01 Introduction and strategy 02 Measuring and managing sustainability 03 Climate change related disclosure 04 Strengthening our foundation 05 Our universal principles 02.1 Sustainability in insurance 02.1.3 Climate change and decarbonization Through our insurance business, we anticipate climate risks and protect and care for people vulnerable to climate change. We also target our insurance solutions and expertise to support the transition to a low-carbon economy. Our Climate Change Strategy is focused on providing insurance solutions to help customers respond to a changing climate and facilitate the development of the low- carbon economy with net -zero emissions in 2050. See section 01.5. Managing climate risks The future impact of climate change in insurance will depend on the ability of stakeholders to address the crisis. If emissions are reduced swiftly enough and warming can be limited, the resulting risk might be kept at an affordable level for the customers. If climate-related risks like extreme weather events become more severe, the public sector and the insured may need to take more risk. This could be in the form of investment in higher protection standards such as flood defenses or higher risk retentions for the clients. The warmer it gets, the more likely challenges for insurability arise. This will burden clients and societies, especially in highly exposed regions such as low-lying coastal areas. With extreme weather ev ents b ecoming more common and intense, we research the already materialized and future impacts of climate change to provide the best possible risk advic e to so ciety and customers. The Allianz Climate Change Risk Solution (ACCRiS) provides inhouse climate risk scores and metrics. These hazard, risk and financial impact scores help to assess physical climate change risk in in vestment and insurance decisions. Under ACCRiS 2.0, two additional scenarios were implemented in 2022: the IPCC’s Representative Concentration Pathway (RCP) 2.6 and RCP 6.0. Also, ACCRiS has functionality to estimate any degree-based scenarios e.g. RCPs, Shared Socioeconomic Pathways (SSPs), The Network of Central Banks and Supervisors for Greening the Financial System (NGFS), etc. Managing the challenge of modelling climate risks requires constant and open dialogue to foster understanding of the issues and better resilience to climate risks. In December 2022, Allianz hosted the annual Climate Risk A ward. Launched in 2017, the award acknowledges and rewards scientists at the beginning of their academic career (PhD candidates and Post-Doctoral researchers), whose works shed light on the nexus b etween climate change and extreme weather events. The winner of the 2022 Award was Emily Vosper from the University of Bristol who stood out with her innovative research on the use of Artificial Intelligence to downsc ale tropical cyclone models. Allianz aims to support science working on innovative approaches to address climate risks. Find out more about the Allianz Climate Risk Research Award online here. Development of oil and gas and coal restrictions In 2022, we introduced a targeted restriction for the oil and gas sector. The guideline applies to proprietary investments as well as P&C insurance. As of 2023, direct investments in and single-site/standalone insurance of selected oil and gas projects are prohibited. This includes new oil and gas fields as well as oil pipelines. Also restricted are projects in the Arctic and Antarctic regions, in the ultra-deep sea, as well as those related to extra- heavy oil and oil sands. We expect for the companies with the largest hydrocarbon production (i.e., above 60 million b arr els of oil equivalent production in 2020) to make a thorough commitment to net-zero greenhouse gas emissions by 2050 across their full value chain by January 2025. We will lower our threshold for companies deriving revenue from oil sands from 20 percent to 10 percent. For further details on our fossil-fuel approach, please see section 03.2. We continue to phase out coal in line with our coal restrictions, which have the same principles across insurance and proprietary investments. In 2022, we continued our phase-out of insuring c oal-based business models in line with 1.5°C pathways with low/no overshoot. In 2021, Allianz released an update of its policy on coal-based business models which defined even more ambitious thresholds from 1st of January 2023 and a clear pathway to further r educe thresholds in the future to fully phase out coal by 2040 at the latest. For more information, please see section 03.2. Please also see our public Statement on Coal-Based Business Models. A llianz Gr oup Sustainability R ep or t 2022 32