ESG Integration Framework 03.7 Active ownership 03.7.1.2 Material engagement topics Based on Allianz’s ESG work over the past years, certain material 03.7.1 Engagement approach engagement topics have been identified to assist prioritization of For Allianz, active ownership is an integral part of the ESG engagement activities. integration approach. Through systematic engagement with its The most material ESG concerns for Allianz and its stakeholders invested companies, Allianz intends to improve these companies’ include: management of material ESG risks and issues. • Climate change (carbon emissions, etc.) The principal engagement approach is mainly linked to the ESG • Natural capital (water stress, raw material sourcing, etc.) scoring approach. All issuers below the applicable ESG scoring • Pollution and waste (lacking environmental management threshold (see section 03.6 for details) are potential candidates for system, toxic emissions & waste, etc.) engagement. Furthermore, Allianz engages issuers with alleged • Human capital and human rights (child labor, supply chain involvement in human rights incidents. labor standards, health & safety, etc.) Engagement is driven by a team of experts from AIM SE supported • Involvement in highly controversial projects by Global Sustainability. Allianz sees potential mid-term to long-term investment and reputational risks from these ESG issues. The aforementioned 03.7.1.1 Objectives of the engagement approach topics are considered high priority engagement topics, thus Allianz To address these ESG risks, clear objectives are defined at the onset generally engages all companies that have issues in these areas. of each engagement: For other ESG concerns, Allianz closely monitors companies’ • Encourage stronger governance and management oversight performance and reviews annually to decide, on a case-by-case regarding sustainability topics basis, if an engagement should be initiated with the respective • Encourage additional disclosure on e.g. ESG-related policies, company. processes and programs 03.7.1.3 Engagement selection • Encourage setting ESG-related targets and disclosing KPIs • Encourage assurance, audit, and/or verification of approach Based on the initial research and prioritization of companies falling (e.g. policies, KPIs & targets) under our ESG scoring threshold, Allianz prepares a short list of • Call for the adoption of or adherence to international companies to be engaged. standards, best-practice, and/or frameworks To avoid duplicate engagements from Allianz Group with the • Clarification of controversies/allegations engaged companies, the short list is reviewed with the engagement • In certain cases, additional objectives may be adopted for a teams at AllianzGI and PIMCO. Any companies already being given engagement. engaged by those asset managers are filtered out from the • Through these objectives Allianz aims engagement list. • to raise awareness for ESG risks that can have material business impacts, 03.7.1.4 Engagement operationalization • to better understand companies’ approaches to addressing Following this prioritization and selection, the engagement team these risks, and conducts in-depth research for each company on the list using • to act as a partner of its invested companies to improve their information from MSCI ESG Research, various other ESG data and non-financial performance. intelligence providers, and the respective corporate disclosures and 30