01 03.1 Our engagement approach Principles 7 9 Introduction 02 Sustainable investing As an active investment manager, Thematic approach: We also lead themed engagement How we go about engagement 03 projects. These are either linked to our three strategic Active stewardship we are committed to driving positive sustainability themes – climate change, planetary We use a broad range of engagement tools including 03.1 Our engagement approach change and believe that constructive boundaries and inclusive capitalism – or related to one-on-one or group meetings with chairpersons, board 03.2 Engagement outcomes engagement dialogue with investee governance themes within specific markets or more members, senior management, company secretaries, by theme broadly. We identify thematic engagement projects heads of specific company functions, as well as 03.3 Collaborative engagements companies is essential. based on topics that we deem to be important for our written correspondence. 03.4 E scalation where initial At the start of 2021, our approach was primarily based portfolio investments, for example energy transition or We believe it is important to differentiate between engagement is not enough on bottom-up identification of engagement targets, climate change. We prioritise them based on the size the normal research and monitoring meetings that we 03.5 I nfluencing companies through largely focusing on portfolio priorities and material of our holdings per market or portfolio, and also factor undertake as an active manager, and instances where proxy voting risks. Historically this approach was taken to ensure the in the priorities of our clients. We observe an increasing we actively seek to make an impact. The latter meetings 03.6 Conflicts of interest most meaningful integration of material risk factors in number of requests from clients for engagement, are, by default, classified and reported as engagement 03.7 Industry engagement our investment decision-making. Additionally, several in particular on topics such as climate and energy meetings. We expect that our overall stewardship and and commitments themes relating to governance and sustainability such transition. This has prompted us to make these topics influence is much broader than reflected in the numbers 04 as engaging with oil and gas majors (see page 43). a priority of our engagement programme in 2021 below, considering our work in industry bodies or AllianzGI as a sustainable business were identified as priorities for engagement. As the and beyond. conveying our stewardship stance to larger audiences year progressed, we transitioned our strategy towards We believe this two-pronged approach will allow us at industry events. 05 a greater emphasis on thematic analysis aligned with to achieve better balance between ESG risk reductions Through our Climate Engagement with Outcome Appendix our three-pillar approach focused on climate change, in our portfolios and leading clients and companies on (CEWO) programme (see page 32), we systematically planetary boundaries and inclusive capitalism (see an inclusive transition pathway to a sustainable future. reach out to target companies in writing to discuss section 03.2). This allows us to scale up the integration The approach also improves our ability to set out the scope and progress of their climate strategy. whilst ensuring systematic coherence across portfolios. engagement objectives clearly at the outset. In 2021, This programme is intended to achieve an ongoing The resulting engagements rest clearly on we developed a new engagement template to support evaluation of progress via questionnaires. In many two approaches: us with this change of approach and improve the efficiency cases (see figures on following page) these letters Risk-based approach: Our risk-based approach of recording engagements. The template was rolled were followed up by engagement conversations. focuses on the material ESG risks that we identify. out via a series of workshops within sustainability and To make engagement meetings impactful and productive, Targeting is closely related to the size of our exposure, investment teams. we frequently include relevant investment team members whether per market, fund or considering total value of While our preference is to engage investee companies in addition to members of the Sustainability Research and investment. The focus of engagements is determined confidentially, we are prepared to escalate engagement Stewardship team at AllianzGI. This means the company by considerations such as significant votes against activities publicly if we conclude that the confidential receives insights from all critical parts of our investment company management at past general meetings approach has gone as far as it can without delivering platform. Our investment views are influenced by the and sustainability issues that we identify as below progress, and that our engagement objective would be outcomes of engagements and are linked to the proxy market practice. Engagements can also be triggered best served by escalation see page 50. voting process, forming a consistent stewardship approach. by controversies connected to sustainability or All engagement results are shared on our collaborative governance. Engagement activities typically relate research and investment platform and thus can be to an investee company’s strategy, operational accessed globally. or financial performance, capital management, corporate governance and ESG risks and impacts.