04.2 Risk management 2. Organisation’s processes for managing climate- ongoing asset management activities. They are also structuring phases, often through project- and fund- related risks often flagged through sustainability risks guidelines specific due diligence questionnaires. Additionally, When it comes to climate data, we rely significantly on (based on international best-practice standards) or using many of AllianzGI’s private market assets are subject the disclosure provided by companies. Therefore, it is one minimum exclusion lists. When a sustainability risk is to the Allianz ESG Integration Framework, which sets of the key topics for us when engaging with companies. Over detected during the origination process, the investment out criteria to be considered and met when investing time, we expect the quality of the disclosure to improve, team can use several methods to mitigate and manage in particular sensitive business areas. allowing us to report in a more meaningful way. these identified risks, whether through commercial terms Sustainability risks and principal adverse impacts are As part of our engagement with companies on climate or documenting specific conditions, or by rejecting the monitored and assessed using our internal sustainability issues, we are encouraging them to report on TCFD transaction if the sustainability risk are deemed to risk assessment tool called ESG Hub. It is accessible and commit to Science Based Targets (SBT) to lead to be insufficiently mitigated. Investments are actively to all of our portfolio managers, and enables them to better quality of disclosures provided to our investors, monitored through the asset management process, find reports on the sustainability risk profile of each of helping them to monitor their progress and meet their responding to materialising sustainability risks quickly their portfolios. These reports include ESG measures as climate goals with more accuracy. We also support and decisively through engagement with the management well as principal adverse impact indicators, giving the and participate in the Climate 100+ initiative. or sponsors of the companies in which AllianzGI invests portfolio managers transparency by: on behalf of our clients. Beyond engagement, climate-related risks are considered Analysis and consideration in the investment process – Providing a view of the overall portfolio’s through AllianzGI’s sustainability risk management of principal adverse impacts sustainability risk profile strategy, which was launched in 2021 and addresses Principal Adverse Impacts (PAI), which have also been – Highlighting potential E, S, G pillar or sector two dimensions: introduced by the SFDR are defined as negative impacts concentration risks Analysis and management of sustainability risks on environmental, social and employee matters or – Outlining the individual holdings from which A sustainability risk is defined by the EU regulation on human rights, and/or impacts which may be linked to tail risks derive 1 governance issues. sustainability-related disclosures in the financial services The data in the ESG Hub is updated on a monthly sector (SFDR) as “environmental, social or governance For listed equities and corporate fixed income assets, a basis and past reports remain accessible, allowing event or condition that, if it occurs, could cause an actual regular portfolio screening of principal adverse impact the portfolio managers to track the evolution of the or a potential material negative impact on the value of is performed along selected key performance indicators, sustainability risk profile of their portfolios and single the investment”. including climate change-relevant indicators, such as indicators within them. For publicly listed asset classes, external sustainability carbon emissions (absolute and relative), whether the The following sample images depict dashboards which research data and/or internal research and analysis are company has committed to any decarbonisation targets, are available for portfolio managers in the ESG Hub. used. These risks are then considered by the investment and exposure to sectors that are affecting climate change manager in the investment process. more than other sectors. For private market assets classes, sustainability risks are For private markets investments, principal adverse considered throughout both the investment process and impacts are considered during the origination and 1.Sustainable Finance Disclosure Regulation (SFDR) (Regulation (EU) 2019/2088) AllianzGI TCFD Report 2021 19