Active stewardship 1. Engagement and proxy voting For publicly listed asset classes , we have launched a dedicated climate engagement approach for several funds that invest in listed securities, recognising the importance of climate change and the power of engagement to drive real- world impact. This approach focuses on engaging with companies to facilitate their climate transition to a pathway aligned with a 1.5 degree low-carbon economy. As a proxy for climate change impact, we identify the top absolute CO2 emitters per portfolio. To set realistic targets for each company, we analyse best practices per sector and assess the feasible progress that could be made going forward. This analytical framework provides a solid basis to define company-specific engagement targets. These are aligned within our listed equities and fixed income investment teams and documented on our global research and collaboration platform. Examples of engagement targets could be GHG emissions reduction targets or board-level remuneration targets linked to climate change. The engagements are performed centrally, tracked over time, and their outcomes are reported – all of which supports our investment and, potentially, divestment decisions. Ultimately, climate engagement targets can help to improve risk-adjusted returns by helping companies to adjust their business models for the future. Additionally, environmental and climate considerations are reflected in our proxy voting activities in respect of listed equity assets. Our voting records on climate-related shareholder resolutions demonstrate strong support for such resolutions, encouraging companies to pursue the transition to decarbonisation. For private market asset classes , we typically have direct access to the management of our investee companies. Our private market assets often play a significant role in the capital structure of investee companies, and this enables a level of engagement that may generate improvements in ESG practices, such as by encouraging them to implement climate transition/resilient measures. A considerable proportion of our private market assets under management are invested in real assets, such as infrastructure. By nature, real and infrastructure assets can have a significant impact (positive or negative) on climate transition. Using the EU Taxonomy as reference is helpful for quantifying the contribution of our real asset and infrastructure investments to climate change mitigation and adaptation. For example, we are invested in renewable power-generation assets, such as wind, solar and hydro plants, and assets that improve energy efficiency, such as portfolios of smart meters. It is our view that a power- generation asset fuelled (in part) by fossil fuels faces “stranded asset” risk if its operating life could be prematurely shortened due to regulatory carbon emissions caps, heavy taxation or an alternative climate-related penalty. Our firm-wide approach is that we believe there is an opportunity to enable the climate transition via engagement with the companies that use fossil fuels. Within private market asset classes, this can take the form of financing the capital expenditure to allow these companies to develop low-carbon technologies and rebalance their energy mix with some exposure to fossil fuels to meet the demand when a substitution option is not available. We also acknowledge the importance of evaluating a company in the context of its jurisdiction and the target impact of the investment – for instance, in emerging markets it is key to analyse the potential trade-off between providing basic electricity access to a certain population and the possibility that the source of such electricity results in some exposure to fossil fuels. We will continue our engagement with companies on climate-related issues and encourage them to increase transparency reporting on leading climate initiatives, such as through the TCFD and Science Based Targets (SBT). We believe this approach will also lead to improved quality of disclosures provided to our investors by positioning them to meet their climate ambition more precisely. We also support and participate in the Climate Action 100+ initiative, as well as collective engagements with The Investor Forum. 2. Industry collaboration As a part of our support for TCFD, we recognise the necessity for a broader change and alignment in the investment industry around climate risks and opportunities. We believe that this can bring several long-term benefits to our investors. These include more attention and efforts from investee companies due to more aligned climate expectations, more precise measurement through clear requirements on climate scenarios that meet investor needs, and more refined climate investment frameworks. We have been an active member of the Paris Aligned Investment Initiative, launched by the Institutional Investors Group on Climate Change (IIGCC) to bring together some of the world’s largest asset owners and asset managers for the development of a “Net Zero Investment Framework”. For a full list of our climate-related memberships, see Appendix. AllianzGI Climate Policy Statement 6