investors Sustainability and Stewardship Report 2023 32