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Factbook: Sustainability and Stewardship Report

Shaping sustainable pathways towards change Sustainability and Stewardship Report 2022: Factbook

About Allianz Global Investors Allianz Global Investors (AllianzGI) is an active investment management firm and part of Allianz Group. 1 With EUR 506 billion of assets invested on behalf of institutions Find out more and individuals worldwide, You can read much more in our full our ambition is to shape pathways Sustainability and Stewardship Report 2022, including insights from our towards change that help to leaders, details about our approach, secure the future for our clients, and information on the performance of our our business and society. sustainable investing, active stewardship Alongside growth in sustainable investing, and corporate sustainability activities. investors and other stakeholders are seeking Our Sustainability and Stewardship greater transparency over investment approaches, Report is part of our commitment to performance and – increasingly – impact. increase transparency and aligns with the We are committed to supporting this journey. requirements of the UK Stewardship Code. This factbook is distilled from our Sustainability AllianzGI Sustainability and and Stewardship Report 2022. It focuses on some Stewardship Report 2022 of the key questions we are often asked about our sustainability and stewardship approach. AllianzGI website Sustainability Now – our new blog dedicated to sustainable investing 1 Data as at 31 December 2022.

EUR 506bn 1 of assets invested on behalf of institutions and individuals worldwide

Our ambition is to shape pathways towards change that help to secure the future for our clients, our business and society.”

Contents You asked… 01 What does sustainable 04 How are you using data to investing mean to AllianzGI? bring greater transparency page 04 to investors? page 11 02 How did the events of 2022 05 How do you embed active impact sustainable investing? stewardship in your approach? page 07 page 12 03 How has AllianzGI 06 Beyond investments, how are evolved its sustainable you embedding sustainability investing approach? across the firm? page 08 page 15 …we answered

Sustainable investing 01 What does sustainable investing mean to AllianzGI? At AllianzGI, we are driven by a simple goal: to generate value for clients every step of the way. As an active and sustainable investor, we aim to capture inclusive, sustainable growth to support the growth and preservation of clients’ assets, while also contributing to real-world change. We know asset owners are at different points on the sustainable investing journey, and our Our strategic shift from ESG to role is to facilitate progress through partnership sustainability to impact by 2030 is guided and collaboration. As an active steward of by three focus areas: capital, we seek to inform – not prescribe – the environmental, social and governance • Climate change: Analysing the physical (ESG), sustainability and climate profile of threats of climate change, identifying which investee companies. sectors are impacted most and engaging with companies to set transition pathways. This focus will guide investors on the journey • Planetary boundaries: Looking beyond from an ESG risk focus towards sustainability climate change alone to identify how –where purposeful solutions support capital can be deployed to support outcomes such as net zero – and, ultimately, biodiversity, the circular economy and the to generating meaningful impact. This is what efficient use of land and water resources. we mean by shaping sustainable pathways • Inclusive capitalism: Recognising that as towards change. resources grow more limited, the threat of distributing them unequally increases, and therefore focusing on social factors that help to maintain social cohesion and underpin economic growth. For more detail on our three strategic focus areas, see our Sustainability and Stewardship Report 2022.

Our investment offering spans investment solutions with differing levels of sustainability incorporation: ESG risk-focused EUR 117bn These strategies incorporate material ESG risk considerations into investment analysis without constraining the investment universe. This category includes our integrated ESG 2 investment approach. Sustainability- focused EUR 126bn These strategies have specific sustainability objectives and values, and apply sustainable minimum exclusion criteria. This category includes our sustainable and responsible investment (SRI) best-in-class, climate engagement with outcome and key performance indicator (KPI) based investment approaches. Impact-focused EUR 9bn These strategies aim to achieve measurable sustainable outcomes on specific issues, such as renewable energy and the priorities set out in the UN Sustainable Development Goals (SDGs). This category includes our private market impact and SDG-aligned investment approaches. 2 The ESG risk-focused category (integrated ESG investment approach) is not considered sustainable according to EU Sustainable Finance Disclosure Regulation.

Sustainable investing is increasingly crucial to the resilience of asset owners, investors, the wider industry, and society as a whole – especially as the impacts of climate change are felt.”

Events of 2022 02 How did the events of 2022 impact sustainable investing? Our sustainable investing approach is necessarily guided by the shifting global context. In 2022, the war in Ukraine came with a terrible human cost. As well as sparking wider geopolitical instability, it had far-reaching impacts on energy security, transition and affordability. EUR 506bn3 Higher inflation, rising interest rates, supply As interest in sustainable investment strategies chain issues and challenging equity and bond continued to grow, we saw retail and managed across all markets were other hallmarks of the year. institutional investors seeking sustainability- asset classes in public The effects of climate change materialised with driven considerations within the investment and private markets floods in Pakistan, South Asia, Malaysia and process. Their desire for outcome-oriented West Africa, and heatwaves and drought in solutions is driving demand for increased 5 Europe, China and Africa. data and insights. new sustainable Against this backdrop, we increased our We expect market volatility to continue in 2023, funds launched focus on the interconnected issues of the presenting both challenges and opportunities. 4 climate crisis and biodiversity. The topic of Our focus will continue to be on addressing the in 2022 renewable energy remained central to our diversity of client needs and driving sustainable themes of climate change and inclusive growth through investing. 177 capitalism, since it is linked to biodiversity sustainable loss, food supply, water scarcity and inequality. Read our interview with AllianzGI’s Global products offered Head of Investments Deborah Zurkow and Through our ongoing series of thematic Global Head of Sustainable and Impact at the end of 2022 research papers we communicate our experts’ Investing Matt Christensen, where they discuss sustainable investing highlights from 2022 consideration of investments in the respective and how they see the landscape developing 31 themes and seek to guide clients. in future. mutual funds converted to a sustainable investing approach 3 Data as at 31 December 2022. 4 These figures relate to EU-domiciled funds that are classified as either Article 8 or Article 9 under SFDR.

Evolving our approach 03 How has AllianzGI evolved its sustainable investing approach? If 2021 set the scene, 2022 was about building momentum and developing the data architecture to support our journey. Our research capability is structured around sector, thematic and company research. We enhanced our sector frameworks, which show how different industry sectors screen across multiple sustainability factors. Each sector framework incorporates our proprietary sustainability materiality matrix. This identifies the 16 most material sustainability sub-factors, forming a core element of our proprietary rating system: Four sustainability factors 16 sub-factors Environment Climate change Natural resources Pollution/waste management Green opportunities across the value chain Social Health and safety Working conditions and environment Human capital management/development Labour relations Corporate governance Corporate/sustainability leadership and disclosure Internal controls Executive remuneration Shareholders Business behaviour Business ethics Customers Suppliers Communities Source: AllianzGI’s sustainability materiality matrix.

We have moved beyond ESG to think holistically about sustainability across We also developed separate absolute and investment portfolios. Our relative company ESG scores to provide goal is to show the real-world additional perspectives for investment decision- impact of our investments.” making. Furthermore, we supplemented these with detailed company analysis commentary which now includes human rights – a key topic within our inclusive capitalism theme. To enhance climate data capture, we invested in data monitoring to support decarbonisation pathways and net zero alignment. We also expanded the key performance indicators (KPIs) used for the planetary boundaries and inclusive capitalism topics in line with our work on climate change KPIs. 2023 focus Looking ahead, 2023 will see further implementation of our conviction-led approach, including guiding clients on the risks and opportunities of key sustainability themes. We will increase the scalability of our solutions to seek greater real-world impact and continue to strengthen firm-wide knowledge and capabilities for sustainable investing, for example through mandatory firm-wide sustainability training. For more detail on sustainable investing, please see section 02 of our Sustainability and Stewardship Report 2022.

ESG data is the foundation of every sustainability-informed investment decision we make. It is fundamental to our aim of delivering financial alpha plus sustainable impact, without compromising on returns.”

Using data for greater transparency 04 How are you using data to bring greater transparency to investors? Robust data provision is critical to our ability to combine sustainability and financial alpha in portfolios. Our approach is built on a proprietary best-in-class model and in-depth research. Active stewardship and ESG risk assessment ensure that our portfolio managers have full transparency on E, S and G scores, as well as Principal Adverse Impacts such as CO2 emissions and water use. 100+ Our long-term strategy is to use proprietary Putting collaboration at the heart of our research as the primary driver of our investment research approach sustainability analytics decision-making. We will use emerging artificial h c r a e s e R available through our intelligence (AI) technologies and data sources y t i l i b insights engine SusIE a to expand our smart analytics and real-time n i a t s signals relating to company behaviours. u 10,000+ S Launched in 2022, our new sustainability companies rated insights engine tool (SusIE) uses state-of- S by proprietary the-art technology to facilitate access to te sustainability w methodology ESG data for all our investment experts, Power of dra product specialists, risk management and collaboration hs other stakeholders. It transforms data Su pi 178 from more than 10 third-party vendors into stain countries rated standardised datasets using cloud data abili by proprietary storage. SusIE is a key enabler of our active ty Me sustainability investment decisions on sustainability thod methodology across all asset classes, in a move towards ology an d A ytics more quantitative ESG scoring and nal 250 sustainability input. Deep dives on thematics Identify high-risk issues sustainability analyses See section 02.3 of our Sustainability and Elevate expertise to next level performed on Stewardship Report 2022 for a fuller description of companies worldwide our new sustainability insights engine tool (SusIE).

Active stewardship 05 How do you embed active stewardship in your approach? As an active investment manager, we see constructive engagement dialogue with investee companies as essential for creating sustainable pathways towards change. Our global approach to active stewardship In 2022, we continued to refine a thematic incorporates a detailed proxy voting policy to and collaborative engagement approach support our goal of voting at the shareholder aligned to our three focus areas (see page 4) meetings of all the companies in which we plus governance. We targeted additional invest, where we have the authority to high-emitting sectors to expand our exercise voting rights. climate engagement. Substantial expansion of our stewardship activities in 2022 Engagements 299 438 Companies engaged 238 355 Stewardship outcomes5 28 38 Company dialogue on We engaged with sustainale inestment sharerincipal 37 derse mpacts E­ soereigns 30 7 engagement 355 2021 2022 companies in 2022. 5 Some engagement activities span multiple years. 6 Engagements began in 2022 per regulatory requirements. 7 Not reported in 2021.

Active stewardship at AllianzGI means influencing the future of investee companies. We do this through a robust engagement process. This complements our proxy voting strategy to address some of the most important long-term issues that companies face.” We also added data clarification requests to our interaction with companies in line with 2022 highlights regulatory requirements. These comprised dialogues on sustainable investment share8 10,200 and Principal Adverse Impact/Do No Significant 9 shareholder meetings participated in during 2022 Harm in the context of EU sustainability regulation. We also refined our voting approach to elevate “Say on Climate”, ethnic diversity on Representing 94% boards, and sustainability-related remuneration. of all votable meetings We focused our proxy voting on the election of board directors, executive compensation, We opposed 22% capital-related authorities and the appointment of external auditors. Other voting topics of all management resolutions included climate change, workforce diversity, political donations and lobbying activities. At 69% See section 03 of our Sustainability and of meetings globally we voted against, withheld or Stewardship Report 2022 for specific abstained from at least one agenda item examples of our engagement and voting. 8 The share of a fund that is considered sustainable according to the EU Sustainable Finance Disclosure Regulations. 9 Principal Adverse Impacts is part of the EU Sustainable Finance Disclosure Regulation requiring market participants to take into consideration impacts of investment decisions that result in negative effects on sustainability factors. Do No Significant Harm applies to funds classified under EU Sustainable Finance Disclosure Regulations Article 8 and Article 9 categories in relation to their funds’ stated environmental and/or social objectives.

Our management and colleagues are committed to living up to high ethical standards.”

Corporate sustainability 06 Beyond investments, how are you embedding sustainability across the firm? We are elevating the importance of corporate sustainability as a driver of sustainable growth across our global operations. In 2022, we established the role of Corporate Sustainability Officer (CSO) to drive a holistic approach, shape strategy and advise the Executive Committee (ExCo) and business We apply scrutiny and units. Business units are responsible for conduct due diligence implementing sustainability-related business practices with the help of the CSO and local across our organisation sustainability leads. Our management and and processes to support colleagues are committed to living up to the sustainable, long-term high ethical standards, and compliance is the foundation of our responsible approach. growth of our clients’ assets.” Our three-year sustainability roadmap starts with building strong foundations, which enable delivery of our long-term ambitions. 2023 2024 2025 Prioritising the development Expanding our Delivering against our of the corporate sustainability influence and long-term corporate function and further impact by forging sustainability goals. strengthening governance. external partnerships.

Corporate sustainability 06 Beyond investments, how are you embedding sustainability in the firm? Living our sustainability commitments – 2022 highlights We will report annually on progress against our long-term corporate sustainability goals. Here are some of the highlights from 2022. We foster a working environment where We care for the health and wellbeing people, performance and clients matter, of our employees and support them to and we take a strong stance on diversity, develop skills and knowledge that help equity and inclusion. them shape sustainable pathways. 50% women More than on the Executive Committee since 2020 EUR 2.7m 32% invested in employee development 10 83% female managers in 2022 favourable score for the employee survey 66 question: “Our company offers flexible nationalities in our workforce work opportunities” For more information on our corporate Find out more in our Diversity, Equity and sustainability commitments, please see Inclusion Report 2022. section 04 of our Sustainability and Stewardship Report 2022. 10 This refers to the first level of leadership where managers have at least one direct report.

Our licence to operate is built on the trust that our clients, employees and others have in our performance and integrity. 100% of employees participated in Global Compliance Training covering Anti- Money Laundering, Anti-Fraud and Economic Sanctions. We are committed to having a positive We aim to be a role model in delivering our own targets social impact and contributing to delivery on climate change and environmental impact. of the UN SDGs. 59% 60% Over 700 reduction in GHG emissions per reduction of travel emissions corporate volunteering hours employee in 2022 against the per employee against our recorded in 2022 2019 baseline baseline emissions in 2019 2023 focus: New corporate citizenship 100% 45% programme to be rolled out in 2023 focused on SDG 8 – decent work and of the electricity used by reduction in waste generated economic growth, SDG 13 – climate AllianzGI in its offices and per employee against the action, and SDG 17 – partnerships for local data centres comes from 2019 baseline the goals renewable, low-carbon sources

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Learn how we’re shaping sustainable pathways towards change. Sustainability and Stewardship Report 2022. www.allianzgi.com/sustainability. AllianzGI on LinkedIn. Sustainability Now – our new blog dedicated to sustainable investing. Allianz Global Investors Sustainability and Impact Team 3 Boulevard des Italiens 75002 Paris France