Sustainability Report 2021 02.2 Sustainability in proprietary investments 01 Introduction We require all asset managers investing on our process. We have published guidelines for ESG leading to a more holistic steering of our portfolio Our ESG scoring and engagement behalf to integrate sustainability considerations sensitive business areas (see the Allianz ESG and targeted management of sustainability risks 02 Measuring and into their investment and stewardship processes Integration Framework sections 03.3 and 03.4). and opportunities. approach systematically identifies and managing sustainability for both public and non-listed assets (see Table ESG screening is mandatory for all transactions We have set a clear sustainability performance manages risks in our listed proprietary Sustainability in our business activities ESG-14). Asset managers must meet the minimum within these areas. Initial ESG screening is carried threshold below which investments are deemed investment portfolio 02.1 Sustainability in insurance obligation of being a PRI signatory or having out by responsible investment professionals within ‘ESG critical’. The list of issuers in our portfolio 02.2 Sustainability in their own qualified sustainability, responsible the asset management unit. that score below the threshold is monitored proprietary investments investment, and/or ESG policy. More than 99 Detection of a sustainability risk triggers a referral by the AIM ESG team. An asset manager with Setting the 02.3 Sustainability in asset management percent of our assets are managed by asset process which leads to a detailed assessment investments on this list must ‘comply-or-explain’ sustainability managers that meet this minimum requirement. threshold Sustainability in our organization of the potential risk by Global Sustainability – meaning either reallocate to another issuer 02.4 Human resources AIM systematically reviews and evaluates the and the AIM ESG team. Based on the outcome or explain and provide reasons for holding these Long-term Applying 02.5 Customer satisfaction sustainability approaches of external asset of this assessment, a decision is made whether issuers. The reasoning and approach taken by the sustainability sustainability 02.6 Environmental management managers, including their climate change-related to proceed with a transaction, to proceed asset manager is discussed and assessed during performance threshold to strategies and decarbonization approach. and require mitigation and management of regular sustainability deep-dive meetings with asset improvements portfolio 03 Strengthening Engagement dialogues focus on governance sustainability risks, or to decline a transaction on managers. In cases where the reasoning provided is our foundation structures to ensure clear responsibilities for ESG grounds. From time to time, assessments may not sufficient to address the sustainability concerns, 04 Climate-related overseeing sustainability matters, systematic require additional discussion between the asset the AIM ESG team will ask for an escalation financial disclosure monitoring approaches for sustainability risks and manager, Global Sustainability, the AIM ESG team, approach to be applied to the issuer or will consider opportunities, stewardship activities to ensure Group Communications or Group Risk to better excluding the issuer from our investable universe. Systematic Operationalizing climate ambitions are aligned with our interests, understand the nuances of the transaction and engagement the scoring 05 Our universal principles and engagement approaches to improve effectively assess the sustainability-related risks. 4. Active engagement sustainability practices in investee companies. In 2021, 71 investment transactions were assessed The role of engagement as an effective and At the sourcing stage, we require all asset (2020: 65) (see Tables ESG-1 to 3). meaningful tool to address sustainability concerns managers in the public equity asset class to meet in investment portfolios has garnered widespread the expectations of the U.N. Net-Zero Asset Owner 3. Systematic integration of sustainability acceptance among the investment community. We continue to use our sustainability engagement 1 When we factors – ESG scoring Engagement is a cornerstone of active ownership program as an established, consistent way Alliance voting expectations document. to address sustainability issues and support engage with asset managers that are found to Our sustainability scoring and engagement as set out by our PRI commitment and it is the lag in one area of their approach but meet our approach systematically identifies and manages most direct way to represent our interests to sustainable programs among the companies overall expectations, we set expectations for risks in our listed proprietary investment portfolio. companies in our portfolios. in which we invest. It is also an effective way to improvement and we monitor their progress. We apply an ESG scoring process to all listed assets For Allianz, engaging on sustainability topics leverage the diversity of employees from business This is an important step towards our goal to including sovereign bonds, corporate bonds and with our portfolio companies has become an functions and geographies to participate in have a positive real-world impact and proactively public equity. The scoring process assesses the expectation of our customers and stakeholders. the sustainability efforts of Allianz globally. address climate change. sustainability performance of individual issuers It also makes clear business sense. When the Engagements involve the AIM ESG team who across 35 different key issues (e.g. carbon emissions, companies we invest in emphasize creating value represent Allianz’s broad interests and colleagues 2. Systematic integration of sustainability from the Allianz entity, which is close to the factors – sustainability referral and toxic emissions and waste, labor management, for all stakeholders, they are better positioned to business and responsible for developing our assessment process business ethics, etc.) using sustainability data generate sustainable, long-term business success expectations and objectives and representing For non-listed investments such as real estate, provided by external data provider, MSCI ESG and to deliver better results for our customers, them with the company’s management. infrastructure and private equity, we address Research. This information is used to consider whose premiums we invest. Our 2021 progress is described below under sustainability risks through a detailed referral sustainability criteria in investment selection, ‘Bilateral engagements’. 1 https://www.unepfi.org/wordpress/wp-content/uploads/2021/04/16-Elevating-Climate-Diligence-2.pdf 26