Sustainability Report 2021 04.4 Strategy resilience, stress-tests and climate scenario analysis 01 Introduction Outlook Methods, assumptions and limitations Market value loss in 2031 The first round of the survey-based qualitative The CBES 2021 provides three scenarios exploring % 02 Measuring and risk assessment for P&C retail business delivered different levels of transition and physical risks.1 -23 managing sustainability valuable insights. Moving forwards, qualitative The Early Action (EA) scenario assumes an risk assessments will be performed through early and orderly transition to net-zero by 2050, 03 Strengthening a step-by-step process for the most relevant with limited impact on economic growth. The -17 our foundation P&C business portfolios, expanding the scope late and disorderly transition to net-zero entails with regards to client segments and regions. a sudden contraction of the economy in the 04 Climate-related Further development of the approach is planned Late Action (LA) scenario in 2031, only slowly financial disclosure to make it fit for feeding into business strategy recovering to growth by 2050. Physical risks are -10 -10 04.1 Highlights and decision-making related to identified negligible in the EA and LA scenarios over the -8 04.2 Governance risks and also business opportunities (e.g., 2050 time horizon. Accounting only for climate 04.3 Strategy for product development, portfolio management policies that were in place before 2021, the No -4 04.4 Strategy resilience, stress-tests and and provision of risk consulting services). Additional Action (NAA) scenario is characterized -3 -3 climate scenario analysis Upon repeating the exercise in coming years, by limited transition risks and high physical risks -1 -2 04.5 Risk and opportunity management it will be interesting to see how these assessments which start to materialize over the second half of 04.6 Targets and metrics 2 change over time as climate policies and, the century. Fixed Alternatives Public Real Total 05 Our universal principles correspondingly, climate scenarios continue income /Other equity estate portfolio to evolve. EA2 A2 04.4.3 Top-down quantitative climate stress-test for investments Asset allocation based on market Market value loss in 2050 The initial assessment of financial risks from value as of December 31st 2021 % climate change on the Allianz investment % -15 portfolio we report here leverages on a rich set -13 -12 of climate scenario data developed by the Bank Fixed income -10 -10 of England for regulatory stress-test purposes 7% -9 in 2021 (Climate Biennial Exploratory Scenario, 6% Alternatives / other -8 5% Public equity -7 CBES), using input from NGFS reference scenarios -4 and various other sources. We may adopt other Real estate scenarios for similar top-down analysis going -2 forward, depending on analysis objectives. Fixed Alternatives Public Real Total 82% income /Other equity estate portfolio Early Action 2 ate Action 2 1 Please refer to https://www.bankofengland.co.uk/stress-testing/2021/key-elements-2021-biennial-exploratory-scenario-financial-risks-climate-change for a detailed description of the CBES 2021 scenarios. 2 Note that in the NAA scenario pathways provided by the BoE physical risks that are expected to materialize in 2050–2080 are mapped to 2020–2050, the time period used for the CBES 2021 exercise. We reverse this mapping for the purpose of our analysis, effectively moving the starting point of the NAA scenario pathways to 2050. 77