01 03.2 Engagement outcomes by theme continued Principles 7 9 Introduction 02 Sustainable investing engagement to be an important step to professionalise 5. Engagement with a UK bank on pay transparency 1. E ngaging with a food products company to 03 the board. We will continue our dialogue with the During several years’ engagement with a UK bank we develop its sustainability strategy Active stewardship chairman to point to additional improvements in 03.1 Our engagement approach highlighted concerns around the transparency and Following an engagement meeting with a food governance standards. disclosure of its remuneration report. We had previously products company on its business model and strategy, 03.2 Engagement outcomes noted the complexity of the balanced scorecard the company requested our guidance on formulating by theme 3. Engagement with US technology company – used for the annual bonus. Our understanding was 03.3 Collaborative engagements shareholder rights its sustainability strategy. We advised the company to 03.4 Escalation where initial This company reached out to us for input on its response that this historic complexity was largely driven by map its sustainability footprint using the Sustainability engagement is not enough to a shareholder proposal that called for adoption of regulatory requirements, which need to be reflected Accounting Standards Board (SASB) standards to 03.5 Influencing companies through the right for shareholders to act by written consent. in addition to internal strategic objectives. Following capture operational performance and to link its proxy voting Given the well-defined scope of the consultation reach further consultation, we saw material improvements handprint (the impact of its products and services) to 03.6 Conflicts of interest and our publicly provided guidance, we replied in in the 2021 remuneration report, aligned with our specific SDGs. We also encouraged the company to set 03.7 Industry engagement writing to set out our position. The outcome was that feedback. The bank was able to simplify and enhance a climate target for 2040. In addition, we highlighted the and commitments management did not submit a voting recommendation remuneration disclosures while reducing scorecard importance of reporting these efforts. We will follow up and, with almost 80% of shareholders supporting this metrics from 15 to seven. We think this simplicity greatly closely with the company on any developments. 04 topic at the AGM, we expect the company to implement enhances investors’ ability to scrutinise pay outcomes 2. E ncouraging disclosure using English AllianzGI as a sustainable business and provides a clearer focus for management. this resolution. language in Asia 05 4. E ngagement with a chemicals company on Engagement topic: Sustainability strategy A common issue for Asia-based companies is lack of Appendix long-term incentive targets and transparency public disclosure in English, especially on sustainability The company consulted us on proposed remuneration Integrating sustainability into their strategies will practices. While companies may have made progress changes as part of its shareholder engagement help enhance companies’ value and uncover new towards being more sustainable, global investors programme. As we are supportive of the long-term business opportunities. We seek to understand and rating agencies can struggle to get updates in a oriented management team, we did not raise material companies’ strategies and how they integrate their timely way. This results in misinformed or out-of-date concerns around remuneration increases through sustainability efforts. disclosure that can undermine investment decision- adjusted CEO base salary and increased overall For companies at the early stage of integrating making. When our local research and sustainability variable opportunity. However, we suggested more sustainability, we advise them on adopting and teams come across such cases, they reach out to the diverse performance metrics, in particular the inclusion developing a sustainability strategy that comprises company and encourage it to publish its sustainability of a returns or cash flow metric. We also highlighted a material ESG matters and ambitious targets. reports in English. Investee companies in Asia generally stagnant earnings per share (EPS) target range and We encourage companies to improve their disclosure welcome our engagement as they often underestimate stated that we expected to see further stretch built into and report consistently on strategy and targets in line the negative impacts of a lack of English language the plan given the greater pay opportunity. In the latest with internationally accepted standards, and their disclosure. The majority of companies we have annual report, proposed changes to the remuneration progress in achieving them. engaged with have committed to improving their structure show a higher threshold and EPS target sustainability disclosure. range as well as the inclusion of return on average For example, we engaged with a Chinese company capital employed as a factor accounting for 20% of the that produces a detailed sustainability report in Chinese. long-term incentive plan. We welcome these positive We learned that the company has established an ESG changes, which are in line with our suggestions. strategy with a dedicated team. We encouraged them to report additionally in English to ensure international outreach and the company has committed to do so. We will follow up with the company in 2022.