01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principles 4 7 02.6.1 ESG risk-focused possible idiosyncratic risks. Looking ahead, 02.6.2 Sustainability-focused Within our ESG risk-focused category, we continue to review enhanced Fund naming guidelines Our sustainability-focused product we offer strategies that apply the controversy tools for integrated ESG. In 2022, the European Securities and offering aims to achieve financial returns Integrated ESG investment approach.3 Markets Authority (ESMA) issued a for clients while following sustainability This approach integrates material ESG ESG in private markets supervisory briefing and consultation objectives and values, and applying risk considerations into mainstream ESG is an increasing factor in all our clients’ on guidelines on funds’ names using sustainable minimum exclusion criteria. investment analysis, without constraining decisions. In private markets, this comes sustainability-related terms. The aim Strategies within this category apply a the investment universe, and requires with challenges as these markets tend to is to ensure that specific minimum dual-layer approach: a set of sustainable the portfolio manager to provide a be less transparent. Our focus in 2022 was standards are adhered to when minimum exclusions plus one of the rationale for holding companies that have on further enhancing our ESG practices using terms such as “sustainable” following approaches: been flagged for possible material E, S in this area. Private Markets Investments or “sustainability” in fund names, and G risks. teams have delivered ESG frameworks and in particular that products Sustainable and Responsible Investing which set out their approach to integrating require a specific link to sustainable (SRI) Best-in-class The portfolio manager is free to either divest ESG and they continue to make use of investments. While we have taken Our SRI Best-in-class approach extends or continue to hold “risky ESG” companies in tools provided by the Sustainability team, action to ensure our products mainstream fundamental research a portfolio if the expected return justifies the including sector frameworks. We also are in line with the supervisory by analysing financially material and risk. Active stewardship activities (dialogue supported industry initiatives to improve briefing, understanding of the terms non-material ESG factors. The portfolio with investee companies and proxy voting) ESG standards. For example, our Head of “sustainable” or “sustainability” within construction is geared towards a superior may also be considered to mitigate risks. Sustainable and Impact Investing Matt the market reflects that a broad range ESG quality by applying sustainable Christensen became a board member of funds exists with various degrees minimum exclusions (negative screening) Integrated ESG is seen as an enhanced of the GRESB foundation, a mission- of ambition level. Nevertheless, and so-called best-in-class considerations risk management approach that adds driven and industry-led organisation we take into consideration the (positive screening) on the investment another risk analysis dimension to providing standardised and validated recommendations and continue to universe. These ESG screens guide security existing investment processes and ESG data to private markets. The GRESB assess the evolution. selection towards companies with best-in- can be applied to any asset class. Foundation Board will guide the GRESB class or improving ESG quality compared Portfolio managers have access to an Standards to ensure they remain with their peers, while excluding increasing depth and breadth of ESG investor-led and aligned with responsible companies linked to, for example, risk perspectives for investee companies investment principles. coal, tobacco, weapons, and controversies through the new Sustainability Insights that may bring significant financial and/or Engine (SusIE) to identify and opine on reputational risks. 3 ESG risk-focused category (integrated ESG investment approach) is not considered sustainable according to EU Sustainable Finance Disclosure Regulation. Allianz Global Investors Sustainability and Stewardship Report 2022 49