Sustainability & Stewardship Report | AllianzGI
Contents Introduction 03 Active stewardship About this report 02 How to read this report 03 03.1 Developing our 62 engagement strategy Welcome from our CEO 04 03.2 How we engage 64 In conversation with our Global Head 06 03.3 AllianzGI’s engagement 69 of Investments and Global Head of in numbers Sustainable and Impact Investing About Allianz Global Investors 09 03.4 Engagement outcomes 72 03.5 Collaborative engagements 82 01 Our sustainability approach 03.6 Escalating engagement concerns 84 01.1 Evolving our strategic approach 13 03.7 Exercising our voting rights 86 01.2 Strengthening sustainability 18 03.8 Transparently managing 95 governance conflicts of interest 01.3 Guiding clients on sustainable 23 03.9 Industry engagement 97 investment solutions and commitments 02 Sustainable investing 04 Corporate sustainability 02.1 Evolving our approach to 32 04.1 Strengthening our corporate 100 sustainable investing sustainability strategy 02.2 Sustainability research 34 04.2 Creating an inclusive and 103 supportive workplace 02.3 Sustainability methodologies 39 04.3 Ensuring responsible 110 and analytics business conduct 02.4 Climate-related risks 43 04.4 Managing the environmental 114 and opportunities impact of our operations 02.5 Sustainability risk management 45 04.5 Driving our corporate citizenship 119 02.6 Sustainable investing categories 46 05 Appendix 01
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Introduction About this report We began our sustainable investing Report scope and boundaries journey over 20 years ago and published The content of this report relates to our first Responsible Investing Report all AllianzGI activities and locations. in 2018. Our sustainability reporting All measures, activities and figures refer now incorporates our investment to the 2022 fiscal year (1 January 2022 to activities and commitment to active 31 December 2022) unless otherwise stated. stewardship with our stakeholders. We have included an expanded section Find out more on corporate sustainability that features Read more about our approach to more details of our work on embedding sustainability and explore our latest environmental, social and governance research on our website, where you will (ESG) practices in our business operations, find key policy documents and reports, and engagement with our communities including our latest Task Force on and society. Our reporting journey reflects Climate-related Financial Disclosures the broader shift from sustainability (TCFD) Report. commitments to progress, with the onus on demonstrating tangible change and For information on the sustainability real-world impact. commitments and performance of Allianz, please refer to the Allianz Group This Sustainability and Stewardship Sustainability Report 2022. Report showcases our sustainable investment and corporate sustainability AllianzGI website. beliefs and capabilities. The content is AllianzGI TCFD Report. Allianz Global Investors (AllianzGI) is an active also intended to renew our admission to investment management firm and part of the UK Stewardship Code, one of the most AllianzGI Diversity, Equity and Allianz Group. Sustainable investing is a core important external accreditations of our Inclusion Report 2022. part of our strategy to shape pathways towards stewardship activities. Being a signatory of the Stewardship Code is an increasing Allianz Group Sustainability change that secure the future for our clients, priority for institutional investors when Report 2022. our business and society. considering partners. Allianz Global Investors Sustainability and Stewardship Report 2022 02
Introduction How to read this report Our Sustainability and Stewardship Report 2022 has four sections plus an appendix, which together reflect our commitment to sustainable investing, active stewardship and corporate sustainability. Hear from our CEO, our Global Head of Investments and our Global Head of Sustainable and Impact Investing about the Introduction events that impacted us over the last year and how we are evolving our approach. Find out how we are evolving our strategic approach from Our sustainability ESG to sustainability to impact, and from sustainability approach commitments to progress. Read about how our investment offering and active approach Sustainable aim to position us as a shaper of sustainable investing solutions investing across public and private markets. Understand our guiding themes – climate change, Active planetary boundaries, and inclusive capitalism – and how stewardship they impact our active approach to engagement and voting. Learn how we are increasing our efforts to benefit employees, Corporate communities and the environment, and how we manage risk sustainability and ensure compliance across our business. UK Stewardship Code indexing Principle 1 Throughout the report, we mark content that specifically addresses the Principles of the UK Stewardship Code. Principles 2 3 A full index is included on page 123. Allianz Global Investors Sustainability and Stewardship Report 2022 03
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Introduction Welcome from our CEO, Tobias Pross Welcome to Allianz Global Investors’ 2022 With devastating floods in Pakistan, Sustainability and Stewardship Report South Asia, Malaysia and West Africa, as we reflect on an extraordinary year and heatwaves and drought in Europe, for investors. This is the second year that China and Africa, the year 2022 gave we have combined our sustainability and clear signs of the potential impacts of stewardship reporting in a single report to climate change. provide a holistic view of our commitments and achievements. Our focus this year was AllianzGI’s culture principles – including on emerging from the Covid-19 pandemic putting clients first, being solution-oriented better, stronger and more resilient. and being sustainable in everything But on top of that, we faced unexpected that we do – underpin our commitment. market turbulence driven by the war While our strategic ambition remains in Ukraine and geopolitical instability. the same, with sustainability as a key The impacts have been wide ranging, pillar, our approach is evolving. We have spanning energy security, transition and moved beyond simply incorporating affordability, inflation, rising interest rates, environmental, social and governance supply chain issues and challenging equity (ESG) risk factors into portfolios to think and bond markets. more holistically about sustainability across investment portfolios. These challenges have huge implications for the investment community. But while Our ultimate destination is to be able to investors’ commitment to sustainable achieve and show the true impact of these investing may have been tested, our view investments. This shift is the foundation remains the same. We believe sustainable of our strategic journey from ESG to investing is every bit as crucial to the sustainability to impact by 2030. You can resilience of asset owners, investors, read more about how we are developing the wider industry, and society as a whole. outcome-oriented impact solutions for investors in section 02 of this report. Allianz Global Investors Sustainability and Stewardship Report 2022 04
Introduction Welcome from our CEO, Tobias Pross Despite a major focus on managing In July 2022, we completed the transfer market volatility this year, we have made of certain US investment teams and the good progress in integrating sustainability assets they manage to Voya Investment into our various activities – from our Management as part of our strategic investment capabilities to our business partnership. We are grateful to regulators, operations. It is our continued investment colleagues and clients who made this in expertise and people that allows us to possible and look forward to making the develop new products and approaches, most of the opportunities presented by alongside transitioning existing products this partnership. to be more aligned with sustainable investing. We have also started the roll- Volatility seems set to be a continued out of our proprietary sustainability data companion in 2023, presenting challenges architecture to inform, shape and track and opportunities. Inflation remains a sustainable investment decisions across all concern for everyone – both firms and asset classes. individuals – and the impact of slower growth will be felt to varying degrees We have created a new role to focus on around the world. Geopolitics will corporate sustainability, underscoring the continue to impact economic decisions, firm-wide commitment to sustainability that reiterating the crucial need to maintain is key to delivering on our clients’ priorities – the focus on sustainable investing to from reducing emissions to supporting local generate value for asset owners and communities as part of the global social society, elevate the investment experience impact approach of the Allianz Group. and protect and enhance clients’ assets See section 04 of this report for over the long term. more details. In this context, our commitment to shaping Protecting our offering to clients by being sustainable pathways will focus on compliant with regulation is critical for all addressing the diversity of client needs new and existing products, and we are through leadership and collaboration constantly learning and evolving at pace as we continue to evolve our holistic in response to developments in regulation. approach to sustainability. Allianz Global Investors Sustainability and Stewardship Report 2022 05
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Introduction In conversation with our Global Head of Investments Principle 1 and Global Head of Sustainable and Impact Investing 2022 was an extraordinary to quality raw data. This has made it one year for investors. How has of the most extraordinary years, not just investor appetite for sustainability in terms of the data we had to source and transparency been impacted by but also the need for engagement to the events of the year? supplement this data. 2022 was certainly a year during which sustainability was tested What does being a sustainability and, in our view, came of age. The onset shaper mean for AllianzGI? of the war in Ukraine was a defining We are the guardians of the capital event of the year, and the conflict sparked and savings of a wide range implications far beyond its geographic of people, from younger generations footprint. We saw an energy crisis in to grandparents. They want to do the Europe and global food supply volatility right thing for the future, and they also alongside climate-related weather have to meet their needs now. Being a events. This has tested both markets and sustainability shaper means addressing investor commitments to sustainability, these dual needs by keeping the but it has also brought a new level spotlight firmly on seeking to deliver of realism about what sustainable financial outperformance while building investing needs to achieve and how it our sustainable offerings and future- is measured. The transition has been proofing our investments. Allianz, our aided by regulation that sets a high parent company, is vocal on its stance on bar for what qualifies as sustainable. sustainability as a company and what it Clients are rightly seeing the European brings to the world in terms of net zero as Deborah Zurkow Union’s SFDR Article 81 as the minimum a founding member of the Net-Zero Asset Global Head of Investments commitment for sustainable products, Owner Alliance. At AllianzGI, we’ve seen and data and insights are increasingly a step change in our sustainability critical in reconciling their desire for commitments since 2020, consistent with both financial returns and sustainable our belief that we have a role to play in Matt Christensen outcomes. Across the industry we’ve seen shaping future outcomes. Doing good Global Head of Sustainable historic methodologies called out as part for the world also involves being fiscally and Impact Investing of the move from opaque scoring systems responsible and avoiding stranded assets 1 Sustainable Finance Disclosure Regulation – Article 8. Defined as “a fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices.” Allianz Global Investors Sustainability and Stewardship Report 2022 06
Introduction In conversation with our Global Head of Investments Principle 1 and Global Head of Sustainable and Impact Investing by staying ahead of where investors and classic example, whereby we develop a sustainability and financial performance We made research a key part of financing priorities are going. It means portfolio not just based on managing ESG in a portfolio. There’s a growing number of our team for a reason, starting with being innovative with how we create risk but on aiming to deliver outcomes different sources of sustainability data and defining what ESG factors are key for each and funnel investments. And it requires that support the pathway to net zero. it can be difficult to reconcile these sources sector in order to feed the development of strengthening our focus on corporate Beyond sustainability considerations, impact into meaningful insights. That is why we new data analytics software. The launch sustainability and ensuring all our goes further by targeting measurable social have invested heavily in creating an ESG of SusIE, our Sustainability Insights Engine, employees can contribute, while holding or environmental benefits as well as an data architecture and platform that can represents a significant milestone for ourselves to the high standard of investment return. This is the most ambitious service our own ratings and screening, and our journey to create our own dataset governance that our stakeholders expect. level to achieve. It requires a portfolio enable us to look at markets and portfolios and processes to drive our sustainable manager to have a strong impact conviction, to determine how to push forward on performance. Now that the heavy lifting Can you describe what you and the opportunities can span both sustainability outcomes while aiming to has been done in creating the tool, the mean by the journey from ESG public and private markets. AllianzGI has maintain financial outperformance. next steps will be the addition of modules to sustainability to impact? developed an impact scoring framework for of stewardship and engagement in 2023. Beyond the big events we’ve seen in private market investing and an emerging the headlines this year, we think the body of industry standards is enabling more move from ESG to sustainability to impact accurate measurement and reporting for will be the long-term trend of the decade. impact investing. Over time, expect to see To explain, ESG is the foundation from which more portfolios being developed to meet a we must develop our long-term approach. range of goals, which will be well-defined It’s a base level of risk management that for investors from the outset. clients expect of sustainable investments in terms of assessing and filtering out risks. How are you addressing data Building on that, sustainability shifts the needed to support the journey? purpose from risk management towards The importance of data cannot be developing purposeful solutions that are overstated, in terms of delivering created to deliver outcomes needed by impact, keeping pace with regulation, and society, like those targeted by the United delivering financial returns. To be robust Nations’ Sustainable Development Goals in our approach to Article 8 funds, as (SDGs). This requires a solution mindset defined under the EU’s Sustainable Finance that uses ESG intelligence to solve the Disclosure Regulation, we need our own key challenges. Decarbonisation is a ratings and screening process to reconcile Allianz Global Investors Sustainability and Stewardship Report 2022 07
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Introduction In conversation with our Global Head of Investments Principle 1 and Global Head of Sustainable and Impact Investing Alongside this, our new impact framework blended finance as an access point to the architecture and infrastructure to is being used on the equity and debt sides seek to address climate problems across deliver Article 8 and 9 solutions, and we of our private markets work, as well as at a the globe. Scale is key and blended are targeting a steady journey to achieve fund level to feed into our direct investing. finance as a technique is something we long-term scalability. need to pay attention to and draw in Innovation around funding is more investors. We’re already doing this in What do you predict we will see critical in delivering sustainability emerging markets and the same technique over the next few years in terms objectives. How do you see blended could be applied to developed markets. of sustainable investing? finance playing an increasing role in We are at an inflection point – as people We think demand for sustainable delivering sustainable, long-term impact? become more receptive to seeing the track products will increase dramatically We’ve focused over the past several record on these financings, we can start to with the accumulation of wealth in a years on our ambition to gather expect growth in interest from more third- generation that has been focused on more private markets funding around party investors. sustainability for longer than those climate and the needs of emerging of us who are closer to retirement. markets across the SDGs. Blended finance How is AllianzGI evolving its This is a change that has already started. is about directing private markets funding approach for a low-carbon future? One of the big challenges we will need into investments that have historically What we see happening with the to overcome is the issue of so much been the domain of development finance impact of events in Ukraine and the disparate regulation, which has created institutions (DFIs). In emerging markets, volatility of energy markets are tests along significant complexity. More consistency there often isn’t enough capital to fund the way as sustainable investing continues across regions would make it easier to infrastructure projects and the idea is that, to become mainstream. We must maintain invest in sustainable products in different by working together, private investors a long-term mindset and put our building places. Europe is on a forward roll and carry less risk and DFIs can make their blocks in place for the future we want collective will is not going away, as we money go much further. We’re also to shape. You cannot simply turn on the have both a bottom-up and a top-down increasingly involved in the equity and switch for a net zero system today, but you agreement about the critical importance debt side of blended finance in emerging can thoughtfully plan for tomorrow and of sustainable solutions. Overall, I’m very markets on projects that have a climate we are pragmatic about moving towards a positive about the trajectory we are on, change element. We have a tripartite lower-carbon world. Decarbonisation and and how we’re increasingly living and agreement with Allianz to see how we net zero alignment are complex, and breathing sustainability right across our can positively impact climate-related we are developing solutions which firm. Progress on sustainability takes outcomes. But an increasing number we believe are credible, practical and partnership and collaboration with clients, of third-party investors are looking at scalable. We’ve worked hard to set up colleagues, regulators, communities and all our other stakeholders. Allianz Global Investors Sustainability and Stewardship Report 2022 08
Introduction About Allianz Global Investors Principle 1 With a commitment to active Providing value for our clients means asset management, we seek to securing and protecting their long- 2022 highlights2 elevate the investment experience term wealth. We do this through our EUR 506 billion Our Executive and protect and enhance our commitment to personal client service and total assets under Committee (ExCo) is global and local market knowledge and management (AuM) 50% female clients’ assets over the long term. insights. This is reinforced by identifying (since 2020) long-term growth opportunities that align Allianz Global Investors (AllianzGI) is with our vision of a sustainable future. EUR 251 billion 100% of an active investment management of ESG risk-focused, employees firm and part of Allianz Group. With a Sustainability has evolved in the last sustainability-focused and completed the Global focus on managing assets and investing two decades to become an integral part impact-focused assets Compliance Training for the long term, we have more than of the AllianzGI investment philosophy. 600 investment professionals and 500 This is mirrored by our commitment to 250 sustainability 59% relationship managers working across embedding sustainability in our own analyses reduction in greenhouse 20 locations worldwide. We manage EUR operations. This echoes the purpose of completed on gas emissions per 506 billion of assets for institutions and our parent company, Allianz Group – companies worldwide employee (vs. 2019) 2 “We secure your future” – which prioritises individuals around the globe. Active stewardship: 100% tackling climate change, delivering social 438 engagements AllianzGI offers a diversified range of impact and ensuring sustainable growth. renewable active investment strategies across four covering 996 electricity in our offices main pillars: equities, fixed income, Generating value for our clients is at the core topics and local data centres multi asset and private markets across of our ethos as we aim to shape sustainable (since 2021) the Americas, Europe and Asia Pacific. pathways towards change. In practice, Greenwich Quality With this footprint, we combine expertise this means motivating inclusive sustainable Leader across public and private investments growth for our clients’ wealth generation and in developed and emerging markets preservation. To achieve this, we partner with in institutional and with our advisory services – delivered clients and other stakeholders to develop intermediary investment by our specialist risklab capabilities. innovative, forward-looking solutions and management in Asia and This enables us to guide clients in aligning seek opportunities for collaboration towards Continental Europe3 their sustainability values and their real world impact. investment objectives. 2 Data as at 31 December 2022. 3 Coalition Greenwich, 2022. Allianz Global Investors Sustainability and Stewardship Report 2022 09
Introduction About Allianz Global Investors Principles 1 6 Our five business objectives To achieve this, we focus on five principal Foster a fulfilling work Together with our clients, employees business objectives: environment for employees and other stakeholders, we aim to drive 3We motivate our people by lasting change by using our expertise, Generate strong investment fostering a merit-based, values-driven, influence and impact-focused investing returns for our clients inclusive culture and providing the right We motivate our across the entire investment value chain. 1We measure our strategies’ technology and support. The annual We approach this with a long-term asset-weighted performance against their Allianz Engagement Survey is our main people by fostering perspective because our active strategies benchmarks over one-year, three-year and tool for assessing employee satisfaction can take a longer-term view and align five-year periods, the time horizons defined and we use the results to highlight where a merit-based, with the time horizon of our clients, as well to us by our clients. We also track how we need to improve. as the trends reshaping markets. strategies are performing against peers. values-driven, Grow our company inclusive culture. Provide excellent client service organically and sustainably We measure client satisfaction 4We measure our growth in 2through an annual survey carried terms of revenues and net cash flow out by independent research consultants to gauge the extent to which we are Coalition Greenwich. It assesses how our offering clients the most relevant and institutional and intermediary clients view attractive capabilities. our investment and client services. We aim to achieve first-quartile performance and Generate profitable growth we use the feedback to identify areas for our shareholders where we can strengthen our offerings. 5All five objectives are interlinked. Since 2018, Coalition Greenwich has also By serving our clients well and motivating conducted client interviews to measure our employees to excel, we believe our clients’ perception of our sustainable company will grow sustainably and deliver investing capabilities. Through our client strong results for our shareholders over forums in select markets, we promote the long term. two-way feedback and shared learnings. Allianz Global Investors Sustainability and Stewardship Report 2022 10
Introduction About Allianz Global Investors Principle 1 Shaping sustainable pathways as Our culture principles alongside positive change. These culture a responsible business Our culture principles – set out below – principles describe behavioural We see embedding sustainability inspire sustainable behaviours and foster expectations and aspirations towards as the role of everyone at AllianzGI, a working environment that supports AllianzGI employees and are consistent because it is intrinsic to our success as our strategy to be first choice for savers with our corporate values. an active investor and our function as and investors who seek financial returns a responsible business. Our values Our culture principles Our company values – excellence, Put the Take integrity, respect, and passion – describe client first ownership how we want to conduct our business. of the final outcome They underpin our commitment to being sustainable across all our activities and in our stewardship approach. Be Think outside the box sustainable and embrace failure as a • Excellence in operations drives us in everything we do learning opportunity to optimise our ways of working and reduce emissions. Be Win together as a • Respect confirms our commitment to solution- oriented team develop long-term relations with clients, providers and colleagues. • Integrity requires holding ourselves Be to standards over and above courageous compliance requirements. • Passion means we apply ourselves and make tough choices consistently in the face of both success and adversity. Allianz Global Investors Sustainability and Stewardship Report 2022 11
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01 Our sustainability approach This year’s report focuses on how we are shaping pathways towards change. This reflects our direction of travel as an active investor from ESG to sustainability to impact, and a broader shift in sustainability from commitments to progress, to clearly demonstrate tangible change. Principle 1 12
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.1 Evolving our strategic approach Principles 1 9 01.1.1 What sustainability Corporate sustainability at AllianzGI Allianz – and their trust is fundamental to means to us We are elevating the importance of our social licence to operate. This means Our commitment to shaping sustainable corporate sustainability as a driver for we must be transparent in how we pathways addresses client needs sustainable growth in the face of the communicate our successes and failures alongside the needs of society and our climate crisis and societal challenges. as we continue to learn and evolve planet. To be a sustainability shaper, In driving sustainable pathways towards our approach. we must take a holistic approach. change, we must go beyond our focus on of institutional investors say the resilience and long-term growth of Over the course of 2022, we continued they now subject ESG to the Sustainability and sustainable investing clients’ assets and aim for the same deep to enhance the sustainability function same scrutiny as operational are complex and wide-ranging. We are scrutiny and due diligence to our own with a dedicated focus on corporate and financial considerations. constantly learning and testing innovative impact as a company. This is how we will sustainability and a mandate from our approaches and forging partnerships. continue to embed trust in the AllianzGI Executive Committee to deliver long-term In May 2022, Allianz SE announced brand as a corporate citizen and a business value without compromising the resolution of US governmental Being a sustainable and resilient business responsible steward of assets. people, planet or profit. This means taking investigations concerning our Structured is an essential part of this journey, a balanced and forward-looking approach Alpha funds with a guilty plea by Allianz alongside driving sustainable growth Stakeholders are demanding increased that demonstrates social accountability Global Investors US. Following heavy losses through investing. Innovation is key corporate responsiveness on sustainability, and a commitment to transparent in the funds during the Covid-19 market and we constantly learn as we progress and complex legal and enterprise reporting, partnerships and engagement. turmoil, we fully cooperated with from an ESG focus to sustainability risk issues require a more defined and investigations by US authorities. It became and on towards real-world impact sophisticated approach. According to At the core of our approach is a apparent that three former employees 1 manipulated numerous bespoke client across our three strategic focus areas of the latest Edelman Trust Barometer , commitment to inclusive meritocracy – climate change, planetary boundaries, public trust in business is declining in building and enhancing a culture and communications to understate the risk of and inclusive capitalism. several countries, including Germany, working environment where people and portfolios. As soon as the misconduct was See visual on page 15. and 88% of institutional investors say they performance matter. We promote a established, we took quick and forceful now subject ESG to the same scrutiny as culture that is built on mutual trust and action. We continue to implement targeted operational and financial considerations. respect, empowerment and collaboration. enhancements to further strengthen We foster diversity and client satisfaction as oversight, investment analytics and client We are accountable to all our top priorities, along with the environmental communication controls. stakeholders – including clients, management of our operations and employees, societal partners, philanthropic engagement with local regulators and our parent company, communities and wider society. 1 https://www.edelman.com/trust/2021-trust-barometer/investor-trust. 13
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.1 Evolving our strategic approach Principles 1 4 9 Ensuring regulatory compliance and Our approach to sustainable investing We seek to inform, not prescribe, the ESG, extreme weather events as the second organisational resilience is key. We are We aim to simplify the complexities of sustainability and climate profile of greatest risk after the cost of living. developing harmonised, visible and sustainable investing by guiding investee companies. Our aim is to Over the next 10 years, the report transparent processes to simplify, and partnering with clients and motivate inclusive sustainable growth by identifies the top three risks as failure scale and enhance process quality other stakeholders to offer effective actively partnering for forward-looking to mitigate climate change, failure of and efficiency. It is essential that our solutions that address diverse solutions and creating real-life change climate change adaptation, and natural leaders have the right knowledge, investment objectives. through collective action. disasters and extreme weather events. experience, professional qualifications, In fourth position is biodiversity loss integrity and soundness of judgement. Our sustainable investing philosophy This includes responding to regulatory and ecosystem collapse. We see these We also need every employee to have the centres around an investee entity’s demands and challenging climate risks as closely interdependent and this understanding and capabilities to meet future “operating and financial and geopolitical events. The World view underpins our holistic approach to our standards. That is why compliance is resilience” in evolving economic and Economic Forum’s Global Risks Report sustainable investment. central to performance appraisal and we 3 ranks natural disasters and climate scenarios, and its positioning 2023 monitor for breaches and misconduct with in different investment strategies. a range of possible outcomes. Our investment in the sustainability function supports our culture principle of “being sustainable in everything that we do”. Bringing the Corporate Sustainability We aim to simplify Officer (CSO) function together with sustainable and impact investing cements the complexities AllianzGI’s commitment to operate as a sustainable business in a world in of sustainable which investors require a diverse range 2 investing by guiding of sustainable products and solutions. This will ensure that we operate as a good and partnering corporate citizen by positively contributing to communities and society, and delivering with clients and sustainable value for stakeholders. For more information, see section 04. other stakeholders. 2 For the avoidance of doubt, whenever using the term sustainable product/fund in this publication, AllianzGI refers to a product or fund classified as Article 8 or 9 under SFDR as a minimum criteria. 3 https://www3.weforum.org/docs/WEF_Global_Risks_Report_2023.pdf 14
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01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.1 Evolving our strategic approach Principles 1 4 9 We have identified three pivotal themes which we believe are critical to society, our investors and us as a business: climate change, planetary boundaries, and inclusive capitalism. We aim to deconstruct these into actionable sub- themes and use them to guide targeted engagement and research to ensure we identify the most material risks and Planetary boundaries Inclusive capitalism opportunities for our business and its Climate change how we will sustain the how we live equitably future impact. the future temperature population in a higher in a higher temperature in which we will live temperature world world with an evolving global economy Key ESG • Climate change • Biodiversity • Social welfare and inclusion issues • Climate action • Circular economy, resilience • Access to health, finance and education • Resource use (eg, water use, • Human capital, livelihoods land management) Beliefs Climate change is one of our planet’s We have to define the environmental Inclusion will become the next big most pressing challenges, with potential limits within which humanity can safely wave after climate change, and consequences across all three operate, and avoid any unintended will require innovative thinking and ESG elements. consequences of the fight against solutions that meet the demands climate change. of younger generations. Examples • Over 30 mutual funds implement • SDG-aligned capabilities: Global • SDG-aligned capabilities: Sustainable our Climate Engagement with Water, Clean Planet, Food Security Health, Positive Change 4 Outcome (CEWO) approach and • Collaboration with initiatives to • Emerging markets blended finance engage top carbon emitters to set develop standardised indicators focus in private markets ambitious pathways • Decarbonisation solutions 4 Since launching CEWO, increasing regulation has shifted the focus towards more data-driven approaches, while engagement is typically viewed as complementary to a sustainability strategy. We have evolved our approach to climate transition to encompass data and measurability using key performance indicators. 15
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.1 Evolving our strategic approach Principles 1 4 9 The year 2021 saw significant evolution of our Risk and exclusion flags: greater clarity These enhancements also help to identify Our focus for 2022 included: approach to sustainable investing, setting the to improve understanding of the reasons what types of investors can hold specific scene for 2022. The year’s geopolitical events for exclusions. assets, which is important for technical • Addressing the close interconnectivity and regulatory environment, however, considerations and positioning. All of between the climate crisis and created unexpectedly testing market Clearer guidance: a new framework this informs how we can engage and biodiversity. We see these as key themes dynamics for sustainable investors. Our focus on regulatory measures (sustainable target stewardship outcomes for investee to be tackled in collaboration with remained a commitment to developing investment share, “Do No Significant holdings, which can add important other stakeholders. The need to tackle scalable solutions to support the transition Harm” principles, EU taxonomy shares) perspectives on how to interpret existing risks and opportunities associated with from ESG to sustainability to impact. which combines a quantitative approach data sets at a time when data continues biodiversity loss has been emphasised with qualitative research. to evolve. by food supply shortages because of The implementation of this strategy in 2022 the war in Ukraine and droughts around included a number of key developments Evolving climate data capture: data Looking ahead to 2023, having developed the world in 2022. which underpin our vision for credible monitoring to support decarbonisation a robust architecture for the “inputs” • The future of energy accelerated as sustainable investing and meaningful impact. pathways and net zero alignment. into investment decisions, we will turn a theme following the outbreak of war our attention to the best way to approach in Ukraine in February 2022. Energy is Sector research: enhanced sustainability Performance transparency: expanding the outcome or “impact” of those central to our themes of climate change sector frameworks, showing how an key performance indicators (KPIs) for investment decisions and the extent to and inclusive capitalism. industry sector screens on multiple planetary boundaries and inclusive which capital has achieved non-financial • Inclusive capitalism has come to the fore factors, and our proprietary Sustainability capitalism topics in line with work done goals alongside financial returns. as investors look to increasingly embed Materiality Matrix identifies the most on climate change KPIs. We expect to see accelerating progress social factors into decision making. material E, S and G sub-factors for in the coming year. This touches upon social inclusion, but is 24 broad sector classifications. We believe enhanced research and our new highly interconnected with climate proprietary Sustainability Insights Engine 01.1.2 Focusing on the material change, biodiversity loss and welfare Company research: we developed separate (SusIE) will enable colleagues across the sustainability themes of today security deriving from food, water and absolute company ESG scores to provide investment platform to help investors and tomorrow and energy. additional perspectives for investment understand the scope of non-financial Our approach is guided by the material See section 02.2.1 for insights decision-making. We supplemented these considerations of investee companies, sustainability themes of today and those from our research across themes with detailed company analysis commentary and the potential for this to influence of tomorrow, which requires a constant including sustainable food systems, which now includes human rights – a key financial returns. focus on the shifting global context. healthcare and energy security. topic within our inclusive capitalism theme. 16
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.1 Evolving our strategic approach Principles 1 4 6 01.1.3 How active asset In 2022 we built out our thematic • Advising on sustainability risks and • Active stewardship continues to be management supports the engagement approach along these engineering active investment solutions a core action across our product transition to a better future three themes. that meet our clients’ individual strategies: in 2022, we engaged with 355 We are fully committed to active asset See section 03.1. objectives, powered by an innovative companies across 11 different sectors management, which offers unique approach to allocation and a deep and 28 countries. We participated advantages in today’s investment Other highlights include: understanding of risk. With 60 advisers in 10,200 shareholder meetings in environment – whatever the asset class, globally, risklab – an advisory team 2022, representing 94% of all votable geographic scope or investment style. • Integrating ESG risk considerations into within AllianzGI – helps our clients to meetings. We voted against, withheld, Being active allows us to stay ahead of all our investment processes and active meet their investment goals through or abstained from at least one agenda our clients’ future needs and to manage stewardship approach. specialist advice and solutions. In 2022, item at 69% of all meetings globally, developing risks and opportunities for See section 02.5. our sustainability-specific capabilities and overall we opposed 22% of all sustainable investing. • Constructing portfolios designed within risklab helped more than resolutions globally. to deliver financial returns over the 25 clients understand and enhance the See section 03. As part of our active approach, long term combined with strong sustainability profiles of their portfolios. we have further embedded the three sustainability performance. See section 01.3. sustainability themes that we identified See section 02.6. • Financing the United Nations’ In 2022, the Sustainability Team in 2021. These continue to shape our Sustainable Development Goals (SDGs) developed a firm-wide sustainability research and engagement activities • Enhancing our ESG approach in private by incorporating ESG considerations training programme, launched in and underpin our entire approach markets alongside creating an Impact in our active investment decisions. Q1 2023 and mandatory for all to sustainable investing: Management and Measurement team. We partner with our clients to mobilise employees globally. This training This team has built the AllianzGI impact capital to meet multiple sustainability- has been designed to help • Climate change: finding solutions to avoid framework for private markets to related goals, such as those set out our employees enhance their the harmful effects of climate change. ensure investments generate material in the UN SDGs. Our SDG-aligned understanding of what sustainability • Planetary boundaries: how we sustain and measurable positive impact for strategies specifically address the means to AllianzGI and what it will ourselves in a higher temperature world. our clients. financing of the SDGs. take to deliver on our ambition to • Inclusive capitalism: living equitably See section 02.6. See section 02.6.3. become a sustainability shaper. in a world with a rising population and increasing resource constraints. 17
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.2 Strengthening sustainability governance Principles 1 2 Responsible and transparent In 2021, Allianz established a centralised governance is crucial to enable Global Sustainability function which the creation of sustainable value supports the Sustainability Board in for all our stakeholders. integrating sustainability into the business. Also in 2021, the Sustainability Committee was created within the Supervisory We are committed to clear and Board of Allianz SE to drive sustainability transparent governance principles strategy integration and implementation. and this commitment extends to our Sustainability-related performance is governance of sustainable investing integrated in compensation systems and stewardship. Sustainability is through relevant targets, incentivising embedded throughout AllianzGI and our board members to act and make decisions sustainability ambition is set by senior according to E, S and G priorities. management as part of the overall For more information, see the Allianz strategy of the business. As part of the Group Sustainability Report 2022. Allianz Group, we are subject to its governance requirements relating 01.2.1 Our sustainability to ESG matters. governance structure AllianzGI has clearly established lines Allianz has increased the importance of responsibility for sustainability, of sustainability with the ambition to which enables effective oversight fully integrate sustainability across the and accountability: company. The Board of Management at Allianz SE is ultimately responsible for The Executive Committee (ExCo) is the all matters related to sustainability and central governance and decision-making is supported by the Group Sustainability body for AllianzGI and other relevant Board (formerly known as the ESG Board). committees on sustainability issues. 18
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.2 Strengthening sustainability governance Principles 1 2 Allianz Global Investors – Sustainability Governance Structure The Global Head of Sustainable and The Net Zero Working Group Impact Investing reports to the Global is a dedicated AllianzGI forum Head of Investments, who is a member established in 2022 to oversee key of the ExCo. This anchors sustainable elements of our climate action and impact investing at the top of plan, including methodologies and the organisation. decarbonisation implementation plans in line with the Net Zero Asset The Investment Executive Committee Managers initiative. This working (IEC) is the decision-making body for the group comprises representatives from management of the firm’s investment across functions who meet monthly or platform and has responsibility more frequently to discuss proposals for all sustainability-related topics and implementation plans. The group within investments. evaluates climate-related decarbonisation plans, commitments, methodologies The Sustainable Investing Working and measures such as stewardship Group (SIWG) ensures high-quality and client advisory. The group makes sustainable investing and stewardship recommendations to the SIWG/IEC/ standards are applied and enables ExCo to make final decisions for cross-asset class topics to be considered. governance purposes. The SIWG includes asset class chief investment officers (CIOs) and managers The Global Proxy Voting Committee of the Sustainability Team, who share determines our global voting policy and best practices and discuss and agree handles conflicts of interest. Any major sustainable investing activities to integrate issues or changes are discussed by the sustainability into the investment process. SIWG and reported to the IEC. It also confirms the strategic orientations of our sustainable investment policy such as exclusion policy and stewardship policy. 19
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.2 Strengthening sustainability governance Principles 1 2 Established in May 2022, the Corporate AllianzGI consists of several operational Sustainability Working Group comprises entities and additional lines of two ExCo members for Investments and responsibility exist at the AllianzGI GmbH Shaping sustainable pathways towards change Finance, the Corporate Sustainability level. The GmbH Management Board Officer, and four department heads in is responsible for overall strategy and the areas of Technology, Operations and corporate sustainability and sustainable Strengthening sustainability Products; Human Resources; Marketing investing strategy. It reports to the and Communications; and Sustainable supervisory board. The GmbH supervisory governance in Asia Pacific in 2022 and Impact Investing. The working group board receives regular updates on the meets monthly and ensures effective business strategy of AllianzGI GmbH from execution of the corporate sustainability the management board. This includes a We have strengthened sustainability governance structures strategy and the integration of associated section on the latest strategic updates in Hong Kong, Singapore and Taiwan to combine global initiatives and principles. regarding sustainability. oversight with local oversight of sustainability. The Reputational Risk Working Group The AllianzGI Asia Pacific Legal relating to climate risk and sustainable comprises global representatives Compliance Risk Working Group investing are discussed at semi-annual from across functions who meet twice monitors the ESG risk profile and board meetings. yearly to discuss topics that may pose a climate scenario stress-test findings reputational risk and determine whether related to AllianzGI’s Asia Pacific In Taiwan, a cross-functional action is necessary, including escalation investments on a quarterly basis. sustainability working group works to senior management. The group may closely with the global Sustainable input on ad-hoc topics that require a Both the Hong Kong and Singapore Investing team to monitor trends collaborative sounding board to assess boards also receive quarterly reports and regulations in the sustainable the need for action. on the ESG risk profile and climate investing space, report on material Other working groups are dedicated to scenario stress test results of locally ESG developments to the Taiwan sustainable investment across different asset managed and domiciled funds. board, and coordinate provision of classes and investment methodologies. These reports and other material topics ESG-related training. 20
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01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.2 Strengthening sustainability governance Principles 1 2 Linking sustainability with remuneration clear lines of responsibility. Sub-teams Sustainability Research and is gender-balanced as part of our The International Management Group cooperate closely and report directly Stewardship teams: manage thematic commitment to diversity, which enables –comprising senior functional heads to Matt Christensen, Global Head of research and engagement strategy and us to create a holistic and interdisciplinary from across the firm – has sustainability Sustainable and Impact Investing. develop a thematic approach along view on all aspects of sustainable embedded in its goals through firm- the strategic topics of climate change, investment. We continuously assess the wide global solidarity goals. A specific Sustainable Investment Office (SIO) planetary boundaries and inclusive training needs of the team and several sustainability goal was introduced in team: shapes AllianzGI’s overall capitalism. The Stewardship team leads team members have participated in the 2021 and implemented in 2022. This goal sustainable investment strategy and AllianzGI’s engagement and proxy-voting CFA UK Level 4 Certificates for Climate targets sustainability achievement as policies and its sustainable product activities globally. and Investing and Investing in ESG, measured by delivery of above-median strategy, as well as leading key helping to develop this course which was signatories’ Principles for Responsible initiatives. The team plays a critical role in Strengthening our focus on in its pilot phase at the time. The outcome Investment (PRI) results. Achievement of providing knowledge to clients and other corporate sustainability of this was to widen the spread of climate the global solidarity goals5 influences stakeholders on AllianzGI’s sustainable In May 2022, we established the role of knowledge, which in turn means we can the firm-wide remuneration pool. investment capabilities. Corporate Sustainability Officer (CSO) to be more effective in deploying relevant AllianzGI functions are also embedding ensure AllianzGI’s organisational business expertise across our activities such sustainability considerations into team Sustainability Methodologies and practices are environmentally and socially as engagement. and individual goals. For instance, Analytics (SMA) team: responsible for sustainable. The CSO communicates the investment platform has implemented driving innovation using state-of-the-art and coordinates with management, Growing our impact investing expertise goals that specifically reflect the way technology and ESG data. This includes clients, employees and community Impact investing is an important and fast- sustainability is integrated into the fund employing artificial intelligence (AI), partners to address sustainability issues. growing asset class that facilitates positive and focus areas of each team. natural language processing (NLP) The role develops, manages and monitors change while resonating with growing and new forms of data to support the corporate sustainability strategy. interest from clients. Opportunities are 01.2.2 Investing in our team the Sustainability Research team, increasing fast, particularly in private With sustainability and impact being developing new methodologies across Widening our climate knowledge markets. Where investors previously a strategic growth area, AllianzGI has asset classes, delivering innovative tools The members of the Sustainable and thought only in terms of risk and reward, established a growing team dedicated for our investment platforms and shaping Impact Team have a diverse range of they can now add impact as a third to sustainable investment and shaping client-oriented solutions. The team professional backgrounds including dimension of oversight for their portfolios. sustainable pathways. It now includes oversees ESG integration and scoring finance, investment, legal, environmental close to 40 team members structured with approaches and develops the climate and sustainability expertise. The team strategy dataset. 5 Solidarity goals are corporate goals specific to Allianz Global investors which include, for example financial targets, client service metrics, employee engagement targets. 21
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.2 Strengthening sustainability governance Principles 1 2 5 To leverage the growth opportunity, and procedures at least annually to and developments in the jurisdictions in management services due to changes we must ensure that our investments ensure continuous improvement. In 2022, which we operate. To be at the forefront stemming from the Markets in Financial create credible impact and measure this included strengthening our corporate of sustainability regulation, we set Instruments Directive (MiFID) II. and report on this impact. governance guidelines and proxy up a global regulation workstream voting policy. to implement sustainability-related AllianzGI’s Executive Committee reviewed Our Impact Investing team is responsible See section 03.7.2. regulation into our business including and approved this Sustainability and for managing private equity social into the investment approach. Stewardship Report 2022. In doing and environmental impact portfolios We also reviewed our processes to so, they consider the report to provide and prioritising commercial capital to meet the requirements of sustainability In 2022, we were implementing new a fair and balanced view of our achieve the UN Sustainable Development labels for our funds when it comes regulation in Hong Kong, Singapore approach to sustainable investing and Goals. The Impact Measurement and to engagement. and Taiwan as well as in the EU. stewardship activities as well as corporate Management team developed and Rules are focusing on governance and sustainability initiatives. Initial input launched AllianzGI’s impact framework Review processes are led by our risk management as well as detailed was provided by the respective teams in 2021. The framework – designed to Sustainable Investment Office and and stringent disclosure. The EU has also responsible for the various activities, ensure high standards of impact due Stewardship team. All review processes introduced sustainability preferences with overall review by the Sustainability diligence, measurement and management are based on regulatory requirements in investment advice and portfolio and Impact Team. –has since been fully integrated into the Allianz Impact Investment Fund’s Organisational structure – Sustainability and Impact Team (AIIF) investment process, with AIIF also publishing its inaugural Annual Impact Report in 2022. The framework is in the process of being integrated into a number of upcoming impact investing strategies. See section 02.6. 01.2.3 Robust review and assurance The credibility of our approach, as reflected in our internal processes and external reporting, is crucial to ensure trust in our company. We have sound processes in place to review ESG-related policies 22
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 As an active asset manager, we create solutions and products We also share our investment expertise and voting. The climate strategies that address clients’ evolving investment objectives. We manage via client meetings and host regular of companies are a particular focus EUR 506 billion6 across all asset classes in public and private client events on sustainable investing. of these meetings. We also provided markets for our global client base and aim to give investors access These provide a platform for renowned clients with insights on our voting policy keynote speakers and AllianzGI’s own review, voting processes and decisions. to a broad range of sustainable investment strategies. sustainable investment experts to discuss In these conversations we collected the opportunities and challenges of feedback on where our processes could Since the inception of our first sustainable our ESG credentials, internal research sustainable investing, emerging regulatory be improved and transparency enhanced. investment strategy in 1999, the number capabilities, the robustness of our frameworks across jurisdictions, and the Feedback was used to inform our proxy of sustainable products we offer reached methodologies and the extent to measurability of sustainable and impact voting policy review. 177 at the end of 2022, up from 150 which ESG criteria are considered and investment strategies. In 2022, we hosted at the end of 2021. In 2022, we converted incorporated in investment processes. the Global Sustainability Days – a two-day 01.3.2 Maintaining our position as a 31 mutual funds to a sustainable online event during which experts and client service leader investing approach and launched five 01.3.1 Engaging with clients guest speakers from across the industry Our focus on providing guidance on new sustainable funds – a path we aim Engaging with clients is an opportunity debated the most pressing sustainability sustainable investment solutions is part of to continue in the future.7 to help them understand their sustainable issues. Together with our clients, a wider commitment to clients as we look investing preferences and objectives. we explored topics ranging from the beyond pure economic gain to develop Interest in sustainable investment This has been especially important in the future of sustainable finance regulation strong and enduring relationships. strategies continues to increase among context of the war in Ukraine. With energy to the twin crises of biodiversity loss and both retail and professional investors. prices rising sharply, fossil fuel-based climate change, and how to advance Our aim is to create value together and Both client segments are demanding energy production expanding in several inclusive capitalism. we want every interaction to support a higher level of sustainability-driven countries and weapon-producing this goal. We elevate clients’ investing considerations within the investment companies being among the strongest During regular client meetings, experience by understanding their process and they want to better outperformers in 2022, we provided we discuss stewardship activities and individual needs, providing the right understand sustainability features. perspectives and guidance through our gain important insights into engagement solutions and always acting in their Almost every request for proposal (RFP) thought leadership communications, themes clients would like us to prioritise. best interests. Drawing on our toolkit of or fund selection due diligence process including “Sustainable Minute” videos For certain portfolios, we hold dedicated capabilities, we create solutions that help we are part of now contains multiple on social media and dedicated client ESG feedback meetings to discuss the clients achieve their investment objectives ESG-related questions aiming to assess update calls. decarbonisation pathway of the portfolio today and in the future. and the outcomes of engagement 6 Data as at 31 December 2022. 7 These figures relate to EU-domiciled funds that are classified as either Article 8 or Article 9 under SFDR. 23
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 Our commitment is demonstrated in 01.3.3 Supporting institutional clients As part of this engagement, we help impacts of different sustainable investment independent client satisfaction surveys to set their sustainability agenda clients understand current sustainability approaches and help to formulate their which consistently highlight client service We understand it is part of our fiduciary developments and regulatory changes. sustainability objectives, with the objective as one of AllianzGI’s main strengths. duty to help institutional clients understand We typically analyse the sustainability being to support the implementation and We are consistently ranked in the first and fulfil their long-term financial features of their current portfolios, assess further enhancement of their approach. quartile against competitors across all obligations and navigate their present relevant major markets in the annual and future investment challenges. 9 Coalition Greenwich survey.8 We are also Our global asset and client mix a quality leader – as certified by Coalition EUR billion Institutional clients have seen rising Asset class split Client split Greenwich for more than a decade – regulatory pressure around the disclosure of with technological capabilities and client sustainable investment activities, particularly service procedures that ensure we stay in the EU. There is also a bigger drive to align 85 162 158 close to clients. As well as validating our investment activities with specific values approach, the findings of these surveys and long-term sustainability convictions. are invaluable for continuing to enhance Consequently, our clients are looking for our service. a strong partner in understanding the implications of the fast-evolving regulatory 117 Highlights from the 2022 Coalition environment and seeking to capture Greenwich Report: opportunities, aligning with carbon-reduction 348 • Twelfth consecutive year as Greenwich commitments and assessing which activities 142 Quality Leader in institutional they want to finance or divest. Our goal is to investment management in Germany, help clients implement investment solutions and fifth year in Continental Europe. that fit their own values framework while Fixed income Institutional business • Fifth consecutive year as Greenwich adhering to the highest quality standards. Multi-asset Retail business Quality Leader in overall European Equities intermediary distribution quality. Our track record in sustainable investing Private markets • Greenwich Quality Leader in allows us to share knowledge and best institutional investment management practices with our clients to support them 8 Coalition Greenwich. and intermediary distribution in Asia. in setting their sustainability objectives 9 Data as at 31 December 2022. Total assets under management are assets or securities portfolios, and finding the most appropriate valued at current market value, for which Allianz Asset Management companies are responsible vis-à- • The leading strategic advisor and ESG vis clients for providing discretionary investment management decisions and portfolio management, investment manager for institutional investment solutions. either directly or via a sub-advisor. This excludes assets for which Allianz Asset Management companies are primarily responsible for administrative services only. Assets under management are clients in Continental Europe. managed on behalf of third parties as well as on behalf of the Allianz Group. Source: Allianz Global Investors. Any differences in totals are due to rounding. Environmental, social and governance (ESG). Diversification does not guarantee a profit or protect against losses. 24
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 Shaping sustainable pathways towards change Providing sustainable investment advice with risklab risklab is AllianzGI’s Sustainable investment challenges faced by our clients and answers offered by risklab advisory and solutions Sustainability transparency Actionable advice Customised solutions unit helping investors with asset allocation, risk management, private What is the carbon footprint of my How do different climate scenarios How can I increase my allocation markets implementation current portfolio? impact the achievement of my risk to green bonds, while not In which parts of my portfolio and return goals? significantly shifting my portfolio’s and achieving sustainable do I face security-based Which benchmarks can I use to financial characteristics? investment goals. reputational risks? decarbonise my portfolio or lower How can the positive impact my climate transition risk? generated by the projects In 2022, risklab continued to expand Progress in 2022 underlying the green bonds be its sustainable investing expertise • Best practice analysis via peer group Progress in 2022 reflected in my reporting? by allocating further resources to its studies of different investor groups • Climate scenarios (according to Sustainable Investment Advisory team. (eg, pensions, insurers) and their NGFS11 and incorporating physical Progress in 2022 The three pillars of its advisory offering sustainable investment behaviour. and transition risk) integrated into our • Partnering with clients and portfolio aim to support clients to navigate • Proprietary analytics tool upgraded capital markets model to help clients managers to jointly develop customised complex sustainability journeys to a cloud-based application assess the risk of return shortfalls due solutions that fit the client’s needs and shape the future of sustainable (SARAH 2.010) together with additional to climate risk and align their strategic and implement shifts in strategy investing together, as demonstrated by advisory modules (eg, net zero advice) asset allocation accordingly. (eg, increase in green bonds/decrease these representative client questions and incorporating supplementary in carbon intensity in a corporate and key areas of our responses. sustainability and financial data from bond portfolio). internal and external sources. 10 Sustainability Analytics, Research & Advisory Hub. 11 The Central Banks and Supervisors Network for Greening the Financial System (NGFS), a group of central banks and supervisors willing, on a voluntary basis, to exchange experiences, share best practices, contribute to the development of environment and climate risk management in the financial sector, and to mobilise mainstream finance to support the transition toward a sustainable economy. 25
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 We assess the ambition levels of clients through questionnaires and by discussing Shaping sustainable pathways towards change best market practice. This enables us to determine their preferences and motivation, while considering existing The widening Supporting a client to define policies and potential memberships and commitments to organisations and spread of specialist actions based on investor principles of sustainable investing. As a core feature of our advice, we help clients technical knowledge goals and preferences gauge their portfolio sustainability profile and quality in combination with financial enables us to draw In a joint effort with a German family office, we conducted a risk-and-return characteristics. on team resource sustainability preference assessment with their key stakeholders To leverage the sustainability expertise more efficiently. to inform the client’s sustainable investment direction. within AllianzGI, risklab collaborates with our investment platform regarding We will continue to expand our offering We also carried out a status quo and investment managers and used investment solutions, investment trends, by developing additional quantitative and analysis for parts of the client portfolio the outcomes of these to define a best practice and implementation. qualitative advisory modules, angles of via our Sustainability Analytics, potential framework, which included Analytical capabilities are aligned with and analysis in the simulation of sustainable Research & Advisory Hub (SARAH). an exclusion policy, participation enhanced through close collaboration with investment approaches and a potential The process started with a workshop in initiatives and decarbonisation AllianzGI’s Sustainability Methodologies extension of asset classes in portfolio on sustainable investing, best practices goals based on the preferences and and Analytics team, which identifies, analytics and capital market modelling. of global and European family goals of the investors. Following this, manages and masters sustainability data offices, ESG regulation and in-depth we delivered an analysis of the client and develops proprietary analytical tools analysis of sustainable investing portfolio across different sustainability and methodologies. approaches and the respective metrics such as ESG rating, exposure benchmarks. We conducted polls to controversies, and carbon emissions and questionnaires with stakeholders and intensity. 26
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 Shaping sustainable pathways towards change Accompanying our largest client on its Shaping sustainable pathways towards change path to net zero Managing over EUR 200 Collaborating with a large billion for our shareholder, Allianz, we are a key partner public pension fund to in helping it to reach its implement climate policy ambitions across public and private markets as a founding We engaged with a leading engagement and exclusions. For the member of the Net-Zero Asset French public pension fund to portfolios we manage on behalf of Owner Alliance. support the implementation the asset owner, dialogue concerning We are working with Allianz to reach of its ambitious climate policy. measurement of decarbonisation an interim greenhouse gas (GHG) objectives, limits of carbon metrics emissions reduction target of 25% and phasing-in of Scope 3 data is by the end of 2024 across the listed The asset owner committed to ongoing. Our collaboration is enabling equity and corporate bond investments assign reserves to a decarbonisation the institution to focus on real-world that AllianzGI manages on behalf pathway towards a 1.5°C scenario climate impacts using forward- of Allianz, and by the end of 2025 and set stringent standards related to looking climate data to complement for infrastructure equity investments. portfolio decarbonisation, shareholder backward-looking carbon metrics. 27
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01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 Shaping sustainable pathways towards change Creating real-world impact in private markets Through our private markets impact investing strategies, we are committed to delivering positive environmental and social outcomes, which include supporting climate solutions that foster the transition towards a low-carbon economy in developing and developed markets. We launched our latest investment vehicle finance institution (DFI), which will invest –the Emerging Market Climate Action alongside other DFIs in Paris Agreement- Fund (EMCAF) – in late 2021 jointly with aligned projects. AllianzGI’s developed the European Investment Bank (EIB). markets-focused impact strategy – the EMCAF is an innovative blended equity Allianz Impact Investment Fund (AIIF) fund that finances climate mitigation –actively pursues direct and indirect and adaptation as well as environmental investments that generate positive projects in Africa, Asia, Latin America, measurable environmental and social and the Middle East. We will also be impact. We will additionally be building launching a blended climate solutions out our impact offering via a dedicated debt strategy (Allianz Climate Solutions strategy providing tailor-made credit Emerging Markets), in partnership with solutions to impactful companies in Allianz Group and a regional development developed markets. 28
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 01.3.4 Increasing transparency of For example, in our conversations with Regulators in Europe and Asia Pacific are by participating in major regulatory sustainable investments some large clients, we observed that introducing various sustainable finance consultations. For example, AllianzGI was With the growth in sustainable investing, they would like to receive more granular regulations to ensure policy objectives of a member of the former EU Technical demand is increasing among investors reporting of engagement conversations greener and more inclusive financial flows Expert Group, and has been a member of and regulators for greater transparency with companies held in portfolios. are delivered and to increase transparency the EU Platform for Sustainable Finance over the performance and impact of for investors. For example, the EU Action during its first term ending in 2022, investments. We support this shift and Navigating the shifting Plan on Financing Sustainable Growth continuing into its second term in 2023. have provided monthly reporting on regulatory landscape includes common classification of sustainable investments to our clients The redirection of capital flows to finance environmentally sustainable activities We have initiated an ESG Programme since 2020. Clients can view their sustainable growth is becoming an within the EU sustainable finance to implement the required processes sustainable investments compared to the ever-greater priority for policy makers as taxonomy, and enhanced disclosure and enhance our product offering product benchmark and see the carbon financial market participants represent requirements for financial markets with to ensure we are prepared to meet footprint of their portfolios in absolute an important catalyst for channelling the Sustainable Finance Disclosure regulatory obligations and client demand and relative terms, as well as an overview private investments to create a more Regulation (SFDR) and the Corporate for sustainability. of the engagement activities relevant to sustainable economy. Sustainability Reporting Directive (CSRD). the fund. Major activities in 2022 included: It also required that sustainability is We are constantly enhancing our integrated into the investment process and • Integration of sustainability risk reporting to meet evolving regulatory investment advice through amendments and principal adverse impact (PAI) requirements and client needs. Our goal of the funds, asset management and assessments into the investment process, is to make sustainable information We aim to help insurance regulations. In Asia Pacific, as of 1 August 2022. digitally accessible via a dedicated client initiatives are underway in various markets • A review of our product offering reporting portal for institutional clients shape the regulatory to increase sustainability disclosure to address investors’ sustainability and distributors. The application we requirements and integrate sustainability preferences according to MiFID II. are developing will allow continuous landscape by risk into the investment process. • Detailed disclosure to create enhancements as reporting requirements transparency on Article 8 and 9 products and client needs evolve. Our clients’ participating in AllianzGI is taking an active role in the and meet the SFDR Level 2 requirement, stewardship and investment principles major regulatory development and implementation of as of 1 January 2023. shape how we manage their portfolios, sustainable finance regulation in order and we evolve our processes and consultations. to ensure a sensible outcome. We aim reporting in line with their needs. to help shape the regulatory landscape 29
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 01.3 Guiding clients on sustainable investment solutions Principle 6 Regulation is driving greater transparency in sustainability can issue EU Green can issue/invest Companies green bonds Bond Standard in green bonds Financial Market End Investors/ Voluntary standard Participants (FMPs) Beneficiaries Corporate Sustainability for green bonds Reporting Directive (CSRD) SFDR Disclosure requirements for Disclosure requirements FMPs require Companies’ disclosure to financial market participants Investors to receive disclosure for companies fulfil own transparency requirements (pre-contractually and regular reporting) FMPs to disclose Taxonomy Relevance of Relevance of SFDR terms and Taxonomy Regulation share of SFDR terms disclosure: Taxonomy and Framework to define environmentally ESG products and disclosure: sustainable investment share Companies to disclose sustainable activities Sustainability and principal adverse impact Taxonomy share of risks and principal their activities Screening criteria adverse impact for four remaining objectives Distributors to Corporate Sustainability Due Asset Managers, Insurers, Pension Fund Providers Distributors Diligence (CSDD) Directive enquire investors’ Due diligence and supply UCITS, AIFMD, MiFID II, Solvency II MiFID II, IDD sustainability chain obligation Integrating sustainability risk and adverse Integrating sustainability preferences preferences impact in investments and risk management in advice and portfolio management European Supervisory Authorities (ESAs), European Commission: Q&A ESAs: Proposal on greenwashing (based on call for evidence) European Securities and Markets Authority (ESMA): Fund naming rules Colour code applicable final proposal expected legislation guideline Source: AllianzGI. 30
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02 Sustainable investing Allianz Global Investors has been an active responsible investor since its first sustainable investing portfolio was launched in 1999. Our guiding theme in 2021 was shaping sustainable pathways across public and private markets. We maintained this in 2022, leading clients and companies on an inclusive transition by aiming for sustainable growth and meaningful impact alongside financial returns. Allianz Global Investors Sustainability and Stewardship Report 2022 3131
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.1 Evolving our approach to sustainable investing Principle 1 Our sustainable strategies are built on a proprietary best-in-class model and in-depth research. We draw on our deep experience to design pathways for clients, wider stakeholders and the companies we invest in to help advance their sustainability journeys. As information on companies’ We are evolving our sustainable environmental, social and governance investment strategies to meet an (ESG) practices becomes increasingly increasingly broad range of client needs robust and accessible, we continuously and objectives. Active stewardship and refine our ESG ratings model and make ESG risk assessment ensure that our proprietary sector, thematic and stock- portfolio managers have full transparency specific research available to all our on E, S and G scores and principal adverse investment professionals. Deep ESG impacts (such as CO emissions, water use, 2 awareness and our culture of close etc) for each holding in a portfolio and collaboration between sustainability on aggregate. analysts and portfolio managers within the firm is one of our key strengths. 2022 1999 2007 2021 NZAMi Data insights engine 2022 • Launched our • Among the first 50 • Expanded and • First Net Zero Asset • Go-live of Continued first sustainable asset managers to strategically reshaped Managers initiative Sustainability investing strategy sign the Principles our sustainability team commitments Insights Engine for Responsible under the leadership submitted in (SusIE) as a central Investment (PRI) of Matt Christensen, April 2022 ESG data portal and Head of Sustainable enabling input into and Impact Investing investment decisions Allianz Global Investors Sustainability and Stewardship Report 2022 32
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.1 Evolving our approach to sustainable investing Principle 1 If 2022 was a year of uncertainty, • Climate action – taking a long-term 2023 will be a defining year for approach to climate and decarbonisation. sustainable investing. Our focus on • Transition to a more sustainable future creating pathways to change will guide and how to facilitate that with our investors on the journey from an ESG clients and industry stakeholders. risk focus towards broader sustainability • Increasing the scalability of our solutions and, ultimately, to generating meaningful to achieve greater real-word impact. impact through their investments. • Implementing our impact framework Our 2023 plans will see further from private to public markets and implementation of our conviction-led across different asset classes. approach including: • Building on the sustainability insights engine as a proprietary tool feeding • Guiding clients to better understand the into research, stock selection, investment risks and opportunities of reporting, and compliance. key sustainability themes. • Strengthening our firm-wide knowledge and capabilities around sustainable investing for integrated client service. 2022 Data Research Stewardship Private markets Regulation • Launch of new key • 16 sector frameworks developed as input for • Admitted as a • Continued success in • Successful implementation performance indicator stewardship activities and investment decisions signatory of the UK blended finance with of MiFID II and SFDR L2. (KPI) carbon approach to • >460 assessments on sustainable business activities Stewardship Code EMCAF endorsement by AllianzGI funds account for >40% enhance methodology set conducted as basis for MiFID II commitments • Externally recognised G7 alongside conversion/ of European market-wide Article focus on social and development of >10 8 and 9 funds committed to all • 11 thematic papers published climate voting Article 8 and 9 products 3 MiFID sustainability parameters Allianz Global Investors Sustainability and Stewardship Report 2022 33
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.2 Sustainability research Principle 7 The Sustainability Research team is Three interconnecting research perspectives 2022 highlights a cornerstone of AllianzGI’s active investment approach. It conducts 11 proprietary research on sustainability thematic papers issues and helps translate them into published impactful investment insights which are shared with investment professionals via the AllianzGI collaboration platform. 250 To identify, monitor and analyse the most sustainability analyses relevant sustainability issues, the team performed on builds and formulates views through companies worldwide three interconnecting perspectives – thematic, sector and company research. 16 Joined up working ensures a robust and holistic approach to ensure pertinent sustainability sector and coherent rationales. For example, frameworks developed thematic research informs the materiality of sustainability factors for different sectors, which are then reflected in company analysis and engagement, while inversely company analysis and engagement loop back to shape our thematic and sector approach. This expands the breadth and depth of our coverage of sustainability issues and their implications for investments. Allianz Global Investors Sustainability and Stewardship Report 2022 34
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.2 Sustainability research Principle 7 02.2.1 Thematic research Thematic research is organised across our three pillars of climate change, planetary boundaries and inclusive capitalism. This research informs our experts’ consideration of investments in these themes by providing a clear understanding of underlying sustainability topics. The team shares insights internally and externally through papers and publications. Insights, publications and papers Unlocking the “S” in capitalism – Nicole Papassavas & COP 27 preview: regaining momentum – Matt Christensen In 2022, we published Marie Rupp (Feb 2022). (Nov 2022). How do recent events in Europe affect the opportunities Nuclear and gas in the EU taxonomy: what this means for in transitional energy? – Julien Girault (Mar 2022). the energy mix of tomorrow – Jingying Han (Nov 2022). The crisis on our plates: finding potential in failing food Access to healthcare: more important than ever – systems? – Mélissa Bourassi (Jun 2022). Nicole Papassavvas (Oct 2022). Diversity comes of age as an investment theme – COP 27 review: progress amidst the setbacks – 11 Guirec Thouement (Jun 2022). Matt Christensen (Nov 2022). thematic papers covering Energy transition and energy security – complementary COP 15 preview: the “Paris moment” for nature? – a broad array of topical subjects or conflicting? – Julien Girault (Sep 2022). Mélissa Bourassi (Nov 2022). through the year. Defending the defensible: is the defence sector sustainable? – Guirec Thouement (Oct 2022). Allianz Global Investors Sustainability and Stewardship Report 2022 35
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.2 Sustainability research Principle 7 Shaping sustainable pathways towards change Unlocking the S in capitalism Social issues have typically been overshadowed by other Shaping sustainable pathways towards change aspects of sustainability, such as climate change. This is beginning to change as the events food or energy) and livelihood A crisis on our plates: finding of recent years have shone a light on essentials (essentials in the modern inequalities in access to essentials and economy, such as education and potential in failing food systems opportunities. The solution calls for a digital access). The social issues new brand of capitalism. caused by such inequalities can The war in Ukraine highlighted risks in how we hold back growth and resilience of produce and consume food. In “Unlocking the S in capitalism”, economies and may be exacerbated we discussed the theme of inclusive by climate change and digitalisation. As a rising global population increases availability, affordability and resilience capitalism and highlighted lessons Inclusive capitalism provides a solution pressure, there is an urgent need to and discuss why a radical rethink is learned about the social impact of as part of a more inclusive approach to build a resilient and inclusive food needed. A long-term view is crucial but recent crises on life essentials (basic economic growth. ecosystem that meets planetary and complex, and recent stresses on food essentials to support life, such as Read our research paper. social needs. There are opportunities systems have amplified the need for for investors across the value chain investors, businesses and policymakers of global food production and to act now. Investors can play an distribution to help mitigate these risks. important role in directing capital In “The crisis on our plates: finding towards shaping a sustainable food potential in failing food systems”, ecosystem and supporting the shift to we highlight the pressures on the a more inclusive, equitable future. global food system that are reducing Read our research paper. Allianz Global Investors Sustainability and Stewardship Report 2022 36
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.2 Sustainability research Principle 7 02.2.2 Sector research In collaboration with the Sustainability Our approach to sector research Sustainability issues differ by sector and Methodologies and Analytics team, understanding this context is central indicators are selected considering their to our company assessments. We have relevance, availability and reliability. introduced frameworks for 24 broad sector segments resulting from the merger The second page provides a materiality GICS of adjacent Global Industry Classification map and key engagement themes sector based Standard (GICS) industries with similar for the sector. The materiality map is ESG issues. Frameworks are developed divided across four pillars – environment, exclusively for internal distribution as a social, business behaviour and corporate tool to empower the investment platform governance – which each have four to focus and engage on what is most underlying factors, examples of which material based on a better understanding include climate change, health and safety, Sector frameworks of the topical issues. business ethics, corporate/sustainability provide a view on leadership and disclosure. For each materiality issues We published sector frameworks for 16 sector the responsible analyst ranks sectors in 2022 with the remainder to be these factors on their materiality level finalised in 2023. Each sector framework over a scale ranging between relevant, sets out key material sustainability factors significantly relevant and moderately for the sector and how to integrate these relevant. The main topics of engagement into investment decisions and engagement. are developed in collaboration with the Presented in a concise two-page summary Stewardship team. format, each framework focuses on the most relevant issues to demonstrate a We also consolidate individual sector strong view for the given sector. materiality maps into an overarching 24 sector frameworks Overview data driven Sustainability Materiality Matrix to cover • 24 materiality maps • Climate indicators Five main The first page provides an overview the 24 sectors and 16 factors. This matrix • Four pillars • Sustainable KPIs engagement of the sector from a data perspective is a core input for our proprietary rating topics with KPIs related to GHG emissions, system with regards to setting the sector- • 16 factors • Controversies workforce safety, controversies and board specific weightings for the four pillars and structure in absolute and relative terms. the 16 factors. Allianz Global Investors Sustainability and Stewardship Report 2022 37
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.2 Sustainability research Principle 7 02.2.3 Company research Proxy voting continued to be a Putting collaboration at the heart of our research approach Company analysis combines a proprietary collaboration track for aligning voting rating system and qualitative research decisions with research views and using the outcomes of thematic and sector capturing the implications of annual research to focus on the most relevant, general meeting (AGM) outcomes in and possibly controversial, aspects of company, sectoral or thematic analysis. an entity’s profile. This approach has For example, our updated climate guided us to develop a new format for materiality analysis in the sector sustainability company profiles. We focus framework for financials instructed our on the most impactful, controversial or proxy voting decision for the high profile divisive investee companies. say-on-climate proposals at several banks in 2022. For each company, we review human rights and the four pillars of environmental, Research and Stewardship at AllianzGI social, business behaviour and corporate We are pursuing an engagement governance. We provide insights into both approach with an activist sustainability absolute and relative scores. In addition orientation as part of our ambition to be a to the dedicated research focus list, sustainability shaper. In 2022 we evolved the Research team provides ad-hoc our engagement strategy, focusing among reviews based on emerging developments, others on thematic engagement. controversies or where data providers See section 3.1. diverge on assessments. In 2022, we completed in-depth sustainability Thematic research projects run by our analysis of over 250 entities. Research team, for example on biodiversity, are a cornerstone of these engagement Company reviews often trigger active follow- activities and the discussion between the up actions and engagements. These are Research and Stewardship analysts help framed together with the Stewardship to form a joint view on the objectives when team to combine research findings with engaging our target companies. engagement experience. We strengthened collaboration between teams in 2022. Allianz Global Investors Sustainability and Stewardship Report 2022 38
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.3 Sustainability methodologies and analytics Principles 4 8 02.3.1 Ensuring robust data Our long-term strategy is to use our Data is sourced from providers directly and methodologies proprietary research as the primary into our internal cloud-based datalake 2022 highlights The Sustainability Methodologies driver of ESG insights and investment in line with AllianzGI’s data strategy. and Analytics team is responsible for decision-making. This will be made Close monitoring and constant update of 100+ ESG integration, socially responsible possible through new AI technologies and data points is supported by technologies sustainability analytics investment (SRI) scoring methodology and alternative data sources to expand the such as application programming available through our development of the analytics dataset for range of available data and perspectives, interfaces (APIs) and secure file transfer insights engine SusIE climate strategy, KPI target setting and smart analytics and real-time signals protocols (SFTPs). Controls apply to SDG measurement. relating to company behaviours. data flows and their evolution over time (coverage, expected values, etc) to track 10 ESG data is the foundation for every How we select and monitor data providers potential issues upstream in our data third-party data sustainability-informed investment We use a robust Request for Proposal supply chain. providers decision. We use multiple third-party (RfP) process to select third-party providers and have access to a huge data providers. This assesses data We continuously monitor the quality of amount of data relating to companies origin, methodology (qualitative and/ key service providers through service level 10,000+ around the world. To supplement or quantitative), raw data points, agreements or operating memoranda. third-party data, we also harvest issuer coverage, resources in place, Depending on the nature of the service, companies rated differentiable, material information on expertise, granularity of research, business owners may receive regular by proprietary ESG premia through our own investment approach, IT support, client support, information from service providers to sustainability research processes. and consistency/quality of data feed. inform on the quality of the services methodology (eg, standard KPIs and other information). The independent Risk Management 178 function reviews monitoring procedures of key service provider relationships countries rated implemented by the respective business by proprietary owner in line with AllianzGI’s key vendor sustainability We continuously monitor the quality of and outsourcing provider policy. methodology See section 03.8. key service providers through service level agreements or operating memoranda. Allianz Global Investors Sustainability and Stewardship Report 2022 39
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.3 Sustainability methodologies and analytics Principle 4 Leveraging ESG data also supports the development of innovative sustainable investment approaches. Leveraging ESG data Our new KPI approach was rolled out Developing robust methodologies and over 2022. It considers and addresses analytics based on the overall ESG environmental and social challenges dataset to which we have access is one of within the portfolio construction process AllianzGI’s core competencies. This begins by defining sustainability as a KPI with methodologies to assess the ESG objective that must be met at portfolio characteristics of issuers, both corporates level. Targeted, measurable and reported and sovereigns. It includes climate outcomes on the carbon intensity KPI will analytics to monitor the impact of climate serve to strengthen our approach. In 2023, change and the Paris Agreement-aligned we will develop additional KPIs including, commitments of a specific corporate. but not limited to, sustainable investment share, net zero alignment share and Improved corporate disclosure biodiversity footprint. informs the design of innovative proprietary frameworks for evaluating sustainability risks and opportunities. Leveraging ESG data also supports the development of innovative sustainable investment approaches. Allianz Global Investors Sustainability and Stewardship Report 2022 40
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.3 Sustainability methodologies and analytics Principles 2 4 Shaping sustainable pathways towards change AllianzGI Sustainability Insights Engine (SusIE) Leveraging ESG data enables our investment experts to implement innovative sustainable investment approaches. An effective interface is required to allow our investment experts, product specialists, credible firmwide integration of ESG with risk management and other stakeholders. efficient processing of proprietary models, high democratisation of sustainability SusIE is a key enabler of active investment data and consistent embedding of ESG decisions on sustainability across all asset data in investment processes. classes, feeding all front-office tools with Screenshot of ESG Profile > Scores section consistent ESG data. This contributes In 2022, we launched SusIE to enable to our differentiation, leveraging our ESG-informed investment decision making. expertise via a powerful proprietary A wide range of external ESG datasets SusIE is also the main portal to access The digital platform uses state-of-the-art engine that delivers added value to complemented by in-house research proprietary sustainability scores with technology to facilitate mainstream access our clients. Our multi-provider-based strategy for ESG transparent and granular indicators. to a range of ESG data in one place for all data ensures that we benefit from a broad In 2023, SusIE will also distribute in-house spectrum of data inputs. SusIE processes, research – thematic, sector and company computes and transforms data from research – from our sustainability research Screenshot of ESG Profile > more than 10 third-party vendors into and stewardship analysts. External and Dashboard at company level standardised datasets using cloud data internal insights contribute to the real storage. This includes automated checks integration of sustainability in our active of pre- and post-data processing to ensure investment decisions. high quality standards and data integrity across the value chain. Allianz Global Investors Sustainability and Stewardship Report 2022 41
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.3 Sustainability methodologies and analytics Principles 2 4 Exclusions and regulatory analytics Negative screening is commonly used under the spotlight for ESG integration by clients and we Looking ahead SusIE supports analysis and have designed a dedicated Exclusion Integrating non-financial factors In 2023, the Sustainability implementation of EU taxonomy and EU policy module to provide comprehensive into investment decision making is Methodologies and Analytics team sustainable investment shares. Provided at transparency for our investment experts increasingly mainstream, but the choice will continue to develop SusIE with a company level, it allows our experts to on companies that do not comply with and types of data being integrated focus on: select the best companies from their international standards, international is still evolving. ESG disclosures and investment universe but also to consider regulations, clients’ guidelines and/or complexity will only grow and the • Embedding stewardship-related any breach of governance principles and/ AllianzGI sustainable convictions. addition of further information to data and outcomes into a new or harming risks. disclose will result in an even more Engagement module. challenging data system to report • Capabilities to break down a portfolio and understand. Therefore, we will based on different criteria through a reinforce SusIE to shape the most new Cockpit module. meaningful solutions and, in doing so, • Increasing the number of data demystify, inform and guide our clients providers for specific needs such as on the most appropriate methodologies biodiversity and impact. and analytics for targeted outcomes. A strong proprietary sustainability data architecture is the cornerstone in understanding and aligning non-financial outcomes alongside financial returns. Screenshot of ESG Profile > Regulatory section at company level Allianz Global Investors Sustainability and Stewardship Report 2022 42
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.4 Climate-related risks and opportunities Principle 4 Climate risks are a crucial consideration Integrating climate risks and as climate change. The climate transition A key belief in our philosophy when assessing potential investments. opportunities in investment processes will create investment opportunities and surrounding climate investments is Transition and physical climate factors Our Sustainable Investment team, risks across all sectors of the economy. that public corporate disclosures on may pose a significant risk or opportunity portfolio managers and analysts Our industry has a crucial role to play climate are not yet in-depth enough to in the short, medium and long term continuously monitor and assess the in addressing climate change risks and inform simple rules-based strategies. through the value of assets we manage science, regulatory response and opportunities through investment decisions Market inefficiencies on climate risks and on behalf of our clients, the investment business implications of climate change. and influencing investee companies and opportunities currently exist and active products at the core of our business, We examine the implications for individual other institutions. We published our second research and corporate engagement are and how we operate as a corporation. issuers and sectors and the ways in annual Task Force on Climate-related necessary to comprehensively tackle the which climate change can be a driver Financial Disclosures (TCFD) report in 2022. dominant long-term global trends. • In the short term, policy and reputational of investment performance. For more information see our Climate risks of our investee companies are the Policy Framework and annual TCFD We are shaping the pathway towards leading climate-related risks that may AllianzGI supports and implements the report on our website. net zero greenhouse gas emissions by affect investments. recommendations of the Task Force on • In the medium term, market and Climate-Related Financial Disclosures Climate strategy technology risks associated with the (TCFD), engaging with companies on We enable our clients to reflect climate risks climate transition may develop more climate-related issues and encouraging and opportunities in their holdings. As a substantially, while acute physical risks them to report on TCFD and Science member of the Net Zero Asset Managers may emerge more frequently. Based Targets (SBTs) to improve the initiative (NZAMi), we are shaping the 2050 • In the long term, chronic physical climate quality of disclosures provided to our pathway towards net zero greenhouse gas in line with global efforts to limit risks could become more substantial. investors to meet their climate ambitions emissions by 2050 in line with global efforts warming to 1.5°C. more precisely. Climate change-relevant to limit warming to 1.5°C. When it comes to climate-related indicators are part of our principal opportunities, initiatives that enable and adverse impact assessment. Next to mainstream strategies, we offer benefit from the climate transition are For more information on climate- climate thematic and impact-driven the leading opportunity that may affect related risk management process, opportunities such as green bonds and investments in the short term. In the please read our 2022 TCFD report. climate transition equity and private medium and long term, climate-related markets renewable energy investments. investment opportunities will arise For investors to be able to make informed These specialised assets can help to align from competitive positioning and decisions, companies must report an asset owner’s portfolio with climate climate innovation. comprehensively on how they are tackling transition targets. dominant global long-term trends such Allianz Global Investors Sustainability and Stewardship Report 2022 43
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.4 Climate-related risks and opportunities Principle 4 Climate-related metrics and targets We will continue to increase the scope of Listed equity assets We want to be as transparent as possible our assets and set intermediate targets for Indicator Unit 2022 2021 2020 regarding our climate-related profile, our third-party client assets. We will also Equities portfolio AuM EUR billion 213.26 326.44 243.09 including investment-related climate actively engage with institutional clients Total financed emissions million t CO 12.10 15.22 12.10 metrics. We submitted our first NZAMi and distributors to integrate net zero 2 interim targets at the beginning of 2022, objectives in their investments and into Total carbon intensity t CO2 /EUR 57.40 47.80 50.50 covering listed equity, corporate debt, our mutual funds. We aim to review our million invested infrastructure equity and infrastructure targets and progress annually. Weighted average carbon intensity t CO2 /EUR 129.70 119.90 130.80 million revenues debt. These targets reflect those set by Emissions data coverage of listed % 99% 98% 99% Allianz in 2021 for its proprietary assets as We use a variety of indicators across equities AuM a member of the UN-convened Net-Zero different lines of business to monitor, Asset Owner Alliance (NZAOA). assess and steer climate-related Corporate bonds assets See the Allianz Group Sustainability aspects of the economy. Our measured Indicator Unit 2022 2021 2020 Report 2022. investment-related carbon footprints (Scopes 1 and 2) are based on the issuers’ Corporate bonds portfolio AuM EUR million 184.20 188.19 168.25 Total financed emissions million t CO 12.33 13.72 17.94 For AllianzGI, assets in-scope of the carbon emission data from data providers. 2 targets represent 14%1 of overall assets Total carbon intensity t CO2 /EUR 75.80 77.90 119.80 under management: million invested Weighted average carbon intensity t CO2 /EUR 158.60 192.20 201.70 Listed equity and corporate bonds – million revenues 25% GHG reduction, Scopes 1 and 2, Emissions data coverage of corporate % 88% 94% 89% by the end of 2024 (baseline year: 2019). bonds AuM Infrastructure equity – 28% GHG Green assets reduction, Scopes 1 and 2, by the end Indicator Unit 2022 2021 2020 of 2025 (baseline year: 2020). Investments in renewable energy EUR million 5,133.03 5,185.95 4,756.27 Investments in green bonds EUR million 10,107.70 10,017.69 6,468.07 Infrastructure debt – Our target is to See our TCFD Report for the full methodology of how we calculate the grow the share of low-emitting and EU financed emissions. taxonomy-eligible assets. 1 Previously stated at 12%, the share of committed assets has been recalculated based on total AuM as of 31 December 2022 to take into account market effects on the asset base. Allianz Global Investors Sustainability and Stewardship Report 2022 44
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix Principles 4 7 02.5 Sustainability risk management We consider sustainability risks • Sustainability factors: Environmental, in our investment processes social and employee matters, respect for across all the assets we manage human rights, anti-corruption and anti- bribery matters. globally. All our investment • Sustainability risks: Environmental, strategies are ESG risk-assessed social or governance risk factors that, so that investment teams if they occur, could cause an actual or a can monitor ESG risks as part potential material negative impact on the value of the investment. of the investment process, In line with European regulation, although they do not necessarily AllianzGI considers sustainability actively incorporate ESG risks risks and PAIs of prospective and and opportunities into their active investments. investment decisions. • For publicly listed asset classes we have implemented a dedicated tool We apply portfolio and individual to systematically monitor and assess security level analysis across all assets sustainability risks. to ensure transparency on ESG risks • For private markets asset classes, ESG and principal adverse impacts (PAIs). risks are considered throughout the Sustainability risk factors can materialise investment process and ongoing asset along any of the three dimensions of ESG management activities. In many cases, investing. We consider sustainability risks they are specifically screened along to be potential drivers of financial risk sustainability risk guidelines, or using factors in investments, such as market minimum exclusion lists as defined by price risk, credit risk, liquidity risk and Allianz’s ESG Risk Framework. operational risk. We follow the EU SFDR Further detail is given in our definition of sustainability factors and Sustainability Risk Management sustainability risks: Policy Statement and Principal Adverse Impact Statement. Allianz Global Investors Sustainability and Stewardship Report 2022 45
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principles 4 7 Our product categories cater to AllianzGI’s product categories clients’ sustainability objectives and preferences and provide transparency on the SFDR characteristics of our products. Conventional ESG risk-focused Sustainability-focused Impact-focused We provide investment solutions Objectives EUR 117bn EUR 126bn EUR 9bn with differing levels of sustainability Financial returns and active Objectives Objectives Objectives incorporation. To ensure transparency, risk management Financial returns and material Financial returns and Financial returns and we categorise our strategies into E, S and G risk considerations sustainability objectives measurable sustainable different types depending on clients’ Qualifying approach and values outcomes sustainability objectives: Integrated ESG Qualifying approaches Qualifying approaches SRI Best-in-class Impact (Art. 9) Climate engagement with SDG-aligned FI/MA/private outcome (this approach will be markets (Art. 9) decommissioned by September SDG-aligned equity (Art. 8) 2023) KPI-based approach Classified as Article 6* only Classified as Article 8* Classified as Article 8 or 9* Firm-wide Exclusions Sustainable Minimum Exclusions ESG risk assessment: identification and consideration of sustainability risks and adverse impacts Active stewardship: company engagement and proxy voting Source: AllianzGI, as of December 2022. ESG: environmental, social and governance. SRI: sustainable and responsible investing. KPI: key performance indicator. FI: fixed income. MA: multi asset. For illustrative purposes only. Exclusions apply to direct investments. Sustainable or impact investing private markets strategies apply the Allianz ESG Integration Framework exclusions. AllianzGI supports the United Nations Sustainable Development Goals (SDGs). *According to EU SFDR regulation. Allianz Global Investors Sustainability and Stewardship Report 2022 46
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Increasing transparency our commitment to offering investors a of SFDR Article 8 funds high standard of sustainable investment The Sustainable Finance Disclosure products. Investment strategies we Regulation (SFDR) is a fundamental classify as Article 8 will always have pillar of the EU Sustainable Finance two binding elements: our sustainable agenda. Its objectives include bringing minimum exclusion policy and one of our transparency to the market for investment sustainable investment approaches. products with sustainability-related claims, enhancing the comparability of products, Each binding element is measurable enabling investors to better understand and reportable, providing transparency the impact of their investment decisions, and clarity to our clients. We believe this and channelling capital towards more approach reduces the gap between what sustainable companies and activities. sustainable products can achieve and the Notable elements of SFDR include expectations of clients. Articles 6, 8 and 9. The first binding element enforces Article 8 is increasingly being used as exclusion criteria related to weapons, a market proxy to classify products as coal, international norms and standards sustainable. In some instances, it is being (including the UN Global Compact), used as a label in the marketing and and tobacco. distribution of funds, with implications for investors’ investment choices. The second binding element consists of one of our qualifying approaches for our With deviating perceptions among sustainability-focused or impact-focused asset managers and regulators as to product categories. what triggers classification of Article 8, See chart on page 48 on AllianzGI’s AllianzGI has determined to go beyond “Two binding elements” approach. the minimum regulatory requirements for our Article 8 classified product range in Allianz Global Investors Sustainability and Stewardship Report 2022 47
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 We apply two binding elements to our sustainability-focused and impact-focused funds. 1st binding element 2nd binding element 2 Sustainable minimum exclusion list Sustainable investment approach Two binding One of the following approaches elements ensure credible sustainability delivery, which we take Sustainability-focused/Article 8 Impact-focused/Article 8 seriously in our role as a or Article 9 sustainability shaper Weapons Coal Private markets sustainable Private markets SDG-aligned (ie, blended finance) Materiality of our harmonised International Tobacco SRI Best-in-class Private markets impact approach is in line with standards regulatory objectives Climate Engagement with Outcome Public markets impact (to be decommissioned by September 2023) (ie, green bond) Measurability and reportability for high level of transparency Multi-asset blend SDG-aligned and clarity KPI: carbon reduction (further KPIs in development) 2 Private markets use the Allianz ESG Framework rather than AllianzGI’s sustainable minimum exclusions policy. AllianzGI, as of September 2022. For illustrative purposes only. Exclusions apply to direct investments. SRI: sustainable and responsible investing. KPI: key performance indicator. AllianzGI supports the United Nations Sustainable Development Goals (SDGs). Allianz Global Investors Sustainability and Stewardship Report 2022 48
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
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 The general philosophy and process of encouraging greater inclusivity in society. assessing sovereigns with a focus on topics And second, to achieve an ongoing year- applying the SRI Best-in-class approach We assess the ability of corporate issuers to such as healthcare, education, the role on-year improvement against a chosen are identical across listed asset classes organise their internal structure to improve played by women in civil society and the environmental or social KPI. globally. The specific processes may differ risk management. This includes evaluating infrastructure available to provide access to slightly depending on the asset class, management or supervisory board basic needs. Our first KPI is GHG intensity. By actively resulting in different portfolio compositions. composition, board independence and managing the GHG intensity of portfolios, Multi-asset products, for example, can be remuneration transparency. We analyse Business behaviour: We assess the we aim to contribute to help shape split into two categories: sustainable audit and control mechanisms to prevent relationships between issuers and their the pathway to a low emission future. advanced (where more than 70% of assets abuse and reduce risks under review. supply chains, customers and communities The GHG intensity KPI-based approach need to be sustainable) and sustainable Finally, we analyse shareholder rights and along with the impact of their products helps us better understand a portfolio’s complete (where more than 90% of assets anti-takeover measures. For sovereign- and services on society and respect for carbon footprint status quo and need to be sustainable). bond issuers, we evaluate systems used to market regulations and fair business future development. prevent and fight corruption, the stability practices. These criteria do not apply to Equity portfolios use AllianzGI’s of political structures and government sovereign-bond issuers. Our goal is to continuously expand the proprietary ESG ratings to identify capacity to introduce necessary reforms. list of available KPIs and extend them to outperformers in each industry with KPI-based other products. In addition, the KPI-based regards to ESG performance. A tailored Environment: We assess issuers’ direct Our KPI-based approach was rolled out approach is to be applied to more products. process for certain fixed income products and indirect environmental impacts, in Q4 2022 and targets measurable, assesses sovereign-bond issuers based risks, approach to environmental monitored and reported KPIs to track ESG Looking ahead on a proprietary emerging-markets ESG responsibility and development of results that are significant enough to drive We plan to further evolve our framework that screens out the bottom environmental solutions. Our analysis sustainability in the investment process of sustainability-focused product 10% of countries on the E, S and G pillars. of sovereigns assesses measures taken a portfolio. offering over the course of 2023. to address a comprehensive range of We will extend the newly introduced Our proprietary sustainability rating environmental issues with a country’s A potential advantage of the approach KPI-based approach by implementing methodology spans the different asset political and legal framework being key is the ability to quantify the sustainability additional sustainability-related key classes and is based on four factors: elements of our assessment. feature of a portfolio and regularly report performance indicators. In addition, outcomes. It allows us to choose between innovative climate-related concepts Corporate governance: Strong corporate Social: We review the extent of issuers’ two objectives. First, to outperform across asset classes will be explored governance helps foster long-term workplace health and safety, dialogue with a reference investment universe or to address our clients’ preferences to investment, financial stability and business employees and relationships with suppliers. benchmark or a defined threshold on at tackle global climate change. integrity, supporting stronger growth and We consider general social policy when least one environmental or social KPI. Allianz Global Investors Sustainability and Stewardship Report 2022 50
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 02.6.3 Impact-focused Intention: The intention of a strategy and Successive crises including Covid-19, Increasing numbers of investors no its investments is to generate incremental the war in Ukraine and the climate Looking ahead longer see environmental sustainability positive social and/or environmental value emergency are exacerbating inequalities Partnering with industry bodies and social equality as an add-on to while delivering financial returns. between and within countries and stifling looking to create clear ESG standards their investment strategy as they move progress to achieve the Sustainable in private markets will remain an beyond pure financial returns – and Association: There is a clear association Development Goals (SDGs) and the Paris area of focus in 2023. Convergence of 4 Meeting the UN SDGs by the standards will help increase the even beyond ESG risk management – between each investment and the positive Agreement. towards positive outcome-orientated output delivered. target year of 2030 will require substantial availability of relevant ESG data that investment approaches. investment from both the public and informs investment decisions and Measurement and reporting: private markets. ongoing engagement with our private We support investors who want to see The impact will be measured on a “best market investments. One challenge a positive change for the planet and effort basis” and reported in order to the market faces is the availability society while generating a financial validate each strategy. of data and transparency to fully return. Impact investing contributes to inform investors on ESG topics. material positive environmental and/or AllianzGI’s impact investments can While improving, we aim to enhance social outcomes that can be measured be accessed through private markets The intention of the transparency of our investments against specific goals and, in many cases, (eg, private equity impact fund of funds) which is becoming increasingly against the United Nations Sustainable or public markets (eg, green bonds). a strategy and its necessary from a regulatory point Development Goals (SDGs). Impact investing also extends to our of view. We will continue to consider blended finance approaches, where investments is to how best to tackle this by engaging Impact investing strategies capital from commercial investors with our assets and using technology Our Impact-focused strategies enable is combined with philanthropic and generate incremental to collect and leverage information in clients to maximise their exposure public sector funds to maximise impact, positive social and/ the investment process and report on to positive environmental and social especially in emerging markets where it to our clients. outcomes by offering impact-focused commercial investors benefit from or environmental approaches across public and private de-risking. This approach can mobilise asset classes. These strategies are defined large-scale private capital in developing value while delivering by three core beliefs: countries and contribute to closing the financial returns. United Nation’s Sustainable Development Goals financing gap in development countries, which grew in 2022. 4 https://www.oecd.org/finance/global-outlook-on-financing-for-sustainable-development-2023-fcbe6ce9-en.htm Allianz Global Investors Sustainability and Stewardship Report 2022 51
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 SDG-aligned strategies Our SDG themes and the SDGs they support SDG-aligned strategies often adopt a thematic investment approach. We invest Financial inclusion in companies that exhibit a certain eg: SME financing level of contribution towards one or more of the UN SDGs. Our assessment Social inclusion is both quantitative and qualitative eg: social infrastructure and a quarterly report highlighting SDG contributions on an individual strategy level is available. The SDGs, Education established by the UN General Assembly eg: EdTech in 2015, consist of 17 distinct goals which serve as a global framework Health (innovation and promotion) and roadmap for action to achieve a eg: health access more sustainable and equitable future. For example, “food security” theme-based Food security investments address SDG 2 “Zero Hunger”. eg: sustainable agriculture Our approach applies a set of sustainable minimum exclusions as well as the E, Clean water S and G factors of investee companies eg: water supply being analysed. In addition, principle adverse impacts are analysed to avoid companies with poor ESG practices and Clean air/energy transition those that cause significant harm. eg: energy generation Clean land/circular economy eg: waste management Allianz Global Investors Sustainability and Stewardship Report 2022 52
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 AllianzGI’s SDG-aligned funds follow Health Clean our thematic investment approach, (Innovation Land/ Clean Air/ which is built on a solid understanding Social and Financial Food Clean Circular Energy of secular drivers and the ability to Inclusion Promotion) Inclusion Education Security Water Economy Transition identify companies with long-term Single theme capabilities potential. We believe these companies Global water have greater growth potential, are more Food security resilient to macroeconomic and political Smart energy volatility and benefit from regulatory Sustainable health tailwinds. Our SDG funds address a single Main theme capabilities sustainable core theme or several themes. Clean planet Seeking out key enablers of the SDGs Positive change We actively select companies based on How a company’s handprint takes its SDG-aligned investment strategies go one a combination of fundamental research footprint one step further step further by investing in companies and the analysis of the contribution of A company’s footprint measures the impact that are key enablers of the SDGs. each company to the SDGs, seeking out its activities have on the environment and These companies effectively enable others what we believe to be the most promising society. Frequently measured footprint to act, as they provide goods or services companies within a topic. SDG-aligned categories include, for example, the carbon that allow others to lower or minimise investing directs capital towards footprint (the amount of carbon dioxide their footprint. This impact is described companies which we call “key enablers” – emitted) or the water footprint (the as its handprint. Key enablers have a companies that are providing solutions to fresh water consumed and/or polluted). multiplier effect through both managing the world’s greatest challenges. Traditional sustainable investment their own footprint and their handprint’s Our SDG-aligned investment strategies strategies focus on the improvement impact on others. invest in companies that provide goods or minimisation of the footprint of or services that allow others to lower or invested companies. minimise their footprint and therefore have a multiplier effect. They not only manage their own impacts but have a potentially much larger effect through their impact on others. Allianz Global Investors Sustainability and Stewardship Report 2022 53
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Impact-focused investing in proceeds will be exclusively applied to public markets finance or re-finance, in part or in full, Shaping sustainable pathways towards change Green bonds new and/or existing eligible green projects Green bonds can support the pathway and which are aligned with the four core to a more sustainable future by components of the Green Bond Principles: Halma plc mobilising capital markets to deliver environmental benefits. On a worldwide • Use of Proceeds (identification of The Halma group of companies manufacture and market scale, green bonds have proven to “green” projects and assets). health and safety sensor technologies designed to save lives be a multifaceted model for success, • Evaluation and selection of eligible attracting a growing number of investors green projects. and provide science-based solutions to complex issues. seeking sustainable, low-carbon • Management of Proceeds (tracking, investment opportunities. allocation and spending of proceeds). With products focused on making the Halma’s water analysis and • Reporting (what information to disclose, world safer, cleaner and healthier, treatment technologies deliver over Our green bonds strategy follows a as well as the frequency of disclosure to many of Halma’s underlying 200 million water tests annually and sustainable investment objective to investors, including methodologies for businesses’ objectives are aligned monitor over 110,000km of water participate in the mobilisation of capital CO₂ emissions calculation). with the SDGs, supporting public and pipelines, increasing water safety, to support the transition to a low-carbon personal health, water management, conservation and efficiency. It has society, natural capital preservation and Our investment in green bonds unlocks hazard detection in buildings and also developed life-saving sensor adaptation to climate change. This favours key enablers of energy and climate industrial work environments, products technology to analyse drinking water the reallocation of investments through a transition. For example, AllianzGI invests such as medical optic devices, water for lead contamination in just three less carbon-intensive economy. in companies that develop large offshore quality test kits, fire and smoke minutes. The importance of this is wind farms, implement solutions to lower detectors, elevator safety sensors, brought into sharp focus by a recent As defined by the International Capital the impact of carbon-intensive freight 5 activity or promote the circular economy and more. UNICEF report which estimates that Markets Association , green bonds are one in three children, up to 800 million any type of bond instrument where the through recycling. globally, are reported to have blood levels with unsafe amounts of lead present. 5 https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/Green-Bonds-Principles-June-2018-270520.pdf Allianz Global Investors Sustainability and Stewardship Report 2022 54
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Impact investing in private markets Increased frequency of major environmental events and social Shaping sustainable pathways towards change movements has raised awareness that capital can – and should – play a role in addressing environmental and social AllianzGI’s OECD markets-focused impact offering issues. As a field, impact investing has grown steadily in the past decade with –the Allianz Impact Investment Fund (AIIF) the total market size now estimated at more than USD 1.1 trillion according to the Global Impact Investing Network (GIIN).6 Following our impact • Inclusive capitalism – investment framework, the AIIF actively in Karriere Tutor, a German digital Our Private Markets Impact teams aim to pursues direct and indirect educational business. deliver tangible real-world impact through investments that generate • Climate change – investment in direct and indirect private equity and debt Hydrostor, provider of long-duration investments and blended finance vehicles. positive environmental energy storage technology. and social outcomes and a • Planetary boundaries – investment measurable contribution to in REBIKE, first large-scale European e-bike refurbishment facility at least one UN SDG. and operations. The AIIF’s investments have made In 2022, AIIF published its inaugural strong progress on portfolio growth Annual Impact Report covering across all three impact thematic investments completed in 2021 to areas, as demonstrated by the report the impact performance of its following examples: underlying portfolio. 6 GIIN, 2022 Sizing the Impact Investing Market. Allianz Global Investors Sustainability and Stewardship Report 2022 55
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Measuring impact Four main elements comprise the AllianzGI Key elements of the AllianzGI impact framework As capital is increasingly allocated to impact framework: impact investing in private markets, measuring impact in a robust and credible 1. Establish impact objectives that target s 2 . way is essential. Defined frameworks key societal challenges in line with the e v A i s t s c e e s j s b for doing so can be built into the UN SDGs. i i o n m t e t g p c r a a a t investment process. e c p i n t t m o m 2. Assess the impact materiality and i h d a s e t i c e The AllianzGI impact framework facilitates additionality of potential investments l i r b s i i a a o t n l s i the due diligence and selection of by applying our impact scoring - t E m y . a a investments that contribute to material system, which is aligned with the five 1 k n i d and positive impact. This approach dimensions of impact as defined by n supports rigorous measurement and the Impact Management Project. g management of impact over the lifecycle of the investment to ensure impact may 3. Identify core impact KPIs to measure 4. be delivered. and report against, where possible, Con nt aligned with the UN SDGs and tin e We align our approach to managing and the Global Impact Investing m u em measuring impact with industry leading Network’s IRIS+. ark ous sur ent et lea ea em principles and standards. -bu rni g m ag 4. Apply continuous testing, learning ildin ng and ngoin an and market-building to strengthen g 3. O nd m our approach to impact generation. a AllianzGI impact scoring system • Enterprise impact • Investor contribution Allianz Global Investors Sustainability and Stewardship Report 2022 56
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Increasing opportunity with junior position. The goal is to achieve Blended finance approach: de-risking via blending blended finance an attractive risk-return profile for Local impact Blended finance is a technique used to all stakeholders by blending public Senior investors Private capital by investing attract large-scale commercial capital and philanthropic capital together alongside to emerging markets with a focus on with commercial capital into risk- development sectors that impact social and economic tiered structures. finance growth such as infrastructure, energy as anchor investor alongside institutions in and agribusiness. AllianzGI was one of the first large other institutional investors First loss sustainable asset managers to facilitate blended protection projects and Blended finance generally includes a finance and we have raised more than companies. combination of commercial (or private) USD 2.5 billion in commitments across Junior investors Public capital capital in a senior position and five blended finance vehicles since 2017. development (or public) capital in a We have raised more than USD 2.5bn in commitments across five blended finance vehicles since 2017. Allianz Global Investors Sustainability and Stewardship Report 2022 5757
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Shaping sustainable pathways towards change Impact Investing team The Impact Investing team at AllianzGI provides equity financing This climate adaptation-focused to generate positive environmental and social impact. transaction exemplifies EMCAF’s focus on financing innovative solutions for The team manages three fund-of-funds CCSF finances development and climate transition in the real asset space. strategies, two of which are emerging operation of first-of-its-kind energy This strategy operates at the nexus of market-focused blended finance vehicles efficient cold chain infrastructure in East climate change – spanning mitigation that bring together public investors to Africa. As climate change increases the and adaptation, food security and health de-risk the underlying investment universe frequency of extreme weather events, with strong positive impact expected for and mobilise large scale institutional including drought and torrential rain, agricultural producers, farmers and the capital to close the equity financing gap adequate cold storage facilities are broader population. in these markets. vital to hold food reserves and extend The first pilot facility in Nairobi, availability of agricultural produce to non- Kenya, should be operational in early We launched our latest vehicle – the harvest seasons. Without this capability, 2023 and other facilities are at various Emerging Market Climate Action Fund local communities are exposed to food stages of development throughout (EMCAF) – in late 2021 jointly with the insecurity associated with such weather the region. European Investment Bank (EIB). EMCAF is events. Cold chain infrastructure facilitates an innovative blended finance fund that a more resilient food supply stock and finances climate mitigation and adaptation supports climate adaptation for climate- as well as environmental projects in Africa, vulnerable communities. It also addresses Asia, Latin America, and the Middle East. high rates of food losses and associated GHG emissions in East Africa, with rotting In 2022, EMCAF closed its first transaction food a large source of methane emissions, –a USD 15 million investment in ARCH a GHG 25 times more powerful than CO . 2 Cold Chain Solutions Fund (CCSF). Allianz Global Investors Sustainability and Stewardship Report 2022 58
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Shaping sustainable pathways towards change Debt financing in developing countries The Development Finance team at AllianzGI focuses on private debt capture any ESG-related items pending investment opportunities that mobilise scalable commercial capital completion. To ensure ongoing ESG in the direction of emerging markets to support the UN SDGs. compliance, the borrower will provide ongoing reporting on the ESAP progress and other ESG requirements during the We have raised more than EUR 3.1 billion connecting several cities across the life of the facility. across our Development Finance strategies, country. The road is part of the country’s including blended finance debt vehicles. national efforts to improve essential The financing is expected to generate Strategies are created through partnerships infrastructure. The financing includes a positive outcomes including reduced with public sector institutions that bring credit guarantee provided by a European transportation time between cities, together market knowledge, investment Export Credit Agency for the benefit of improved road safety and increased expertise and different types of capital. the investors. economic growth of the populations These partnerships result in investment along the road as a result of greater opportunities that aim to contribute to In addition to detailed credit analysis, trade within the country and with reducing the SDG funding gap in the we evaluated a number of ESG issues its neighbouring sovereign. countries that need capital the most. including a Human Rights Assessment, an evaluation of expected GHG For example, AllianzGI on behalf of emissions of the project as a result of the investors provided an East African road improvements, and the project’s sovereign with financing to support compliance with the IFC Performance the rehabilitation and construction Standards. An Environmental and Social of an approximately 90km-long road Action Plan (ESAP) was prepared to Allianz Global Investors Sustainability and Stewardship Report 2022 59
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 02.6 Sustainable investing categories Principle 7 Looking ahead We will continue to develop our private investments in emerging markets markets impact strategies in 2023, that support the achievement of the applying AllianzGI’s impact framework UN SDGs. This will include capital to ensure positive contributions to social deployment from existing strategies and environmental outcomes. (eg, Emerging Market Climate Action Fund, a blended equity strategy) and We will provide tailor-made debt to the launch of additional strategies private sector companies in OECD (eg, Allianz Climate Solutions Emerging countries which are applying innovative Markets, a blended debt strategy). solutions to pressing societal challenges, as well as investing in global private For our listed market strategies, we plan equity and venture capital funds focused to add further use-of-proceeds bond on creating social and/or environmental strategies to our impact-focused impact in OECD markets. product suite. A social bond strategy will complement our offering and allow We will also continue to build on our our clients to participate in this growing blended finance activities, focusing on fixed income segment. private debt and private equity fund Allianz Global Investors Sustainability and Stewardship Report 2022 60
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03 Active stewardship We shape sustainable pathways by engaging with investee companies to deliver real-world change across our three guiding themes of climate change, planetary boundaries and inclusive capitalism. As an active investment manager, constructive engagement dialogue with investee companies is essential for creating sustainable pathways towards change. Our global stewardship approach guides how we engage with investee companies and exercise our rights as owners. Principle 7 Allianz Global Investors Sustainability and Stewardship Report 2022 61
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.1 Developing our engagement strategy Principles 7 9 We are pursuing an engagement approach with an activist sustainability orientation as part of our ambition to be a 2022 highlights sustainability shaper. We evolved our approach in 2022, focusing 438 on thematic and collaborative engagement as well as engagement active engagements across all listed asset classes. We also maintained our risk-based approach to engagement for large holdings. Thematic engagement: In 2022, not only to inform our “Say on Climate” No. of engagements we continued to refine our thematic votes. Regulatory requirements extend to increased by engagement approach aligned to our themes such as biodiversity and human 46% year-on-year three sustainability themes – climate rights. As these issues are a high priority change, planetary boundaries and for us, not least in our sustainable funds, inclusive capitalism – in addition to we have also launched thematic projects governance themes within specific for these topics in 2022 and will continue Engaged in markets and more broadly. We prioritise our work in 2023. 28 markets engagement projects based on the size globally of our holdings per market or portfolio Collaborative engagement: To scale our and the priorities of clients or certain engagement and be more effective in the funds. The many direct conversations with major markets we have holdings, in 2022, Voted at our clients provide us with insights into we laid the legal foundations for broader 10,200 their engagement priorities and thematic collaborative engagement. We are shareholder meetings focus areas which extends particularly partnering with high-profile initiatives, to climate, biodiversity and human rights focusing our efforts on climate transition, issues. Reflecting increased client interest diversity and select governance topics. Voted against in the transition to net zero as well as See section 03.5. 43% of remuneration regulatory commitments, we targeted proposals additional high-emitting sectors to expand Engagement across all listed asset our climate engagement programme in classes: While the bedrock of our 2022. We maintained our engagement engagement activities comes from our on the net zero transition of the fossil fuel heritage as an active equity manager, we sector as we consider this a high priority, are also now anchoring our engagement Allianz Global Investors Sustainability and Stewardship Report 2022 62
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.1 Developing our engagement strategy Principles 7 9 more specifically in fixed income and sustainability or governance. Our activities facilitating dedicated dialogues for our typically relate to an investee company’s corporate credit strategies. Our strategy strategy, operational or financial includes enhancing the engagement- performance, capital management, specific skills of our investment corporate governance and ESG risks professionals through dedicated training. and impacts. See section 03.2.1. This approach allows us to strike a good We seek to reinforce our engagement balance between ESG risk reduction in approach externally through public our portfolios and leading clients and speaking and policy engagement, for companies on an inclusive sustainable example relating to the legal framework pathway to change. It also allows us to for collaborative engagement and set clear engagement objectives from the publishing our convictions via thought outset. While our preference is to engage leadership pieces. investee companies confidentially, we are See sections 03.4 and 03.5. prepared to escalate to engage publicly Our risk-based approach remains the if we conclude that the confidential basis of our engagement strategy and approach has gone as far as it can without focuses on the material ESG risks that delivering progress and our objective we identify. Targeting is closely related would be best served by escalation. to the size of our exposure, whether per See section 03.6. market or fund or considering the total value of investment. The focus of engagements is determined by considerations such as significant votes against company management at past general meetings and sustainability issues that we identify as below market practice. Engagements can also be triggered by controversies connected to Allianz Global Investors Sustainability and Stewardship Report 2022 63
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.2 How we engage Principles 2 7 9 We apply a broad range of principle adverse impact / Do No research thus provides the background team to make engagement meetings as tools to our engagements, Significant Harm in the context of the EU for effective stewardship. We frequently impactful and productive as possible by including one-to-one sustainability regulation. In some cases, include relevant AllianzGI Investment combining insights from all critical parts of or group meetings with these interactions were the starting team members alongside members of the our investment platform. point for a more thorough engagement Sustainability Research and Stewardship chairpersons, board members, process. However, we do not classify them senior management, company as such and report them separately to secretaries and heads of specific underline our conservative approach to Resourcing our Stewardship Activities: Collaboration on company engagements functions, as well as written engagement reporting. correspondence. Through our Climate Engagement Engagement Proposal 1 Initiated by Research or Stewardship Analyst or Portfolio Manager with Outcome (CEWO) programme We differentiate between normal research we systematically reach out to target and monitoring meetings as an active companies in writing to discuss the scope Research Form a Stewardship Discuss Portfolio manager and engagements where and progress of their climate strategy. Analyst view Analyst Manager we actively seek to make an impact or This programme is intended to achieve Align target a specific outcome. The latter an ongoing evaluation of progress made. are, by default, classified and reported In many cases (see figures on page 69) as engagement meetings. Our overall these letters were followed up by stewardship is much broader than is engagement conversations. reflected by the numbers reported Research Investment as we also actively engage through While our stewardship professionals Decision industry bodies and by conveying our often lead engagements, the members Engagement stewardship stance to larger audiences at of the Sustainability Research and Proxy industry events. the Stewardship teams frequently Voting discuss material sector-specific issues, In 2022, we added data clarification thematic focus topics and analytical requests to our interaction with companies frameworks, eg, to evaluate climate votes. in line with regulatory requirements. This collaboration is the basis to form Outcome These comprised conversations on a joint view on a company and define Informs Informs sustainable investment share and engagement objectives. High-quality 1 AllianzGI plans to decommission its Climate Engagement with Outcome Programme going forward. See footnote on page 15 for further details. Allianz Global Investors Sustainability and Stewardship Report 2022 64
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.2 How we engage Principles 2 7 9 Our investment views are influenced Having identified the need for training accelerate transition activities, provide 03.2.2 Emerging market sovereigns by the outcomes of engagements and for Investment teams, the Stewardship appropriate climate-related disclosure Engagement with emerging market outcomes are linked to the proxy voting team developed a bespoke curriculum and adequately respond to climate (EM) sovereigns is part and parcel of our process, forming a consistent stewardship and delivered sessions to all Fixed Income change risks. investment process. The Fixed Income approach. All engagement results are Investment teams. Eight engagement team follows a specific engagement shared via our collaborative research and training sessions were held in 2022, As an outcome of our work in 2022, approach that rests on integrated risk investment platform and can be accessed reaching just over 90% of our Fixed Income we have established a more robust factor modelling to assess non-financial by our teams globally. investment professionals globally. and consistent process and approach risks that may impair a country’s ability to to engagements in fixed income. At the repay its debt. Our engagement approach differs across In addition to internal collaboration, same time, we remain mindful that a different funds, assets and geographies. we have continued to work with external more nuanced approach to embedding Our EM Fixed Income (EMFI) investment organisations such as the European sustainability in stewardship processes process fully integrates ESG considerations 03.2.1 Fixed income engagement Leveraged Finance Association where we within fixed income should exist, for which are set by the EM ESG sovereign Engagement activities apply to all public are members of the ESG Committee and example dependent on time horizons, framework. This framework uses twenty market activities, comprising equity from 2023 have board representation. the nature of the underlying instrument, publicly available indicators spanning E, and fixed income strategies globally. In 2022 we helped facilitate discussions strategy or turnover and portfolio size. S and G supplied by international institutions In 2022, we enhanced the coordination of with stakeholders around ESG and think tanks to quantitatively assess engagement activities in fixed income by engagement in high yield/leveraged Looking ahead EM Sovereigns, supported by our own adding regular dedicated dialogues for loans; and we seek to improve market Enabling our investment professionals qualitative analysis. The EM ESG framework our corporate credit strategies. practice around collaboration among to conduct engagements is a high is maintained and regularly updated investors in these asset classes. priority for us. In 2023, we will publicly and shared on our website. The process is overseen by a working continue to offer stewardship- group on fixed income engagement, The constraints on further development related training to our investment The EMFI team regularly runs meetings including our Global CIO Fixed Income. of fixed income engagement are professionals across public and with sovereign issuers to discuss ESG The benefits of setting up the working market broad. To shape the required private markets. In the first quarter, topics. This allows us to understand what group are already being realised. change, we joined the IIGCC we held engagement training may support or hinder the potential In several cases, we combined the Bondholder Stewardship Working Group. sessions for our Equity investment attainment of ESG outcomes in a certain expertise of the Stewardship, Equity and Members work together to improve professionals and offered dedicated sovereign. The framework enables us Fixed Income teams in joint engagement bondholder stewardship practices sessions for fund managers in Asia to engage in more tailored and deeper meetings and shared the outcomes via our to encourage high-emitting issuers and Europe. discussions with the EM sovereigns we collaborative investment platform. to develop credible transition plans, invest in. Focusing discussions on reliable Allianz Global Investors Sustainability and Stewardship Report 2022 65
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.2 How we engage Principles 7 9 public data from reputable institutions – We believe EM sovereign engagement rather than arbitrarily assigned numerical must adopt a long-term approach. scores – supports meaningful and Raising issues and monitoring change Shaping sustainable pathways towards change objective engagement discussions and or, at a minimum, establishing a rapport minimises potential impacts of political over ESG issues with sovereigns supports economy sensitivities, data challenges and the fiduciary duty to our clients and helps Uzbekistan: improving governance different political cycles. It also provides to increase the ESG outcomes achieved. the opportunity to raise important ESG For example, in the area of fiscal and Our proprietary sovereign ESG framework scores Uzbekistan at issues that our clients care about and debt transparency, our engagement takes to clarify the set of standards that we place over repeated interactions and often 4.5 out of a maximum of 10.2 consider essential for investing in a over a lengthy period to deliver results. certain issuer in our sustainability-focused The governance score (2.3) weighs that will help to detect corrupt practices. portfolios. Finally, engagement helps us In 2022, we conducted over 30 official on the overall rating, while the A new public procurement law is being to gain insight into the mechanics and engagement meetings or touch points environment (6.7) and social (6.6) adopted with an online platform for incentives systems at play in specific with EM sovereign delegations over scores are above average. In October public procurement. This will increase sovereign policy areas. specific ESG topics. These included 2022, our lead sovereign analyst on transparency, including of beneficial country visits to Azerbaijan, Costa Rica, Uzbekistan met with representatives ownership of contracting companies, Dominican Republic, El Salvador, Ghana, from the Central Bank, the Ministry of and reduce opportunities for corruption. Kazakhstan, Kenya, Panama, Uruguay Finance, local corporates/banks and The Listening to the Citizens of and Uzbekistan. They also included the World Bank. Discussions focused Uzbekistan (L2CU) initiative was also London-based roadshows and virtual on the very low Worldwide Governance highlighted. This system is designed to meetings with finance ministries, debt Indictor score from the World Bank capture the views and wellbeing of a management offices and central banks and the Corruption Perception Index representative group of people as the as well as national planning ministries, from Transparency International. country embarks on its ambitious reform state-owned enterprises and donors. Discussions highlighted that Uzbekistan initiatives. Finally, there were discussions is making significant progress. It has around the issuance of green and undertaken several key judicial reforms SDG bonds, which Uzbekistan is and established a Supreme Judicial keen to develop and is working with Council and anti-corruption agency. advisors on a framework which meets There is a planned asset and income international norms. declaration scheme for public officials 2 Rating as of January 2023. Allianz Global Investors Sustainability and Stewardship Report 2022 66
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.2 How we engage Principles 7 9 Shaping sustainable pathways towards change Uruguay: sustainability-linked bond issuance Following our engagement with Uruguay’s Debt Management Office, its first labelled bond was launched in October 2022. The country partnered with the EMIA Enhanced Labelled Bond Inter-American Development Bank Principles. These introduce significant to prepare the framework to issue improvements over prevailing bond a sustainability-linked bond (SLB). standards and encourage an elevated The structure has a coupon step- level of transparency and more down mechanism3 that is activated stringent terms and conditions. if Uruguay reaches environmental targets set in line with its Naturally The USD 1.5 billion 12-year issue was Determined Contribution (NDC) to the more than two times oversubscribed Paris Agreement. Uruguay worked and was placed with investors across alongside the Emerging Markets geographies, capturing high appetite Investors Alliance (EMIA) to ensure for sovereign debt issues with a the SLB is consistent with the sustainability focus. 3 Coupon step-down: a debt instrument with a high coupon in earlier payment periods and a lower coupon in later payment periods. Allianz Global Investors Sustainability and Stewardship Report 2022 67
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.2 How we engage Principles 7 8 9 03.2.3 Selecting and engaging with capabilities, portfolio construction, For exchange traded fund (ETF) fund managers and sustainability efforts are evaluated strategies, we meet with providers on a In the context of engagement and fund- and compared to competitive strategies. quarterly basis and discuss the provider’s of-funds approaches, the research and sustainable products and policies. This can selection of fund managers is a major Assessing sustainability capabilities and be done by offering input on the evolution focus of our multi-asset department. In the processes is a crucial and integral part of of sustainable screens and KPIs and last two decades, we have developed and the manager selection process. We have providing advice on which markets are enhanced our fund research capabilities developed an in-house ESG rating well served by sustainable products and to independently and systematically process to assess this in a systematic way. which need further product development/ select the most promising managers When analysing an ESG/sustainability launches. We also ask how providers deal in the relevant liquid asset classes. strategy, we look at the engagement with regulations (particularly disclosure), We diligently follow a stringent process approach including proxy voting, encouraging transparency so that we are for every strategy and collate findings in engagement reporting and transparency. fully equipped to make decisions and 4 answer queries from our clients. a central shared database, called MARS. The process is the same for every manager While we are not allowed to enforce that we analyse. our own engagement guidelines or The funds we recommend for investment alter the investment process of target are regularly screened for compliance with Ongoing dialogue with clients fund managers, who are responsible for our standards, including sustainability shows that demand for sustainable managing retail money, we do ask for aspects. We continue to improve and strategies has been rising for years. details on proxy voting, engagement enhance this process by updating our We continuously enhance our research process and portfolio composition. questionnaire at least annually – or and selection process to adapt to Our detailed questionnaire looks at whenever there are significant changes, changes in the regulatory environment whether there is a proxy voting policy such as changes in the regulatory and fulfil the requirements of our clients. in place and its guidelines, if proxy environment – and incorporating new As part of this, we undertake a deep voting is done internally or delegated regulatory changes to offer our clients our and comprehensive due diligence that to an external provider, and how the most promising sustainable strategies. encompasses fund manager interviews engagement process works. We go into and an exhaustive questionnaire (RFP). detail on prior examples of engagement Important considerations such as and their outcomes during personal investment philosophy, team and research meetings with managers. 4 Manager Research And Selection. Allianz Global Investors Sustainability and Stewardship Report 2022 68
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.3 AllianzGI’s engagement in numbers Principles 7 9 In 2022, we engaged with companies on 438 occasions, mostly via We engaged with virtual engagement meetings (2021: 299). The substantial increase of almost 50% from last year reflects – among others – the expansion of engagement activities in Asia – particularly in China, Hong Kong and Japan. 355 See case studies on pages 77–78. companies in 2022. Engagements covered 996 topics In 2022, we completed 88 climate (2021: 482). We often engaged on engagements. Most of these were Substantial expansion of our stewardship activities in 2022 more than one topic per company and achieved through answers to very the significant year-on-year increase is specific questionnaires for each 2 driven by our new engagement reporting company and we completed 25 specific Engagements template which enables more granular engagement meetings to collect further reporting of sub-topics. information. These are included in our engagement statistics. Companies engaged 2 We reached out to a total of 276 companies under our Climate To implement European regulation for Engagement with Outcome (CEWO) sustainable fund categories, we reviewed 2 approach since inception in the middle the sustainable investment share of certain Stewardship outcomes 5 of 2021. We engaged with 84% of funds and analysed principal adverse companies (accounting for 88% of these impact (PAI) indicators. Where data was companies’ aggregate emissions) to ambiguous or incomplete, we engaged Company dialogue 6 7 collect information on climate strategy, 37 companies for additional information on SI share/PAI governance and the full scope of the (17 for sustainable investment share and decarbonisation pathway. 20 for PAIs). In 27 cases, this resulted in an EM sovereigns 22 7 amendment of the indicators used in the engagement 222 investment process. 5 Sustainable investment share: the percentage of a fund that can be considered as sustainable according to the EU Sustainable Finance Disclosure Regulations. 6 Engagements began in 2022 per regulatory requirements. 7 Not reported in 2021. Allianz Global Investors Sustainability and Stewardship Report 2022 69
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.3 AllianzGI’s engagement in numbers Principles 7 9 Engagement by geography Engagement by topic Engagements per industry Engagements per topic The location of engagements reflect the Engagement activities in 2022 covered a % % main markets we invest in and the size broad range of topics (see chart). In 35% of individual holdings in those markets of cases, we spoke to companies on 5 2 4 3 2 –both assets under management and corporate governance, business conduct 6 18 4 relative share of the holding. As such, and transparency issues. The reduction 6 6 28 we target issuers globally with a focus compared with 2021 was driven by 6 on Europe, the US and our major markets our re-focus of engagement on our 12 in Asia. three guiding themes (climate change, 7 15 planetary boundaries, and inclusive In Europe we engaged most frequently capitalism). The increased focus on 11 13 17 25 with companies in Germany, France and environmental and social topics resulted the UK, whereas in Asia our engagement in the share of engagements, touching on 12 focus was on China, Hong Kong either topic, increasing from 42% in 2021 and Japan. to 69% in 2022. Where we did not see Industrials Corporate governance sufficient progress, or wanted to follow Materials Environmental risks/impacts Our engagements in 2022 spanned up on recent developments, we engaged Financials Social risks/impacts 355 companies in 28 markets globally more than once. This occurred with 19% of Technology Strategy/business model (2021: 238 companies in 27 markets). companies engaged and was broadly in Consumer Discretionary Transparency and disclosure line with 2021. Consumer Staples Capital management Energy Other Outcomes achieved Health Risk management We registered 38 stewardship outcomes Telecoms Business conduct and culture where companies took steps we had Utilities explicitly referenced during engagements Real Estate (2021: 28). Some cases involved multi-year Percentages do not total 100 due to rounding. engagement. Executive remuneration and governance issues were the focus in about three quarters of these cases. Allianz Global Investors Sustainability and Stewardship Report 2022 70
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.3 AllianzGI’s engagement in numbers Principles 7 9 Engagements per geography Number of companies engaged, by topic AllianzGI engaged 355 companies across 28 markets globally in 2022. Corporate governance 237 rance Japan US Environmental risks/impacts 217 10% 11% 14% ther ocial risks/impacts 158 1% trateg/ siness moel 105 as other ransparenc an isclosre 2 59 erany 11% Aeric Capital management 42 1% Asia Pacific other Other 35 4% Risk management 24 Europe other China and Hong Kong 11% 15% siness conct an cltre 18 UK 15% Netherlands Switzerland Italy 1% 4% 1% Allianz Global Investors Sustainability and Stewardship Report 2022 71
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 In the following pages, we discuss engagement and related outcomes under the three strategic sustainability themes of climate change, planetary boundaries and inclusive Shaping sustainable pathways towards change capitalism – along with governance. 03.4.1 Engagement Engaging oil and gas companies Engaging on an oil spill incident topic: Climate change on the energy transition We have engaged one company The most recent engagement focused In 2022, we had 217 Our increasingly thematic and focused on its energy transition strategy, on an oil spill incident. Due to the nature direct conversations with approach to engagement targets climate targets and a more of the incident, we were concerned companies about climate change. organisations where the implications are comprehensive range of governance, with the response of the company and We approached many companies to most significant, such as oil companies. community and social due diligence questioned its sensitivity in dealing challenge their climate transition targets We continued our engagement with oil topics for several years. We scrutinised with ecological and social impacts. and pathways and understand how and gas majors and spoke with energy GHG emissions reduction targets, We challenged them on how they they intend to amend their business companies on 26 occasions. capital allocation to low-carbon tried to mitigate the effects of the spill model and employ new technologies to technologies and climate lobbying on the environment and its impact on progress to net zero. Many discussions policy. We also questioned challenges local communities who make a living also focused on climate risk assessments faced with respect to commitment to a from the sea and surrounding beaches. and how companies are reflecting climate In 2022, we had just energy transition. We were pleased to see prompt action risk in their strategies, operations and and continue to monitor progress and product pipelines. Our engagement financial implications closely. focus reflects the increasing importance clients place on decarbonisation targets of portfolio companies. Climate and other environmental issues continued to gain 217 relative importance in our engagement activities, increasing their share by three direct conversations with percentage points to account for 25% of companies about climate change. all engagements in the past year. Allianz Global Investors Sustainability and Stewardship Report 2022 72
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Engaging with banks on climate forward by the US Federal Reserve, time. While it is encouraging to see airlines Corporate action must play a key Indirect emissions via financial and will use engagement to assess and addressing climate challenges, we would role in achieving recovery by 2050. support of business activities means encourage balanced decarbonisation like to see them address other issues Our engagement sought to understand banks are highly exposed to climate of books, namely the monitoring and associated with these solutions such as whether and how companies are taking risks. Systemic considerations add management of business risks through biodiversity impacts associated with the action to operate within planetary further motivation to select this as an the climate transition. biomass input for SAF. This will remain a boundaries and protect and enhance engagement theme. We prioritised key focus when we engage with airlines biodiversity. Engagement was strongly systemically important banks for Understanding the role of sustainable and air transportation companies in the driven by our sustainable strategies seeking engagement in 2022 because of aviation fuel for airlines coming year. to foster positive progress within relevant their critical importance to economic Airlines’ use of sustainable aviation fuel (SAF) themes, such as deforestation or pollution. stability first, and second as they play is a key solution to decarbonise aviation GHG 03.4.2 Engagement topic: a leveraged role in transitioning the emissions. Despite the advantage for climate, Planetary boundaries Biodiversity was discussed as a topic in 36 economy through their financing activity SAF faces sustainability challenges linked Economic activities depend engagements with investee companies across the entire spectrum of business to biodiversity (eg, sustainable sourcing on the availability of in 2022. Most companies have started to sectors. The Sustainability Research of biomass-based oils) and food security. natural capital and we need to act within work on addressing biodiversity impacts team developed a framework to assess planetary boundaries to preserve vital by, for example, setting up biodiversity climate performance and identify In 2022, we engaged with several airlines finite resources. Biodiversity is crucial to policies and working with the Taskforce gaps in commitments and governance, for our fixed income holdings with SAF maintaining safe planetary boundaries on Nature-related Financial Disclosures strategic drive and disclosure quality. being a main topic in our dialogues. through vital ecosystems and also helps (TNFD). For those that have not yet This was done by focusing on 15 KPIs While airlines’ use of SAF varies, it mitigate the impacts of climate change. started, we raised awareness of this topic. across commitment and policy, targets, remains a significant focal point for Overall, we sensed that this is a relatively strategy and reporting. The resulting the industry. Common SAFs used are In 2022, after four years of negotiation, new engagement topic for companies, gap analysis was used as the basis for produced from waste fats or vegetable 196 countries adopted the Post-2020 and it requires more consistent reporting. engagement calls, which informed voting oil. Food security and logistics (for waste Global Biodiversity Framework. It sets decisions for shareholder resolutions filed collection) are the main obstacles for out a plan of action to halt and reverse We began a series of pilot in-depth at some US banks and say on climate scaling up. Some airlines invest in Air- nature loss by 2030 and aims to ensure thematic engagements on biodiversity in the UK. We will broaden the theme to-fuel SAF (converting CO2 via carbon that, by 2050, the shared vision of “living with five companies in sectors with high to consider climate risks beyond proxy capture and green H2 via electrolysis into in harmony with nature” is fulfilled. biodiversity impact and dependency, voting implications in 2023. We support hydrocarbons). This is more sustainable such as paper and forest products, the increased prudential focus on climate but technically challenging at the current construction, and chemicals. risks, including those most recently put Allianz Global Investors Sustainability and Stewardship Report 2022 73
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Our engagements sought to explore Increasing transparency on Through the UK-based Investor Forum in require close attention by investors. how companies assess the materiality plastic pollution 2018, AllianzGI supported a project which Tackling climate change raises new of biodiversity and where they stand in Microplastic pollution poses a severe sought to develop standards for companies challenges when it comes to managing terms of integrating it. We encouraged threat to marine biodiversity and has to handle plastic pellets within their supply a just transition. Within the inclusive companies to act on reducing their negative environmental and social impacts. chains. We co-sponsored the creation of capitalism theme, human rights and biodiversity impact and will use the Pre-production pellets (nurdles), which form PAS 510 2021, a document that builds on labour rights as well as diversity were outcomes of discussions to shape our the building blocks of all plastic products, the groundwork laid by Operation Clean focal points of our engagement in 2022. biodiversity engagement approach are the second largest source of primary Sweep® to create a standardised and going forward. microplastic emissions to the environment. consistent approach to risk management We expect companies to adhere to and containment of pellets. This document relevant frameworks including the UN is a key component of a formal certification. Guiding Principles on Business and Human In 2022, we fulfilled our commitment Rights. Companies have a responsibility Shaping sustainable pathways towards change to engage with companies around the to protect human rights within their own issue and to encourage the adoption of operations (workforce) and at upstream the PAS. We held discussions with key (suppliers) and downstream (clients) Engaging a forest-product company producers of plastic resins with a focus on levels. This is especially important in European companies. Our first aim was countries where human rights standards on their biodiversity impact to develop a baseline understanding of are lower and where there are greater how relevant this issue was to the business risks of on-the-ground controversies. We engaged with a paper and forest- company remained conservative and what actions were taken to mitigate product company to understand in reporting progress and setting potential risks. In future, we plan to engage In 2022, we continued to engage with whether its biodiversity target and targets, it is committed to doing more with the value chain, including logistics/ companies on controversies, for example strategy are sufficiently ambitious and once it is more comfortable with transportation providers and end users. related to human rights and labour comprehensive. From the engagement, biodiversity measures and progress. rights, to seek more information, we understand that biodiversity is We encouraged the company to 03.4.3 Engagement topic: understand remedial actions and push for considered a key material topic in the demonstrate how biodiversity could Inclusive capitalism change. This engagement often related company’s sustainability strategy. help to achieve its climate goal as We are convinced that to names held in our sustainable funds to The company has a comprehensive the topics are closely interlinked inclusion will become the confirm whether certain companies were strategy in place to manage its impact –especially for forest-based next big topic of public focus in addition investable or not. on biodiversity, which it considers business models. to climate change. The many inequalities across the value chain. While the that exist and overlap globally are the centre piece of this theme and Allianz Global Investors Sustainability and Stewardship Report 2022 74
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Shaping sustainable pathways towards change Shaping sustainable pathways towards change Investigating a human rights Engaging on labour rights issues controversy with a heavy We engaged an outsourcing company With respect to the content moderation over concerns with respect to labour business, the company held the view machinery producer practices in its content moderation of being compliant with the UN Global business. We investigated allegations Compact. Given the seriousness of the We engaged with a heavy machinery Countries are assessed for risk according of union busting and asked for allegations, we asked for information producer to understand how a severe to the ranking of a data provider and clarification on the way employees on the internal and external audits that human rights controversy – which this serves as an input for the business to were trained and equipped to perform were to be conducted. triggered a temporary exclusion for decide the level of due diligence to apply. their job, which could result in adverse investments in our SRI funds – resulted For higher-risk customers, they follow a health issues. We raised our severe Since then, the company has in a specific approach of human rights more thorough, centralised approach. concerns that the company is not announced its decision to exit the risk mitigation in sales, and whether We made recommendations to further managing the issues arising in this part highly egregious part of the content this was stringent enough to address strengthen the approach. We appreciate of the business properly. moderation business and a global the risk of repeated occurrence in other how the company has improved and agreement with an international countries where the company has will continue to monitor whether it With respect to allegations of union trade union. We consider this positive sales relationships. has integrated our suggestions into its busting, the company denied them action to be a result of heightened policies and processes. and stated that they were in discussion investor pressure. Since the controversy occurred, the with the trade union dedicated for their company has developed a robust industry. We strongly encouraged them approach centred around its human to come to a fair agreement with the rights policy. As a decentralised business, trade union to alleviate the situation. each business area is responsible for driving the responsible sales approach with the support of centralised experts. Allianz Global Investors Sustainability and Stewardship Report 2022 75
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Communicating our Stewardship Principles Shaping sustainable pathways towards change We continue to publish viewpoints Why German companies via our Stewardship Principles series, should embrace the role of lead Supporting employee rights launched in 2021. These outline independent director. the ways we work with investee at a large US retailer companies to promote best corporate Shaping US practice through governance practice and shape shareholder resolutions. In 2022, we continued engagement we consider it the role of the Board pathways towards environmental and with a US retail company on to supervise management as well as social transformation. We also share employment rights and specifically the managing business material risks. results of our themed engagements. right of employees to organise which Retail companies employ a large Where appropriate, we advocate we considered had been impaired. number of employees and therefore new governance concepts for certain These rights are recognised human human capital management is markets or industries, as evidenced rights, contained in the International business material. The engagement by our piece on the Lead Independent Labour Organization’s Core Labour informed our vote at the AGM and we Director for the German market. Standards and subsequently adopted decided to hold directors accountable A deep dive into changing market in national pieces of legislation for the matter. It also provided input trends led to our paper on Shareholder including in the US. This becomes to our assessment of the adequacy Resolutions in the US. more nuanced when evaluating the of governance of human capital specific practices companies take, management issues, which we for example mandatory attendance of believe for large employers is a sessions to dissuade employees from forward indicator to the likelihood of supporting unionisation. As investors, further controversy. Allianz Global Investors Sustainability and Stewardship Report 2022 76
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Increasing engagement in Asia We have stepped up engagement AllianzGI’s engagement activities Shaping sustainable pathways towards change activities dedicated to our investments in in Asia are guided by our top-down Asia, led by our local Stewardship Analyst thematic pillars and also by issues we and Investment teams. This was motivated identify as most critical to the market, Climate strategy engagement by rising expectations of clients regarding such as long-standing governance- sustainability aspects of funds in Asia, related topics, climate strategies, with a financial service increased relevance of these issues to our supply chain management and diversity. fund business, and evolving regulatory Biodiversity only started to draw holding company requirements for sustainable funds. companies’ attention in Asia very recently and we engaged on this emerging topic We believe that large financial holding usage, green certificates purchase with as well. companies in Asian markets could play good quality and other energy-saving an important role in driving different measures. On its financed activities, We leveraged the close partnership sectors’ decarbonisation pathways. we challenged how they would between the Stewardship team and However, many Asian companies expand their GHG emissions reduction local Investment team professionals to lack incentives to proactively develop interim plan from its current focus on proactively engage with our portfolio robust climate strategies due to a few sectors to include other carbon- companies. Our engagements focus on controlling shareholding structures intensive sectors. We also investigated Many Asian evaluating company performance on or lack of concrete guidelines from how the asset management arm of governance and sustainability, setting local regulators. the company practises sustainable companies lack expectations on KPI-based targets to investment in its portfolio. incentives to encourage sustainability outcomes, During the engagement with a and sharing global best practice within Japanese financial holdings company, The company shared detailed actions proactively develop the industry to guide on transition. we discussed climate strategies of and concrete figures. It committed We have observed a notable increase in its own operations and its financed to incorporating more sector specific robust climate responses to our engagement requests activities in the overall portfolio. decarbonisation interim goals in the and improved ESG disclosure in the Asian On Scope 1 and 2 emissions, coming year as it updated its climate strategies. market in 2022. we assessed the feasibility of the strategy. We will reassess progress company’s zero-carbon emissions going forward. plan, including renewable energy Allianz Global Investors Sustainability and Stewardship Report 2022 77
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Shaping sustainable pathways towards change Biodiversity engagement with a cosmetics company Shaping sustainable pathways towards change Among several biodiversity-themed of preservatives. Besides focusing on engagements in Asia, we spoke with progress, we explored its future plans a leading Chinese cosmetics producer and commitments. We shared global Engaging a Taiwanese company to understand progress and urge it best practices from the cosmetics to take more action. We discussed industry to encourage the company on gender diversity the impacts and dependencies that to form longer-term visions. the cosmetic industry can generate Given the historical imbalance, gender female employees and efforts to on biodiversity and raised questions With board-level oversight, the company diversity is among the most critical establish a sound talent pipeline. about its use of Roundtable on committed to tackle biodiversity social issues worthy of attention We also discussed quantitative short- Sustainable Palm Oil (RSPO)- challenges in collaboration with its in many major Asian markets. and mid-term plans to raise female certified products among all palm supply chain companies. It showed an Our conversation with a Taiwanese managers’ participation and targets oil materials it uses. We also asked interest in applying stricter standards company began with questions about on recruitment. whether plastic microbeads have been than minimum domestic requirements how the company’s policies guide a phased out and what substitutes are on chemical safety. We will follow up top-down approach and whether there Recognising investors’ expectations, being used, and explored its choice with the company on future progress. is board-level oversight on gender the company committed to raise diversity-related measures. female senior management participation to more than 30% level We wanted to understand granular in the short term. We see it as an diversity indicators to assess the important milestone that the company company’s performance as well as appointed its first-ever female director internal initiatives and training for to the board in 2022. Allianz Global Investors Sustainability and Stewardship Report 2022 78
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 03.4.4 Engagement topic: Fostering In 2022, we engaged 237 companies at good governance and transparency least once on a governance issue and Strong governance practices at continued our engagement focus on the Shaping sustainable pathways towards change investee companies are critical following topics: enablers of investment performance. With these practices in place, boards • Board composition, quality and Addressing overboarding and management can better address competence of board members; other topics that are highly relevant • Succession planning for chairpersons, with an Irish company to the business and investment case, directors, and executives; including environmental and social risks. • Independence and expertise of Overcommitment by directors is a including as chairman of another key committees; serious concern for investors as it can listed plc. We initially abstained on • Structure and quantum of executive compromise the quality of boards. the re-election until we could gather remuneration, including ESG KPIs in This is explicitly covered within additional information. Through follow- pay; and our global Corporate Governance up engagements with the company, • Shareholder rights, for example in the Guidelines which outline our position we received further details on the context of takeover-related matters or on what other commitments are roles of the chairman who had a capital issuance authorities. acceptable for a board member. positive track record of managing his businesses throughout the Covid- Since 2021, we have engaged with impacted period. Given the value and an Irish building materials supplier on experience he brought to the board, overboarding concerns. We considered we offered our qualified support and In 2022, we engaged with the chairman to be at risk given will keep the issue under review. 237 multiple external appointments, companies at least once on a governance issue. Allianz Global Investors Sustainability and Stewardship Report 2022 79
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Embedding ESG KPIs in remuneration Following the updates to our proxy Shaping sustainable pathways towards change voting guidelines, a key element of our engagement on remuneration is around the integration of ESG metrics into First-time engagement on executive compensation. board independence with See section 03.7.2. This is a trend across multiple markets a Chinese multinational and our feedback to companies is that we want to see metrics which are transparent, We engaged with a Chinese and expressed our expectation that it quantifiable and tied to the long-term multinational technology company should incorporate additional non- strategy. We look to assess whether KPIs on board structure issues, with a executive directors to mitigate investor proposed by the remuneration committee key focus on board independence. concerns. This would also benefit clearly align with the wider business Its board of directors lacked an its overall ESG rating. We received model and material issues and how independent majority for several positive feedback from the company weightings and stretch targets drive value years. The company used to adopt which added two additional creation and strategic decision making. a conservative communication independent directors to the board at A European professional services company approach with investors on corporate its recent general meeting, resulting in sought to include climate metrics in their governance topics, but proactively had a majority independent board for the annual bonus scheme. We engaged the expanded its ESG team in the past first time in years. remuneration committee to understand months. We approached the company the rationale for including this metric and its preference for the short-term incentive. We understood that this tied into its sustainability strategy, which would be supported by SBTi verification, and that it impacted a larger number of employees. We therefore supported the proposal. Allianz Global Investors Sustainability and Stewardship Report 2022 80
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.4 Engagement outcomes Principles 7 9 Engaging Swedish companies on may impact their ability to dedicate governance practices sufficient time and energy to fulfil Shaping sustainable pathways towards change In 2022, we voted against 29% of director their duties. This often extends to the elections at Swedish companies. While we chairperson. Second, we found that many appreciated that most companies have boards and committees are not sufficiently Improving board structure started to unbundle directors’ elections independent due to long tenure and allowing us to assess board candidates shareholder representation. This remained and executive pay with a US on a case-by-case basis, we still have a major reason for us to cast dissent votes. two main issues which impact the quality As we found this to be prevalent in the construction company of boards and prompted many against Swedish market, we started a broader votes. First, directors often have various engagement campaign and sent letters Following up on a failed Say on Pay this could imply informal balance other commitments at boards and/or to our investee companies detailing vote at the AGM, we engaged the of executive power that is not executive level of private and public our governance expectations. We will Compensation Committee of a US transparent. Additional outcomes companies. We are concerned that this continue our engagement in 2023. construction company to encourage requested include the introduction certain governance improvements. of a more challenging vesting We met virtually with the committee scale for the long-term incentive chair. The company committed plan. Our conclusion following this to reduce the gap between pay engagement was that the board, via levels of the chairman and the CEO, the actions taken by the Compensation a key request from us to improve Committee, met our expectations governance. Our expectation is that for responsiveness to shareholder the lead executive role commands concerns. Their action resulted in the highest pay. Lack of clarity on material improvements to governance. Allianz Global Investors Sustainability and Stewardship Report 2022 81
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.5 Collaborative engagements Principles 7 10 Shaping pathways towards change requires collaborative in North America. The initiative seeks to and board oversight, among other topics. engagement with other investors to increase our impact. In some improve GHG emissions disclosures and In 2022, we undertook fewer collaborative cases, collaborative engagement is the most effective way for ask companies to set ambitious emissions engagements via the Investor Forum AllianzGI to achieve engagement objectives for our clients. It is reduction targets and implement credible but participated in additional company climate transition action plans in line with meetings initiated by management. 9 particularly important where we have major concerns and only the Paris Agreement. These allowed executives and the small holdings in investee companies. While we led the majority board to reach a wider audience for of our engagements ourselves in 2022, we undertook several We conduct our engagements bilaterally their discussions. collaborative engagements with a focus on climate issues, with companies we hold in our portfolios. As part of our involvement, we engaged We participated in an Investor Forum diversity and governance matters. a US consumer staples producer. working group on voter turnout in Irish We discussed the company’s approach companies that noted tangible outcomes. 1. Climate Action 100+ oversight. Having received some proactive to target setting for Scope 3 emissions These included enhanced engagement We have been a member of disclosure from the company, we will reduction and how it acts to ensure between key contributors in the proxy Climate Action 100+ since Dec 2017. follow up pursuing policy consistency sustainable food chains. voting value chain, identification and Collaborative engagements of CA100+ once new board members will have been resolution of the source of unnecessary target companies supplement our elected in the upcoming 2023 AGM. Additionally, we regularly join the land share-blocking flags, and improved individual engagement efforts on use and climate working group and the understanding of how the intermediated climate change. With the Climate 2. Ceres Food Emissions 50 biodiversity working group where we take issuer central securities depository (CSD) Action 100+ initiative entering its With a natural link to our planetary part in discussions on research and market model works. This highlighted further second phase in 2023, we provided boundaries thematic, several of our practice trends. Relevant insights are lessons and the need for improved feedback on the consultation assessing funds are themed around sustainability, shared internally across the investment communication through the voting chain, its future set up and aim to continue our food and water. The food sector is also platform to support knowledge building. defined escalation processes and greater work with this group and expand our closely linked with climate risks as the innovation. In 2022, AllianzGI voted collaborative engagements. global food system is responsible for 3. The Investor Forum at 76% of votable meetings in Ireland. approximately one-third of all global We contribute to engagements facilitated This contrasts with 70% in 2021 and 8 In 2022, we contributed to engagement GHG emissions. We are a member of the by the Investor Forum in the UK – a forum reflects improved market functioning. of a Chinese oil major as a collaborative Food Emissions 50 effort, co-ordinated established by institutional investors in We will now seek to further assert our investor in the group, with the focus on by Ceres, which aims to accelerate UK equities. These engagements relate shareholder rights and extend this work strategic planning of its decarbonisation progress to net zero by engaging 50 of the to business strategy, environmental into other markets such as Norway. pathway and top-down management highest-emitting public food companies concerns, management of social risks 8 Food and Agriculture Organization of the United Nations, March 2021. 9 Ceres Food Emissions 50. Allianz Global Investors Sustainability and Stewardship Report 2022 82
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.5 Collaborative engagements Principles 7 10 Legal framework and policy 4. Promoting gender diversity and observed a slight but real shift with issuers. We are active in group discussions engagement in Germany In line with our sustainability theme of respect to meritocracy and looking to the and advocacy around labelled bonds and inclusive capitalism, we chaired the French strengths and competences brought about debt and fiscal transparency. We also In AllianzGI’s home market of investor group of the 30% Club, a global by cognitive diversity, ie, the presence of share lessons from our work on the Germany, collaborative engagement campaign aiming to increase gender broadly diverse perspectives of mind. Sustainable Bond Market Advisory Group is still in an emerging state due to a diversity on boards and executive teams. of the London Stock Exchange, as well as regulatory environment that is not In 2022, AllianzGI joined all corporate 5. PRI Advance Coalition on Human Rights presenting at industry conferences on ESG clearly defined when it comes to engagements, including 18 in-person In line with our sustainability theme topics in emerging markets. the “acting in concert” implications. meetings and conversations via email. of inclusive capitalism, we decided to This means that there is considerable broaden our engagement approach uncertainty among asset managers We engaged with a French defence and on human rights. In 2022, we joined the and owners as to the conditions aerospace company on their diversity PRI Advance stewardship initiative for under which they may cooperate in strategy and how they are planning to investors to act on human rights and social engagements. We continued policy achieve gender equity and reduce the issues. AllianzGI joined as a collaborative work on this topic in 2022 via the gender pay gap. In one year, the company investor and will work jointly with other DVFA10 Governance and Stewardship made great steps towards its diversity investors on engaging companies in Commission, the Working Group on trajectory, committed to realistic and Europe and Asia in 2023. Sustainable Finance at the Ministry of credible targets, and reaffirmed the Finance and public speaking to seek objective of the firm to be in line with 6. Collaborative engagement on clarity from the German regulator on 30% Club France vision. In particular, sovereigns: Emerging Markets the topic. the company has a very proactive Investors Alliance approach to close the gender pay gap, Shaping sustainable pathways towards which stood as a best practice. change requires a collective and long-term approach to emerging market sovereign We also continued to engage with a engagement. We joined the Emerging French reinsurance company on gender Markets Investors Alliance (EMIA) as a diversity due to the disconnect between Board Member in 2022. This pro-bono the percentage of women in the workforce industry association brings together and at management/executive positions. emerging market investors, NGOs and We appreciated the transparency and think tanks to advocate for better ESG the openness to address our concerns outcomes at sovereign and corporate 10 Association of investment professionals in Germany. Allianz Global Investors Sustainability and Stewardship Report 2022 83
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.6 Escalating engagement concerns Principles 7 11 Companies are not always We prefer to engage directly with responsive to our concerns companies but, where direct engagement raised through engagement or does not progress satisfactorily or their actions do not give due where our shareholding is insufficient for an effective escalation in our consideration to the interests own right, we consider other options. of minority shareholders. If we These may include: conclude that our concerns • Voting against resolutions at cannot be resolved through shareholder meetings. standard interactions with • Collaborating with other institutional investee companies, we may investors on single issues. consider escalation to achieve • Joining a collaborative engagement our engagement objectives. initiative co-ordinated by investors, trade associations and other Our engagement approach depends organisations where these seek on the circumstances and nature of to address market or industry- concerns. Escalation options are not wide concerns. mutually exclusive and can be combined • Expressing concerns through advisers to depending on the situation. Initially, the company, for example in merger and engagement is typically escalated through acquisition (M&A) situations. additional meetings with management • Co-filing/filing resolutions at and more intensive dialogue with non- shareholder meetings. executive directors or with the chairperson. • Reducing or exiting our investment We prefer to address issues directly with a position when appropriate (any decision non-executive board chairperson, lead or to exit an investment position is taken at senior independent director, or other non- a portfolio level). executive board members to gain senior input on the matters of concern. We consider We consider making public statements emphasising our position to the board in in respect of individual companies as a writing if we have the impression that direct last resort when all other channels of interaction has been unsuccessful. constructive dialogue have been exhausted. Allianz Global Investors Sustainability and Stewardship Report 2022 84
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.6 Escalating engagement concerns Principles 7 11 We apply these tools broadly across Our Sustainability team held a series our concerns on climate disclosure and our holdings globally. For fixed income of engagement meetings with subject pointed to progress lagging behind holdings, escalation tools are by nature matter experts and Investment teams previously given commitments. As an more limited as they do not extend to to crowdsource perspectives. We then outcome, we supported the dissident actions taken in the context of shareholder escalated the topic with the company and board candidates and voted against the meetings. However, if we have holdings completed two separate calls – one with recommendations of management. both in equity and fixed income funds, the board and the other with the Forestry we lead escalation measures across asset unit – to understand the firm’s sustainable 4. Targeting improved cybersecurity with classes to be more effective. business practices, governance over a German media company See also section 03.7. labels in different locations and the We had entered a multi-year engagement broader regulatory environment in with a company based on its policies 1. Concern over delisting of an which it operates. The insights we gained and governance on cyber security, investee company through collaboration across the firm which we considered to be a material risk. We engaged several times with a German translated into a thorough engagement We considered the company’s IT security company that intended to delist from the on a complex topic and our informed and data protection framework to be Frankfurt Stock Exchange. We were not perspectives were appreciated by the insufficient and had escalated our concern convinced with the rationale the company firm’s management. Portfolio managers with the management board in 2020 and put forward and considered this move to across investment styles gained deeper followed up in 2021. In 2022, we requested have potential negative implications for our perspectives into their investment another conversation at management investment universe in certain strategies. theses, and some decided to divest board level and were pleased to see As a result, we brought the issue to the as a consequence. We were also able that the company had greatly improved attention of the whole board. The company to provide stewardship advice to an its governance around cyber security was not responsive to our concerns, and we investee company. and data protection, made considerable decided to vote against the related agenda investment and employed more people to items at the extraordinary general meeting 3. Supporting dissident board candidates deal with these issues. We consider this to in early 2023. We engaged a US industrial company be a stewardship outcome of our multi- amidst an activist campaign culminating year engagement and escalation strategy 2. Controversy related to deforestation in a proxy contest. The activist pointed to with the company. A core part of the investment thesis for financial under-performance, proposing a UK energy company has been the a stronger element of independence use of biomass as a renewable energy on the board to address this. We had source, which came under scrutiny bilateral calls with both sides. During our following a televised investigative report. discussions with the board, we voiced Allianz Global Investors Sustainability and Stewardship Report 2022 85
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 Exercising voting rights at We apply proprietary Corporate Our goal is to vote at the shareholder shareholder meetings is a Governance Guidelines across our meetings of all the companies we invest 2022 highlights fiduciary responsibility to our holdings globally. We put great effort and in, where we have the authority to clients and a core part of our role care into developing in-house views and exercise voting rights. Our Proxy Voting 10,200 positions on corporate governance and Committee reviews vote outcomes and shareholder meetings as an active investor. It allows proxy voting matters. Our voting decisions we evaluate and address notable year- participated in us to have a say on some of the are informed by in-depth research, on-year changes in the number of shares during 2022 most important issues affecting analysis and engagement with investee voted. We respect the right of clients in the long-term development of companies which we often conduct over segregated accounts to retain voting several years. Detailed proxy voting rights, request that voting rights are Representing investee companies. policies help shape our voting decisions. exercised in line with the client’s voting 94% policy, or delegate proxy voting and of all votable meetings Our focus issues for proxy voting Voting on shareholder proposals is a engagement activities to a third-party include the election of board directors, key part of our stewardship programme. service provider. executive compensation, capital-related Shareholder proposals offer companies We opposed 22% authorities and the appointment of an important insight into the views and We do not provide clients with the option external auditors. Other important concerns of investors. They provide to influence voting decisions on a case- of all management voting topics include climate change, meaningful support for issues raised that by-case basis. We are committed to full resolutions workforce diversity, labour rights, merit careful consideration by companies’ transparency of our proxy-voting activities. political donations and lobbying activities. boards and management. We customarily Our disclosures include detailed Global At 69% review shareholder proposals for all Corporate Governance Guidelines, our holdings. Given the variety and a Stewardship Statement detailing our of meetings globally, variability of shareholder proposals, it is engagement and conflict of interest we voted against, often difficult to develop policy positions policy and real-time disclosure of all votes withheld or abstained on the issues raised by shareholders; cast, accessible through our website. from at least one hence we prefer to review and vote on This insight includes commentary on our agenda item a case-by-case basis, taking account of votes against resolutions and abstentions. factors such as the nature of the proposal, whether it might be overly prescriptive in nature as well as the company’s policies and progress. Allianz Global Investors Sustainability and Stewardship Report 2022 86
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 2 7 8 11 12 03.7.1 Ensuring a robust with our provider, ISS. The reporting AllianzGI proxy voting process voting process contains asset class information to clearly All proxy voting research and initial voting show which accounts require attention. recommendations are generated based We also conduct a quarterly audit across on our proprietary proxy voting policy. all our funds with data reviewed by Proxy voting research is provided by the Compliance team. We review and Portfolio General meetings: Application of Automated vote Vote Institutional Shareholder Services (ISS), challenge unvoted meetings. holdings date and agenda AllianzGI’s PV policy implementation execution a third-party proxy voting service provider. We take a risk-based approach to We use an electronic proxy voting research and analysis around proxy platform provided by ISS to cast our voting. This means the Stewardship Selection votes. Our Stewardship team is in ongoing team focuses its efforts on reviewing criteria apply contact with ISS whenever questions shareholder meeting proposals for the arise with regards to a specific piece of proportion of holdings in our portfolios research and the application of our policy. deemed particularly important to us and Additionally, we hold quarterly review potentially higher risk. These holdings are Case-by-case review meetings to review broader process mainly large aggregate positions across Review by Manual vote Vote issues involving teams responsible for our strategies, core holdings in individual stewardship analyst implementation execution compliance and the operational integrity funds, companies with an ongoing of the voting process next to members of engagement activity, etc. Our proxy the Stewardship team. voting policy is consistently applied to the team for further analysis before reaching In a minority of cases, we apply policy remaining holdings. a consensus decision. For policy overrides, overrides – for example, when we We review a weekly report from internal consultations involving analysts gain additional information following AllianzGI’s Central Enterprise Data Once reviewed, proposals are posted and portfolio managers also take place engagement that is pertinent to the voting 11 on an internal global research and through this platform. We aim to have decision, or when a company makes a Repository specifically centred around voting rights and entity. This picks up collaboration system which is accessible one integrated view when it comes to commitment that we consider important. any change or addition to voting rights to our Investment teams. This means proxy voting decisions. In exceptional We may also override policy to factor in (and the effective dates of these changes) they can review potentially contentious cases where we do not reach consensus, specific circumstances concerning the attached to all accounts and informs proposals for holdings in their portfolios voting decisions are escalated to the Proxy company, for instance its business context. operations to update these statuses and discuss them with the Stewardship Voting Committee. 11 The internal repository for all of AllianzGI’s vehicle, investment, operational (static) data. Allianz Global Investors Sustainability and Stewardship Report 2022 87
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 5 7 11 12 03.7.2 Strengthening voting policy In 2022, we continued to strengthen our Select changes to our Global Corporate Governance Guidelines in 2022 and process voting policy with respect to sustainability- Issue New policy Reason for the change We review our global corporate related aspects, relating to say on Say on Climate Vote against director in case of low Refining our voting approach governance guidelines and related climate and ethnic diversity (see table). vote turnout and if company is not on Say on Climate policies at least annually, considering This approach reflects our three themes. responsive to investor concerns. changes in market developments, A notable change to our guidelines Ethnic diversity Vote against Chair of Nomination Developments in the US vote turnout, regulatory amendments included the decision to vote against Committee or Chair of the Board if and changes in expectation levels of remuneration policies of companies with board does not have at least one our clients. large market capitalisation in the EU director with an ethnic minority that have no ESG KPIs included as of background (US). We include feedback from our service 2023. We believe management should Ethnic diversity Include ethnic diversity aspect Recommendation of the provider on the applicability of our voting be incentivised to take sustainability into our UK voting policy when Parker Review evaluating director elections. policy in the review process. All proposed aspects into account when making ESG KPIs in Vote against remuneration policies Expectation for companies amendments to the guidelines and strategic business decisions, particularly remuneration without ESG KPIs (EU / large to set proper sustainability- voting policy require consultation with climate change. company) as of 2023. related incentives our investment platform, involving equity portfolio managers in all our locations 03.7.3 Securities lending globally. Input from Investment teams Securities lending can enhance returns enables us to create a nuanced approach where it is deemed appropriate. We do that combines global best practice not actively engage in securities lending standards for corporate governance with on behalf of our mutual funds or assets the knowledge of how these can be best for institutional clients, whether via an applied and promoted in local markets. in-house securities lending desk or a third-party agency. However, where an Amendments to the global corporate individual institutional client requests us governance guidelines are approved to facilitate securities lending through by the Global Proxy Voting Committee. external agency lending – for example The committee considers proposals for via an independently selected custodian – change as raised by the Investment and we strive to support this activity within our Stewardship teams. operational process frameworks. Allianz Global Investors Sustainability and Stewardship Report 2022 88
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 03.7.4 How we voted in 202212 How we voted by topic Voting in 10,200 shareholder meetings Voting on 104,552 single proposals We participated in 10,200 shareholder Executive compensation % % meetings in 2022 (2021: 10,190), Compensation-related proposals representing 94% of all votable continued to stand out as the most 13 meetings. We voted against, withheld or contentious area globally, with AllianzGI 2 abstained from at least one agenda item voting against 43% (2021: 47%) of all 31 22 at 69% of meetings globally (2021: 68%). compensation-related management We opposed 22% of all resolutions proposals. This is unsurprising as they (2021: 21%). were introduced by regulators in several markets as a conduit to allow investors These figures reflect our highly active direct voice on pay. We typically voted 69 and globally consistent approach to against packages that were not supported 76 stewardship and our willingness to vote by robust and challenging targets or when against proposals that do not meet performance KPIs and actual targets were our expectations. not sufficiently transparent. A persistent concern is that pay plans often reward In favour of management In favour of management underperformance, which we do Against management, with at least Against management not support. one vote, withheld or abstained Abstained/did not vote 12 The voting examples provided in this section were selected contextually, as they illustrate a key feature of the voting stance and trends of our voting application. 13 We cast votes for all holdings where we have voting rights. However, in certain cases votes cannot be executed, for example, if share blocking applies, or only at a high cost in markets where Power of Attorney is required. Thus, the share of meetings voted came in slightly below all votable meetings. Allianz Global Investors Sustainability and Stewardship Report 2022 89
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 The EU Shareholder Rights Directive II, Our rate of opposition to pay-related opportunity available under the where investors are given a say on pay proposals in the US in 2022 continued long-term incentive, although this and a vote on remuneration reports, to be high at 78%, a slight reduction on was reserved for future headroom has been a positive driver for investor 2021. Considering say on pay proposals with a smaller increase proposed dialogue. In 2022, in some European (advisory vote on executive pay) alone, in-year. The Remuneration Committee markets such as Germany or Sweden, the rate of opposition was much higher also sought flexibility in exceptional regulation required companies to put at 88%. We remain concerned that many recruitment awards to ensure they could their remuneration report to a vote for US companies fail to operate long-term attract the right talent. After engaging the first time. In Germany, AllianzGI voted incentives that truly reflect management on the underlying rationale, we voted against 47% of all compensation-related out-performance rather than market for these changes given that the resolutions and abstained on another 8%. movement. In 2022, we re-focused our company had demonstrated historic In Sweden, we voted against 46% of these approach to concentrate our stewardship alignment with pay and performance resolutions and abstained on another 9%. activities on the worst cases of high pay and a moderated approach to for mediocre performance. compensation increases. In a number of cases, we had concerns over transparency, particularly related 1. We voted against the remuneration Board independence, overboarding and to clearly disclosing the link between policy of a European utility company. role of the chair performance and pay-out. Other issues As part of the 2022 remuneration policy, In 2022, we voted against 23% of all of concern were discretionary pay the board proposed an exceptional director-related proposals, consistent components not backed by performance bonus to the CEO in connection with with the previous year. We opposed 25% and high pension provisions. a corporate transaction which had of all director elections as we continue to not yet been completed and the have major concerns about the sound and The very limited, and frequently absent, benefit to shareholders not proven. balanced set-up of many boards. We also disclosure on ex-post targets for short- Reflecting shareholder opposition, voted against several companies where term and long-term incentive plans the board announced during the AGM we deemed the board of directors and/ constituted the main reasons for voting that it would withdraw the resolution or board committees to be insufficiently against. We expect engagement with and, accordingly, it was not voted on. independent, either because directors our portfolio companies to result in more had a long tenure or where they were transparency over time. 2. As part of ongoing engagement representatives of major shareholders. with an Irish building materials This remained a concern in the US and producer, we met to discuss their the UK where we routinely come across latest remuneration policy and report. directors with long tenure. They sought to increase the maximum Allianz Global Investors Sustainability and Stewardship Report 2022 90
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 Overboarding is a major ongoing concern 1. In France, we observed in 2022 several Auditor-related votes Capital-related resolutions in many markets. As demands on non- successions at the top of CAC40 We expect investee companies to We continued to vote against large executive directors increase in times of companies where the outgoing CEO regularly evaluate and retender audit capital issuance authorisations that were economic uncertainty and geopolitical and chair was appointed as non- contracts and to change auditors after not supported by a credible business risk, we voiced our concerns and typically independent non-executive chairman. a maximum of 20 years of service unless rationale from management. We voted voted against when full-time executives While we welcome the dissociation of stricter local laws apply. We voted against against 16% of capital-related proposals take on more than one non-executive CEO and chair roles, we voted against 28% of proposals to ratify the auditor in 2022 (2021: 15%). Only in exceptional role, or when non-executive directors the appointment as chair when it was (2021: 26%), especially when there was circumstances will we support an increase take on too many appointments in public not for a short period of time to ensure a no commitment from the company to in capital with pre-emption rights of and private companies. We encourage smooth transition. This position explains retender the audit mandate. We continue greater than 33% and an increase in companies to improve gender diversity the increase in dissent votes around to have concerns about some Chinese capital without pre-emption rights of and, in the UK and the US, ethnic diversity directors’ election from 22% in 2021 to companies and voted against 46% of greater than 10% – and only when it is 14 of their boards. We expect this to be 33% in 2022. resolutions. Although this marks an justified by an individual company. achieved by broadening the pool of improvement on 2021 (60%) due to better talent from which to select, rather than 2. In 2022, we voted against the senior disclosure on auditors’ qualifications and As in previous years, our concerns focus excessively overboarding individuals independent director of a UK-listed audit fees, we expect more companies to on certain markets. In Hong Kong and and exposing them to heightened mining company due to concerns provide a breakdown of audit fees versus Taiwan, we voted against almost 30% professional risks. around overboarding. In addition to non-audit fees for investors to evaluate of capital-related resolutions. In several being a non-executive director at the the independence and objectivity of European markets such as Germany, Concentration of power at the top of company, the nominee held a number the auditor. France and Spain, we voted against a company through combined chair/ of chairman roles at various listed in more than 30% of cases. Frequently, CEO roles also led to votes against. (and private) entities. Given that the our votes against were because In these cases, we expect companies to apparent workload went beyond our companies did not provide pre-emption put appropriate checks and balances in policy limits, we withheld our support rights according to our expectations. place, such as the appointment of a lead at the AGM to make clear our concerns independent director. around the nominee’s capacity to discharge their responsibilities. 14 Note that AllianzGI applies stricter rules for Germany. Allianz Global Investors Sustainability and Stewardship Report 2022 91
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 In the US, we voted against almost 60% of Climate-related resolutions framework. As climate transition plans benefits of reduced emissions, we such resolutions. A frequent concern was 2022 marked our second year of voting on are specific in nature, we evaluated believe that having good visibility of around resolutions to increase authorised two types of climate-related resolutions. around 50 Say on Climate resolutions on supply chain emissions brings strategic common stock by over 10% where these The first type is put to vote by management, a case-by-case basis using these sector benefits to companies and their were not undertaken in exceptional the so-called Say on Climate, typically to specific frameworks. shareholders, as well as improving the circumstances and appropriately justified seek shareholder approval for climate quality and resilience of supply chains. by the company. strategy, GHG reduction targets and action 1. We voted against the approval of plans. The second type of resolution is put a climate report of an Australian oil Voting shareholder resolutions 1. We voted against a capital-related to vote by shareholders and varies in scope, and gas company. The company’s In 2022, we voted on 2,600 shareholder resolution at the AGM of a Chinese often requesting the company sets more commitment for net zero by 2050 only resolutions globally. There were record company. The company intended to ambitious climate commitments, enhances covered Scope 1 and 2 emissions. numbers of shareholder resolutions in provide full guarantees to several disclosure or takes specific action. There were no Scope 3 targets in the US in 2022; these resolutions were non-wholly owned subsidiaries and place and the reduction strategy was by far most prevalent in this market. external third parties, without giving We generally support shareholder vague. While the company considered Shareholder resolutions have the potential persuasive justifications or purchasing resolutions that ask companies, for its approach to be Paris-aligned, to play an important role in shaping counter guarantees. Regarding this example, to report on their climate we did not assess its strategy as companies’ sustainability and governance type of commonly observed practice, change strategy in alignment with the credible without inclusion of a Scope 3 practices. To explain our view and the disproportionate guarantee liabilities Paris Agreement or seek information reduction target. At the same annual approach, we published a paper on the would expose listed companies on climate-related financial, physical or meeting, shareholders filed three topic in our series Stewardship Principals. to excessive risks relative to their regulatory risks and how the company other proposals which we supported ownership interest. Therefore, we manages such risks. We evaluate these to encourage enhanced transparency We typically support longer-term focused opposed these proposals. This is part resolutions on a case-by-case basis as they and better alignment with a Paris- resolutions with a focus on improving of our engagement focus in the market are often specific to each company. aligned approach. corporate practice and transparency. and we observe an increasing number We tend not to support resolutions that of listed companies starting to purchase We continued to strengthen our voting 2. We supported a shareholder resolution are too granular, overly restrictive, likely to counter guarantees to mitigate guidelines around say on climate at a US retail company requesting the impose an unreasonable administrative investor concerns. resolutions, including director accountability. adoption of targets to reduce full value burden, or where we believe a We also refined our approach to assessing chain GHG emissions. Retailers can and company has already demonstrated companies’ climate transition plans, with our should influence Scope 3 emissions reasonable progress. stewardship analysts and Research team to progress along a science-based joining forces to establish an analytical trajectory to net zero. Beyond the Allianz Global Investors Sustainability and Stewardship Report 2022 92
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 In the US, we voted on 674 proposals 2. We supported a shareholder resolution think it was in shareholders’ interest Our engagement approach applies including 126 on corporate governance at a US transportation services to support this resolution for the to equity and fixed income holdings, (excluding director elections and director company. The resolution requested that particular company at the current time. in so far as the counter parties overlap. related) and 28 on compensation, 214 on the board oversee a third-party audit We considered that sector price setting We ensure flow of information through our various social themes and the remainder analysing the adverse impact of the dynamics could put the company at investment and collaboration platform, environmental resolutions or a blend of company’s policies and practices on the a disadvantage. The vote followed which both teams can access. In 2022, areas, demonstrating our comprehensive civil rights of company stakeholders. company engagement and internal we broadened and systemised work approach to voting on governance Concluding the additional insight discussion that involved relevant between the Sustainability teams and and sustainability-related shareholder would be helpful to assess those risks, investment teams who are familiar Fixed Income teams in several areas, resolutions. Globally, we supported we differentiated this from another with the sector. notably with respect to engagement 80% of all climate-related shareholder resolution on the same ballot where (see section 03.2.1). Fixed Income teams resolutions, 96% of human-rights related we thought the company made 03.7.5 Exercising our rights and have been trained on the use of internally resolutions, and 94% of resolutions with sufficient progress and therefore did responsibilities beyond equities developed tools and available resources respect to greater transparency on not support this separate shareholder Exercising voting rights is typically limited such as sector frameworks. political contributions and lobbying. resolution on political lobbying. to equity holdings. As debt investors, we This granular analysis was discussed seek to exercise rights at the fund level 1. We supported a climate lobbying with investment teams who are in where possible. Where bond issuers shareholder resolution at a US airline regular contact with the company and have outstanding equity, our debt company. Transparency on climate were able to add valuable insight on investors will benefit from the ability lobbying is in shareholders’ interest management responsiveness. to exercise rights formally through our given the importance of the sector equity holdings. However, where we view transition. Better transparency can 3. We abstained on a shareholder latitude in covenants or bond terms to help in mitigating climate transition resolution requesting a European be inappropriate, we seek to engage – risks and reputational risks by retailer to adopt minimum pay either bilaterally or through collaborative 15 16 ensuring the lobbying activities of the standard. While we acknowledge the engagement groups (eg, ELFA , EMIA ) – company are aligned with the Paris merits of adequate pay conditions, to secure better debt holder rights. Agreement. For this company, the including above legal minimum wage vote was in the context of a broader if appropriate, and support the sector climate engagement during the year, adopting such pay levels, we did not and we supported the request for greater transparency. 15 European Leveraged Finance Association. 16 Emerging Markets Investors Alliance (emia.org). Allianz Global Investors Sustainability and Stewardship Report 2022 93
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.7 Exercising our voting rights Principles 7 11 12 Breakdown of proxy voting by location Percentage of resolutions voted against management in 2022 Belgium China France Germany Hong Italy Japan Nether- Spain Sweden Switzer- Taiwan UK USA Kong lands land 16% 21% 21% 22% 29% 32% 24% 11% 14% 11% 20% 15% 4% 36% Compensation (% against) Belgium China France Germany Hong Italy Japan Nether- Spain Sweden Switzer- Taiwan UK USA Kong lands land 44% 37% 23% 47% 56% 51% 12% 36% 48% 46% 23% 43% 20% 78% Director-related (% against) Belgium China France Germany Hong Italy Japan Nether- Spain Sweden Switzer- Taiwan UK USA Kong lands land 8% 28% 33% 20% 36% 56% 27% 8% 17% 12% 17% 26% 4% 29% Key 0–9% 10–19% 20–29% 30–39% 40–49% 50–59% 60–69% 70–79% Allianz Global Investors Sustainability and Stewardship Report 2022 94
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.8 Transparently managing conflicts of interest Principles 3 7 Our fiduciary duty requires We regularly review existing and new 3. We may sometimes have clients that proxy voting, the Global Proxy Voting us to exercise any rights – business processes, new products and advocate a voting position with respect Committee will convene to evaluate the including engagement – in services, new business relationships and to a proxy vote on a company that we issue, considering information from all the best interest of our clients. internal restructuring measures to ensure view to be inconsistent with the long- relevant sources. we identify conflicts of interest at the term best interests of other clients. • Functional separation – A separation This includes identifying, earliest reasonable opportunity. of processes and management within monitoring and actively and 4. We may invest in a company that is also AllianzGI helps ensure that individuals fairly managing any conflicts We have identified the following major a significant distributor of our products. who are clients or have business of interest that may arise from potential conflicts of interest with respect relationships with the firm are not able to our stewardship activities: Our dedicated governance structure and to exercise improper influence over our our activities. policies and processes for managing proxy voting decisions. Proxy voting 1. AllianzGI is owned by Allianz, a global conflicts of interest in proxy voting and rests entirely with the Investment insurance and financial group whose engagement, including a Conflict of platform in line with pre-defined interests and views may not always Interest Policy which we publish in our oversight procedures. align with what we consider best for Stewardship Statement, comprise the • Training – We have implemented our clients. following elements: employee training designed to prevent 2. Our core business is investment • Global oversight – AllianzGI has perceived or actual conflicts of interests management – managing money and established a Global Proxy Voting from constituting or giving rise to a assets for our clients. Where a client’s Committee to provide oversight of the material risk of damage to the interests fund holds securities in a sponsor proxy voting process. This reports to the of our clients. company, a perceived conflict of interest Investment Executive Committee. • Risk management – To manage may arise if we exercised the proxy • Conflict management – There are potential conflicts in our engagement vote or engaged in topics on behalf of instances when we may not wish to activities, the Risk Management our client which may impact our own vote proxies in strict adherence to our function has developed clear and commercial interests or arrangements. voting guidelines. Where a potential transparent internal escalation material conflict of interest arises guidance. The guidance distinguishes between the company’s interest between non-public and public and those of a client with respect to engagement activities. Allianz Global Investors Sustainability and Stewardship Report 2022 95
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.8 Transparently managing conflicts of interest Principles 3 7 In 2022, the Proxy Voting Committee Type Description and approach taken to manage conflicts of interest convened twice to decide on proxy Voting shares of our parent company Context: voting decisions that constituted a AllianzGI is owned by Allianz, a global insurance and financial group. Several of our funds may potential conflict of interest. As in invest in Allianz securities. A potential conflict of interest arises between the interest of these funds previous years, this concerned voting and those of our parent company when voting on our shares. matters relating to our parent company, Allianz. The Committee confirmed our Mitigating policies and procedures: analysts’ proposals. While research, analysis and alignment follow the usual processes, we instituted procedures to make sure that shares of our parent company are voted in the best interest of our clients. AllianzGI has also imposed strict controls and information barriers designed to insulate our decision- making process from improper influence and to ensure that we are able to carry out our investment decisions and stewardship activities in a manner consistent with the interests of our clients. In particular, all suggested proxy voting decisions are directed to the Proxy Voting Committee for review and decision making that ensures that our fiduciary duties are respected. Voting shares of our main distribution partner Context: We may invest in a company that is also a significant distributor of our products. Mitigating policies and procedures: While research, analysis and alignment follow the usual processes, we instituted procedures to make sure that shares of a key distributor we are invested in are voted in the best interest of our clients. In case of a significant Against vote in line with our proxy voting policy recommendation and considering the size of our holdings, the vote proposal would be directed to the Proxy Voting Committee for review and decision making ensure that we comply with our fiduciary duties. Information on our voting behaviour is available in real time on our website. Proxy Voting Dashboard | AllianzGI. Allianz Global Investors Sustainability and Stewardship Report 2022 96
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.9 Industry engagement and commitments Principles 4 7 10 Sustainable pathways to change In 2022, four subgroups investigated EU Taxonomy, (ii) the usability of the wider task force on SFDR implementation which require industry standards to be aspects including Social Taxonomy sustainable finance framework, and (iii) developed guidance for the drafting of effective, fair and reasonable and technical criteria for EU Taxonomy data science. the SFDR disclosure. We take part in to promote well-functioning objectives such as Circular Economy and working groups on corporate governance Usability of the Taxonomy. We advised European Fund and Asset Management and responsible investment and helped markets. We are an active on the development of an environmental Association (EFAMA) to shape discussion on preserving member of industry committees, transition taxonomy, looking into AllianzGI is a member of the EFAMA shareholder rights in virtual shareholder working groups and initiatives economic activities that are significantly Stewardship Committee and became meetings, which arose in the context of the around the world that harmful, that transition between harmful the chair of the Distribution Committee emergency laws in Germany. and sustainable and that do not have a in 2022. It also became a member of support this. significant impact on the environment. the sub-groups for Sustainable Finance Association Française de la Gestion Disclosure Regulation (SFDR) and Markets Financière (AFG) In 2022, we continued to build on We also contributed to the report on in Financial Instruments Directive (MiFID) AllianzGI is a long-term member of our memberships to help shape the the Usability of the Taxonomy which sustainability preferences. As a member AFG and we actively participate in thematic agenda, especially around contains a detailed overview of the of these working groups, we participate various ESG working groups. At the climate. We engaged with national and first implementation phase of the in consultations and discussions on a Corporate Governance Committee, international regulators, policy makers Taxonomy by economic operators and variety of sustainability topics at the we contribute to the development of and politicians in discussions ranging from across financial markets. It also includes European level. proxy-voting guidelines that we would engagement, stewardship and net zero specific recommendations for targeted like French corporations to apply. commitments to regulatory framework adjustments to enhance the usability Bundesverband Investment and Asset We also discuss how to improve corporate consistency, implementation timelines and of the taxonomy and improve the Management (BVI) governance practices as an opportunity ESG ratings. coherence of the broader sustainable We chair the BVI Sustainability Committee to shape the agenda towards better finance framework. which focuses on regulatory and market stewardship practices. EU Platform on Sustainable Finance developments. This includes developing Through Allianz, we are a member of the The platform’s first mandate ended industry positions such as on the In 2022, we contributed to consultations EU Platform on Sustainable Finance, an in October 2022. The next platform’s requirement of minimum standards for related to the measurement of sustainable advisory body subject to the European mandate will run from Q1 2023 to Q4 Article 8 SFDR products and industry investment (under SFDR) and promoted Commission’s horizontal rules for 2024. We will in particular contribute concepts such as the target market a higher level of harmonisation across expert groups. The platform assists the to the work of the new subgroup 1 on concept to facilitate exploration of client’s European jurisdictions. Commission in developing its sustainable usability and data which will advise the sustainability preferences at the point finance policies, notably the development EU Commission on (i) the usability of the of sale. We are an active member of the of the EU Taxonomy Framework. Allianz Global Investors Sustainability and Stewardship Report 2022 97
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 03.9 Industry engagement and commitments Principles 4 7 10 Hong Kong Green Finance Access to Nutrition Initiative (ATNI) Initiatives we joined in 2022 Association (HKGFA) AllianzGI became a signatory of the Access to Nutrition Initiative (ATNI) In 2022, we became a member of the Access to Nutrition Initiative in 2022. Hong Kong Green Finance Association (HKGFA) HKGFA, a platform that brings together The ATNI focuses on developing tools players within the finance value chain and initiatives that track and drive the to facilitate the development of green contribution made by the food and Working groups we joined within initiatives finance and sustainable investments in beverage sectors to address global Corporate Governance Advisory Council (Initiative: Council of Institutional Investors) Hong Kong and China. AllianzGI joined nutrition challenges. We participate ESG Disclosure and Integration Working Group (Initiative: HKGFA) the ESG Disclosure and Integration in this collaborative platform to enrich Policy Research and Dissemination Working Group (Initiative: HKGFA) Working Group which aims to foster our research and stewardship activities Private Debt Advisory Committee (Initiative: PRI) capacity and cooperation for sustainability and support our investment decisions. “Advance” Stewardship Initiative (Initiative: PRI) incorporation and transparency across As a signatory, we can access resources Distribution Committee (Initiative: EFAMA) the economic value chain, and the such as research on food security and Policy Research and Dissemination affordability, ingredients disclosure and Working Group which offers policy nutrition. We use these to support our recommendations to regulatory bodies individual engagement frameworks and to enhance the ESG ecosystem collaborative engagement. and regulatory regime. Industry consultations and other policy engagement activities We responded to consultations from local and regional authorities including the European Commission, the European Securities and Markets Authority and the Financial Conduct Authority in the UK. Allianz Global Investors Sustainability and Stewardship Report 2022 98
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04 Corporate sustainability Our own pathway towards change is characterised by the same commitment to high standards in our operations and supply chain as we ask of the companies in which we invest. We apply scrutiny and conduct due diligence across our organisation and processes to support the sustainable, long- term growth of our clients’ assets. Allianz Global Investors Sustainability and Stewardship Report 2022 99
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.1 Strengthening our corporate sustainability strategy Principle 1 Being a sustainable business We are aware that our activities can have Our corporate sustainability approach means creating long-term both intended as well as unintended value without compromising social and environmental impacts. It is our Corporate Sustainability (CS) our impact on people, corporate responsibility to be accountable Creates long-term business value without compromising people, planet, or profit. to our stakeholders. We ensure that our planet, or profit. Our holistic decisions and activities are guided by the 1 approach considers different license to operate that they grant to us. Core business Corporate (Social ) Responsibility (C(S)R) values that AllianzGI can activities, Means being socially accountable to all relevant Our goal is to shape sustainable pathways ie, products and stakeholders of the organisation. influence – including natural, by applying innovation and excellence services human, social, manufactured across all our business activities. and financial capital. Our management and colleagues are Business Corporate Citizenship (CC) committed to living up to high ethical conduct Consists of community engagement. We aim to reduce our negative impacts standards. We take immediate and Enabling activities, and increase our positive impact across appropriate action when we fall short of eg, operations, each of these capitals and their sum these and address areas for improvement human resources, by creating sustainable products and to maintain stakeholders’ trust. communications, Societal Social partnerships services, evolving our business operations, supply chain impact increasing transparency through We engage with our local communities sustainability reporting, and developing and society through social partnerships, Employee volunteering relationships with stakeholders. employee volunteering and charitable Read more about what sustainability donations. We collaborate with Reporting, rating Stakeholders’ means to us in section 01.1. non-governmental and non-profit and regulations trust Charitable giving/donations organisations to increase our reach and solve complex societal challenges. As a corporate citizen this engagement is an integral part of our responsibility and contributes to the social value we seek to enhance. 1 Social = related to society; the CSR concept is not limited to charitable work; responsibility refers to social, environment and governance aspects. Allianz Global Investors Sustainability and Stewardship Report 2022 100
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.1 Strengthening our corporate sustainability strategy Principle 1 In this chapter, we describe how we are Building a robust corporate sustainability Our corporate sustainability framework becoming more sustainable as a company function requires clear leadership and by evolving our business processes that close collaboration with corporate directly or indirectly enable our product functions and business units. Create offering to customers. We focus on focused impact four main areas: how we empower our In 2022, we established the role of the Foster positive societal impact in people, how we run our business, how we Corporate Sustainability Officer (CSO) defined UN Sustainable Development Goals manage the environmental effects of to ensure coherence between our our operations and how we contribute to corporate sustainability approach and Build strong foundations societal development. our sustainable investment strategy. Integrate sustainability practices into organisation The CSO will drive a more holistic As the first step in our new corporate approach to corporate sustainability, sustainability strategy, we will strengthen shaping its strategy and advising the internal foundations across environmental, Executive Committee and business units. social and governance dimensions. We are The business units are responsible for building on a good standard of existing implementing sustainability-related environmental management across business practices with the help of the Environmental Social Governance our operations. We aim to develop our CSO and local sustainability leads. • Environmental • Attractive employer: • Business conduct approach in the social dimension and Please see section 01.2 for more management in eg, diversity, equity and operational will work to increase the social impact information on our sustainability own operation: and inclusion, learning risk management of our corporate contributions to the UN governance and how we are eg, carbon footprint, and development • Sustainable Sustainable Development Goals that most expanding our more holistic waste reduction • Good corporate supply chain closely align with our corporate purpose approach to sustainability. citizen in society (as outlined in section 04.5). To strengthen governance, we will reconfirm the trust of our stakeholders with continuously CS function-related areas enhanced internal control processes and • Performance management integrate more sustainability criteria into • Communications and marketing our supply chain management. • Stakeholder and change management Allianz Global Investors Sustainability and Stewardship Report 2022 101
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.1 Strengthening our corporate sustainability strategy Principle 1 Our corporate sustainability roadmap Our three-year sustainability roadmap starts with building strong foundations which enable delivery of our long-term ambitions. 2023 2024 2025 Our long-term corporate sustainability goals (eg, for our Prioritising the development Expanding our influence Delivering against our long-term carbon footprint of our operations or women in senior of the corporate sustainability and impact by forging corporate sustainability goals leadership positions) are described in the following function and further external partnerships sections. We will report on our progress annually. strengthening governance Allianz Global Investors Sustainability and Stewardship Report 2022 102
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace We foster a working environment where people, performance and clients matter. We take a strong stance on diversity, equity Diversity is the mix of visible and and inclusion, as well as the health and wellbeing of our invisible traits that make each of employees. We support them in developing skills and knowledge us unique, including gender, age, disability, nationality, ethnicity, that help to shape sustainable pathways and to be resilient and sexual orientation, cultural prepared for change. background, personality types, and family status. 04.2.1 Living diversity, equity, Mental Health Day where more than 200 and inclusion colleagues joined to discuss the mental Equity differs from equality in 2022 was a special year as it marked health issues that majority and minority that instead of treating everyone 10 years of conscious commitment to groups might face at work, and how we the same regardless of their inclusion and diversity at AllianzGI. can collectively reduce stigma, support needs, it recognises the different We started working specifically to people during difficult times, and create circumstances of individuals and embed respective values into our global a safe environment for all. allocates the resources needed operations in 2012. Our journey began to reach the exact same goal. by defining what inclusion and diversity Inclusion is the behaviour we means to us and establishing local working groups to implement the vision To mark World Mental Health demonstrate and the processes across all regions. Today, we explicitly Day, more than we use that enable everyone to also integrate the aspect of equity. give their best. Our culture of Diversity, equity and inclusion (DEI) is inclusion embraces and values our shaping how we work with and serve differences – it helps us feel free our large and diversified client base. to be who we are. Due to the fact that we are all defined by 200 more than just one trait, and to further consolidate our DEI approach, we view our colleagues joined to discuss DEI challenges through an intersectional the mental health issues that lens. One example was the global online majority and minority groups webinar we organised to mark World might face at work. Allianz Global Investors Sustainability and Stewardship Report 2022 103
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace Ten years of active commitment 2012 2014 2016 2017 2019 • Creation of regional and • First Global I&D Day • Creation of our Flexible • Creation of our Global • Signature of the United local I&D Working Groups Work Arrangements I&D Policy Nations LGBT Standard of Principles and Guidelines • Setting of our 2020 Conduct for Business and of Gender Equality Women in Finance Charter ambitions • Implementation of global Financial Literacy programmes 2020 2022 2022 2022 2022 • Publication of our first • Roll-out of our new global • Publication of our first • First global webinar • Publication of our first I&D guide on “Fostering anti-discrimination and brochure on menopause on transgender identity dedicated I&D Report LGBT+ Inclusion” anti-harassment policy “I’m feeling (really) hot” • Revamping of our I&D strategy around three key pillars: Workplace, Workforce, and Marketplace Allianz Global Investors Sustainability and Stewardship Report 2022 104
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace Our diversity, equity and inclusion Our strategy consists of three pillars: (DEI) strategy DEI is a company-wide responsibility, and everyone who works at AllianzGI has a role in creating an inclusive culture As a generation Y woman building her and supporting our commitment to DEI. career in the finance industry, what is Understand the employee experience Guided by our business strategy, our DEI crucial for me is a meaningful job in through a DEI lens, build a safe work strategy is led by the Executive Committee a company that promotes a positive 1. Workplace: culture and nurture a healthy workplace. (ExCo) and supported by the Global DEI impact on society. AllianzGI as a How does it feel to Leader, a role that has been in place since company represents this social positivity work for us? 2018. Our strategic approach is activated and is vocal about its inclusive culture.” by employee working groups across all our locations. Maeva Ramadier CFA – Associate Credit Attract and develop a wide variety Portfolio Manager, of talent to grow the diversity of our Sustainable Thematics 2. Workforce: workforce at all levels. Who do we recruit and grow? Connect the dots with our engagement 3. Marketplace: in local communities as a good corporate citizen. How do we serve our social purpose? Allianz Global Investors Sustainability and Stewardship Report 2022 105
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace Bringing strategy to life In line with Allianz Group targets, our ambition is to have at least 30% women in 2 senior leadership positions. Since 2020, our ExCo has been 50% female. Recruitment and Commitment to We are proud that in an industry where women have traditionally been under- development equal pay represented, a number of our key leadership positions are held by women, Examples of how we influence gender balance through Our compensation principles underscore our commitment including the Global Head of Investments, recruitment and development include: to an inclusive environment and equal pay, and is brought Global Chief Investment Officer for to life by: Equities, Global Chief Operating Officer, • Leveraging a language revision tool to review job posts and Head of Products. for inclusive language. • Engaging an external consultant to analyse compensation To make a further positive • Requiring all external search firms to comply with our and identify potential pay gaps using statistical regression impact on the gender balance at diversity clause. analysis as a standard part of the annual compensation AllianzGI, we have implemented • Partnering with diversity-focused organisations such as review process. a range of systemic measures, for 100 Women in Finance, SEO (Sponsor for Educational • Basing pay decisions on objective reasons and disregarding instance in the areas of recruiting, Opportunity), Wiser (an employer branding and early protected characteristics. development and compensation. talent agency) and ADAN (“Afro Deutsches Akademiker • Regularly discussing individual compensation at the Netzwerk”, a German network for graduates who are local level with managers, along with market references Afro-German, African and from the African continent) to where available. help attract under-represented talent. • Conducting annual functional reviews to support fair • Ensuring a gender balanced presence in executive salary decisions. development programmes. • Always including at least one female candidate in executive succession plans. 2 Senior leadership positions equal ExCo and Managing Director roles. Allianz Global Investors Sustainability and Stewardship Report 2022 106
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace Beyond gender, we monitor dimensions such Women in leadership Nationalities and age as age and nationality to nurture a truly international and age-balanced workforce. Workforce ratio 3 % women in senior % female managers No. of nationalities Average age 2022: 2022: leadership positions 2022: 2022: Looking ahead 2022: In 2023, we plan to strengthen our 58% 32% 66 43 years collaboration with business heads male 26% male and work on specific DEI functional 2021: 32% Managing Directors 2021: 63 action plans to ensure a deeper integration of DEI in our company 42% 43 years value chain. female 50% female Find out more in the 2022 Diversity, ExCo members Equity and Inclusion Report. 2021: male 59% / 2021: male 44 years / female 41% 2021: 23% / 50% female 43 years 3 This refers to the first level of leadership where managers have at least one direct report. Allianz Global Investors Sustainability and Stewardship Report 2022 107
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace 04.2.2 Promoting health and Our framework allows for flexibility in Supporting employee health wellbeing in a flexible and hybrid both time and place, providing room for and wellbeing work environment individual work set-ups for the benefit of The health and wellbeing of our employees “We care for tomorrow” is our employee a thriving culture. Some may agree within is a top priority. Our holistic approach value proposition – a promise that we their team to come in on fixed days while incorporates mental, social and physical make to our current and future employees. others choose to split their time between wellbeing. We consider the causes of stress Our aim is to be the preferred inclusive morning hours in the office and work from and depression through an intersectional home for our industry’s best talent. home in the afternoon. This flexible model DEI lens to promote good mental health We strive to provide a caring and inclusive empowers our colleagues to balance and offer advice on topics such as work environment where employees have work, career development and personal nutrition, sleep and managing work- the support they need to succeed. priorities in the way that best suits their life balance. individual work and life situation. In 2022, Creating a flexible work environment the framework for flexible working was Our efforts to support employee wellbeing As a global business, we have many updated to formally include the option for are paying off with a four percentage point years of experience using technology- eligible roles to work from another country increase to 74% favourable responses enabled virtual collaboration. Our global up to 25 days per calendar year. for the AES question: “Our company framework for flexible work arrangements sufficiently looks after the wellbeing and has been in place since 2016. With the The results of the Allianz Engagement health of its employees”. development of new tools and equipment Survey (AES) show that flexible work is a to support digital collaboration and the strong driver for employee engagement 04.2.3 Encouraging lifelong learning deep experience gained over the past with an 83% favourable score for the We recognise that learning and few years, we continue to build on this question: “Our company offers flexible development is a key differentiator framework. Our focus is on empowering work opportunities that meet my current in the financial services industry, employees with collaborative and flexible needs with regard to where and when I and contributes to long-term business ways of working. perform my tasks” (+1 percentage point success. Performance management from 2021). and transparent feedback informs regular development dialogues, and employees are provided access to global, regional and local development offers for lifelong continuous learning. Allianz Global Investors Sustainability and Stewardship Report 2022 108
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.2 Creating an inclusive and supportive workplace 04.2.4 Listening to our employees In-depth analysis and open commentary The AES is our formal platform for from our employee listening efforts Additional facts and figures gathering annual employee feedback. It is provide direction to continuously improve supplemented with regular pulse surveys the employee experience at AllianzGI. Training/upskilling Safety, health and wellbeing which help track our progress against Examples of action taken in response specific commitments. to their feedback in 2022 include the More than Average sick days per employee launch of a crowd intelligence sourced In 2022, the AES participation rate was Trend & Technology Radar which provides EUR 2.7m 3 days 84% (+1 percentage point from 2021). employees with an opportunity to shape invested in employee After a jump of seven percentage points future focus areas at AllianzGI. development in 2022 2021: 2 days in the Employee Engagement Index (EEI) in 2021, we noted a one percentage point 04.2.5 Respecting employee rights 2021: EUR 2.1m decline on the EEI in 2022. We ensure that the rights of employees are protected in all entities. In line with Average length of service Our employees recognised efforts to Allianz’s principles, we are committed to 10 years create an inclusive culture and a healthy continuing to respect and implement the 22 hours male / female work environment: fundamental rights and principles at work of the International Labour Organization of training in average per employee • The Inclusive Meritocracy Index (IMIX), (ILO) as well as the principles of UN 2021: 11 years which reflects our ambition to create Global Compact and the OECD Guidelines 2021: 15 a culture and working environment for Multinational Companies. where people and performance matter, reached 78% favourable answers Looking ahead Find out more in the 2022 Diversity, Equity and Inclusion Report. (+1 percentage point from 2021). • The Work Well Index+ (WWi+), In 2023 and beyond, we will further which measures the stress level of strengthen our zero-tolerance policy employees for work-related strain, on discrimination and harassment improved to reach 70% favourable by continuing to communicate our answers (+1 percentage point principles and offering new training from 2021). for all managers and employees. Allianz Global Investors Sustainability and Stewardship Report 2022 109
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.3 Ensuring responsible business conduct Principles 3 5 Our license to operate is 04.3.1 Three Lines of built on the trust that our Defence framework The first line of defence is performed by investors, employees and Responsibility for ethical business conduct the respective business functions through and risk management is an integral part the management of day-to-day activities. other stakeholders place in our of our business processes spanning the The business functions are responsible for performance and integrity. entire value chain, from client onboarding designing and implementing adequate and portfolio risk management to controls to manage risks and returns related A key component is the personal ethical ensuring personal information is treated to activities assigned to them. behaviour of all our employees worldwide. with utmost care. The second line of defence provides Their actions are guided by global policies independent oversight of employees’ and ethical standards, as well as a robust Risks are addressed as part of an adherence to the company’s regulatory and mature internal control framework overarching reporting and controlling requirements and internal policies, as well (Three Lines of Defence) that facilitates framework. This covers qualitative and as the risk-taking and controls conducted and ensures employees manage business quantitative risks for each function along by the first line. The second line of defence ethically and in compliance with internal three lines of defence. The distinction is performed by Legal and Compliance procedures and regulatory requirements. between the different lines of defence and Risk Management, which oversee and is principle-based and determined advise the first line of defence. by activity: The third line of defence is performed by Internal Audit, which independently assesses the governance and internal control systems, processes and compliance with risk principles, performs quality reviews of risk processes, and tests adherence to business standards, including the internal control framework. Allianz Global Investors Sustainability and Stewardship Report 2022 110
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.3 Ensuring responsible business conduct Principles 3 5 04.3.2 Globally harmonised policies The Code of Ethics serves as a foundation In 2022, all AllianzGI employees risk in the portfolio via implicit or explicit and standards for our compliance culture and regulatory participated in Global Compliance performance promises. Investment risk Globally applicable policies include, but are expectations for all AllianzGI employees. Training covering (amongst other areas) also includes liquidity risk, which depends not limited to, the AllianzGI Code of Ethics, The code and the accompanying supporting Anti-Money Laundering, Anti-Fraud and on asset liquidity and flows on the liability Speak-Up policy and policies governing policies have been revised in 2022 to Economic Sanctions. side, as well as constraints imposed by Anti-Money Laundering, Anti-Fraud, provide consistent application of our policies regulators. For investment risk oversight, Anti-Trust, Anti-Bribery, Economic across jurisdictions worldwide, meet the 04.3.4 Managing risks effectively the Risk Management function defines Sanctions, Personal Account Dealing, expectations of various regulators, and The independent Risk Management which risk models and analytics are used Order Execution, Confidential Information/ reflect industry best practices. function is responsible for setting up a to ensure compliance with regulatory Insider Information, and Data Privacy. firm-wide auditable, documented risk requirements and, for selected topics 04.3.3 Ensuring compliance management system and risk policies or if contractually agreed, that further Employees are required to act in The Compliance function is responsible for that are consistent with AllianzGI’s independent risk analyses and supervision accordance with these policies at all times, implementing and maintaining an effective business strategy. We cluster risks is conducted beyond what is required whether dealing with clients, external third compliance programme. This includes into four risk categories: investment by regulation. parties or other Allianz employees. compliance risk analyses as well as the risk, operational risk, business risk, annual compliance self-assessment and and reputational risk. We consider Operational risk is defined as the risk of Our clients expect their personal control plan. Compliance also develops sustainability risk, concentration risk loss inherent in our internal organisation, information to be treated with and administers guidance for employees, and emerging risk as transversal risks processes and controls resulting from the utmost care and we take this regular compliance training sessions on the that may be realised in one or more of potential failure to deliver our products responsibility seriously. Employees must Code of Ethics and Anti-Money Laundering, these categories. Our robust processes or services in the required time and adhere to confidentiality in relation to and annual and ad-hoc training on and procedures ensure that we effectively quality, and in line with all regulations. client information and firm activities. matters related to other company policies monitor and manage risks within Each function is responsible for ensuring AllianzGI pursues an effective and procedures. these categories. an appropriate control framework to management and fair handling of the govern its key processes and mitigate potential conflicts of interests that may This involves the monitoring of proxy voting Investment risk includes the risk of operational risks. The Risk Management arise in the course of providing investment and investment guidelines, including those changes in the value of investment function has established an integrated services. We have embedded robust related to sustainability matters such portfolios that may be perceived as framework to oversee operational risk business policies and processes governing as exclusion lists. AllianzGI Compliance inconsistent with the risk profile of the management by the business. ethics and client confidentiality. These are monitors portfolios for compliance with respective portfolio as communicated to detailed in the AllianzGI Code of Ethics and investment guidelines, both pre- and the investor. This includes the risk that the echo Allianz Group’s overall standards. post-trade. company is exposed to market and credit Allianz Global Investors Sustainability and Stewardship Report 2022 111
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.3 Ensuring responsible business conduct Principles 3 5 Business risk is defined as the risk of 04.3.5 Fostering security and world. At the same time, our digital assets changes to government requirements not being able to reach the financial business resilience are evolving and expanding, and we are around the world. This coordination objectives in a given competitive market Data privacy and cybersecurity implementing new technologies to meet ensured that employees could move or regulatory environment. To monitor The Global Data Privacy function is growing business demand. efficiently and safely between remote business risks, the Risk Management part of Legal and Compliance and working and office locations to support function uses key risk indicators that cover includes regional Data Privacy Officers To manage cyber risks, we select best the firm and its clients. business and investment performance of and a Global Data Privacy Officer. practices from leading cybersecurity the management company, among others. The function informs, advises, and makes frameworks such as the International Our business resilience framework is a Ad-hoc and regular meetings are held recommendations on compliance with Organization for Standardization (ISO) or multi-tiered risk defence model supported between the Risk Management function applicable data privacy laws and the National Institute of Standards and by input from steering groups, a corporate and stakeholders in other functions to regulations, the Allianz Privacy Standard Technology (NIST). These frameworks set resilience organisation and every function discuss the current business situation and (APS) and other internal and legal standards for processes, controls, security within the firm. The programme is subject forward-looking developments. standards as well as guidelines. It works testing and reporting. to oversight by Allianz Asset Management closely with the respective Information (AAM). Annual self-assessments are Reputational risks are defined as risks Security Officers to ensure that adequate Since there can never be 100% protection submitted to AAM in accordance with of activities undertaken within the firm or data protection-related technical and against cyberattacks, we also implement group requirements, and the programme by employees outside the firm that may organisational measures are taken. controls and training to ensure effective is subject to regular audit reviews. result in unintended material negative recovery from a successful attack to impacts on stakeholder perceptions Strong cybersecurity is essential reduce the potential impact and duration The Business Resilience team is that could potentially impact AllianzGI’s for protecting systems, data and of business disruptions. responsible for managing the programme ability to do business. These stakeholders communications from intended and and ensuring that all business functions include clients, investors, the media, unintended misuse. Our cybersecurity Business resilience comply with the framework and policies. the public, regulators, and employees of programme is fundamental to the Business resilience incorporates business Business recovery plans are established AllianzGI and/or Allianz Group companies. sustainability of our business. We focus on continuity and disaster recovery and is an for each major function. This ensures key Prudent management of reputational designing, operating and monitoring an integral part of our service commitment business processes can be resumed in the risk is deemed essential in the overall appropriate level of preventive, detective to our clients. The importance of business event of a severe business interruption. risk framework. and responsive security controls. This is a resilience was evident during the Covid-19 Plans cover the most important risk priority as increasingly sophisticated attack pandemic when our Business Resilience scenarios for the loss of employees, methods affect organisations around the team constantly monitored the frequent facilities, technology, and third- party support. Allianz Global Investors Sustainability and Stewardship Report 2022 112
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.3 Ensuring responsible business conduct Principles 3 5 As part of a continuous improvement Our tax strategy is closely aligned to our Responsible communication with clients programme, we collect and analyse business strategy and our sustainability AllianzGI has always been committed Looking ahead feedback to improve the effectiveness strategy, and requires full compliance to client communications that are fair, We are enhancing capabilities in of the business resilience framework. with tax regulations and tax laws in all not misleading, accurate and up-to- the independent Risk Management A recent major global crisis management countries in which we operate. Allianz is date in all material respects. We strive function that apply to all AllianzGI exercise demonstrated that our Global committed to acting transparently and to meet the highest standards for client entities. Examples include: Crisis Unit is capable of successfully responsibly in all tax matters and to communications in accordance with managing a ransomware attack and working closely with the tax authorities regulatory requirements under local laws. • Building out the function’s systems minimising potential damage to the to ensure we pay our fair share of taxes. infrastructure to enable more firm and its clients. Our processes and internal governance Furthermore, in 2022, we launched a flexible and specific coverage of are implemented in line with our tax group-wide project to improve processes investment risks. 04.3.6 Being transparent about tax strategy to ensure full compliance in every and controls related to the review of all • Enhanced market risk capabilities Our ambition is to support the fairness, jurisdiction where we operate. types of client communication. We have such as stress-testing, risk analytics, transparency, and balance of all tax See the Allianz Group Tax Transparency reviewed and strengthened our processes best-practices of modelling systems at national and international Report 2022 and AllianzGI’s UK tax for client communications where capabilities and review of market levels in dialogue with key stakeholders, strategy for more information. necessary to ensure information is subject risk models. and to transparently communicate our to rigorous quality, accuracy, consistency • A stronger governance framework tax positions. 04.3.7 Strengthening internal controls and governance checks before it is shared. for our private markets business, We continuously enhance our internal Clarifying roles and responsibilities for with Risk Management The taxes we pay are an important part control framework, processes and client communication is a key objective representation at investment of our contribution to the economic and procedures to ensure they remain robust of this initiative. committees and more involvement sustainable development of the countries and effective in sustaining clients’, in the valuation process. in which we operate. Fair, effective, employees’ and stakeholders’ trust. As part of the overall enhancements to • Refined management reporting and stable tax systems are beneficial Two important enhancements during 2022 our client communications review that includes investment risk- for governments, companies, and the were the strengthening of controls around process, a new and dedicated client oriented dashboards and provides wider society. client communication and a number of communications policy, together with an overview of ex-ante risks, based enhancements to the independent Risk online training and a detailed client on risk statistics for each asset class. Management function (implementation communications handbook was published of some of these measures continues at the beginning of 2023. into 2023). Allianz Global Investors Sustainability and Stewardship Report 2022 113
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.4 Managing the environmental impact of our operations We strive to be a role model transparent reporting of environmental include GHG emissions from flexible employee in 2022 against the 2019 baseline in achieving our own targets impacts, and improves environmental working as well as certain cloud-based (2021: 77%). on climate change and management governance practices. systems in our footprint. environmental impact These practices and processes are oriented The decrease against the 2019 baseline towards ISO14001. Implementation and Our strategy focuses on a variety of is a result of progressive efforts and alongside the targets we set compliance with the EMS are monitored initiatives including energy-efficient investments in the efficiency of our for our investments. by Allianz Group through the Group planning, construction and operation operations and improved energy Environmental Officer (part of the Global of buildings, sourcing green electricity, management in a time of post-pandemic Our efforts contribute to the operational Sustainability team) and supported by the using carbon-efficient means of transport, return to offices. Changes in our business environmental goals of Allianz Group, Board of Management of Allianz. as well as reducing air travel. We achieved structure also led to the ceasing of our which include reducing GHG emissions in a 59% reduction in GHG emissions per business activity in the US market. over 70 markets where the Group has a Reducing GHG emissions In line with the latest climate science, GHG emissions – breakdown by source and proportions in tons (t) of CO presence to net zero by 2030, earlier than 2 2050 as originally targeted, and reducing AllianzGI has decided to advance its equivalents per employee GHG emissions per employee by 50% climate targets based on the science 3.8 versus 2019 by 2025. underpinning the Paris Agreement climate Read more about the Allianz Group goal. We are committed to reducing Climate Change Strategy. our GHG emissions per employee by 1.8 52% by 2025 (against a 2019 baseline), Our environmental management system further elevating our previous target of For the reporting, monitoring and decreasing GHG emissions per employee 0.0 2.0 management of our environmental by 38%. e…employee2 1.6 GHG target performance and footprint, we apply the 1.5 by 2025: environmental management system (EMS) Our carbon reduction strategy focuses on t CO 2.1 0.9 0. 1.8 t CO2e reducing GHG emissions from material 0.01 per employee of Allianz Group. It guides the monitoring 0.02 0.5 and management of our carbon footprint, sources across Scope 1, Scope 2, and 0.5 0.01 0.8 selected parts of Scope 3 (with a focus on 0. use of energy and natural resources such 2019 2020 2021 2022 as water, and efforts to reduce waste. business travel and energy consumption), baseline The EMS provides all Allianz entities with against a 2019 baseline. To reflect clear standards and controls, supports infrastructure changes as our way of Travel aper Energy (total environmental data collection, promotes working continues to evolve, we now Target: 52 re€‚tion by 2025 (against 2019 baseline. ƒ‚t€al: 59 re€‚tion 2019–2022. Allianz Global Investors Sustainability and Stewardship Report 2022 114
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.4 Managing the environmental impact of our operations 4, 5 The reduced workforce and office closures achieved through the continued sourcing Energy consumption from office buildings in gigajoules (GJ) per employee brought about a decline in emissions of renewable electricity globally and 19.2 and resource consumption. Global travel investments in the efficiency of our restrictions until mid-2022 and strict travel operations. The latter involves improved 17.0 16.6 policies also prevented a surge above the energy management, including centralised Energy target in business travel emissions in 2022. regulation of heating and cooling, 14.4 consumption target by 2025: As outlined in the next sections, we have decreased use of air conditioning post- 17.5 GJ per put further initiatives in place to prevent a pandemic, as well as refurbishments and employee future rise in emissions, and developments office moves to more sustainable buildings. of GHG emission will be closely monitored GJ/employee in 2023. Looking ahead Reducing energy consumption The expansion of our energy Our 2025 target is to reduce energy saving initiatives with a focus on consumption in our office buildings by rethinking ways of working, use of 2019 2020 2021 2022 9% per employee against a 2019 baseline. office spaces and investment in more baseline Our energy consumption goal was sustainable IT and energy-efficient amended (previously -10%) due to an equipment will facilitate adjustment of the calculation methodology a long-term decrease in our energy by Allianz Group, resulting in a higher consumption in 2023 and beyond. baseline and absolute targets for energy Energy accounts for 46% of AllianzGI’s 4 total GHG emissions in 2022. 82% of consumption. In 2022, we achieved a 13% all our energy-related emissions are decrease per employee in our internal generated through our office buildings. energy consumption from office buildings Where heating and cooling is not (2021: 25%). powered by renewable electricity, Apart from the major effects of office we are working to introduce more closures in the US, decreases in energy sustainable energy solutions. consumption across the offices were 4 The adjustment of the energy consumption calculation methodology led to a restatement of the energy baseline for 2019, and the actual numbers for 2020 and 2021. The energy used by local data centres is now excluded from our energy consumption target per employee. Emissions associated with energy consumed by local data centres are integrated in our total GHG footprint along with emissions caused by flexible and hybrid working arrangements and selected cloud-based systems. 5 All office buildings procure 100% renewable electricity. Allianz Global Investors Sustainability and Stewardship Report 2022 115
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.4 Managing the environmental impact of our operations Increasing use of renewable electricity Reducing emissions from business travel Our new Global Travel Policy prioritises As a signatory of the RE100 initiativ Evolving our carbon reporting e, and Business travel accounted for 53% of client-facing business travel over travel for in line with the specific ambitions of this GHG emissions from our operations in internal reasons. Combined with cloud- Our current emissions arise primarily initiative, Allianz Group has committed 2022 (2021: 40%). By the end of 2022, based working and Covid-19-related from business travel (2022: 53%) to source 100% renewable electricity (RE) emissions associated with travel had travel restrictions until mid-year 2022, and energy consumption (2022: 46%) for its group-wide operations by 2023. increased to 0.8 tonnes per employee this played a material role in preventing across Scope 1 and 2, with selected Since 2021, AllianzGI is RE100 compliant. (2021: 0.4 tonnes). Overall, we achieved a surge in business travel activities and parts of Scope 3. Capturing the full a 60% reduction of travel emissions per emissions back to 2019 baseline levels. scope of the impact of our operations, Since 2021, 100% of the electricity used employee against our baseline emissions particularly by looking at the by AllianzGI in its offices and local data in 2019. We are also supporting employees to emissions along the entire value centres has come from renewable sources. commute to work via low carbon means of chain of the company, will be This was achieved through agreements travelling. In 2022, 84% of our headcount equally important. with suppliers on ”green tariffs” and worldwide had access to offices with a the continuous sourcing of unbundled green commuting plan and infrastructure We have started by capturing Energy Attribute Certificates (EACs)6 for in place to support it. the footprint arising from flexible renewable electricity. working and some cloud-based Looking ahead systems and will gradually extend The purchase of credible unbundled EACs our measurement of emissions to plays an important role in delivering With business travel being our highest upstream and downstream activities temporary solutions to meet our goals in source of emissions, we have raised that we identify as material. the short- to medium-term, especially in our target to a 41% reduction of countries where renewable power cannot GHG per employee from business Additionally, our growth across the yet be readily sourced through green travel activities by 2025 against markets and offices in the APAC tariffs. This is a temporary solution while the 2019 baseline (previously 20%). region will be reflected in the scope the markets transition to meet demand Our ambitious target, investment in of our future reporting to ensure with real-world solutions. more sustainable ways of travelling global performance and progress is and the continued enforcement of the captured, tracked and enhanced. Global Travel Policy will contribute to keeping our footprint small. 6 EACs are an instrument to document and track the production, distribution, and consumption of renewable energy. EACs do not represent the electricity itself (as they are unbundled from the production) but allow us to prove that the energy we use is directly attached to electricity produced at a specific renewable energy site which can be identified. Allianz Global Investors Sustainability and Stewardship Report 2022 116
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.4 Managing the environmental impact of our operations Reducing paper use office printing. Our ongoing efforts include operations, we concentrate on using water estimated to be still below the target -15% By the end of 2022, AllianzGI had sourcing sustainably certified paper for efficiently and considering the impacts of by 2025 against our 2019 baseline. achieved a reduction of 74% in paper used internal and external use (2022: 66%) and climate change. We have committed to per employee against a 2019 baseline reducing paper consumption. The latter is reduce water use in AllianzGI offices per The reductions we have achieved are (2021: 68%). So far, we have exceeded the underpinned by increasing digitalisation, employee by 15% by 2025 against a 2019 the result of reduced operation of air- reduction target set at 20% by 2025. including of subscriptions, and paperless baseline. By the end of 2022, we achieved conditioning systems post-pandemic office concepts such as the closing of a 56% reduction (2021: 4%). and the impact of office closures, Paper consumption represents less than corporate print centres. space reductions and moves to more 1% of our global carbon footprint from During 2022, the scope of our reporting sustainable buildings. We have invested in operations. We use paper mainly for Reducing water use was adapted for operational reasons. water-saving solutions in our facilities and external communications with clients, Minimising our water consumption is Considering this, the actual water kitchens and adapted cleaning measures with a smaller amount used for internal a key principle of the Allianz Group reduction achieved across all entities is across our canteens. Environmental Guideline. For office-based 3 Paper consumption in kilograms (kg) per employee Water consumption in cubic metre (m ) per employee 27.4 35.4 aper 26.0 24.9 19.4 consumption target by 2025: 22kg per ater employee consumption 9.4 3/employee target by 2025: kg/employee m 11.4 3 7.0 22m per employee 2019 2020 2021 2022 2019 2020 2021 2022 baseline baseline Target: -20% reduction by 2025 (against 2019 baseline) Target: -15% reduction by 2025 (against 2019 baseline) ctual: -% reduction 2019–2022 ctual: -5% reduction 2019–2022 Allianz Global Investors Sustainability and Stewardship Report 2022 117
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.4 Managing the environmental impact of our operations Principle 8 Driving down waste recyclable packaging, avoidance of plastic Going forward, we will continue driving We aim to minimise waste and reuse and and reduced paper consumption. the global roll-out of these initiatives and Looking ahead recycle materials. Our operations mostly work with colleagues to encourage waste We plan to include additional generate household-type waste, and our We adopted the global Allianz Group best reduction behaviours. environmental, social, and target is to drive down waste by 14% by practices for removing single-use plastic from governance-related clauses into 2025 against a 2019 baseline. our operations across all our offices. 87% of Managing sustainable procurement our contracts with suppliers. our headcount is in an office with a dedicated Our commercial relationships with Procurement will continue to combine By the end of 2022, we achieved a 45% plan to sustainably eliminate the presence suppliers and partners around the globe tools and data to further equip reduction per employee against the 2019 of single-use plastic. These initiatives include enable us to encourage the adoption of AllianzGI with meaningful insights on baseline (2021: 49%). This was driven by reusable takeaway boxes in our canteens innovative sustainable business practices, the supply base to be able to steer initiatives focused on waste centralisation and providing only reusable, refillable, or and to adopt them ourselves. it in the direction of our corporate and separation, increased use of recyclable supplies in kitchens. sustainability strategy. One role of our procurement team is to Waste output in kilograms (kg) per employee consolidate the supply base towards 149.0 preferred suppliers that meet our business and compliance requirements as well as our expectations with respect to aste output sustainability standards. The AllianzGI target by 2025: Global Procurement Policy has been 89.7 12kg per updated to harmonise and align with the We expect our 82.3 employee 75.3 Allianz Group Vendor Code of Conduct. suppliers to embed kg/employee We are also enhancing procurement sound sustainability processes to ensure sustainability is considered throughout each phase of practices within the procurement lifecycle. We expect our their organisations. suppliers to embed sound sustainability 2019 2020 2021 2022 practices within their organisation and to baseline promote similar practices within their own Target: -14% reduction by 2025 (against 2019 baseline supply chain. We do this by embedding ctual: -45% reduction 2019–2022 requirements into sourcing projects and when onboarding suppliers into our systems. Allianz Global Investors Sustainability and Stewardship Report 2022 118
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.5 Driving our corporate citizenship While the acute impacts of SDG 8 are also closely linked with Promoting financial literacy and Covid-19 have receded, many SDG 13, Climate Action and SDG 17, education for next generations communities are grappling Partnerships for the Goals. In line with Our aim is to support future generations with the rising cost of living the Allianz Group corporate citizenship to overcome the economic and social strategy, future generations are a key At present, there are more children in impacts of the pandemic and other and the impacts of climate focus of our approach. need of humanitarian assistance than systematic social risks. Examples include: change. It is important for us to at any other time since the Second continue our work for positive Our corporate volunteering World War. Across the globe, they are • In collaboration with IW Junior in social impact and contribute and donations facing a confluence of crises – from Germany, 15 AllianzGI employees In 2022, over 700 corporate volunteering violence and displacement to infectious provided financial literacy education to the achievement of the UN hours were recorded within AllianzGI, disease outbreaks, soaring rates of for students nationwide through Sustainable Development with colleagues around the globe malnutrition and growing up in extreme online training and school class visits. Goals (SDGs). engaged in actively supporting numerous poverty. Meanwhile, climate change More than 300 corporate volunteering local community initiatives aimed at is compounding the severity of these hours were contributed by our Frankfurt Our approach to corporate citizenship creating positive long-term impact. crises and unleashing new ones. But the office in 2022. Our ambition is defined by our business situation is not hopeless. Together with • Also in Germany, our long-standing strategy and brought to life through We continued with our tradition of end-of- supporters like AllianzGI we have risen collaboration with “BVI Hoch im Kurs” our employees and the local efforts of year donations across the globe to causes to the challenge. From Afghanistan to is educating young people on topics our global entities. Our longstanding that are important to our employees. Somalia, from the Sahel to Yemen – such as “the financial crisis and its commitment to shaping a more resilient Our donations of around EUR 620,000 UNICEF is on the ground in countries implications” and “How to save money society continues to motivate our corporate in 2022 focused on supporting local around the world, providing children efficiently” since 2008. citizenship efforts in our offices around communities to deal with the rising cost with lifesaving assistance during • In Taiwan, our employees worked with the world. of living, promoting financial literacy and humanitarian emergencies. Our work Help Rainbow Family Life Education education among the next generations, continues – thank you very much for Association since 2020 to organise and Our activities prioritise SDG 8, Decent supporting child safety and basic your support!” create financial education courses. Work and Economic Growth, which aims needs, and protecting the environment. A total of 546 students took part in the to “promote sustained, inclusive, and Beneficiaries included UNICEF for their Christian Schneider, courses in 2022. sustainable economic growth, full and Humanitarian Action for Children appeal CEO of UNICEF Germany productive employment, and decent and food banks in Frankfurt, Hong Kong, © UNICEF/UN0606725/Etges work for all.” Our actions to deliver London, Munich and Singapore. Allianz Global Investors Sustainability and Stewardship Report 2022 119
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.5 Driving our corporate citizenship Supporting vulnerable communities Protecting local environments AllianzGI colleagues supporting the World Cleanup Day. We support communities where we live World Cleanup Day is a global movement and work, especially in times of need. which unites 191 countries for a cleaner We leverage our expertise, resources and planet through local waste and litter assets to align with local priorities and collection efforts. Allianz entities around maximise our impact. Examples include: the world take part and we encourage employees, customers, agents and • In the UK, we partner with partners to join this global concerted St Luke’s Community Centre through effort for our planet. In 2022, the day initiatives like the Job Club – which took place in September and our helps unemployed people find jobs, activities included: volunteering roles and training – and Steps to Success, a job inspiration • In Italy, over 30kg of waste was day for local primary schools. collected at the mouth of the Sturla AllianzGI employees contributed river by a team of AllianzGI employees over 65 hours of their time to join the from our Milan office, Allianz Trade Telephone Befriending scheme which in Italy and Allianz Partners Italy and supports residents who need a listener other volunteers from Legambiente or guidance for further help. and AzzeroCO2. • Our Taiwan office has supported • In Indonesia, our Jakarta team met on the Christmas Shoebox project since a Sunday and collected 16kg of waste. 2008. In 2022, the office raised nearly An educational booth was also set up to EUR 20,000 and provided 20 young bring more awareness to the topic. children, over 750 school students and • Our Taiwan office teamed up with social 217 senior people with the essentials for enterprises and non-profits to launch a schooling and learning and the basic Green Tour project, where they planted needs in their daily life. trees and cleaned up the beach in the area, collecting over 86kg of waste. Allianz Global Investors Sustainability and Stewardship Report 2022 120
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 04.5 Driving our corporate citizenship Supporting innovation among future generations AllianzGI is committed to engaging with communities to exchange ideas and solutions that address the multifaceted We need to inspire and empower our challenges of a sustainable future. young people to visualise a better future, To encourage the next generation, and to do all that we can to ensure every we have entered a three-year partnership career becomes a sustainable career. with the International Green Gown We need to turn feelings of anger and Awards. These are administered by EAUC anxiety into hope and action. This is a –the Alliance for Sustainability Leadership decisive decade for our very own future. in Education – and supported by the UN In our partnership with AllianzGI we Engaging the community through art Looking ahead Environment Programme to recognise show that education plays a crucial role AllianzGI sponsors illustrators across the exceptional sustainability initiatives for a just and fair transition towards a globe to create artworks relating to climate Many of our activities have been being undertaken by universities and more sustainable world.” change to provide a platform for the successfully led by our local charity colleges across the globe. In the first year exchange of ideas and inspire meaningful groups and employees across the of partnership, AllianzGI was part of the change. The Art on Climate International firm to date. To ensure we continue judging panel to exchange suggestions Fiona Goodwin, Illustration Competition was launched in to make meaningful social impact, and feedback between the academic and Deputy CEO at EAUC 2019. Over 3,400 artworks were submitted we are taking steps to evolve our corporate worlds. and Green Gown by more than 2,300 illustrators from over corporate citizenship approach Read more about the International Awards Secretariat 100 locations in 2022. The top 53 artworks to further drive co-ordinated Green Gown Awards here. were featured in a 3D virtual exhibition engagement and activity across and the winner chose Earthwatch Europe AllianzGI by utilising our global to receive a donation from AllianzGI of structure to support such locally led EUR 10,000 to support the Teach Earth efforts. A refreshed, global corporate In The Field project. Through this project, citizenship programme will be rolled teachers are empowered to support the out at AllianzGI in 2023 and we will next generation to understand the effects provide further details on this in next of climate change and inspire action. year’s report. See more on Art on Climate. Read more about Earthwatch Europe. Allianz Global Investors Sustainability and Stewardship Report 2022 121
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05 Appendix Allianz Global Investors Sustainability and Stewardship Report 2022 122
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.1 UK Stewardship Code index This report should be read in its entirety to obtain a comprehensive picture of our stewardship activities during 2022. The table below provides links to the specific sections within this report that demonstrate how Allianz Global Investors (AllianzGI) applies the principles of the 2020 UK Stewardship Code. 2020 United Kingdom Stewardship Code Principle Section Page 1 Signatories’ purpose, investment beliefs, strategy, and culture enable stewardship that Leadership insights on our journey 06 – 08 creates long-term value for clients and beneficiaries leading to sustainable benefits for About Allianz Global Investors 09 – 11 the economy, the environment and society. Evolving our strategic approach 12 – 17 Strengthening sustainability governance 18 – 22 Evolving our approach to sustainable investing 32 – 33 Strengthening our corporate sustainability strategy 100 – 102 2 Signatories’ governance, resources and incentives support stewardship. Strengthening sustainability governance 18 – 20 Linking sustainability with remuneration 21 Investing in our team 21 – 22 AllianzGI Sustainability Insights Engine (SusIE) 41 – 42 How we engage 64 – 65 Ensuring a robust voting process 87 3 Signatories manage conflicts of interest to put the best interests of clients and Transparently managing conflicts of interest 95 – 96 beneficiaries first. Ensuring responsible business conduct 110 – 113 4 Signatories identify and respond to market-wide and systemic risks to promote a Our approach to sustainable investing 14 – 16 well-functioning financial system. Focusing on the material sustainability themes of today and tomorrow 16 How active asset management supports the transition to a better future 17 Sustainability methodologies and analytics 39 – 42 Climate-related risks and opportunities 43 – 44 Sustainability risk management 45 ESG risk-focused 46, 49 Industry engagement and commitments & Sustainability initiatives overview 97 – 98; 132 – 139 5 Signatories review their policies, assure their processes and assess the effectiveness of Robust review and assurance 22 their activities. Strengthening voting policy and process 88 Ensuring responsible business conduct 110 – 113 Allianz Global Investors Sustainability and Stewardship Report 2022 123
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.1 UK Stewardship Code index 2020 United Kingdom Stewardship Code Principle Section Page 6 Signatories take account of client and beneficiary needs and communicate the activities Provide excellent client service 10 and outcomes of their stewardship and investment to them. How active asset management supports the transition to a better future 17 Guiding clients on sustainable investment solutions 23 – 30 7 Signatories systematically integrate stewardship and investment, including material Sustainability research 34 – 38 environmental, social and governance issues, and climate change, to fulfil their responsibilities. Sustainability risk management 45 Sustainable investing categories 46 – 60 Active stewardship 61 – 98 8 Signatories monitor and hold to account managers and/or service providers. How we select and monitor data providers 39 Selecting and engaging with fund managers 68 Ensuring a robust voting process 87 Managing sustainable procurement 118 9 Signatories engage with issuers to maintain or enhance the value of assets. What sustainability means to us 13 – 16 Developing our engagement strategy 62 – 63 How we engage 64 – 68 AllianzGI’s engagement in numbers 69 – 71 Engagement outcomes 72 – 81 10 Signatories, where necessary, participate in collaborative engagement to influence issuers. Collaborative engagements 82 – 83 Industry engagement and commitments & Sustainability initiatives overview 97 – 98; 132 – 139 11 Signatories, where necessary, escalate stewardship activities to influence issuers. Escalating engagement concerns 84 – 85 Exercising our voting rights 86 – 94 12 Signatories actively exercise their rights and responsibilities. Exercising our voting rights 86 – 94 Exercising our rights and responsibilities beyond equities 93 Allianz Global Investors Sustainability and Stewardship Report 2022 124
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 1 Other engagements include engagements on strategy, risk management, transparency etc. Allianz Global Investors Sustainability and Stewardship Report 2022 125
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope 30% Club France Member The purpose of the 30% Club France Investor Group is to engage with SBF120 2021 Inclusion and France companies on gender diversity to drive systemic change on company boards and Diversity (I&D) within senior management teams and to develop best practices and recommendations to make SBF120 companies more inclusive, diverse and sustainable. Association Française Member AFG is the French Asset Management Industry Association. since ESG, Corporate France de la Gestion inception Governance Financière (AFG) Member Corporate The Corporate Governance Committee of the AFG aims to promote best governance since Governance Committee practices in the French marketplace, improve practices at French issuers and discuss inception proxy-related issues such as the role of proxy advisors and shareholder activism. Member Technical This committee organises the working groups on different topics such as the SRI label, 2019 Committee Responsible the ESR indicators or the energy transition law and others. The committee aims to Investment be a place for sharing information on current regulations, initiatives, promotion and responsible investment. Asian Investor Group Member AIGCC is an initiative to create awareness among Asia’s asset owners and financial 2018 Climate Asia on Climate Change institutions about the risks and opportunities associated with climate change and low (AIGCC) carbon investing. Member Engagement and The work this group undertakes on engagement is complementary and in parallel 2021 Policy Working Group with company engagement as part of Climate Action 100+. The focus of this working group enables investors to understand how their increasingly important role in policy advocacy can also help drive more ambitious corporate climate action. Member Paris Aligned The group focuses on developing investor solutions for facilitating the transition to a 2021 Investment Working Group net zero emissions economy in Asia, and to track global progress. The group oversees AIGCC’s second annual low carbon investment survey. Access to Nutrition Member* ATNI focuses on developing tools and initiatives that track and drive the contribution made 2022 Nutrition Global Initiative (ATNI) by the food and beverage sector to address the world’s global nutrition challenges. * New this year. Allianz Global Investors Sustainability and Stewardship Report 2022 126
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope Bundesverband Member BVI is the German Investment Funds Association. 2011 ESG Germany Investment und Asset Member Committee The committee deals with strategic and technical issues related to sustainable 2020 Management (BVI) Sustainability investing, including corporate governance. It accompanies regulatory and political initiatives in the field of sustainable finance, especially at the European level, and evaluates their practical effects. Member Working Group The working group prepares the association’s position on responsible investing. 2011 Responsible Investing Member Working Group The working group prepares the association’s position on current legislative projects 2015 Corporate Governance relating to corporate governance at national and European level and develops the BVI analysis guidelines for general meetings. Member Working Group The working group prepares the association’s position on sustainability risks in the risk 2020 ESG Risk Management management processes of fund portfolios and on the management company level. Carbon Disclosure Investor Member International non-profit organisation that promotes carbon reporting by requesting 2015 Climate Global Project (CDP) information from leading companies about their GHG emissions and other environmental impacts. Climate Bonds Partner International, investor-focused not-for-profit. It’s the only organization in the 2015 Climate Global Initiative world working solely on mobilizing the USD 100 trillion bond market for climate change solutions. Climate Finance Founding Member CFLI aims to unlock climate finance in emerging markets, thereby mobilizing private 2019 Climate Emerging Markets Leadership Initiative capital in order to help finance the transition towards a more sustainable tomorrow. (CFLI) Council of Member The Council of Institutional Investors is the leading corporate governance network in 2017 Corporate US Institutional the US, advocating effective corporate governance practices for US companies and Governance Investors (CII) strong shareowner rights and protections. Member Corporate The Corporate Governance Advisory Council provides input to the board and staff 2022 Governance Advisory about CII activities that promote effective corporate governance and ways to enhance Council* the value of membership. Climate Action 100+ Participant The Climate Action 100+ is an investor-led initiative to ensure the world’s largest 2017 Climate Global corporate greenhouse gas emitters take necessary action on climate change. * New this year. Allianz Global Investors Sustainability and Stewardship Report 2022 127
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope The Conference Board Member The Conference Board connects businesses across geographies and provides them 2019 Corporate Global with insights that enable them to anticipate what is ahead, improve their performance Governance and better serve society. Co-Chair Corporate The Council was founded in Europe in recognition of the growing importance 2019 Governance Council attached by investors to the effectiveness of the corporate board. The Council is dedicated to executives with governance interest and responsibility, based in Europe, including corporate secretaries, legal counsel, and institutional investors responsible for corporate governance policies. Deutsche Vereinigung Board Member/ Sponsor DVFA is a professional association of investment professionals in Germany. DVFA sets 2005 ESG Germany für Finanzanalyse German Industry Standards. (DVFA) Member Kommission The DVFA Kommission Sustainable Investing addresses how to better integrate 2018 Sustainable Investing Sustainability in analysis and how to address policy and regulation in the German market with a focus on education and formation of analysts. Member Fachausschuss The DVFA Kommission Corporate Governance has set itself the goal of promoting best 2015 Governance & Stewardship practice for corporate governance in listed companies. The Commission’s activities include addressing current aspects of corporate governance, developing standards and helping to shape relevant regulatory processes. European Fund and Member Stewardship, The Committee’s areas of focus are the stewardship role of asset managers, market integrity 2015 ESG Europe Asset Management Market Integrity, and ESG and Sustainable Investment topics. In particular, the Committee addresses the Association (EFAMA) ESG Investment topics of Shareholders Rights and Obligations, Relationships between asset managers and Standing Committee investee companies (Stewardship), Responsible Investment, ESG Labels, Market Abuse and Sanctions. The membership includes participation in the subgroup for Sustainable Finance Disclosure Regulation (SFDR). Chair of the This Committee focuses on fund distribution and disclosures to investors. These include 2022 Distribution Committee* investor protection and disclosure issues arising from the evolving Packaged Retail and Insurance-based Investment Products (PRIIPs) and Markets in Financial Instruments Directive (MiFID) frameworks, the shift towards digital distribution tools, and the continued integration of ESG considerations into fund products. It includes the membership in the subgroup MiFID sustainability preferences. * New this year. Allianz Global Investors Sustainability and Stewardship Report 2022 128
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope European Leveraged Member ELFA is the European Leveraged Finance Association, which derived from a former 2020 ESG, Corporate Europe Finance Association European High Yield Association. The foundation of the association is to have a buyside Governance (ELFA) group which helps push for improved reporting and governance in the European leveraged finance arena. About topics on ESG, it covers primarily governance, but the association helps educate and promote asset management engagement with issuers on ESG. Member of ESG Committee The ESG Committee is working to improve disclosure on ESG topics in the leveraged 2020 finance market and to develop best practice guidance on ESG disclosures for sub- investment grade corporate borrowers in collaboration with the PRI. FAIR Member FAIR unifies different stakeholders of social impact finance in France and is the French 2021 Social impact France centre of expertise in this field at an international level. FAIR also manages a label, the Finansol label, which distinguishes social savings products from other savings products for the general-public. FAIRR Initiative Member FAIRR is an investor network raising awareness of ESG risks and opportunities in 2019 ESG Global intensive animal agriculture and helping build a more sustainable food system. Forum pour Member French Sustainable Investment Forum – membership based organisation addressing 2009 ESG France I’Investissement policy and other ESG topics specific to the French market. Organises regular events, Responsable (FIR) seminars, workshops, co-ordinates responses to consultations, etc. Forum per la Finanza Participant Italian Sustainable Investment Forum is a membership based organisation addressing 2011 ESG Italy Sostenibile policy and other ESG topics specific to the Italian market. Organises regular events, seminars, workshops, co-ordinates responses to consultations, etc. Forum Nachhaltige Member German Sustainable Investment Forum – membership based organisation addressing 2013 ESG Germany Geldanlagen (FNG) policy and other ESG topics specific to the German market. Organises regular events, seminars, workshops, co-ordinates responses to consultations, etc. France Invest Member French association representing private equity (PE) and private debt professionals 2021 Impact Investing France active in France. France Invest promotes the growth of PE among entrepreneurs, global savings managers, French and European public authorities and opinion leaders. Member of Impact The Commission meets regularly with its members to discuss the issues faced by impact 2021 Commission investing players. The Commission assists its members with regulatory issues, financing issues and best practices. Allianz Global Investors Sustainability and Stewardship Report 2022 129
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope Green Bond Member The GBP are intended for broad use by the market: they provide issuers guidance on 2015 Environment Global Principles (GBP) the key components involved in launching a credible Green Bond; they aid investors by ensuring availability of information necessary to evaluate the environmental impact of their Green Bond investments. Member Advisory The role of the Advisory Council is to advise the Executive Committee, to increase its 2019 Council Green Bonds market awareness and outreach, and to enable further engagement with specific and Social Bonds membership categories and observers. Global Impact Member The Global Impact Investing Network is a non-profit organisation dedicated to increasing 2018 Impact Investing Global Investing Network the scale and effectiveness of impact investing around the world. They do this by (GIIN) building critical infrastructure and developing activities, education, and research. Global Private Member GPCA aims to connect and influence key market participants, and to promote the 2021 Impact Investing Global Capital Association sectors, strategies and deals driving investment returns and meeting societal needs. (GPCA) Hong Kong Green Member* The aim and mission of the HKGFA is to gather industry experts and provide policy 2022 ESG Hong Kong Finance Association suggestions to the Hong Kong special administrative region (HKSAR) Government (HKGFA) and other regulators in developing green finance in the city. Member ESG Disclosure and The ESG Disclosure and Integration Working Group aims to foster green finance 2022 Integration Working Group development in Hong Kong through promoting and enhancing ESG disclosure and integration with working plans on research, policy consultation, capacity building and cooperation. Member Policy Research The Policy Research and Dissemination Working Group targets to offer policy 2022 and Dissemination recommendation to the HKSAR Government to strengthen Hong Kong’s green finance Working Group market and the ESG ecosystem. Hong Kong Member The HKIFA represents the fund management industry of Hong Kong. It aims to foster 2004 ESG Hong Kong Investment Funds the development of the fund management industry in Hong Kong. Association (HKIFA) Member ESG The ESG working group brings together fund managers to discuss current ESG topics in 2021 Working Group the industry, thereby shaping the development of sustainable investment in Hong Kong. The Investment Member IA is a trade body for the UK’s asset management industry. 2015 ESG UK Association (IA) * New this year. Allianz Global Investors Sustainability and Stewardship Report 2022 130
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope International Member Aims to inspire effective standards of corporate governance to advance efficient 2015 Corporate Global Corporate markets world-wide. This is achieved through the ICGN Global Governance Principles. Governance Governance Network (ICGN) Initiative Climat Member The iCI represents a collective commitment to understand and reduce carbon emissions 2021 Climate Global International of private equity based companies and secure sustainable investment performance. IFRS Sustainability Member IFRS The IFRS Sustainability Alliance is a global membership programme for sustainability 2020 ESG Global Alliance (SASB Sustainability Alliance standards, integrated reporting and integrated thinking. Standards) Member SASB Investor The IAG comprises leading asset owners and asset managers who are committed to 2020 Advisory Group improving the quality and comparability of sustainability-related disclosure to investors. Institutional Investors Member IIGCC provides investors with a collaborative platform to encourage public policies, 2016 Climate Global Group on Climate investment practices, and corporate behaviour that address long-term risks and Change (IIGCC) opportunities associated with climate change. (Under Paris Aligned The group contributes to the PAII by addressing analytical gaps where further 2021 Investor initiative) development of methodologies and approaches is required to support implementation of the Framework. Net Zero Technical Working Group (Under Paris Aligned A dedicated working group to develop best practice and support members to increase 2020 Investor initiative) investment in climate solutions. Climate Solutions Working Group Net Zero Stewardship This working group aims to provide a forum to help investors view how best to operationalise 2021 Working Group “net zero stewardship” and develop key tools to enable progress and work with proxy advisors to ensure they are ready to support investors. UK Investor Forum Underwriting Signatory An investment industry body set up to facilitate dialogue between UK corporates and 2015 ESG UK their investors. The Investor Participant The Investor Mining & Tailings Safety Initiative is an investor led engagement convening 2019 ESG Global Mining & Tailings institutional investors active in extractive industries including major asset owners and Safety Initiative asset managers. Allianz Global Investors Sustainability and Stewardship Report 2022 131
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope Nasdaq Sustainable Member of the Advisory Nasdaq Sustainable Bond Network (NSBN) is a global platform that aims to increase 2019 Climate Global Bond Network Board of the Nasdaq transparency and accessibility to environmental, social and sustainability bonds. Sustainable Bond Network Net Zero Asset Member NZAMI is an international group of asset managers committed to supporting the goal 2021 Climate Global Managers Initiative of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to (NZAMI) limit warming to 1.5 degrees Celsius. One Planet Asset Member OPAM was launched to support the members of the One Planet Sovereign Wealth 2021 Climate Global Manager Initiative Fund (OPSWF) in their implementation of the OPSWF Framework. The goal is to (OPAM) accelerate the understanding and integration of the implications of climate-related risks and opportunities within long-term investment portfolios through sharing of investment practices and expertise. Member of Steering The steering committee brings together technical leadership and commitment by its 2021 Committee participants aiming to further support the implementation of the OPSWF framework. Thereby this group contributes to actively shaping the future of the initiative. UN Principles Signatory Global industry wide initiative to mobilise greater integration of ESG factors in day-to- 2007 ESG Global for Responsible day investment decisions and processes. Investment (PRI) Member Global Policy The aim of the group is to inform and strengthen PRI’s and its signatories’ public policy 2018 Reference Group engagement on responsible investment topics, as well as to encourage alignment between its signatories’ responsible investment commitments and public policy efforts. Member Private Debt The aim of this group is to drive ESG integration in private debt. 2022 Advisory Committee* Member “Advance” The overall objective of the Initiative is to advance human rights and positive outcomes 2022 Human Rights Stewardship Initiative* for people through investor stewardship. The Initiative will primarily seek change through investors’ use of influence with portfolio companies. The following three expectations will be set for engagement focus companies: (1) Fully implement the UNGPs – the guardrail of corporate conduct on human rights, (2) Align their political engagement with their responsibility to respect human rights, (3) Deepen progress on the most severe human rights issues in their operations and across their value. Spanish Sustainable Member Spanish Sustainable Investment Forum – membership-based organisation addressing 2018 ESG Spain Investment Forum policy and other ESG topics specific to the Spanish market. The forum organises regular events, seminars, workshops, etc. * New this year. Allianz Global Investors Sustainability and Stewardship Report 2022 132
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.3 Sustainability initiatives overview Principles 4 10 Initiative Allianz Global Description Date – Topics Region/location Investors‘ Position present of scope Swiss Sustainable Member Swiss Sustainable Finance aims to strengthen Switzerland’s position as a leading 2021 ESG Switzerland Finance voice and actor in sustainable finance, thereby contributing to a sustainable and prosperous economy. Taskforce on Climate- Supporter TCFD seeks to develop recommendations for voluntary climate-related financial 2019 Climate Global related Financial disclosures that are consistent, comparable, reliable, clear, and efficient, and provide Disclosures (TCFD) decision-useful information to lenders, insurers, and investors. World Benchmarking Supporter WBA seeks to generate a movement around increasing the private sector’s impact 2019 ESG Global Alliance (WBA) towards a sustainable future for all. Allianz Global Investors Sustainability and Stewardship Report 2022 133
01 Our sustainability approach 02 Sustainable investing 03 Active stewardship 04 Corporate sustainability 05 Appendix 05.4 UN Sustainable Development Goals key Allianz Global Investors Sustainability and Stewardship Report 2022 134
Imprint Project responsibility Copyright © Allianz Global Investors 2023 Tatijana Kulas, Corporate Sustainability Officer Publisher Nina Hodzic, Head of Sustainable Investment Office Allianz Global Investors GmbH Alexa Christie, Content Lead Sustainability Bockenheimer Landstr. 42–44 John Bolton, Head of Content Management 60323 Frankfurt Germany Design, concept and production allianzgi.com/sustainability Radley Yeldar, London, U.K. Editor-in-chief ry.com Matt Christensen, Global Head of Sustainable We would like to thank all of our colleagues and and Impact Investing partners who have helped us to create this report. Date of publication: May 2023 Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted. This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. 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