ALLIANZ GROUP SUSTAINABILITY REPORT 2019. COLLABORATING FOR A SUSTAINABLE FUTURE 1. Allianz Sustainability Report 2019 CONTENTS 01 Introduction 01.1 Message from the CEO 3 01.2 Our business model 4 01.3 Our corporate strategy 5 01.4 2019 highlights 6 04 Sustainability in operations 04.1 Human resources 45. Inclusion and diversity 46. Training and development 48. Employee engagement 50. Health and wellbeing 51 04.2 Data protection and privacy 52 04.3 Regulatory and public affairs 54 04.4 Customer satisfaction 55 04.5 Compliance 56 04.6 Tax transparency 58 04.7 Environmental management 59 04.8 Responsible procurement 61 04.9 Corporate citizenship 62 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 8 02.2 Climate change and decarbonization 9 02.3 Social inclusion 11 02.4 ESG business integration 12 02.5 Materiality 14 02.6 Stakeholder engagement 17 02.7 Sustainable development goals 18 02.8 Corporate responsibility governance 19. Governance 19. Corporate responsibility management 21 03 Sustainability in core business activities 03.1 Sustainability in insurance 23. Integrating ESG in insurance 23. Climate and renewables 25. Natural catastrophes 27. Cyber security 28. Emerging consumers 29 03.2 Sustainability in proprietary investments 30. ESG integration and engagement approach 30. Sustainability-themed investments 34. ESG in real estate investments 35 03.3 Sustainability in asset management 36. Allianz Global Investors 36. PIMCO 39 03.4 Sustainable solutions 42. WHAT IS NEW IN THIS REPORT? In line with the findings of our new materiality assessment, we have adjusted the structure of this report to focus on how Allianz governs sustainability strategically and how it is integrated across its business activities and corporate operations. We have added new discussions of Allianz’s approach to cyber risk insurance, natural catastrophe insurance and data privacy and protection. This report is aimed at specialist sustainability audiences and we target other publications, such as our sustainability brochure and website, towards non-expert customers and employees. COMMUNICATING OUR PERFORMANCE. We communicate our performance in four ways: • through tables and charts throughout the report; • references to GRI standard disclosures are tagged using this icon; GRI 102-49 • references to the U.N. Sustainable Development Goals (SDGs) are tagged using the respective SDG icons. The size of each icon indicates the level of impact Allianz can have with its activities; and • data tables at the back of the report, which are referenced using a circle icon (example: Table ESG–1). ABOUT THIS REPORT For information on the scope and parameters of this report, please see section 06.7. 05 Allianz’s climate-related financial disclosure 05.1 Highlights 65 05.2 Governance 66. Overarching and board-level governance 66. Business and management-level governance 67. Remuneration and climate competence 67 05.3 Strategy 68. Our strategic response to climate change 68. Climate-related risks and opportunities 68. Our response 71 05.4 Strategy resilience, stress tests and climate scenario analysis 73 05.5 Risk and opportunity management 75. Overarching risk governance 75. Natural catastrophe risk governance 75. Climate and ESG related risk governance 75 05.6 Metrics and targets 76. Targets and target performance 77. Metrics 77. Business operations 80 06 Data and performance 06.1 Our targets and achievements 82 06.2 Membership and partnerships 86 06.3 ESG performance data 87 06.4 Environmental performance data 90 06.5 Human resources performance data 92 06.6 Additional sustainability performance data 96 06.7 Reporting parameters, scope and materiality 97 06.8 Independent Practitioner’s report on a 99. Limited Assurance Engagement on Sustainability Information. GRI 102-49. Disclaimer regarding rounding Due to rounding, numbers presented may not add up precisely to the totals presented and percentages may not precisely reflect the absolute figures. 2. Allianz Sustainability Report 2019 01 Introduction 01.1 Message from the CEO 01.2 Our business model 01.3 Our corporate strategy 01.4 2019 highlights 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. With millions of customers worldwide, Allianz has grown to be one of the world’s largest insurers, investors and assistance providers. This enables Allianz to protect customers locally while offering an increasingly diverse global portfolio of products and services that meet customers’ needs and the needs of wider society. Allianz stands for trust and strives for profitable and sustainable growth that ensures everyone who belongs to its community benefits. Allianz SE and its subsidiaries (Allianz Group) offer property and casualty insurance, life and health insurance, and asset management products and services in over 70 countries, with the largest of our operations located in Europe. Allianz Group insures over 100 million private and corporate customers. 01 INTRODUCTION. Active in 70+ countries worldwide. Over 100 mn customers worldwide €142.4 bn total revenues. Over 147,000 employees worldwide €1,686 bn third-party assets. GRI 102-1 3. Allianz Sustainability Report 2019 01 Introduction 01.1 Message from the CEO 01.2 Our business model 01.3 Our corporate strategy 01.4 2019 highlights 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. INTRODUCTION 01.1 MESSAGE FROM THE CEO. Oliver Bäte Chief Executive Officer Allianz SE. On January 21, 1890, Allianz issued its first policy in Berlin to one of its founders. Today, we have about 100 million customers across the globe with annual revenues of 142.4 billion euros. Over the past 130 years of our existence, we have witnessed the emergence and disappearance of a number of companies and even industries and overcome several crises, some of which were severe. But we have prevailed and even come out stronger. However, one thing that has stayed constant for us throughout is our determination to do our business in a sustainable manner and to support our customers in their quest for lasting success. That will not change going forward – we will continue to secure the future of our customers and society sustainably. Of course, the face of sustainability has changed over time. In these pages, you can read about our current focus topics, the principles that guide us, the framework that we have set up to achieve our ambitions, and the progress we made in 2019 towards our goals. Our foundational values of solidarity and cooperation are embedded in our name Allianz, which is the German word for ‘alliance’. Like always, we are collaborating closely with not just our employees, agents and customers but also governmental and social organizations on our environmental, social and governance (ESG) strategy. This spirit of collaboration is reflected in the title of this report – “Collaborating for a Sustainable Future”. It’s encouraging to see that our efforts are being noticed. 2019 was the third straight year that we topped the Dow Jones Sustainability Index in the insurers category. Last year, we were also named the world’s top insurance brand by Interbrand. These honors show that we are not alone in our belief that we are headed down the right path, even if the destination is some distance away. I would like to take this opportunity to highlight one of last year’s initiatives that has kept me busy recently. Our involvement in the United Nations-convened Net-Zero Asset Owner Alliance is particularly close to my heart. It’s a partnership of institutional investors, including pension funds and insurers, who are committed to reducing greenhouse gas emissions of their investment portfolios to net zero by 2050. Our involvement in this came from a simple question: How can we, as a financial services provider with considerable reach and a worldwide presence, act as a catalyst in the global movement to reduce emissions? What does our involvement mean specifically? Among other things, we are talking to companies whose securities we hold in our portfolios. These talks focus on how they can best incorporate sustainability into their operations. Our aim is to create an effective engine that gradually steers the larger economy towards carbon neutrality and consequently, slows down climate change. Another initiative I would like to tell you about is the Global Investors for Sustainable Development, which is also convened by the U.N. The group of 30 business leaders aims at leveraging the insights of the private sector to remove hurdles and implement solutions for mobilizing resources for sustainable. GRI 102-14 development. As vice chairman of the group, I see this as an important step towards helping the U.N. realize its Sustainable Development Goals (SDGs). It pleases me to know that our employees strongly believe in our vision. This becomes obvious if you look at the strong participation last year in the Allianz World Run, an employee initiative to raise funds for our partner SOS Children’s Villages. In 2019, the fourth edition of the run mobilized 12,300 runners from 98 countries. Together, they covered a total distance of 1.6 million kilometers. The funds raised will help SOS Children’s Villages support many underprivileged children in their journey to adulthood. These projects are just a few I wanted to highlight. You will find details of many more of our initiatives in this report. The extensive data section will give you a clear look into what material we use for making our decisions. Why do we consider this non-financial report so important? Because we believe that the more our efforts are recognized and the more transparent we are about our plans, the greater the chances of others being encouraged to consider adopting sustainable strategies. Despite the disruptions caused by the recent unforeseen events, it is possible for all of us to together slow down climate change, encourage global progress, and develop an equitable society over the long term. Now wouldn’t that be the greatest gift we can give to our children? Chief Executive Officer Allianz SE 4. Allianz Sustainability Report 2019 01 Introduction 01.1 Message from the CEO 01.2 Our business model 01.3 Our corporate strategy 01.4 2019 highlights 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. INTRODUCTION 01.2 OUR BUSINESS MODEL. Allianz’s structure reflects both its business segments and geographical regions: Business activities are organized by product and type of service: insurance activities, asset management activities, and corporate and other activities. Due to differences in the nature of products, risks, and capital allocation, insurance activities are further divided into Property-Casualty and Life/Health categories. INSURANCE OPERATIONS. Allianz offers a wide range of Property-Casualty and Life/Health insurance products to both retail and corporate customers: The Property-Casualty business segment includes motor, accident, property, general liability, travel insurance and assistance services. The Life/Health business segment offers savings and investmentoriented products in addition to life and health insurance. Allianz is a leading Property-Casualty insurer worldwide and is ranked amongst the top five in the Life/Health insurance business. Most insurance markets are served by local Allianz companies. Key markets (in terms of premiums) for both Property-Casualty and Life/Health insurance are Germany, France, Italy and the U.S. Some business lines – such as Allianz Global Corporate & Specialty (AGCS), Allianz Partners (AP) and Credit Insurance – are run globally. ASSET MANAGEMENT. Our two major investment management entities, PIMCO and AllianzGI, operate under the governance of Allianz Asset Management (AAM). We are one of the largest asset managers in the world that actively manage assets. Asset management offerings cover a wide range of equity, fixed income, and alternative investment strategies, products and solutions. Our core markets are the U.S., Germany, France, Italy, the U.K. and the Asia-Pacific region. CORPORATE AND OTHER. Corporate and Other business segment’s activities include the management and support of the Allianz Group’s businesses through its central holding functions, as well as Alternative Investments and other business units. For more information on Allianz’s business model, corporate governance and markets served, please refer to the Group Annual Report 2019. GRI 102-2, 102-4, 102-6, 102-9 5. Allianz Sustainability Report 2019 01 Introduction 01.1 Message from the CEO 01.2 Our business model 01.3 Our corporate strategy 01.4 2019 highlights 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. INTRODUCTION 01.3 OUR CORPORATE STRATEGY. CORPORATE STRATEGY. Allianz Group seeks to position itself as one of the world’s most trusted financial services providers and a global sustainability leader. We want our stakeholders to know Allianz as a financially stable, responsible and trustworthy company that embraces sustainable business as good business. Allianz’s purpose ‘We secure your future’ guides our work and actions and expresses why we exist in the world. It underscores the impact Allianz has on society by taking uncertainty out of the equation and driving change in the right direction. To live up to its purpose, Allianz pursues the strategic objectives to Outperform, Transform and Rebalance: OUTPERFORM its competitors, both traditional and emerging, in terms of growth and profitability as well as customer and employee satisfaction. TRANSFORM its organization to become: simple by streamlining products and processes; deeply digital thanks to high-performing systems, data analytics and AI; and scalable via process and product harmonization and network effects. REBALANCE its portfolio towards large, profitable and fast-growing geographies and business segments. Allianz’s updated corporate strategy ensures it delivers these goals as one of the most responsible insurance and investment businesses in the world. It includes ambitious targets for the time period 2019 – 2021 and aims to go further in the medium- and long-term. The strategy is implemented through our change initiatives of the Renewal Agenda. The Renewal Agenda 1.0, was further developed in 2019 to become ‘Simplicity wins – Renewal Agenda 2.0’, which consists of the following five pillars: RENEWAL AGENDA 1.0 RENEWAL AGENDA 2.0. CUSTOMER CENTRICITY Customer-centric culture Intuitive products and services Loyalty leadership. DIGITAL BY DEFAULT. IT consolidation Digital buyable products and customer interface. Legacy-free operations Multi-channel access. TECHNICAL EXCELLENCE Portfolio optimization and ALM focus Data-driven product design, pricing and claims. GROWTH ENGINES Some rebalancing Systematic rebalancing. INCLUSIVE MERITOCRACY Stronger collaboration and ‘what & how’ leadership Beat-the-best mindset and incentives Digitally literate, agile and lean organization. To deliver our Renewal Agenda 2.0, we set clear annual targets: TARGETS 2019 RESULTS 2019 TARGETS 2021 3-year Earnings per Share (EPS) growth with a compound annual growth rate (CAGR) of 5% 8.4%1 5% plus o/w 4% plus organic. Total Return on Equity (RoE)2 of 13% 13.6% 13% plus. At least 75% of our businesses to be rated by their customers as Loyalty Leader in terms of Net Promoter Score 70% 75% plus. Increase our Inclusive Meritocracy Index (IMIX) to at least 73% 73% 73% plus 1 8.4% represents the growth rate from 2018 to 2019. 5% compound annual growth rate target is for the full 2018 to 2021 period. 2 Represents the ratio of net income attributable to shareholders to the average shareholders’ equity excluding unrealized gains/losses on bonds, net of shadow accounting, at the beginning of the year and at the end of the year. WHY do we exist? STRATEGIC OBJECTIVES Outperform Transform Rebalance. IMPLEMENTATION PLAN Renewal Agenda 2.0. PURPOSE We secure your future. Our Corporate Strategy. WHAT do we do? WHAT do we do? 6. Allianz Sustainability Report 2019 01 Introduction 01.1 Message from the CEO 01.2 Our business model 01.3 Our corporate strategy 01.4 2019 highlights 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. INTRODUCTION 01.4 HIGHLIGHTS 2019. MATERIALITY SUSTAINABLE SOLUTIONS. ENCOURAGING FUTURE GENERATIONS. ENVIRONMENT, SOCIAL AND GOVERNANCE. LEADING THE INDUSTRY PEOPLE. CLIMATE CHANGE extended to 11 more countries More robust materiality assessment to inform our strategy and reporting > page 14. ENVIRONMENTAL MANAGEMENT. NET ZERO ASSET OWNER ALLIANCE commitment to reduce investment portfolio greenhouse gas (GHG) emissions to net-zero by 2050 Read more in section 02.2 1.95GW generating capacity from 99 wind and solar investments Read more in section 03.2. LISTED EQUITY PORTFOLIO CARBON FOOTPRINT disclosed for the first time Read more in section 05. TCFD. OVER 115,000 volunteering hours in 2019 Read more in section 04.9 €29.4 bn sustainable investments, up 17% on last year Read more in section 03.2 203 sustainable solutions generating revenues totaling €1.33 bn Read more in section 03.4 37.9% of managers in the core business are female Read more in section 04.1 EMPLOYEE SHARE PURCHASE PROGRAM extended to 11 more countries Read more in section 04.1. No. 1 insurer in the Dow Jones Sustainability Index for the third consecutive year No. 1 insurer in the 2019 Interbrand Best Global Brand Rankings -35% overall GHG emissions reduction per employee since 2010 against a 2020 target of -30% -53% paper reduction since 2014 against a 2020 target of -40% CO2 602 assessments of ESG risks Read more on page 12 49 engagements with investee companies Read more on page 32 7. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. Allianz aims to be one of the most trusted financial services providers, which means creating sustainable economic value through commitment to strong corporate governance and transparent performance. Allianz believes that building a sustainable business means increasing transparency and fostering dialogue about how it operates. Our corporate responsibility approach and commitments guide all Allianz business worldwide to respond to societal challenges and drive continuous improvement. Our Corporate Responsibility Strategy is focused on embedding sustainability in all business activities and using our roles as an insurer, investor and asset manager to manage the risks posed by climate change and to foster a more inclusive society. 02 SUSTAINABILITY STRATEGY AND GOVERNANCE. No. 1 insurer in the Dow Jones Sustainability Index. Materiality New assessment carried out in 2019. GRI 102-15 8. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.1 CORPORATE RESPONSIBILITY APPROACH. We are working to align the Corporate Responsibility approach with the Renewal Agenda 2.0 and to drive implementation and continuous improvement across the Group. The approach is focused on three key areas, on which more information is provided in the following pages: CLIMATE CHANGE AND DECARBONIZATION. Using our roles as an insurer, investor and asset manager to help manage the risks arising from climate change and to promote the low-carbon economy. Allianz’s Climate Change Strategy (see section 02.2) lies at the heart of its business model that aims to protect people and businesses from risk. SOCIAL INCLUSION. Using our roles as an insurer, investor, employer and corporate citizen to contribute to more inclusive societies. Encouraging Future Generations (see section 02.3) is Allianz’s Corporate Citizenship program that is promoting social inclusion of young people worldwide. ESG BUSINESS INTEGRATION. Managing material environmental, social and governance (ESG) risks and seizing opportunities, while embedding compliance, responsible sales, transparency as well as data protection and privacy across all areas of our business. The Allianz ESG approach (see section 02.4) ensures ESG integration in all insurance business and investments of proprietary assets. 9. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.2 CLIMATE CHANGE AND DECARBONIZATION. Limiting global warming and mitigating climate change is a top priority for Allianz. We are committed to helping to deliver the 2015 Paris Climate Agreement and believe that reaching its goal calls for rapid decarbonization of the global economy towards net-zero emission levels by 2050. As one of the world’s largest insurers and institutional investors, Allianz has the opportunity and the responsibility to use its global leverage to help achieve the Paris Agreement’s goals and ensure a fair transition to a low-carbon future. CLIMATE CHANGE STRATEGY. Since 2005, the Allianz Group Climate Change Strategy has encouraged solutions for tomorrow’s climate. It helps to drive Allianz’s contribution to the U.N. Sustainable Development Goals (U.N. SDGs), specifically: SDG 7 Affordable and Clean Energy, and SDG 13 Climate Action, by focusing on three areas: 1. WE ANTICIPATE THE RISKS OF A CHANGING CLIMATE. Allianz identifies and manages climate-related risks and opportunities as part of its business strategy and through its financial products and services by: • Systematically considering climate and sustainability criteria in its insurance and investment business. Allianz stopped financing coal-based business models and no longer provides insurance for the construction and/or operation of single coal-fired power plants or coal mines. • Committing to fully phase-out coal-based business models across its proprietary investments and P&C insurance portfolios by 2040, at the latest. Allianz provides sustainable solutions for customers, including insurance that supports renewables and energy efficiency around the world. It also strategically invests in low-carbon assets, including renewable energy, green buildings, and green bonds. Allianz is committed, through the RE100 initiative, to minimizing the environmental impacts of its business operations and is actively pursuing its commitment to source 100 percent renewable power for its group-wide operations by 2023. Find our disclosure on climate-related risks and opportunities in section 05. • Improving transparency around climate-related disclosures and working to further align strategy and reporting with the recommendations developed by the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). • Ensuring active dialogue with investee companies on the definition and implementation of climate strategies. • Engaging with policymakers to drive sustainable finance and achieve the Paris Agreement and the U.N. SDGs. 2. WE CARE FOR THE CLIMATE-VULNERABLE. Allianz supports its customers to reduce risks and minimize damage, compensates those who have suffered losses, and insures low-carbon developments. It works with peers, governments and the civil society to manage climate risks and ‘close the protection gap’, specifically in most vulnerable developing countries. Allianz also supports scientific research and innovation that improves society’s understanding of climate-related risks. Find out more on the Climate and Renewables insurance in section 03.1.2. Find out more about the Allianz Climate Risk Research Award online here. 3. WE ENABLE THE LOW-CARBON TRANSITION. Allianz joined forces with other asset owners through the U.N.-convened Net-Zero Asset Owner Alliance (AOA) to collaboratively support companies in their low-carbon transition. Find out more on the AOA on page 10. Allianz has committed, through the Science Based Targets initiative, to set long-term climate goals for its proprietary investments and business operations, linked to the Paris Agreement’s goal and committed to reach net-zero greenhouse gas (GHG) emissions in its proprietary investment portfolio by 2050. 10. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.2 CLIMATE CHANGE AND DECARBONIZATION. U.N.-CONVENED NET-ZERO ASSET OWNER ALLIANCE The financial sector has a crucial role to play in enabling society to tackle the climate crisis - including by taking responsibility for its part in limiting global warming to 1.5°C, compared to pre-industrial times. Business must transition to net zero and low-carbon business models. For asset owners, this means decarbonizing investment portfolios by reducing GHG emissions in the real economy. By doing so, investors like Allianz can create real impact and a societal shift towards climate protection. At its Climate Change Summit in September 2019, the U.N. launched the U.N.-Convened Net-Zero Asset Owner Alliance to bring together the world's largest asset owners such as pension funds, insurers and sovereign wealth funds. Together, they have committed to reduce GHG emissions of their investment portfolios to net-zero by 2050. Allianz is a founding member of the Alliance and as such working closely with the other members and the United Nations Environment Program Finance Initiative (UNEP FI) as well as the Principles for Responsible Investment (PRI). Additional partners for the U.N.-Convened Net-Zero Asset Owner Alliance are the WWF and the Mission 2020 campaign. Driving transparency and best practice – towards net-zero By the end of 2019, the Alliance included 16 asset owners from across the globe, who are collectively responsible for more than 3.8 trillion U.S. dollars of assets under management. Members are working to set intermediary decarbonization targets every 5 years for their portfolios starting with a 2025 target. They are also engaging with portfolio companies and advocating for sector-wide transition to a low carbon economy. As a next step, members have committed to carry out and disclose portfolio baseline assessments and develop climate strategies and action plans, including trajectories. In addition, they will work together to define best practice to reduce GHG emissions by engaging with portfolio companies and with governments on public policies. The Alliance will report publicly on progress against targets. The first quantitative joint report will be published by December 2023, with individual members' portfolio targets for 2025 being planned for announcement in 2020. “The entire global economy, including societal actors from governments, corporations and the financial sector, must collaborate to limit global warming. Asset owners like Allianz play an important role in bringing together the actors required to address climate issues and to lead by example. That is why we are a founding member of the UN-Convened Net-Zero Asset Owner Alliance and have committed our portfolio to be aligned with a maximum 1.5°C temperature rise.“ Günther Thallinger. Chair of the U.N.-convened Net-Zero Asset Owner Alliance. Member of the Board of Management of Allianz SE Investment Management, ESG. Find out more online: U.N. Environment’s AOA Website. Allianz’s AOA Website. Watch related videos: Oliver Bäte's announcement at the Climate Action Summit 2019. U.N. Secretary-General António Guterres' closing statement at the Climate Action Summit 2019. Christiana Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change, and Günther Thallinger talking about the AOA at the World Economic Forum 2020 11. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.3 SOCIAL INCLUSION. According to the World Economic Forum, social instability and polarization of societies pose an increasing global risk. As a global insurer and investor, Allianz relies on the principal of solidarity. We promote social inclusion through our Corporate Citizenship programs which focus on empowering children and youth. Civil unrest, social tensions and societal upheaval pose a major business risk for Allianz and have significant cost implications for the insurance industry and society as a whole. In the context of ESG integration, Allianz places a key focus on improving social inclusion. It drives its contribution to a number of the U.N. SDGs, namely: SDG 1 No Poverty; SDG 8 Decent Work and Economic Growth; and SDG 17 Partnerships for the Goal. Allianz’s Corporate Citizenship Strategy is shaped by the outcomes of its materiality analysis. The strategy provides a framework for all corporate citizenship activities across the Group. With 13 foundations around the world, Allianz contributes to a wide range of philanthropic activities (see section 04.9). Together, these foundations enable Allianz to support a wide range of initiatives while recognizing that each country has different social needs and priorities. Allianz’s operating entities and 13 corporate foundations therefore adapt the strategy to meet local needs and priorities. Corporate citizenship activities in general have been shown to contribute to improvement employee satisfaction and customer satisfaction. This reflects the potential of corporate citizenship activities to improve our reputation and employer brand. Within its corporate citizenship activities, the Encouraging Future Generations Program is Allianz’s global lighthouse program. It includes an ambition to increase the number of children and youth benefited by 20 percent by 2020 (baseline 2018). The program is focused on the following three priority projects and partnerships: 1. Working with social entrepreneurs around the world and enable them to scale up ideas that overcome barriers in youth employment and education through the Allianz Future Generations Award. 2. Empowering local Allianz entities to work together with civil society to bring innovative solutions to local communities through the Allianz Social Innovation Fund. 3. Leveraging expertise within Allianz by globally supporting SOS Children’s Villages. In 2019, our efforts reached 660,000 beneficiaries1 worldwide, including 290,000 children and youth1. Find out more in section 04.9. SOS Children's Villages International, Claire Ladavicius. 1 Our current data collection process does not allow for a complete tracking of beneficiaries. Number of beneficiaries included is subject to data availability. 12. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.4 ESG BUSINESS INTEGRATION. Allianz aims to lead the industry by embedding strong ESG considerations in everyday decision-making across its insurance and investment businesses. Our approach integrates ESG concerns by applying group-wide corporate rules and ESG processes across all underwriting, investment and asset management activities. Through the internal Allianz Standard for Reputational Risk and Issues Management and other corporate rules such as the Allianz Standards for Underwriting and Allianz ESG Functional Rule for Investments, ESG considerations are embedded across the business. The publicly available Allianz ESG Integration Framework further increases transparency around internal ESG-related processes and guidelines. Read more on the ESG Integration Framework here. WHAT IS ESG AND WHY IT IS IMPORTANT? ESG refers to non-financial issues which can be influenced by, and can influence, Allianz’s business activities. Examples include human rights violations, illegal logging activities and severe corruption allegations. ESG factors can also represent business opportunities, such as insuring and investing in renewable energy to support the energy transition. If they are not effectively identified and managed, ESG risks can have significant repercussions for Allianz, its customers and invested companies. These span legal and reputational risks, supply chain and business disruption risks, quality and operational risks, human rights and financial risks. Allianz manages ESG risks diligently across its businesses. Its industry-leading approach integrates ESG concerns by applying group-wide corporate rules and ESG instruments across all our underwriting, investment and asset management activities. ESG IN INSURANCE AND PROPRIETARY INVESTMENTS. Consistent application of ESG processes in insurance and proprietary investment activities is crucial to avoid opening Allianz Group up to potential ESG and/or reputational risks and to capture new opportunities arising from ESG trends. ESG processes property and casualty underwriting (P&C) are integrated into the overall risk management framework through the Allianz Standard for Reputational Risk and Issues Management and group-wide underwriting standards. The Allianz internal audit functions and underwriting integrity and governance teams also review ESG processes in insurance. OUR 13 SENSITIVE BUSINESS AREAS. Agriculture Fisheries and Forestry. Hydro-Electric Power. Animal Welfare. Infrastructure. Betting and Gambling. Mining. Clinical Trials. Nuclear Energy. Animal Testing. Oil & Gas. Defense. Sex Industry 18+ Human Rights. ESG referral and assessment process Number of assessments by category 2019 2018 2017 539 470 474. Insurance 43 109 64 58 52 1 6 583 631 602. Investments Procurement (as of 2018) Other. GRI 412-3 13. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.4 ESG BUSINESS INTEGRATION. For ESG integration in listed assets, established solid processes such as the ESG scoring approach are designed to manage ESG risks and opportunities in Allianz’s proprietary portfolio. For more details on ESG integration approaches in insurance and proprietary investments see section 03.2. Other tools that help to integrate ESG into investment processes include: • ESG investment exclusions; • Integration of ESG criteria in asset manager selection and monitoring; • Sustainability-themed investments such as renewable energy, green real estate, and green bonds; and • Regular dialogue and exchange with our investee companies and asset managers. See the Allianz ESG Integration Framework for additional details on all ESG integration processes at Allianz Group. See section 03.2 for additional details on these processes for our proprietary investments. ESG IN ASSET MANAGEMENT. Allianz asset managers, Allianz Global Investors (AllianzGI) and PIMCO, continue to expand their ESG capabilities and product offerings. They actively support asset management clients by developing tailor-made solutions to integrating ESG considerations in the investment of portfolios. Both entities published reports outlining their responsible investment activities in 2018. For further details, see section 03.3. Across all P&C underwriting and unlisted proprietary investments, the ESG referral and assessment process and guidelines for sensitive business areas (see the 13 areas below) are applied. Every transaction is screened by the respective (local or global) operating entity to identify potential ESG concerns. If a risk is identified, the case is referred to the appropriate group-level ESG function to assess the ESG risk in more detail. In 2019, Allianz published an internal guide to support the identification of ESG risks in real estate investment transactions. Furthermore, Allianz has continued to pilot the extension of the referral process to its procurement activities. Group-level ESG functions conducted 602 assessments based on the guidelines in 2019 (2018: 631 assessments). 53.3 percent of cases were approved, 38.7 percent were approved subject to certain mitigation measures or conditions, and 8.0 percent were declined or not pursued (for details see Tables ESG–1 to 3). Assessment results % of assessed transactions in 2019. Proceed 53% Do not proceed 8% Proceed with mitigation or additional conditions 39% 14. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. Allianz’s success depends on understanding and responding to the changing world in which it operates. We regularly carry out a materiality assessments to identify the environmental, social, economic and governance issues that are perceived as being most important to Allianz’s stakeholders and its businesses. The outcomes of the assessment are used to inform our sustainability approach, strategy and reporting. This ensures Allianz focuses on the risks, opportunities, issues and impacts that matter most to its stakeholders, and which it has the ability to influence. In 2019, the materiality assessment process was revised based on GRI guidance and external ratings requirements. To more clearly inform Allianz’s strategic focus and reporting content, we conducted detailed assessments of the strategic issues that are most material to Allianz’s sustainability approach and strategy, and also its reporting. The assessment included a more data-centric approach using databases to track stakeholder views, trends and analysis. It also refocused on strategically important issues rather than issues related to operational or compliance requirements. METHODOLOGY. The materiality assessment was comprised of a number of key stages. 1. Desk-based analysis of recognized information sources to assess relevant strategic issues, including: • Peer and competitor assessment of six companies to understand the material issues defined by those companies in their CR reports. – The most common material issues identified by peers and competitors were employees and workplace, climate change and customer innovation. – The top three issues among Property & Casualty customers were safety, cyber risk and natural disasters. • Investee companies: the top three issues among Investment & Asset Management customers as being employees and workplace, climate change and cyber risks. 4. Assessment of the relevance and significance of strategic issues to Allianz business units and the services they provide, as well as their ability to influence them. • This assessment involved the analysis of revenue breakdowns against material issues across each major business segment. 5. Independent analysis of the most material issues according to sustainability report users by the Corporate Citizenship Company to shape Allianz’s sustainability reporting. • Independent, confidential interviews were carried out with 19 expert sustainability report users (responsible investors, ratings agencies and others) to understand the sustainability issues, content and report features of most interest to them. 6. Consolidation and analysis of insights gained from steps 1-6 to determine and prioritize Allianz’s material issues. • Data was consolidated and analyzed including stakeholder weighting/prioritization, issue clustering and increased quality/ scope of data compared to previous years, with all business segments covered for first time. • Issues were mapped on a materiality matrix and the outcomes were reviewed with the ESG Sponsors (see section 02.8) and the Group ESG Board. • Analysis of ESG intelligence firm RepRisk data to identify the most material media stories and issues relevant to Allianz and the financial services sector, and trends over the past four years. – The most common issues among the media were human rights, employees and workplace, environment, and social and political unrest. • Analysis of ESG intelligence firm SigWatch data on the activities and campaigns of 8,000 activist groups and 15,000 companies across 64 sectors to understand the most material concerns in relation to Allianz and the financial services sector, as well as trends over the past four years. – The most common issues for NGOs were climate change, environmental and social products and social/ financial inclusion. 2. Assessment of Allianz employee views using the Allianz internal communications platform. • Allianz employees were invited to pick their top three issues from a list of 15 issues perceived to be of most relevance to Allianz. We received 1,339 responses. – The top material issues identified by employees were climate change, natural disasters and demographic change. 3. Analysis of external stakeholder views including: • Retail customers: the Allianz customer marketing survey asked retail customers across 27 countries to identify the three most important issues for Allianz in the short-term (0-3 years) and in the future (6-9+ years). We received 27,636 responses. – The top short-term issues identified by customers were safety risk, health and community support. – The top long-term issues identified by customers were demographic change, natural disasters and environment. – Commercial customers: Analysis of detailed annual consumer research conducted by Allianz business units, for example an annual assessment of key issues for 2,415 risk managers in the industrial insurance business, investment divisions and others. GRI 102-40, 102-42, 102-43, 102-44, 102-46, 102-47, 103-1. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.5 MATERIALITY 15. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.5 MATERIALITY. STRATEGIC MATERIAL TOPICS. The results showed that the most important material strategic topics Allianz should be addressing through its sustainability strategy are: STRATEGIC MATERIAL TOPIC LEVEL OF MATERIALITY FOR STAKEHOLDERS. Climate change  Environmental and social products1  Environment  Employees and workplace  Human rights  Social/financial inclusion  Customer innovation  Natural disasters  Data privacy  Social and political unrest  Ethics  Cyber risks  Safety risks  Customer satisfaction  Animal welfare standards  Health  Demographic change  Charitable/community support   High materiality to Medium materiality  1 Integrating ESG in insurance and investments, sustainable insurance and asset management products, sustainable and responsible investing. IMPORTANCE TO STAKEHOLDERS. Climate change. Employees and workplace. Environmental and social products. Environment. Human Rights. Natural disasters. Social and Financial inclusion. Customer innovation. Data Privacy. Cyber risks. Social and Political Unrest Ethics. Safety risks Health. Customer satisfaction. Animal welfare standards Charitable and Community support. Demographic change. ALLIANZ'S INFLUENCE ON TRENDS AND LINK TO CORE BUSINESS. STRATEGIC MATERIAL TOPICS FOR ALLIANZ 2019. HIGH LOW MEDIUM. HIGH LOW MEDIUM 16 4 5 6 1 15 14 8 7 10 9 11 2 3 17 18 13 12. Top 3 media issues over last 4 years. Top 3 NGO issues over last 4 years. Top 3 retail customer issues in the next 3 years. Top 3 retail customer issues in the next 6-9+ years 16. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.5 MATERIALITY 5 2 6 17 18 15 1 11 13 7 4 14 9 12 8 16 10 3. MOST IMPORTANT CONTENT FOR SUSTAINABILITY REPORT USERS. CR strategy, approach and governance. Ensuring fair treatment of claims and customers. Climate change approach. Natural catastrophes and disaster response. Integrating ESG criteria in insurance and investment. Environmental management and renewables. Sustainable products and solutions. Financial inclusion and wealth inequality. Sustainable and responsible supply chains Charitable support for local organizations. Diversity and equal opportunities. Responsible treatment/ engagement employees. Tackling safety issues for our customers. Policies and positions on ESG issues. Public policy positions and engagement. Sustainability data, KPI and targets Materiality processes. Cyber risks, data protection and privacy. HIGH. IMPORTANCE OF ASPECT OF REPORTING. IMPORTANCE OF PROMINENCE IN ALLIANZ SUSTAINABILITY REPORT. LOW MEDIUM. HIGH LOW MEDIUM. REPORTING TOPICS. In addition to the materiality analysis, we conducted a reporting content assessment with active users of the sustainability report (reporting experts, ratings agencies, SRI analysts). The assessment identified the highest priority topics Allianz should be addressing through its sustainability reporting as: 1. Climate change approach, risks and opportunities 2. Integrating ESG criteria in insurance/investment decisions 3. Offering sustainable products and solutions. The strategic material topics are generally aligned with the reporting topics identified. To meet the requirements of our report users, additional topics beyond the strategic materiality assessment are included in this report. Climate change remains a major priority focusing on developments in the regulatory space, e.g. TCFD. Allianz continues to take leadership on behalf of the sector in collaboration with the United Nations on various issues. We also report on our progress in the decarbonization of our business and operations, see section 02.2. Allianz remains committed to communicating its approach to ESG integration in business decision-making through its ESG Framework and disclosure of sensitive business transaction decisions, see section 02.4. The growing business case for sustainability is underlined by the increasing share of environmental and social solutions that Allianz offers covering both our insurance and investment businesses. Information on sustainable solutions can be found in section 03.4. For further details, please refer to section 06.7 (Reporting parameters, scope and materiality). 17. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.6 STAKEHOLDER ENGAGEMENT. The challenges Allianz faces as a multinational business are diverse and complex. Understanding different stakeholder needs is crucial for designing effective products and services. We also understand the importance of collaboration and partnership for scaling positive impact. In addition to materiality analysis and customer surveys, Allianz engages and collaborates with a broad range of stakeholders who’s insights they help shape its strategy, activities, and reporting. Besides engagement with international and national sustainability bodies and initiatives, Allianz’s activities focus on four stakeholder groups which are most impacted by its business. CIVIC PARTNERSHIPS. Long-term partnerships are instrumental to delivering Allianz’s sustainability agenda. Strategic partners include: • SOS Children’s Villages • German Corporation for International Cooperation (GIZ) • Sustainable Development Investment Partnership (SDIP) • International Paralympic Committee • International Olympic Committee (as of 2021) • U.N.-convened Net Zero Asset Owner Alliance • U.N.-convened Global Investors for Sustainable Development (GISD) Alliance. GLOBAL INITIATIVES. Allianz’s businesses are signatories to and members of a wide range of global sustainability initiatives and principles. They guide it to: • incorporate sustainable development principles into activities, products, services and investments; • work with and learn from others through open dialog and knowledge sharing; • collaborate to find solutions to local and global challenges relevant to our industry and beyond; and • improve transparency across Allianz’s operations and value chain. For a list of Allianz’s memberships and partnerships, please refer to section 06.2. INVESTORS. Allianz engages with investors to communicate its sustainability strategy and performance, enabling them to make informed decisions about their investments and our businesses to understand their expectations. • Annual General Meeting • Dialogs and roadshows • Ratings and benchmarks • Website, Sustainability Report, rating results e.g. DJSI. CUSTOMERS. Feedback from customers helps improve products, services and processes and offer easy and adaptable solutions. • Customer surveys and dialogs • Learning from and sharing customer insights • Review of financial services sector developments • Research and development to support product innovations • Net Promoter Score (NPS) • Allianz Risk Barometer Survey. SOCIETY. Given the pace and scale of global change, businesses, governments and institutions must work together to identify sustainable solutions and drive positive change. • Partnerships for civic engagement • Thought leadership on global issues • Panel discussions and roundtables • Foundations, donations and volunteering • Press events, journalist surveys and roundtables • Formal dialogs with NGOs and ESG professionals. EMPLOYEES. Employees who are engaged with and committed to their jobs generate long-term value for businesses. To this end, Allianz continuously seeks and responds to employees views. ideas and concerns, including through: • The Allianz Engagement Survey (AES) • Employee dialogs and networks • Corporate volunteering programs • Events for employees (including the Allianz Sustainability Forum) GRI 102-12, 102-40, 102-42, 102-43, 102-44. OUR KEY STAKEHOLDER GROUPS 18. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.7 SUSTAINABLE DEVELOPMENT GOALS. The U.N. Sustainable Development Goals (SDGs) are a universal call to action to end poverty, to protect the planet and to improve global political and economic stability. Through 17 bold commitments and 169 sub-targets, the goals seek to drive global action across social, environmental and economic development issues up until 2030. Allianz believes that the SDGs have a crucial role to play in driving global sustainable development. In recent years, work has been undertaken to develop a robust and detailed understanding of the Group’s business impacts on the SDGs and their targets – both positive and negative. Given the nature and size of its business, Allianz impacts many of the targets set by the SDGs. However, the SDGs and their sub-targets are intricately connected, which makes identifying and measuring the impacts and contribution of global businesses – both positive or potentially negative – an ongoing challenge. WHAT IS THE BEST WAY FOR ALLIANZ TO ACCURATELY MEASURE AND REPORT ON ITS IMPACTS ON THE SDGS? 2016. The first strategic exercise was completed to map Allianz’s activities and sustainability strategy against the SDGs. This provided an initial overview of the goals to which Allianz broadly contributes. 2017. The SDGs to which Allianz’s activities and targets contribute were analyzed in more detail using the guidance “Business Reporting on the SDGs: An Analysis of the Goals and Targets”. Strategic projects, targets, policies, and disclosures were mapped against the business indicators of the SDGs. 2018. Allianz commissioned Trucost to apply its SDG Evaluation tool to Allianz’s business model as a pilot assessment across the 70+ countries and business segments in which it operates. SDG 1 NO POVERTY By the very nature of what we do – protecting people and businesses against risks – we contribute to our customers’ long-term financial wellbeing and help stabilize local economies, with a key focus on emerging consumers. SDG 7 AFFORDABLE AND CLEAN ENERGY We actively support the transition to a global low-carbon economy and provide sustainable solutions for our customers, including insurance solutions that support renewables and energy efficiency around the world. SDG 8 DECENT WORK AND ECONOMIC GROWTH As one of the world’s largest financial services providers, enabling sustainable economic growth is fundamental to our core business and underpins our entire contribution to delivering the SDGs. SDG 13 CLIMATE ACTION We constantly work to identify and manage risks and opportunities resulting from climate change. We anticipate the risks as an investor, and we protect and care for our customers through our insurance products, while using our assets and insurance expertise to enable the transition to a low-carbon economy. Four SDGs were identified, to which Allianz makes a particularly significant contribution. The Trucost methodology involves a quantitative analysis of a company’s SDG performance across the value chain, spanning the entirety of its geographic operations, using for key stages: STAGE 1 Understanding exposure to SDG risks. STAGE 2 Evaluating SDG risk mitigation. STAGE 3 Evaluating positive impact. STAGE 4 Evaluating holistic SDG performance. THE RESULTS: WHERE DOES ALLIANZ HAVE ITS GREATEST POSITIVE IMPACT? The results confirmed much of what was expected and identified new considerations and focus areas for further analysis. In addition to Allianz’s own analysis in 2017, the pilot highlighted SDG 3 Good Health and Well-Being as an area for further consideration. Read the Results of the Trucost Evaluation on our website. NEXT STEPS. Despite widespread support and commitment among businesses, a globally consistent approach to effectively measure business impact on the SDGs is still in its infancy. Allianz strongly believes that all businesses stand to benefit by reviewing their SDG impacts and enabling greater potential contributions. We will continue to explore how Allianz can contribute to the SDGs. Moreover, we will encourage our industry peers and others to jointly promote cross-sector collaboration thus improving transparency on the SDGs and shaping strategies to ensure their success. Furthermore, through the U.N.-convened Global Investors for Sustainable Development (GISD) Alliance we are working with other investors to develop an approach to finance the SDGs. 19. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.8 CORPORATE RESPONSIBILITY GOVERNANCE 02.8.1 GOVERNANCE. Established in 2012, the Group ESG Board is the highest governing body for sustainability-related issues. It consists of the Members of the Allianz SE Board of Management in charge of Finance, Controlling and Risk, Investments and Asset Management, as well as non-voting representatives of the following functions and entities: • Group Communications and Corporate Responsibility; • Group Risk; • Group Compliance; • Allianz Investment Management SE; and • Allianz Global Corporate and Specialty SE. The Group ESG Board meets quarterly and is responsible for ensuring ESG integration across all business lines and core processes dealing with insurance and investment decisions. It also takes ownership of CR and climate-related topics and associated stakeholder engagement. Various corporate functions provide regular updates on sustainability-related issues directly to the Group ESG Board. Christof Mascher, Member of the Board of Management of Allianz SE, Operations, Allianz Services, was invited as standing guest for all topics related to sustainability in operations as of 2019. In addition to the Group ESG Board, several committees play an important role in Allianz’s decision-making processes. The Group Finance and Risk Committee oversees risk management and monitoring, including sustainability risk. The committee is the escalation point for ESG-related topics, based on analysis and deliberations within the Group ESG Board. The Group Underwriting Committee monitors the underwriting business and its risk management as well as the development of new underwriting policies and strategies. GRI 102-18. GROUP ESG BOARD MEMBERS. Günther Thallinger • Member of the Board of Management of Allianz SE since 01 January 2017, responsible for Investment Management, ESG • Member of the Group ESG Board since 01 January 2017; Chair of the Group ESG Board since 01 January 2018 • Chair of the U.N.-convened Net Zero Asset Owner Alliance since September 2019. Giulio Terzariol • Member of the Board of Management of Allianz SE as of 01 January 2018, responsible for Finance, Controlling and Risk Management • Member of the Group ESG Board since 01 January 2018. Jacqueline Hunt • Member of the Board of Management of Allianz SE since 01 July 2016, responsible for Asset Management and U.S. Life Insurance • Member of the Group ESG Board since 01 July 2016 20. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.8 CORPORATE RESPONSIBILITY GOVERNANCE. ESG TASK FORCES AT ALLIANZ. In late 2019, we continued the integration of sustainability matters across core processes of Allianz SE by establishing ESG Task Forces led by senior executives from different functions. Addressing sustainability matters requires cross-functional collaboration and support. The ESG Task Forces ensure top-level alignment and buy-in from leadership across the organization. ESG TASK FORCE SPONSOR. Corporate Responsibility Disclosures Head of Group Accounting and Reporting, Allianz SE. Environmental management Head of Group Operations and Performance, Allianz SE. ESG integration in communication and in branding/marketing1. Head of Group Communications and Corporate Responsibility, Allianz SE. ESG integration in investments1 Managing Director, Allianz Investment Management SE. ESG integration in underwriting1 ESG Working Group (including representatives Group ESG Office, Global P&C, Allianz Re, Allianz Global Corporate and Specialty, Euler Hermes, Allianz Germany and other P&C entities)2. OE collaboration Head of Group Communications and Corporate Responsibility, Allianz SE. Sustainability Ratings1 Member of the Board of Management, Investment Management and ESG, Allianz SE. Societal impact Member of the Board of Management, Human Resources, Legal, Compliance, Mergers & Acquisitions, Allianz SE. Sustainable finance regulation Head of Group Regulatory and Public Affairs, Allianz SE Head of Asset Manager Management, Governance and Compliance, Allianz Investment Management SE 1 Task force established in early 2020. 2 The ESG Working Group has been in place since 2014 and will be integrated into the new task force set-up in 2020. The Group ESG Office acts as the secretariat for the working group. 21. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 02.1 Corporate responsibility approach 02.2 Climate change and decarbonization 02.3 Social inclusion 02.4 ESG business integration 02.5 Materiality 02.6 Stakeholder engagement 02.7 Sustainable development goals 02.8 Corporate responsibility governance. Governance. Corporate responsibility management 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance. SUSTAINABILITY STRATEGY AND GOVERNANCE 02.8 CORPORATE RESPONSIBILITY GOVERNANCE. In compliance with the German implementation of the E.U. Non-Financial Reporting Directive (2014/95/EU), Allianz publishes relevant non-financial information within the Governance section of its Group Annual Report. This so called Combined Separate Non-Financial Report is approved by the Supervisory Board of Allianz SE and assured with reasonable assurance by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (PwC). The reported indicators in the Non-Financial Report 2019 assured with reasonable assurance are GHG emissions per employee, renewable electricity, NPS and IMIX. For further details, please see the Allianz Group Non-Financial Report 2019. DATA AND ASSURANCE To enhance the quality and reliability of Allianz’s sustainability reporting, PwC has conducted limited assurance reviews of our sustainability reports, processes and data since the 2016 reporting year. A sample of operating entities of Allianz SE is reviewed onsite by PwC on a regular basis, depending on their impact on the Group’s sustainability activities. The implementation of recommendations is monitored by the Group. For further details, please see the 2019 Independent Practitioner’s Report on a Limited Assurance Engagement on Sustainability Information (section 06.8). 450 Corporate Responsibility experts globally. ENVIRONMENTAL TARGETS EMBEDDED IN ALLIANZ SE BOARD REMUNERATION Allianz’s Supervisory Board has taken the decision to link the Allianz SE Board of Management’s remuneration to specific ESG targets. The variable component of Board member’s remuneration will take into account performance against environmental targets defined in the company strategy. Moving forward, each Board member’s individual contribution factor will look at progress towards emission-related environmental targets and net-zero GHG emissions for both proprietary investments and Allianz Group operations. “At Allianz, financial targets go hand in hand with sustainability targets. Linking our Board’s remuneration to specific environmental targets shows the extent of the company’s commitment and demonstrates performance is not just measured in terms of financial results.” Urs Bitterling Head of Corporate Responsibility Allianz SE 02.8.2 CORPORATE RESPONSIBILITY MANAGEMENT. The Group Corporate Responsibility (CR) function is responsible for managing the strategic framework that drives all groupwide sustainability activities. Its scope includes CR governance, meeting external reporting and rating requirements, and supporting operating entities to effectively integrate the Group’s strategic sustainability approach and policies into their business processes. The Group CR function is part of Group Communications and Corporate Responsibility (GCORE), which is under the responsibility of the CEO’s division of Allianz SE. This enables a close alignment of CR issues with the CEO’s agenda. CORPORATE RESPONSIBILITY NETWORK The Group CR function works in close alignment with a network of around 450 CR experts across all Allianz operating entities globally. Different experts, including ESG leads and Local Environmental Officers, support the implementation of the Group CR approach. They are responsible for local environmental management and the management of local social activities and partnerships (e.g. SOS Children’s Villages). The network drives knowledge and best practice sharing as well as group-wide localized multiplication. TRANSPARENT REPORTING Allianz bases its management approach and reporting on voluntary international standards and guidelines such as the Global Reporting Initiative (GRI) guidelines, sustainability indices, and engagement with expert working groups such as the United Nations Environment Programme Finance Initiative (UNEP FI). Allianz’s annual U.N. Global Compact (UNGC) Communication on Progress can be found on our website and the UNGC websites. GRI 102-56 22. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. As a global insurer and responsible investor, sustainability is part of Allianz’s DNA. By the very nature of what it does, Allianz takes a long-term view and aims to make the world a better place through its core business activities. Sustainable innovation represents a significant business opportunity and Allianz is constantly striving to creative a positive legacy by developing sustainable products and services that mitigate societal risks and seize on opportunities. 03 SUSTAINABILITY IN CORE BUSINESS ACTIVITIES €29.4 bn sustainable investments, up 17% on last year €1.33 bn revenue from 203 sustainable solutions 23. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE. COMMITMENT TO THE PRINCIPLES FOR SUSTAINABLE INSURANCE (PSI) Allianz is a signatory of the United Nations Environment Program Finance Initiative (UNEP FI) Principles for Sustainable Insurance (PSI). It submits an annual Disclosure on Progress. Find out more here. Allianz co-leads the PSI initiative to develop an industry standard on ESG integration in insurance. We are engaging with insurers, reinsurers, brokers, academics and regulators to identify the ESG risks that are most material to different insurance lines. This work continued in 2019 with a global survey of underwriters on ESG and the first draft version of the standard was published in early 2019. Allianz is also part of the PSI working group that is developing an industry response to the TCFD requirements. At present, there is no guidance on how different climate scenarios would impact on various types of insurance (e.g. personal, Property-Casualty, Life/Health, reinsurance, etc.). Allianz is working with 15 other industry participants to develop this guidance. You can find out more about the ESG standard on the UNEP FI PSI website. Allianz insurance underwriters identify ESG risks and refer them for assessment by either Allianz Global Corporate & Specialty (AGCS) ESG Business Services and/or the Group ESG Office at Allianz SE. Experts conduct in-depth assessments of ESG risks such as severe environmental impacts, human rights violations and poor health and safety performance. Based on the outcome of these assessments, they then decide whether a transaction may proceed or proceed with conditions such as monitoring of the project/ client or engagement in a risk dialogue. In case of severe, systemic and unmitigated ESG issues, experts decide whether or not further escalation measures will be taken, including declining the transaction (see Tables ESG–1 to ESG–3). In 2019, 474 insurance transactions were assessed for ESG risks, remaining stable compared to 2018 (470 transactions). Being responsible for a large underwriting portfolio requires significant resources to screen and assess ESG risks and engage clients and brokers in risk dialogues. Allianz increasingly uses digital infrastructure to scale-up the standardization and efficiency that is required to sufficiently cover all the risks it manages. A detailed description of the Allianz ESG approach and processes relating to our insurance business can be found in the Allianz ESG Integration Framework. By the very nature of what it does – protecting people and businesses against risk – Allianz bases its decisions on customers’ needs and a long-term view. Its industryleading expertise in insurance, risk management, consulting and assistance services means Allianz is ideally positioned to help stakeholders meet their challenges by developing innovative solutions to emerging issues. 03.1.1 INTEGRATING ESG IN INSURANCE. Embedding ESG considerations into its insurance business enables Allianz to manage its risks and identify opportunities to develop solutions that support sustainable development and a low-carbon future. Allianz’s exposure to risk is mostly indirect; it accepts risks that it carries for its insured clients. A strong ESG risk management approach is embedded throughout Allianz’s underwriting processes to manage its exposure. The ESG referral and assessment process ensures risks are effectively identified, assessed and managed (see also section 02.4). The process is integrated via the Allianz Group Risk Management Framework that is applied to all insurance business globally, whether Allianz is acting as lead insurer or as part of a panel. 24. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE. ADDING VALUE TO OUR BUSINESS, OUR CLIENTS AND THE SECTOR AS A WHOLE Allianz applies its in-depth expertise to its own risk management and underwriting due diligence as well as to that of its clients, brokers and business partners. As ESG risk experts, consulting services enable our clients to identify and assess their material ESG risks. This dialogue and sharing of expertise adds value to improve overall risk awareness and mitigation. Allianz conducts in-depth research that enables it and other stakeholders to stay ahead of developments. The findings help to inform and develop the approach to risk identification and management. We continue to initiate and conduct research to understand the relevance of ESG factors on claims and underwriting profitability. Our research shows that this extrafinancial information provides signals that are relevant for our underwriting decisions. In 2019, a more regulatory approach to ESG began to emerge, driven particularly by the current political focus on climate change and the goals of the Paris Agreement. GHG emissions need to be significantly reduced and the financial industry has a key role to play in fostering the growth in renewable energy that is needed. The European Insurance and Occupational Pensions Authority (EIOPA) is integrating the topic into the Solvency II framework and national regulatory bodies like the German Federal Financial Supervisory Authority (BaFin) are publishing more detailed guidance. Regulation will require insurance companies in the European Union to integrate ESG and climate considerations into their risk processes. Sustainability considerations on the asset and liability side of the balance sheet are likely to become an integral part of (prudential) regulation. Allianz is actively involved and supportive of this process. Systematic engagement with major coal companies provides an opportunity to support companies’ management of material risks related to climate change and establish the transition away from coal. Participants at the 2019 PSI-Allianz Conference networking over lunch. 25. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE. INSURING SOLAR IN THE NETHERLANDS In April 2019, one of the largest PV plants in the Netherlands – an 18 MW photovoltaic plant located close to Schiphol Airport – became operational. Allianz Climate Solutions provided financial advisory services and insurance solutions in cooperation with TRIO Investment B.V., a Dutch renewable energy investment company. Allianz’s three-year strategic alliance with the GIZ is aimed at ‘Closing the Protection Gap’. Launched in 2017, the project started up in January 2018 and runs until December 2020. Allianz also works with its peers through the Insurance Development Forum (IDF) to provide insurance solutions that allow governments in countries that are vulnerable to climate change to better protect their populations against natural disasters. 03.1.2 CLIMATE AND RENEWABLES. Climate change poses a major risk to the livelihoods of millions of people worldwide. Through our business, we anticipate the risks, work to protect and care for our customers, and enable the transition to a low-carbon economy. Our Climate Change Strategy (see section 02.2) is focused on developing and offering insurance solutions that help our customers respond to a changing climate and develop the low-carbon economy. INSURING CLIMATE RISKS Allianz aims to reduce the impacts of climate risks by incentivizing preventive measures to increase customers’ resilience and compensating for climate-related damages. Examples include risk consulting services offered by AGCS and our work with the German Corporation for International Cooperation (GIZ) to pilot innovative insurance solutions in emerging and developing countries. Our work includes researching the actual and future impacts of climate change to provide the best possible risk advice to society and customers. This research helps to inform and develop both prevention and resilience solutions. With its experience as a microinsurer and reinsurer in agriculture, Allianz brings innovative climate risk insurance to vulnerable regions. They include weather index insurance, yield loss and animal mortality cover. Allianz actively supports the InsuResilience Global Partnership, which builds upon the G7 Climate Risk Insurance Initiative to provide climate risk insurance for up to 500 million people in the most vulnerable developing countries by 2025. PHASING OUT COAL IN OUR INSURANCE PORTFOLIOS. Allianz announced in May 2018 that it would no longer insure single-site/standalone coal-fired power plants or mines whether in operation or being planned. Allianz is committed to completely phasing out all coal-based risks from P&C insurance portfolios by 2040 at the latest. For further information, please see the Allianz ESG Integration Framework. Allianz continues to insure companies that generate electricity from multiple sources, including coal, other fossil fuels and renewable energies. These are individually reviewed using our ESG criteria (see sections 02.4 and 03.1). INSURING THE LOW-CARBON ECONOMY The renewable energy industry is constantly evolving, at pace and in many directions. National climate change strategies and policies, the Paris Climate Agreement and corporate initiatives like RE100 are driving momentum. However, many markets are not ready to make the transition – in terms of experience, financing, regulations and insurance. The large and growing demand for electricity in developing countries, and the potential for renewables to reduce pollution and GHG emissions, present this as an attractive growth market. Developments are increasingly driven by private investors and corporate clients who recognize clean energy as a valuable investment. Allianz is one of the leaders in insuring low-carbon technologies, providing standardized and tailor-made insurance products as part of its Sustainable Solutions offering (see section 03.4). Through deep technological expertise and understanding of the power and energy industry, we enable investment and actively support clients with their renewable energy transition. 26. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE. Building and operating renewable energy plants involves multiple stakeholders and poses complex risks at different stages for investors, construction companies, operators and manufacturers. Allianz’s products cover all stages of the project lifecycle – from planning to decommissioning – and include a variety of solutions including erection and construction all risk insurance, liability insurance, marine insurance and technical advisory solutions. A tailor-made approach makes it possible to bundle multiple covers in one single policy. Allianz also offers insurance against financial losses from lower than expected annual energy yields for renewable energy plants (e.g. lack of wind or sun). Allianz aims to reach significant market share in emerging renewable energy markets, building on its expertise from more than 60 countries where it already insures renewable energy. In 2019, we continued to scale renewable energy insurance services in fast-developing growth markets through the ‘Scaling Up Renewable Energy’ (SURE) initiative. SURE aims to cement Allianz’s position as the global ‘go-to’ provider of insurance for renewable energy projects and infrastructure. It targets fast developing growth markets, such as the Central and Eastern Europe region and several African countries, to support their transition to the low-carbon economy. GOING BEYOND INSURANCE SOLUTIONS IN THE RENEWABLE ENERGY INDUSTRY Allianz’s goal is to make renewable energy projects bankable, investable and insurable to support the low-carbon transition. Ensuring risks are maintained at acceptable levels is crucial to maintaining strong portfolios that support this goal. The renewable energy industry is fast moving. Our risk advisors and renewable energy experts ensure Allianz and its customers stay abreast of the latest developments. Risk advisory services are important for meeting customers’ demands and assuring a sound insurance portfolio. During the planning and delivery phases of a renewable energy project, cost efficiency, accuracy and fast reaction to rapid changing conditions are crucial. Projects are often sold to investors at this stage and quality assurance, the right cash flow models, and meeting tax and legal requirements is critical to the successful process. Often, different experts look at the risk for each of these areas in a non-integrated way, which may put projects at risk. Having one single risk advisor who understands all aspects and helps to ensure a smooth transition across all phases is important. Allianz’s risk advisors also act intermediaries between relevant stakeholders – including banks, investors, the insurer and the project developer. Allianz Climate Solutions supports the renewable energy industry with insurance and risk management solutions and, in parallel, works with private and public sector partners to improve societal resilience through dedicated insurance approaches. While the main insurance focus for small and medium enterprises is currently solar and wind, we are beginning to explore opportunities to extend our services to other renewable technologies. Allianz Climate Solutions plans to expand the renewable energy toolbox to new technologies for storage, hydrogen, energy efficiency and new business models for insurance and reinsurance solutions. Find out more about Allianz Climate Solutions on their website. 27. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE 03.1.3 NATURAL CATASTROPHES. Natural catastrophes – including earthquakes, fires, floods and extreme storms – cause devastation to affected communities and it can take months or years to recover. Demographic shifts, global interdependencies and climate change all play a role in weather-related insurance losses. Such losses have increased 15-fold over recent decades, implying high risk and volatility for the insurance industry. The Allianz Risk Barometer 2020 ranked natural catastrophes fourth in its ranking of global business risks, with economic losses totaling around 133 billion U.S. dollars in 2019 according to Swiss Re. Allianz is an expert in insuring customers against the impacts of natural catastrophes. Experts at Allianz Reinsurance (Allianz Re) – including meteorologists, hydrologists, geophysicists, geographers and mathematicians – model around 50 natural catastrophe (Nat Cat) scenarios for Allianz Group, with data captured using best-in-class standards. Applying their scientific understanding to the Allianz portfolio with its insured values, they assess its overall Nat Cat risk. Vendor and in-house applications build a comprehensive picture of risk accumulation in any defined location and form the basis for effective risk management measures. Allianz Re is constantly working to improve Cat Risk Management at a Group level. In 2019, the new Cat Risk Data Warehouse was put into full production. It centrally stores and validates all data used for cat risk modeling and gives risk experts access to a wide range of analytics tools to monitor data quality and exposure development. Allianz Re has also recently launched global hazard layers for the most important natural perils such as windstorms, floods and earthquakes. These are available for all operating entities to assess the risk of natural catastrophes at the point of sale in the underwriting process globally. Following the high activity of wildfires in the recent years (California, Portugal, etc.), Allianz Re added a global wildfire layer to address this important peril, which is expected to get more severe with climate change. This allows it to provide a risk adequate view for customers in times of change. The Allianz Risk Barometer 2020 ranked natural catastrophes fourth in its ranking of global business risks, with economic losses totaling close to $133 bn. Clearing work after the bush fires on Kangaroo Island, Australia captured by an Allianz employee. 28. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE 03.1.4 CYBER SECURITY. In the wake of high-profile data breaches, privacy scandals, major IT outages and tighter data protection rules in Europe and beyond, cyber risk has become a core concern for businesses. According to the Allianz Risk Barometer 2020, cyber incidents are the top business risks globally. Cyber-crime costs an estimated 600 billion U.S. dollars a year according to McAfee. While criminals use more innovative methods to steal data, commit fraud or extort money, there is also a growing cyber threat from nation states and affiliated hacker groups targeting critical infrastructure providers or stealing valuable data or trade secrets from companies. Cyber incidents are increasingly likely to spark litigation, including securities and consumer class actions. Data breaches and IT outages can generate large third-party liabilities as affected customers or shareholders seek to recoup losses from companies. Allianz Global Corporate & Specialty (AGCS) has more than a decade of experience in cyber insurance, protecting organizations against cybercrime and digital threats. The types of risks it covers include first-party losses (e.g. business interruption, restoration, and crisis communications) and third-party losses (e.g. data breaches, network interruption, and notification expenses). However, cyber insurance offers much more than just compensation for potential financial losses. It also includes valuable prevention and incident response services that enable companies improve their cyber resilience and mitigate negative impacts after an incident. Allianz is working to provide more certainty to its customers on what level of cyber risk is covered by each insurance product. In 2019, AGCS assessed corporate insurance product lines offered by Allianz operating entities. As a result, we have defined a range of specific cyber clauses – from no cover to full cover – for the impacts arising from cyber incidents. These will be implemented across all Allianz products by the end of 2020. We are also improving our privacy cover to be as clientorientated as possible. As well as insurance for when a problem arises, ACGS’s expert consultants support customers to recover from an incident on the technical side and to ensure proper disclosure of a privacy incident to regulatory bodies and their customers. Looking ahead, we see opportunities in also protecting individuals from cyber-related risks, including in their homes and vehicles. “Cyber risk has been a major risk for a number of years, but as with any new risk it has struggled with awareness. We have now reached a point where cyber is as equally concerning for companies as their major traditional exposures.” Marek Stanislawski Global Cyber Underwriting Lead Allianz Global Corporate & Speciality. Number 1 risk Cyber crime costs about $600 bn per year according to McAfee. 29. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.1 SUSTAINABILITY IN INSURANCE. DEVELOPING THE NEXT GENERATION OF MOBILE INSURANCE. In summer 2019, Allianz teamed up with emerging market insurtech leader, BIMA, and German development agency, GIZ, to grow small-ticket mobile insurance in a sustainable way. Our shared aim is to design new health insurance offerings and develop direct distribution models to maximize client value. Allianz, BIMA and GIZ will also engage in best-practice exchanges with market stakeholders and regulatory bodies. The collective ambition is to reach one hundred thousand new customers in Ghana in 2020 and to dedicate around 4.2 million Euro to the overall initiative. “BIMA has been very successful at scaling microinsurance through mobile operators. This new partnership helps us develop a new direct to consumer business model, and build our customer engagement strategy, in a way that we could never do alone.” Russell Haresign Africa Head of Operations BIMA “Our objective is to support sustainable market development for mobile microinsurance, putting special emphasis on client value and customer protection. Working with the industry leaders in a public-private-partnership is a great lever to do so.” Matthias Range Head of Project GIZ 03.1.5 EMERGING CONSUMERS. Allianz pioneered its first ever microinsurance in Germany in 1926. Today, it continues to expand its offerings to support lower-income populations, particularly in Africa, Asia, and Latin America. The emerging consumers’ market consists of half of the world’s population, many of whom are severely underinsured. Allianz includes these consumers in the delivery of its purpose ‘We secure your future’ by providing affordable and effective insurance solutions. This represents a significant sustainable growth opportunity for Allianz – both financially and socially. REACHING UNDERINSURED CUSTOMERS Allianz is committed to closing the protection gap for more people and providing access to affordable financial services that are tailored to their needs. In 2019, it served 49.4 million customers1 in the emerging consumers segment (2018: 44.1 million). Revenues were at 410.1 million Euro1 (2018: 310.3 million Euro) – equivalent to around 8.31 Euro in annual revenue per customer1 for this market. Thereof consolidated entities served 10.0 million customers, and contributed revenues of 40.7 million Euro. Because traditional financial services infrastructure does not typically cater for low-income populations, the emerging consumers segment offers major potential for digitalization. To make the most of the opportunity, Allianz continues to explore partnership opportunities with companies that can complement its core capabilities with digital technologies and go-to-market approaches, tailored to the requirements in the emerging consumers’ business. Find our Emerging Consumer Reports in the Download Center on our website. 1 Total customer and revenue data includes figures from non-consolidated entities outside the reporting boundaries (GRI 102-45). 30. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.2 SUSTAINABILITY IN PROPRIETARY INVESTMENTS. Strong ESG management is crucial to mitigating risks and seizing opportunities. Allianz aims to create a lasting positive legacy for society through its investments, believing that sustainable business practices improve the financial performance of companies. That is why we consider ESG aspects whenever we allocate money. 03.2.1 ESG INTEGRATION AND ENGAGEMENT APPROACH. ESG is an integral part of the investment processes. As an asset owner, Allianz invests its proprietary assets, which are primarily the premiums collected from insurance customers. Allianz has committed to the Principles for Responsible Investment (PRI). These principles guide its approach to responsible investment and drive continuous improvement across our businesses. In addition to the disclosures contained in this report, Allianz SE and Allianz Investment Management SE (AIM) report annually to the Principles for Responsible Investment. Our latest and past PRI Transparency Reports can be found on our profile on the PRI website. Sus tai na ble in ves tm ent s (gr een bo nds , gr een bu ildi ngs , et c) Simplified illustration of Allianz ESG integration approach for proprietary investments. Illustration not to scale. Figures based on economic view. Compared to accounting view it reflects a volume increase due to switch from book to market values and changed asset scope (e.g. including For Valuation Only (FVO), trading and real estate own-use). 80% LISTED INVESTMENTS (fixed income, listed equities) 20% NON-LISTED INVESTMENTS (alternatives, real estate, infrastructure, renewables, ...) Sy st e m at ic. E S. G in te gr at io n: E. S G sc or in g an d en g a ge m en t a p pr oa ch. E S. G e xc lu si o ns ( co al , co nt ro v er si al w e a p o ns , et c. ) PROPRIETARY ASSETS €795 bn. E S. G i n a ss e t m a n a g e rs s el e c ti o n, m a n d a ti n g a n d m o ni t o ri n g. ES. G r efe rra l a nd as se ss me nt ap pro ac h. Sys te ma tic. ES. G i nte gra tio n: Sus tai na ble in ves tm ent s. Our ESG integration approach as an asset owner This graph is a simplified visualization of our ESG integration approach across our portfolio and asset classes. 31. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.2 SUSTAINABILITY IN PROPRIETARY INVESTMENTS. Allianz invests more than 795 bn Euro1 in a wide range of asset classes. We systematically integrate ESG considerations across our entire investment portfolio2 and continuously enhance and deepen the approach, which is comprised of the following key elements: 1. Asset manager selection, mandating and monitoring: Allianz requires all asset managers investing on its behalf to integrate ESG considerations into the investment process (see Table ESG–7). Asset managers can fulfill these acquirements by being a PRI signatory or by having their own ESG policy. More than 99% of our assets are managed by asset managers that are PRI signatories and/or have an ESG policy in place. In 2019, AIM started to systematically review the ESG practices of its external asset managers. We entered into dialogues with these firms to review their respective ESG approaches, including their climate-related strategies. These engagement dialogues include reviewing governance structures for clear responsibilities to oversee ESG matters, understanding monitoring methods for ESG risks and opportunities, and assuring commitment to improving ESG practices in investee companies. This is an important step towards Allianz’s goal to have real world impact. As an asset owner, we are well-positioned to conduct crucial ESG discussions with our asset managers and this is an effective multiplier of our ESG efforts. As a founding member of the U.N. convened Net-Zero Asset Owner Alliance, Allianz wants to ensure all asset managers are well prepared for the decarbonization of their portfolios in line with achieving a global average temperature increase of not more than 1.5°C. 2. Systematic integration of ESG factors – ESG referral and assessment process: For non-listed investments, such as real estate, infrastructure and private equity, Allianz addresses ESG risks through a detailed referral process. Guidelines have been published for 13 sensitive business areas (see section 02.4) and ESG screening is mandatory for all transactions within these areas. Detection of an ESG risk triggers the referral process, leading to detailed assessment of the potential risk by the Group ESG Office. Based on the outcome of this assessment, a decision is made whether to either proceed with a transaction, to proceed and require the mitigation and management of ESG risks, or to decline a transaction on ESG grounds. In 2019, 64 investment transactions were assessed (see Tables ESG–1 to 3). 3. Systematic integration of ESG factors – ESG scoring: Allianz applies its ESG scoring process to all listed assets including sovereign bonds, corporate bonds and public equity. It systematically assesses the ESG performance of individual issuers using ESG data provided by an external data provider, MSCI ESG Research. This information is used to consider ESG criteria in investment selection, leading to a more holistic steering of our portfolio and targeted management of ESG risks and opportunities. Allianz has set a clear ESG performance threshold, below which investments are considered to be ‘ESG critical’. Investments in companies scoring below the threshold are continually monitored. An asset manager with investments scoring below this threshold must ‘comply-or-explain’, meaning either reallocate to another issuer or explain and provide reasons for holding these issuers. The reasoning is discussed and assessed during regular ESG deep dive meetings with asset managers. 2019 2018 2017 43 52. ESG assessments conducted on investment transactions Number of transactions assessed 64 1 Based on economic view. Compared to accounting view it reflects a volume increase due to switch from book to market values and changed asset scope (e.g. including FVO, trading and real estate own-use). 2 ESG integration processes and coverage vary by asset class and between the type of portfolio and mandate. Minimum standards for ESG integration are in place for covering all investments through the Allianz ESG Functional Rule for Investments. OUR ESG SCORING AND ENGAGEMENT APPROACH Our ESG scoring and engagement approach systematically identifies and manages risks in our listed proprietary investment portfolio. Systematic engagement. Setting the ESG threshold. Long-term ESG performance improvements. Operationalizing the scoring. Applying ESG threshold to portfolio 32. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.2 SUSTAINABILITY IN PROPRIETARY INVESTMENTS 4. Active Ownership – ESG engagement: Meaningful change can take several years and engagement is an ongoing process that can be both impactful and mutually beneficial. Allianz could not contribute to this positive change if it automatically withdrew its investments. Therefore, engagement processes are an integral part of Allianz’s ESG strategy. In 2019, Allianz solidified its systematic approach to engaging investee companies on ESG topics. Based on the initial research and prioritization of companies falling under the ESG scoring threshold, we prepared a list of companies to be engaged with due to severe ESG risks and concerns. Topics range from toxic emissions and waste to risks of child labor and negative impacts on communities. CLIMATE ACTION 100+ Allianz is an active member of Climate Action 100+. More than 370 investors representing more than 35 trillion U.S. dollars in assets under management have signed on to the initiative. Its purpose is to engage with the world’s largest corporate GHG gas emitters to set GHG emission reduction targets, strengthen climate-related financial disclosures and improve governance on climate change. 40 9 3 8. Engagements by Topics 2. CO2 Emissions and Management Health and Safety Toxic Emissions and Waste Product Safety Biodiversity and Land Use 2. Other 8 90. Engagements by Outcomes % 2. Engagement on-going. Engagement closed successfully. Engagement closed with restrictions 10. Engagements by Industry Sector % 67 8 6 4 4. Oil and Gas Metals and Mining Steel and Cement Chemicals Construction and Engineering Other 31 8 24 37. Engagements by Region % Europe. North America. Asia Pacific. Emerging Markets. ESG Engagement Approach Highlights. The engagement team conducts in-depth research on each company using information from MSCI ESG Research, other ESG data and intelligence providers, and the respective corporate disclosures or publications of each company. Relevant questions and requests related to the identified ESG risks or opportunities and engagement objectives are submitted to the company for a written reply. Based on the company’s response, they may conduct additional engagement activities including clarifying open points, requesting additional disclosures, expressing concerns as an institutional investor or conducting in-person meetings with management. If the company shows significant action to improve their ESG risk management and/or to solve and avoid further ESG issues, the engagement is closed. Should the company’s answers continually prove insufficient, the company shows no willingness to improve its ESG performance, or it does not respond to our engagement communications, the engagement team recommends the restriction of all investments in the company. This recommendation is received and reviewed by the Chair of the ESG Board, who subsequently approves the restriction of the company from all proprietary portfolios. In 2019, Allianz opened or continued engagement discussions with 49 investee companies. Four of these engagements were considered successful and were therefore closed, one was closed without success, and the remaining 44 are still ongoing or continue to be monitored. In addition to these engagements, AllianzGI and PIMCO conduct ongoing ESG-specific engagements with investee companies. 33. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.2 SUSTAINABILITY IN PROPRIETARY INVESTMENTS 1 Please note that this reporting covers Allianz’s proprietary insurance assets as well as assets from third-party clients on whose behalf AllianzGI exercises voting rights. 2 Weapons that fall under the scope of the following international conventions: Ottawa Convention (anti-personnel landmines); Convention on Cluster Munitions (cluster ammunition/bombs); Biological and Toxin Weapons Convention (biological weapons); and Chemical Weapons Convention (chemical weapons). 5. Active Ownership – Voting: Voting rights are exercised by AllianzGI on the Allianz Group’s behalf. Details on the AllianzGI’s voting policy and voting records can be found online1. You can find Proxy Voting Records on the AllianzGI ESG page. 6. Excluding certain sectors and companies: Exclusion lists are updated annually based on data from external service providers and in-house research. This approach covers multiple aspects: 1. Exclusion and restriction of certain sectors, such as companies producing or associated with controversial weapons2 and excluding companies involved in coal-based business models (see below, and the ESG Integration Framework, section 03.9). 2. Restriction of certain sovereign bonds: We restrict investments in sovereign bonds from countries associated with severe human rights violations and significant issues managing ESG concerns. 3. Exclusion and restriction of issuers as a result of the scoring and engagement process: As part of the ESG scoring and engagement processes, single issuers that fall below the ESG threshold and where engagement has not been successful may be excluded if: • answers to engagement questions are consistently insufficient; • the company shows no willingness to improve its ESG performance; or • the company does not respond to any of Allianz’s engagement communications over the annual cycle. DECARBONIZING INVESTMENTS Allianz introduced an exclusion of coal-based business models in 2015. No new investments have been allowed, equity stakes have been divested and fixed income investments made before 2015 are in run-off. This approach was further refined through the forward-looking approach in 2018. In addition to the exclusion of utilities and mining companies involved in coal above our threshold (30+% generation from coal, 30+% revenues from thermal coal mining), the 2018 update to our exclusion introduced a forward looking component. Through the forward-looking approach, companies planning to significantly expand their coal-based capacities or having to retire a significant part of their generation portfolio are also excluded. The threshold will be gradually reduced to zero by 2040. The exclusion list is updated annually based on data from an ESG data provider. This leads to companies being added to and removed from the exclusion list over time, based on their reported coal share. For additional details see section 3.9.2 of the Allianz ESG Integration Framework. Divestment status. In 2019, Allianz divested a further 14 million Euro in equities and an additional 236 million Euro fixed income is in run-off. This brings the total of divested/run-off assets to 340.5 million Euro/5,942.7 million Euro (see Table ESG–10). GLOBAL INVESTORS FOR SUSTAINABLE DEVELOPMENT ALLIANCE In October 2019, Secretary-General of the United Nations, António Guterres, announced the Global Investors for Sustainable Development Alliance (GISD) initiative. It aims to leverage finance and investment know-how to foster the 2030 Development Agenda. The initiative is co-chaired by Oliver Bäte, CEO of Allianz SE. According to the U.N., achieving the U.N. SDGs requires substantial financing in sectors such as health, education, transportation and climate change. Close collaboration of the private and public sectors in both developing and developed countries will be key to achieving the SDGs. GISD members commit to actions such as establishing partnerships to strengthen relations between investors, governments and multilateral institutions that foster scalable investment opportunities in developing countries. They will also roll out and promote the use of innovative financing facilities and tools that enhance the risk-return profile of investments in sustainable development, including in sectors and countries where investment is most needed. “As responsible companies, we can create long-term value by embedding sustainability into our core business. Investing in the stable development of societies across the globe is not only the right thing to do, it also provides economic opportunities. We are convinced that investments in emerging markets can foster sustainable growth without losing sight of our customers’ interests.” Oliver Bäte CEO of Allianz SE 34. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.2 SUSTAINABILITY IN PROPRIETARY INVESTMENTS. Sustainability-themed investments Investments by asset class € bn 2017 2018 2019 1.4 0.2 2.0 Renewable energy investments. Certified green buildings. Other (Sustainability bonds, social bonds, and others such as affordable housing and dedicated investment in PIMCO ESG fund) Green bonds 5.6 19.7 25.1 11.4 6.8 2.5 5.6 14.6 7.2 29.4 3.6 13.3 03.2.2 SUSTAINABILITY-THEMED INVESTMENTS. As well as managing ESG risks, Allianz actively pursues investment opportunities that offer solutions to environmental and societal challenges such as climate change and infrastructure development. Selected ESG-themed investments can generate stable returns and create long-term shared value. At the end of 2019, investments in sustainability-themed assets totaled 29.4 billion Euro (see Table ESG–8). Allianz is steadily increasing its sustainability-themed investments and is a large investor in renewable energy. We finance infrastructure projects with environmental and social benefits such as the Thames Tideway Tunnel in London, public transport infrastructure including metro infrastructure in Madrid and Barcelona, a Finnish power distributor and a wind park in Peru. We increasingly look for investment opportunities in sustainable infrastructure in emerging economies. These markets face large financing gaps and, with Allianz’s investments alongside multilateral development banks and other partners, we support sustainable development and economic growth. For example, Allianz finances African infrastructure projects by investing into Emerging Africa Infrastructure Fund (EAIF). We are providing financing of 75 million Euro and 25 million U.S. dollars, both over 12 years, as EAIF’s first insurance-investor. Allianz has a growing global portfolio of wind and solar power. We also finance energy innovations, energy efficiency measures and other renewable energy sources. Examples include investments in the AllianzGI Renewable Energy Fund, the Meridiam Transition Fund and a Mini Hydro Power Plant Fund in Indonesia. AFRICAGROW In Africa, it is mainly small companies that create the most jobs and support income security. On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW Development Bank and Allianz Global Investors have set up a new fund of funds – AfricaGrow. The project is an important component of Allianz’s Africa strategy. The EUR 170 million fund of private equity funds blends public finances and private investments from Allianz companies. It will finance 150 innovative SMEs and startups in reform-oriented African countries by 2030, promoting sustainable economic and social development and creating more than 25,000 new jobs. Careful monitoring will ensure the fund has a measurable positive social and/or economic impact. Read more here. 35. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.2 SUSTAINABILITY IN PROPRIETARY INVESTMENTS 1 Source: International Energy Agency and the United Nations Environment Programme (2018): 2018 Global Status Report: towards a zero-emission, efficient and resilient buildings and construction sector, page 9. 03.2.3 ESG IN REAL ESTATE INVESTMENTS. Allianz Real Estate (ARE) is Allianz Group’s dedicated investment and asset manager for real estate. It develops and executes tailored investment strategies, focusing on direct and indirect equity worldwide and commercial real estate loans in Europe and the U.S. ARE invests 14.6 billion Euro in certified green buildings around the world, including both equity and debt investments. As a whole, the real estate sector accounts for nearly 40 percent of energy-related CO2 emissions globally1. Real estate assets are facing significant costs to meet tightening environmental regulations, including higher energy efficiency standards and demands from investors and tenants. Real estate is also highly exposed to physical climate risks such as increasing flooding and heatwaves. Significant investments may be required to improve resilience, while changing investor and tenant preferences will provide new opportunities, for example by tapping into climateconscious tenant groups. As a responsible Investor and asset manager, ARE strives to incorporate ESG factors into its ‘Buy-Manage-Sell’ cycle for its real estate business. In line with Allianz Group’s commitment, ARE works towards reducing GHG emissions of its real estate portfolio to net zero by 2050. Furthermore, ARE is focused on increasing the share of properties that have an environmental or sustainability certification. ARE’s ESG integration framework is designed to improve the ESG performance and transparency of assets and address issues such as physical climate risks that could materialize over time, thereby reducing risks of obsolescence and depreciation. The framework is based on three key areas of activity: assess, engage and improve. 1. Assess: During the acquisition phase in particular, transactions are screened for potential ESG issues. Every new equity investment undergoes a thorough due diligence process, including technical and environmental due diligence and property-related ESG assessment. Any new office or retail investment (equity) must have an environmental or sustainability certification that is either globally recognized (such as LEED or BREEAM) or locally dominant (for example HQE in France and DGNB in Germany). With regards to new fund investments, fund managers must have an ESG policy. 2. Engage: During the management phase, a collaborative engagement strategy seeks to influence business partners to strengthen their ESG activities. This includes ensuring asset managers consider ESG topics as part of performance review meetings with joint venture partners and supporting external property managers to improve ESG standards and performance. 3. Improve: ARE aims to measure and improve the ESG performance of its entire real estate portfolio. This includes seeking out pilot ‘lighthouse’ projects and group-wide initiatives such as procuring of certified green energy, investing in onsite energy production and energy efficiency measures, for example installing LED lighting. ARE’s ESG Policy was updated in 2019, strengthening its approach in the context of E.U. debt and placing a stronger emphasis on tenant engagement for direct investments. Targeted energy audits are conducted to better understand energy performance and inform action plans to bring down the energy consumption of assets. Aligned with the Allianz Group commitment to drive decarbonization, efforts will be stepped up to conduct further energy audits to improve energy efficiency and increase the use of renewable electricity – including by engaging with tenants to switch to renewable electricity. In 2019, ARE launched a global carbon accounting and reporting project to improve environmental reporting across its portfolio. The project will result in a new reporting framework and tools to address the challenges of energy data collection in the context of a globally diversified real estate portfolio. The information will also be used to inform the setting of medium-term climate targets for our real estate business. This building owned by Allianz has the following certifications: Label Effinergie BBC 2017, BiodiverCity and HQE New Excellent. 36. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.3 SUSTAINABILITY IN ASSET MANAGEMENT 1 Third-party assets and assets managed on behalf of other Allianz entities. From increased regulation to heightened customer demand, the integration of sustainability considerations in asset management is an important industry driver. Allianz Group is well positioned to offer ESG and responsible investment solutions to its asset management clients – from the retail fund investor to institutional clients with bespoke ESG integration needs. Allianz’s two major investment businesses are Allianz Global Investors (AllianzGI) and PIMCO. 03.3.1 ALLIANZ GLOBAL INVESTORS. As an active investment manager with proprietary sustainability investment research capabilities, AllianzGI innovates sustainable investment solutions tailored to meet its clients investment objectives. Clients’ interest in sustainable investing stems from many perspectives, which lend themselves to varying approaches and investment strategies. Having built its expertise across a range of sustainable investment approaches, AllianzGI is categorizing them to enable clients to better identify the appropriate strategy for their needs. In total, AllianzGI manages third-party assets totaling 56.1 billion Euro across four main ESG approaches. PROGRESS AND ACHIEVEMENTS Given the increasing emphasis on sustainability in its overall investment proposition, AllianzGI appointed Beatrix AntonGrönemeyer as its first Chief Sustainability Officer in 2019. The newly-created role is responsible for driving the firm’s overarching sustainable investing strategy and positioning. For the third year in a row, AllianzGI received the top grade A+ rating from the PRI for its ESG Governance and Strategy. It received three A+ grades and A grades across all categories in the assessment. With ESG factors playing an increasingly important role in fixed income portfolio management, in 2019 AllianzGI started to systematically implement its Integrated ESG approach in fixed income portfolios. It also expanded its sustainable investment offering, launching three multi-factor SRI funds for global, European and emerging market equities and converting a flagship multi asset fund family into SRI strategies. AllianzGI has pioneered the development of two fixed income strategies focused on sustainable investing in emerging markets to reflect growing client interest. AllianzGI has also expanded its alternative offering with the launch of the Allianz Impact Investment Fund. Its remit is to invest in private debt and equity opportunities that generate measurable environmental and/or social impact as demonstrated through KPIs that align with the framework of the U.N. SDGs. Overall, the assets under management of AllianzGI’s sustainable investment offering have increased to 165 billion Euro1 (as of 31 December 2019). Integrated ESG: Integrates material ESG risk considerations into investment analysis and security selection in order to improve risk/ return profile. Unconstrained investment universe (‘comply or explain’) and active stewardship programme. Sustainable and Responsible Investing (SRI): ’Best-in-class’ strategy that aims at constructing portfolios with superior sustainability credentials in order to generate superior longterm performance. SDG-aligned / Sustainabilitythemed Selects securities whose business largely contribute to positive environmental and societal change towards one or multiple SDGs. Impact investing: Invests in order to generate intentional environmental and societal outcomes aligned with SDGs that are measured against specific extrafinancial KPIs. ALLIANZGI SUSTAINABILITY INVESTMENT CATEGORIES 37. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.3 SUSTAINABILITY IN ASSET MANAGEMENT. ENGAGEMENT AND STEWARDSHIP ACTIVITIES AllianzGI investment professionals engage with investee companies to help them to improve their performance and safeguard their long-term prospects. Engagement is aimed at enhancing understanding of the company, assessing leadership and oversight and building confidence in the Board and management team. With 448 company engagements covering 711 issues in 333 companies and 28 markets AllianzGI has intensified its engagement activities in 2019. Engagement activities focus on the investee company’s strategy, operational or financial performance, capital management, corporate governance and environmental and social impacts. Investment views are influenced by the outcome of this engagement and linked to the proxy-voting process, forming a consistent stewardship approach. In 2019, AllianzGI voted at 9,532 shareholder meetings. In 77% of the meetings we voted against management, withheld or abstained with at least one vote. In addition to direct engagement with the boards and management of sizeable holdings, AllianzGI leads targeted, themed engagement projects – such as on cyber security and the role of climate change in investee companies’ strategy. It also participates in collaborative engagement initiatives aimed at improving corporate practices and disclosure of information at industry and market levels. You can find more detail on AllianzGI’s ESG related policies and proxy voting reports here. FINANCING THE LOW-CARBON ECONOMY It is beyond question that climate change will have significant investment implications in the years and decades to come. It will fall to active managers to distinguish the potential winners from the losers and support the innovation required to tackle these challenges, be it through market finance or other means. AllianzGI is one of 35 members appointed to the Technical Expert Group to advise the E.U. Commission on the implementation of its Action Plan on Sustainable Finance. This is an opportunity for AllianzGI to actively engage at a policy level to help shape the European sustainable finance agenda and its focus on the low-carbon transition. More specifically, AllianzGI’s representative helped define and develop minimum requirements and specifications for Parisaligned, climate-transition benchmarks and, in June 2019, publicly communicate the Group’s proposals to stakeholders. AllianzGI is also a founding member and an active participant in the Climate Finance Leadership Initiative. In September 2019, it was tasked by the U.N. to present its recommendations on how the mobilization and deployment of private sector capital can help to meet the goals of the Paris Agreement. In 2019, AllianzGI joined Allianz SE and many other companies in supporting the recommendations of the TCFD. LAUNCH OF THE ALLIANZ CLIMATE TRANSITION FUND With the launch of the Allianz Climate Transition Fund, AllianzGI has introduced a pragmatic investment solution for clients who value a decarbonizing approach. The Fund’s strategy is to invest in European equities that focus on achieving a low-carbon economy. Companies selected will either demonstrate a significant reduction in their carbon footprint through credible and ambitious reduction targets or will develop and provide efficient solutions that help others to reduce their carbon footprint. Health. Real Estate. Utilities. Consumer Staples. Energy. Engagements by industry % 13 9 9 16 19 7 8 5 5 3 6. Financials. Industries. Telecoms. Consumer Discretionary. Materials. Technology. Strategy/Business Model. Audit and Accounting. Other. Engagement activity per topic % 8 8 9 13 47 3 4 4 4. Corporate Governance. Environmental Risks/Impacts. Social Risks/Impacts. Transparency and Disclosure. Capital Management. Business Conduct and Culture 38. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.3 SUSTAINABILITY IN ASSET MANAGEMENT. ESG IN DIRECT INFRASTRUCTURE As ESG factors usually play out in the long-term, they need to be a key consideration when investing in private markets, particularly in infrastructure. The investment team of Allianz Capital Partners (ACP), a company of AllianzGI, carries out an internal ESG screening process to determine the ESG ‘health’ of the investment when they first identify new direct infrastructure opportunities . The evaluation also reflects the views of ESG Committees within the wider Allianz Group including the ESG, risk and communications functions and considers fundamental issues such as environmental contamination (ground, water and air including CO2 emission levels), social impact (including resettlement, maltreatment of people and loss of rights for both land and water) and governance (ethical and business compliance). If no key issues are flagged, the investment opportunity passes on to a secondary due diligence stage where internal scrutiny is supplemented by external advice. This assists in further evaluating ESG performance and the materiality of any risks. Based on this information, ACP is able to consider the human and financial impact of ESG risk covering severity levels, resulting impact, potential liability, probability of occurrence and remedy implementation. Historically, analysis has focused on potential downside risk and ACP is working toward identifying ESG opportunities in this process. An investment will only be presented to the Allianz Group Investment Committee for approval once ESG issues have been satisfactorily addressed (find out more about the ESG screening and assessment process in section 02.4 and 03.2.1). ACP applies the same process and scrutiny on ESG issues in its newly-established infrastructure offering for third-party clients. In the event that an ESG risk is considered material, the investment opportunity is declined and the reasons noted by ACP and within Allianz. In 2019, ACP rejected a number of coal- and oil-related investment opportunities at the early stages of evaluation due to their perceived ESG risk and non-alignment with Allianz’s decarbonization approach. Opportunities with strong ESG benefits are encouraged and this must be complementary to the underlying economic attractiveness of the investment. The Investment Team addresses ESG liabilities in a number of ways during the due diligence process. If, on balance, an ESG risk is acceptable, quantifiable and remediable, ACP may seek representations and warranties from the seller and/or factor in any potential resulting financial impact. On acquisition of an investment ACP conducts an audit to ascertain if the existing compliance and ESG procedures within the new Portfolio Company are in line with Allianz’s requirements or in line with industry peer benchmarks. ACP may suggest improvements and require additional reporting measures to bring it in line with its other Portfolio Companies, but will not change systems for the sake of homogeneity. Where the new Portfolio Company’s ESG performance falls below industry benchmarks, as a matter of priority ACP will define a remedy plan with the management team and if required bring in external advisors. Implementation takes place as a first step within the first 100 days of asset ownership and is then followed on an ongoing basis. Any ESG remediation requested by Allianz ESG Committees as part of the final investment recommendation to the Allianz Group Investment Committee is reflected in this 100-day plan; ACP will continue to work on any unresolved issues even if they fall outside the 100-day plan time limit. Portfolio companies are required to report regularly to ACP including through bi-annual reviews, during which ESG progress is monitored, ESG reporting improvements are implemented and new targets (including decarbonization) are set. Should a material ESG issue occur however, this is reported immediately to the relevant Allianz ESG Committee. 39. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.3 SUSTAINABILITY IN ASSET MANAGEMENT 1 We consider SRI investing to be an ethics or values-based approach to investing for which investors employ negative screening to prohibit exposure to certain “sin sectors”. The above number includes selected PIMCO funds and separate accounts that use negative screens. 03.3.2 PIMCO. The global bond market with an estimated size of over $100 trillion is essential to financing a sustainable future. As a leader in the industry, PIMCO has an opportunity to spearhead this positive change. For third party investment customers, PIMCO manages assets of roughly 113.8 billion USD invested in Socially Responsible Investing (SRI)1 strategies. PIMCO’s approach to ESG investing rests on two pillars. First, it integrates ESG analysis in its broad investment research process. Systematically incorporating traditionally non-financial factors into the research process provides a more holistic view of the long-term credit-worthiness of issuers. Second, for investors seeking greater ESG orientation in their portfolios, PIMCO has created a platform of ESG-centered solutions that focus on delivering financial returns while achieving sustainability objectives and driving positive environmental and social change . ESG portfolios utilize the same investment resources and incorporate the same macro positioning as other PIMCO portfolios. Unlike other portfolios, however, ESG portfolios emphasize three additional building blocks: • Exclude: PIMCO ESG portfolios exclude issuers - by prospectus and in practice – fundamentally misaligned with sustainability principles; • Evaluate: As well as seeking to exclude ‘worst-in-class’ ESG issuers, PIMCO ESG portfolios emphasize ‘best-in-class’ ESG issuers; and • Engage: The final building block is constructive and collaborative engagement with issuers to influence ESG practices over time. PIMCO has continued to integrate its ESG framework across key fixed income sectors, namely corporates, sovereigns, securitized mortgages and U.S. municipals. It also launched new ESG strategies, focused on ESG opportunities across Global Investment Grade Credit and Emerging Markets, strategies focused on Short Term fixed income securities and Fundamental Equity investing as well as a bespoke Climate Bond Strategy. PIMCO published its second ESG Annual Investment Report, providing a comprehensive overview across multiple ESG initiatives and its robust engagement progress. For the second consecutive year, PIMCO was rated A+ across all categories in the PRI Assessment Report, highlighting the strong commitment to sustainable investing. ADVOCACY AND COLLABORATION In its effort to support a globally-coordinated ESG voice, PIMCO partners closely with key industry groups, including: • Work with the U.N. Global Compact to advance progress towards the SDGs; • Promote climate related financial disclosures by signing up to the TCFD; • Leverage on collaborative engagement via the Climate Action 100+; • Collaboration with the PRI to develop a work stream linking ESG-based analysis across sovereign issuers; and • Membership of the recently announced U.N. SecretaryGeneral’s Global Investors for Sustainable Development Alliance (see page 32) which brings together 30 influential leaders from the corporate world in a bid to free up trillions of dollars to finance the SDGs. ESG INTEGRATION AND ENGAGEMENT PIMCO’s team of credit research analysts assesses the ESG profile of the issuers that they cover relative to peers with a goal of separating leaders from laggards. Using industry-specific ESG frameworks, analysts review their companies’ ESG performance based on information available in public filings, recent ESG news and controversies, as well as through regular engagement with company management teams to assign separate scores for ‘E’, ‘S’ and ‘G’. PIMCO’s resulting assessments are proprietary and distinct from those provided by ESG rating providers. As shown in the figure below, scores distinguish between ‘Leading Practice’ issuers and those that raise ‘Significant Concerns’. They also include a forward-looking assessment of the ‘ESG Trend’, which recognizes companies whose ESG performance is significantly improving or deteriorating. PIMCO’s ESG scoring system. Source: PIMCO. For illustrative purposes only. Peer Assessment. Loading Practice. Better than peers. In-line with peers. Weaker than peers. Significant Concerns. Numerical ESG Score 5.0 1.0. Trend Analysis. Improving. Stable. Deteriorating. Valuation. Cheap. Fair. Rich 40. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.3 SUSTAINABILITY IN ASSET MANAGEMENT. PIMCO’S CLIMATE STRATEGY Climate change is proving to be a disruptive force in the global economy; there have been notable examples of global markets feeling the consequences of deadly wildfires, hurricanes, floods and other climate-related catastrophes. The impacts affect investments across asset classes and create significant investment opportunities, including a wide range of fixed income securities: corporate credit; mortgage-backed securities; sovereigns; and municipalities. As a steward of client assets, it is critical that PIMCO incorporates climate risk evaluations in its investment decisions. Active asset managers must be forward-looking and consider material risks that are on the horizon, not just those immediately affecting issuers. Climate risk now features in PIMCO’s proprietary ESG scores for the issuers evaluated. To help analysts evaluate climate risk, PIMCO’s ESG specialists have designed seven proprietary tools (see table). The insights these tools provide are intended to help portfolio managers to better manage and mitigate climate-related credit risks and align ESG dedicated portfolios with the Paris Agreement. Additionally, they are the basis for the recently launched climate bond strategy that focuses on both the risks and, importantly, the opportunities associated with the transition to a net zero emissions economy. Read more about PIMCO publication online here. SUMMARY OF PIMCO’S SEVEN TOOLS FOR CLIMATE RISK ANALYSIS AND MANAGEMENT. These factors are combined to create a proprietary ESG score in which the relative weighting of the E, S and G pillars, and the trend assessment, is based on the company’s business profile and differences in industry dynamics. For example, the environmental pillar has the highest weight for issuers in extractive industries (e.g. oil, gas, and mining), the social pillar has the highest weight for pharmaceutical issuers, and the governance pillar has the highest weight for financial issuers. PIMCO’s ESG engagement with issuers is a critical component of its in-depth research analysis, leveraging the firm’s extensive platform, 50+ year investment history and scale as a large asset manager analysis. This engagement dialogue provides important input to PIMCO’s forward-looking ESG trend assessment, which seeks to identify issuers whose performance is improving or deteriorating. PIMCO’s analysts and portfolio managers spend a significant amount of time conducting calls and in-person meetings with issuers’ senior management. This regular dialogue across multiple touch points is a highly effective method of engaging on ESG issues and has led to multiple instances of successful engagements, at both corporate and sovereign levels. Objective Tool Focus PICMO tool name Key Question. Lower credit risk 1 Economic Impacts (Top-down) Climate Macro Tracker How to assess and decrease portfolio exposure to financial risks brought about by climate change? 2 Credit Risk Impacts (Bottom-up) Portfolio Climate Heat Map 3 Issuer Climate Heat Map. Reduce Carbon Emissions 4 Brown bonds Energy and Technology Mix compared with the Paris Agreement (IEA scenarios) How to reduce portfolio exposure to activities that help mitigate global warming? 5 Carbon Intensity Portfolio Carbon Intensity How to reduce portfolio’s carbon footprint? 6 Green Bonds Green Bonds Framework How to increase portfolio’s exposure to activities that help mitigate global warming. Both Objectives 7 Engagement Expectations toward issuers on climate change How to influence companies strategy? 41. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.3 SUSTAINABILITY IN ASSET MANAGEMENT. PIMCO’S CLIMATE STRATEGY (CONTINUED) The Climate Bond Strategy offers a multi-sector credit portfolio that aims to help foster the transition to a net zero carbon economy while seeking risk-adjusted returns comparable to an investment grade credit portfolio. The Climate Bond Strategy opportunistically invests in those demonstrating global leadership of climate action through labeled and unlabeled green bonds targeting specific low-carbon investments, as well as the bonds of issuers demonstrating innovative approaches to environmental sustainability (see graphic). INVESTMENT SEGMENTS FOR PIMCO’S CLIMATE BOND STRATEGY. Three Segments. Green bonds Green bonds displaying best practices. Unlabeled green bonds Issuers materially exposed to low-carbon products and services. Climate leaders Issuers that lead in mitigating carbon emissions and broader environmental externalities across their value chain. Selected Examples. Banking • Global bank with a European base, repeat Green Bond issuer, solid environmental framework • Developing innovative methodologies and forms of finance to support a low-carbon economy. Paper • Leadership paper/packaging company with a comprehensive sustainability strategy • Initiative to lower carbon footprint by implementing a circular business model in day-to-day operations. Real Estate • REIT, repeat Green Bond issuer with a sound environmental strategy • Science-based carbon emissions reductions targets cover both corporate operations and logistics. Energy • Leading renewable energy provider in India; green bond proceeds used for wind/solar • Focused on investment of decarbonized, digitized, and decentralized energy assets. Energy • Renewable generation company • Growth through acquiring and investing in low-carbon generation assets such as solar, wind natural gas, geothermal and hydro-electricity. Food and Beverage • Food company with a growing focus on plant-based products and climate neutrality target • Plans to remove deforestation from supply chain via solid sustainable sourcing policy 42. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.4 SUSTAINABLE SOLUTIONS. Providing responsible and innovative solutions represents a significant business opportunity for the insurance market and for Allianz. Through its Sustainable Solutions program, Allianz provides products and services that create shared value by improving people’s lives and/or delivering a positive environmental or climate-related impact. In 2019, Allianz generated revenues totaling 1.33 billion Euro1 from 203 sustainable solutions. They included 97 sustainable insurance solutions, 28 emerging consumer solutions2 , 35 insurance solutions with a sustainability component3 and 43 sustainable asset management solutions4. As a leader in the emerging consumers sector, Allianz has reached over 10.0 million people living on low incomes in Asia, Africa and Latin America with affordable microinsurance and micro-savings solutions (see section 03.1.5)4. Allianz is a partner in the transition to a low-carbon economy. Its insurance, risk management solutions and advice enable individuals, companies, and governments to implement renewable energy projects and manage climate-related risks (see section 03.1.3). HOW WE DEFINE AND DEVELOP SUSTAINABLE SOLUTIONS Every year, Allianz local entities and global lines develop new and/or identify existing sustainable products and services for their customers. We differentiate between four categories of sustainable solutions. CATEGORIES OF SUSTAINABLE SOLUTIONS. Sustainable insurance solutions Sustainable insurance solutions are products and services that directly address environmental and/ or social risks and opportunities. Insurance solutions with a sustainability component. The inclusion of sustainability components in standard products is becoming increasingly common. In 2018, we decided to differentiate standard insurance products with additional environmental and/or social benefits (such as add-ons to home or car insurance products). Emerging consumer solutions Emerging consumer solutions include affordable microinsurance and other insurance products that cater to customers entering financial services markets for the first time. To find out more, please see section 03.1.5. Sustainable asset management solutions. Sustainable asset management solutions include the ESG and Socially Responsible Investment (SRI) products and strategies offered to thirdparty asset management clients. To find out more, please see section 03.3. 2017 2018 2019 874.0. Sustainable solutions performance Revenue from sustainable solutions by category1, 4, 6 € mn 15 27.7 389.8 456.6 1,278.6 1,332.9 881.0 371.2 364.3 927.8 26.4 40.7 2017 2018 2019 170. Number of sustainable solutions by category7 23 17 37 93 172 203 94 37 16 25 43 28 35 97. Sustainable Insurance Solutions Insurance solutions with a sustainability component Emerging Consumer Solutions Sustainable Asset Management Solutions. Details about the number of sustainable solutions Allianz offers, and associated revenues and trends, can be found in section 06.3 in Tables ESG–4 and ESG–5. 1 Our current data collection process does not allow for a complete tracking of revenue data. Revenues are included subject to data availability. 2 This figure includes only emerging consumer solutions from consolidated entities. Allianz non-consolidated entities (such as Allianz in India) offer an additional 13 solutions. 3 Revenue data for insurance solutions with a sustainability component is only included when this component can be clearly separated from other parts of the revenue. 4 Revenue data is not collected for sustainable asset management solutions. 5 This figure includes only emerging consumers served by consolidated entities. Allianz nonconsolidated entities (such as Allianz in India) serve an additional 39.4 million customers. 6 Data for 2017 and 2018 has been restated. 7 Sustainable asset management solutions figures have been restated in 2017 and 2018. Sustainable insurance solutions have been restated in 2017. As a result, totals have also been restated for 2017 and 2018. 43. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 03.1 Sustainability in insurance Integrating ESG in insurance. Climate and renewables. Natural catastrophes. Cyber security. Emerging consumers 03.2 Sustainability in proprietary investments. ESG integration and engagement approach. Sustainability themed investments. ESG in real estate investments 03.3 Sustainability in asset management. Allianz Global Investors. PIMCO 03.4 Sustainable solutions 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN CORE BUSINESS ACTIVITIES 03.4 SUSTAINABLE SOLUTIONS 1 Initial environment criteria developed in conjunction with WWF and KPMG in 2011. 2 Socially disadvantaged groups are defined as populations that are excluded in their local society for reasons that may be tied to age, sex, disability, race, ethnicity, origin, religion, economic or other status. See section 04.3 for more details. 3 See section 03.3 for more details. 4 See section 03.1.5 for more details. SUSTAINABLE SOLUTIONS EVALUATION CRITERIA To be included as a sustainable solution, a product must meet at least one of six sustainable solutions criteria (see below). Environmental criteria1 1. Supports development of sustainable technology and markets such as renewable energy, environmental goods and services, and/or green infrastructure 2. Conserves natural resources or biodiversity, or helps to mitigate against climate change (e.g. solutions that encourage or reward environmentally responsible behavior) 3. Protects against environmental risks and supports adaptation to climate change impacts (e.g. insurance or incentives to manage weather-related risks) Social criteria 1. Facilitates activities to tackle social challenges and issues faced by socially disadvantaged groups2 (e.g. insurance tailored to social value-adding products/services that would otherwise not be insured) 2. Specifically tailored solutions for socially disadvantaged groups (e.g. products aimed at reducing the risk of underserved groups by providing otherwise unavailable access to finance) 3. Raises awareness to prevent and mitigate challenges faced by socially disadvantaged groups (e.g. products that include cause-related marketing or support schemes manage weather-related risks) WHAT DO WE MEAN BY SUSTAINABLE SOLUTIONS? Examples of Allianz products with an environmental or social added value. Sustainable asset management solutions3. Emerging consumers solutions4. Insurance solutions with a sustainability component. Sustainable insurance solutions. Energy efficiency solutions Green home energy saving pack Energy performance services/certificate. Renewable energy solutions Photovoltaic insurance Wind turbine insurance Home-based renewable energy insurance. Environmental liability solutions Pollution liability Impairment liability Water pollution liability. Mobility solutions Electric auto insurance Bonus drive app Electric bike insurance. Agricultural solutions Crop insurance Forest insurance. EXAMPLES OF SUSTAINABLE SOLUTIONS. Renewable Energy Insurance. We offer renewable energy insurance solutions in 21 entities such as Allianz Brazil, Allianz Italy and Allianz Ukraine. Insurance for IGO and NGO staff. We offer insurance solutions for employees of international organizations and NGOs through Allianz Care. Insurance for persons with disabilities. We offer tailored solutions for persons with disabilities such as Allianz Ability Life insurance in Allianz Malaysia. 44. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance 04 SUSTAINABILITY IN OPERATIONS. Trust in Allianz is based on the integrity, resilience and competency of every one of its businesses and people. We want our stakeholders to know that Allianz is a responsible and trustworthy company that embraces sustainable business as good business. We strive to embed sustainability in all areas of our Allianz’s operations – from providing a workplace where people and performance matter to protecting customers’ data, reducing our environmental impacts and fostering social inclusion through our global corporate citizenship activities. Through its social inclusion program, Encouraging Future Generations, Allianz promotes inclusion of young people worldwide. 660,000 beneficiaries worldwide reached by corporate citizenship activities 35% cut in CO2 emissions per employee since 2010 45. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES. GRI 102-41, 404-2. Defining future workforce requirements in a fastchanging world is one of the key challenges facing business. Which employees to recruit? Which trainings to offer? And which leadership styles, development and remuneration strategies are needed to be seen as an attractive employer by the most talented people? Allianz fosters a culture and working environment where both people and performance matter. This includes taking a strong stance regarding gender equality, inclusion and diversity, training and development, employee engagement and caring for the health and safety of employees. INCLUSIVE MERITOCRACY: A CULTURE WHERE PEOPLE AND PERFORMANCE MATTER Inclusive Meritocracy is the term Allianz uses to describe a culture and working environment where both people and performance matter. Our Inclusive Meritocracy Index (IMIX) measures the progress of the organization on its way towards inclusive meritocracy. This internal index is based on ten items from the Allianz Engagement Survey (AES) which deal with leadership, performance, and corporate culture. Allianz’s target is to reach an Inclusive Meritocracy Index score of 73 percent by 2021. In 2019, we met this target, scoring 73 percent, up from 68 percent in 2015 and 71 percent in 2018. The Allianz People Attributes are at the core of all activities; employees live by these principles and they are at the heart of Allianz’s corporate culture. The People Attributes also impact all areas of HR management – from recruitment, promotion and reward to people development and feedback culture. substantial value and creating stronger user focus to improve the employee experience across all areas of HR. In 2019, the HR Transformation Program was refined in a collaborative approach with operating entities in order to simplify and enhance speed of the Program. Additionally, standardized and redesigned functionalities across talent management, performance management, compensation, and/or variable pay were rolled out across various OEs in the Asia-Pacific region, Central and Eastern Europe, as well as Iberian and Anglo markets in December. The rollout for the future HR Portal and the piloting phase for the Global HR chat bot is planned to be started in 2020. EMPLOYEE RIGHTS Allianz actively supports employee rights and strives to apply core human rights principles based on the United Nations Universal Declaration of Human Rights throughout the organization. As a participant of the United Nations Global Compact, its 10 principles are integrated into the globally binding Allianz Code of Conduct. Allianz respects the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and is a signatory to the International Labor Organization (ILO) Declaration on Fundamental Rights and Principles at Work, including the ILO declaration on the freedom of association and the right to collective bargaining. Allianz was one of the first companies to create pan European worker participation standards and to establish a European SE Works Council under the legislation for Societas Europaea companies. STRATEGIC WORKFORCE PLANNING To prepare our workforce for the future, Allianz is expanding its strategic workforce planning program across all operating entities. By end of 2019, it covered around 32 percent of the global Allianz workforce and this will increase to 60 percent by the end of 2020 and 80 percent by the end of 2021. Understanding what the transition to a more digital world means for Allianz and its people is a strategic priority. Five-year strategic workforce plans focus on upskilling, reskilling and smart recruitment while minimizing potentially detrimental social and financial impacts. Digitalization is going to change the composition of the future workforce. Some job profiles are not going to exist in the future and there will be new profiles and capabilities to be developed, alongside considerable changes in existing profiles and required skills. This will lead to major up- and reskilling initiatives in order to prepare the workforce for future requirements. Also a smart recruiting strategy is needed as like-for-like backfills will no longer ensure the acquisition of the right skills for the future. Strategic workforce planning at Allianz works by comparing workforce supply within the next five years by job profile against workforce demand. This analysis gives us the right indication on where to invest first and most wisely in our workforce. HR TRANSFORMATION Allianz is building a business-oriented, global HR function which acts as an impactful, strategic partner and service provider to the business globally. This transformation involves increasing standardization and automation in areas where it creates. Customer and Market Excellence. Collaborative Leadership Entrepreneurship Trust 73% Allianz target Inclusive Meritocracy Index score. In 2019, we met this target, scoring 73% (2018: 71%) THE FOUR ALLIANZ PEOPLE ATTRIBUTES 46. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES. GRI 405-1. FAIR AND TRANSPARENT REWARD Allianz’s remuneration and incentive structures are designed to reward people in a fair and appropriate way using monetary and non-monetary rewards to encourage sustainable value creation. Allianz’s remuneration system provides a transparent and balanced offering to attract, motivate and retain highly qualified employees. Based on position, employees receive local markedbased fixed compensation (base salary and in some markets additional fixed special payments such as tariff-mandated payments in Germany) and additionally can be eligible to receive variable compensation. To continuously maintain market excellence, Allianz obtains benchmarking information on an annual basis. Compensation is reviewed annually to ensure the remuneration offering remains competitive in relevant markets, taking into account individual performance and internal and external adequateness aspects. A variable remuneration system aligns remuneration with individual performance and the achievement of Allianz’s financial and strategic goals. This ‘pay for performance’ culture allows Allianz to operate effectively under different performance scenarios and business circumstances, while promoting risk control and avoiding inappropriate risk taking. Allianz is working to bring greater transparency to job roles and capabilities by developing a common global language and understanding of roles. This will enable more targeted learning and development, career paths, strategic workforce planning and succession planning. It also underpins fair and equal pay initiatives. 04.1.1 INCLUSION AND DIVERSITY. Allianz fosters a culture of inclusion where employees feel they belong, are valued and can contribute their ideas regardless of gender, race, sexuality or ethnic background. Consistent with the Allianz Code of Conduct, there is zero tolerance of discrimination and harassment in the workplace. The long-standing Global Inclusion Council sets the direction of the Diversity and Inclusion Strategy and is chaired by Board Member of Allianz SE, Niran Peiris. Inclusive leadership is a standard component of leadership programs. Allianz trains people on the topic of unconscious bias to raise awareness and educate them on what can be done to reduce the negative impact of bias in, for example, job interviews and performance reviews. EMPLOYEE SHARE PURCHASE PROGRAM Allianz motivates its employees to contribute to its strategy and digital transformation by creating a shareholder culture that includes sharing the ‘digital dividend‘ with employees. The Allianz Employee Share Purchase Program (ESPP) was launched across 30 countries in 2018. It was designed to provide eligible employees with the opportunity to purchase Allianz shares with a substantial discount: For every three Euros employees invest, Allianz adds another 1 Euro into the plan for them. Shares purchased in the ESPP are subject to a three year holding period in order to promote long-term value creation and align employees’ interests with those of shareholders. In 2019, the ESPP was extended to 11 more countries: the U.S., Canada, Bermuda, Mexico, China, South Africa, Lebanon, Sweden, Norway, Finland and Denmark. In 2020, the ESPP will be extended to include employees in the U.K., covering approximately 92% of the total Allianz population in 42 countries. As productivity goals have been met in 2019, Allianz will offer a free share to all Allianz employees where legally possible in order to celebrate the early successes of its strategy in 20201. 1 New definition: All employees who work and reside in an Employee Share Purchase Plan (ESPP) country from 01 August 2020 throughout 06 October 2020 are eligible for the Free Share. Board of Management members, students and interns are not eligible. Employees in non-ESPP countries will receive a cash-equivalent instead – primarily due to legal constraints. Inclusivity in Sport. Allianz encourages inclusivity in the world of sport and has partnered with the International Paralympic Committee (IPC) since 2006. This long-running global partnership helps increase awareness and popularity of sports among people living with a disability. 47. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES. GRI 405-1. CELEBRATING DIFFERENCE Gender equality continues to be a key focus at Allianz. Over the years we have emphasized on identifying female successors for leadership roles, provide development opportunities, increasing flexible work options and addressing unconscious bias in all our processes and our efforts are paying off. The number of women in Allianz Boards has increased to 31% and also the 2021 global talent pool target has already been reached. In addition to its focus on gender equality, Allianz supports initiatives designed to raise awareness of inclusion and diversity and to celebrate a diverse workforce. One of the important factors to drive change is open dialogue. Employee networks give Allianz employees a voice and enable them to connect with each other to promote information exchange and joint actions. Allianz is proud to have an employee LGBT1 network called Allianz Pride. This network actively engages in local pride events, such as Coming Out Day. In 2019, this involved communications from Allianz senior leadership about why LGBT inclusion is important. Employees made personal statements on the corporate intranet and reverse mentoring was offered to create a safe space for dialog. Employees also marked the U.N.’s International Day of Persons with Disabilities by celebrating AllAbility Day. It aims to foster awareness and recognize efforts to advance inclusion of employees and customers with disabilities. 2019 saw the launch of Allianz NEO (Networking – Engagement – Opportunities). An employee network that exclusively focuses on the gender topic and the expansion of Allianz Pride networks across operating entities, including France, Spain and Ireland. Also new employee networks on parents and disability awareness have been started. The aim is to continue focusing expanding the number of local networks as a key tool for fostering local, regional and global collaboration and for shaping Allianz’s diversity and inclusion strategy. WOMEN AND DIVERSITY IN LEADERSHIP Allianz has group-wide gender parity in its workforce. It continues to drive change to reflect this at management level’s taking deliberate actions to support future female leaders world-wide. More details can also be found in the data tables in section 06.5. Women in the workforce (2018: 51.2 percent) 51% Women on Boards of Management (Target 2021: 25%) 31% Female managers in the core business2 (2018: 37.8 percent) 38% Women on the Allianz SE Board of Management (Target 2021: 30%) 20% Women in talent pools (Target 2021: 40%) 40% Allianz SE Supervisory Board status for diversity3 (On-going Target: 30%) 33% WE ARE VERY HONORED OF RECEIVING THE FOLLOWING REWARDS. Thomson Reuters/Refinitiv – ranked 8th. Bloomberg – included in index. DAX30 LGBT – ranked 2nd. Universum – ranked 50th 1 Lesbian, gay, bisexual and transgender. 2 Includes women functionally responsible for other staff, regardless of level, e.g. division, department and team managers. 3 Diversity on the basis of origin or function and representing regions or cultural areas where Allianz Group conducts business. For additional details see the diversity concept for the Supervisory Board published in the Group Annual Report 2019, page 15. 48. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance 04.1.2 TRAINING AND DEVELOPMENT. Learning and development is a key differentiator in the financial services industry. As the global workplace and business environment evolve, companies that develop employees’ skills for the long-term will be best prepared to respond to emerging trends and opportunities and attract the best talent. Allianz employs a wide range of learning and development approaches to develop its people. They include: on-the-job learning; mentoring and coaching; classroom training workshops; peer circles; and digital/mobile learning. Recruiting and training specialists in all areas is a key priority. The Property & Casualty and Life & Health Academy, for example, aim for strengthen Group-wide underwriting and pricing capabilities. Allianz also has programs in place in key areas including strategy, finance, communications, market management and operations. Allianz focuses its investments on promoting lifelong learning, employability and digital skills. In 2019, it invested over 85 million Euro in developing its employees, equivalent to 613 Euro per employee. Around 75 percent of employees took part in at least one training session and an average of 3.3 days training per employee were delivered. ALLIANZU Allianz University (AllianzU) is the group-wide home for employee learning activities. Its vision is to provide every employee of the Allianz Group with the right program to support their continuous development. It does this by providing accessible learning technologies that empower employees to equip themselves with the right information, at the right time. AllianzU unites group-wide learning and development opportunities, creates new learning content and frameworks, and realizes opportunities to reinforce a culture where people and performance matter. To increase its impact and efficiency, AllianzU provides digital opportunities such as LinkedIn Learning @ Allianz. Allianz was one of the top users of LinkedIn Learning globally in 2019, based on the number of employees accessing the platform. Other digital education offerings include eBites and an Open Source Online Learning Library. AllianzU is developing a new state-of-the art learning platform, aligned with the strategic workforce planning project. It will provide high quality learning content focused on digital skills and includes learning paths for different employee groups based on the outputs of strategic workforce planning. The new platform, developed in 2019, has been launched across pilot operating entities in January 2020 and will provide a ‘one stop shop’ simplified learning experience for employees. It will leverage content from inside as well as outside the organization to provide high quality learning programs for all employees. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES. GRI 404-1, 404-2. ALLIANZ STRATEGY CAMPUS Strategy Campus programs are firmly aligned with Allianz’s strategy with a global focus. Each program is sponsored by a Board Member and leverages the strategic priorities set by the Renewal Agenda, with the focus on: • Key challenges critical to Allianz’s business transformation by supporting impactful implementation that delivers competitive business value; • A developmental leadership experience that creates more than the sum of its parts and builds trust; and • Building an international network of colleagues across functions and companies to maximize collaboration. Each program is designed in collaboration with a Board sponsor and comprises three training days plus pre- and post-program activities. In 2019, 161 people took part in five programs, including 28 percent women. Going forward, Strategy Campus will incorporate thought-provoking, innovative and future-smart scenarios to empower Allianz leaders to propel the cultural transformation in the digital age. €85 mn invested in employee development in 2019 3.3 average days of training per employee delivered 75% employees took part in at least one targeted training session €613 investment per employee in development and training 49. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES. PERFORMANCE MANAGEMENT AND TRANSPARENT FEEDBACK Performance discussions (including Priority Setting, Mid Year Check In, and Year End Review) as well as Personal Development Plan (PDPs) and ongoing feedback are key tools for enabling employees and managers to discuss competencies, skills, experience, performance and potential. Allianz’s global performance management approach now covers more than 24,000 employees, with the rest covered by local performance management processes. The goal is to cover all Allianz employees globally with the global Performance management approach as part of the HR Transformation. The Multi Rater Feedback tool enables Allianz managers to gain feedback from their peers, direct reports, managers and others and is based on our four people attributes. This feedback is important for providing a transparent basis for development. In 2019 the Multi Rater has been further refined and focuses even stronger on qualitative feedback. ATTRACTING TALENT In 2019, Allianz recruited more than 23,000 external candidates. When looking to attract especially digital talent, Allianz is exploring new and innovative ways to reach out to potential candidates. For example by establishing the Allianz employer brand in a new interface. Via Google Assistant specific candidate groups are targeted through online challenges, making them aware of possible career opportunities. The One Allianz Career Website puts the candidate in the center and simplifies their user journey by making it much easier for them to browse through opportunities across the Group. In 2019, more Allianz entities were on-boarded into the One Allianz Career Website. The One Allianz Career Website combines 40+ local and operating entity specific career websites. Candidates can switch between different countries and vacancies and, no matter where they may be, view all positions available at Allianz worldwide. This enables content to be targeted to attract scarce talent, leading to higher number of quality applications. To position itself as an attractive employer, Allianz runs a global Instagram careers account. In 2019, local Allianz entities shared career opportunities and showcased their employees and work places around the world. This was well received by employees. DEVELOPING STRONG LEADERS The Group sponsored Allianz Management Program is designed to equip the next generation of global Allianz leaders with the knowledge, mindset and skills to lead in an inclusive meritocracy environment. In the last three years it has been completed by over 190 participants, 49% of whom were women, from over 20 different operating entities. In 2019, it was completed by 64 participants, 50% of whom were women. Allianz’s long-term success depends on fostering strong leadership skills at all levels. The Allianz Leadership Development Program is a group-wide program for experienced leaders that provides participants with development support for their next career step to a senior executive role in the near future. Over the past three years 91 of our high potential leaders have completed this program of whom 42% were women. In 2019, it was completed by 31 new leaders, 54% thereof were women. One of the first global programs launched by the leadership academy to support our Inclusive Meritocracy initiative was awarded two Gold Brandon hall awards: Best Unique or Innovative Learning and Development Program & Best Learning Program Supporting a Change Transformation Business Strategy. This a recognition that we are on the right course with the investments that we are making in our leaders development. Leading with people development. For the third year running, Allianz led the insurance sector for ‘human capital development’ in the RobecoSAM Corporate Sustainability Assessment, which underlies the Dow Jones Sustainability Index (DJSI). 50. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES 04.1.3 EMPLOYEE ENGAGEMENT. Allianz makes employee engagement a high priority, recognizing that an engaged workforce performs better, is more committed and delivers a stronger customer focus. THE ALLIANZ ENGAGEMENT SURVEY Over the past nine years, the Allianz Engagement Survey has become the main employee feedback platform for gathering feedback and promoting a high-performance culture. Survey results are directly linked to the performance objectives of the Group’s Board of Management. In 2019, 123,505 employees from more than 60 Allianz companies worldwide were invited to take part in Allianz Engagement Survey, with a response rate of 84 percent (2018: 81 percent). Results were shared with eligible managers within several days after survey closing and a new self-service online dashboard was launched to communicate the results. Reflecting Allianz’s commitment to building a culture of Inclusive Meritocracy, managers and employees discussed the results of the survey within their teams and agreed actions to address areas for improvement. EMPLOYEE ENGAGEMENT INDEX Allianz uses the Employee Engagement Index (EEI) to monitor employee satisfaction, loyalty, advocacy and pride. In 2019, the Employee Engagement Index score was 72 percent (2018: 70 percent). This score has increased due to the many organizational development activities implemented across the organization, specifically the focus on clear communication of strategy and purpose from top management. ACTING ON EMPLOYEE FEEDBACK Key focus areas from the 2018 results, which were addressed in 2019, were: • Vision & Strategy: Top Management at Group and OE level to create, align, communicate and role model a motivating vision of the future • Operations: Simplify processes, provide effective technology and address our employees’ pain points • Culture: Walk the talk on People Attributes & Develop new ways of working supported by inclusive leaders that inspire change. As a result of this focus we have seen marked improvement in all three areas in the 2019 AES results with specific achievement on the topic of Top Management and Strategy score (up 4 percentage points in 2019). VOICE at Allianz SE is a platform that gives bottom-up impetus to empower employees to develop pragmatic, implementable solutions to areas for improvements identified through the Allianz Engagement Survey. In 2019 we ran the Voice initiative for the third consecutive year. SOCIAL DIALOGUE 2.0 Allianz engages engage closely with employee representatives to support change implementation, manage impacts on employees, and promote opportunities. Social Dialogue is Allianz’s pan-European forum which has existed for over a decade. Relaunched as Social Dialogue 2.0 in 2018, it supports progress of the Renewal Agenda and the increased pace of change due to factors such as the digital revolution. Topics that have been discussed were the Gender Equality Working Group LinkedIn Learning, Agile Working at Allianz, Workforce Planning and various best practices from other Allianz entities. 123,505 employees from more than 60 Allianz companies worldwide were invited to take part in Allianz Engagement Survey (during 2019) 84% Response rate (2018: 81%) 72% 2019 Employee Engagement Index score (2018: 70%) 51. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.1 HUMAN RESOURCES. GRI 403-1, 403-3, 403-4, 403-7. TACKLING WORK-RELATED STRESS Despite all success stories, Allianz is constantly working on further improving health and wellbeing for its employees, especially with regards to work-related stress, which has become one of the key health-related challenges facing todays workforce, especially those in service oriented, desk-based jobs. Allianz has signed a pan-European agreement on guidelines concerning work-related stress. These apply to all Allianz companies in the E.U. member states, the contracting states of the European Economic Area and Switzerland. In 2019, we have offers for flexible working in terms of location and hours, including part-time jobs at all levels, to help employees manage work-related stress and work-life balance. For instance, Allianz Italy has set up the concept of smart work, enabling employees to work up to 50% of their working time from home. This has not only reduced commuting time significantly, but also reduced absence rates and supported employee engagement and motivation. Allianz SE’s management and the (European) SE Works Council have signed a Joint Declaration on telework which guarantees an effective operation of telework and serves as good practice guidance for Allianz companies deploying telework. WORK WELL The Allianz Work Well Program systematically addresses the root causes of work-related stress, offering effective solutions and making changes to the work environment that enable employees to realize their full potential. As part of the program, a number of minimum actions have been implemented to help tackle work-related stress. They cover the largest 50 OEs and include assistance hotline, e-learning and classroom seminars and including wellbeing in regular conversations between manager and employee. Operating entities supplement these minimum actions with their own activities that meet the local needs to further combat 04.1.4 HEALTH AND WELLBEING. Employee health and wellbeing directly impacts on business success. Allianz aims to provide a productive and healthpromoting workplace and enables its employees to foster health and avoid work-related stress. This benefits the business through reduced absence and higher productivity, as well as improving the employee experience. From within Group HR, the Head of Employee Health is developing and implementing a global employee health strategy. This governing function has been set up to on the one hand further develop our minimum standards and on the other hand to increase consistency on a global level, to mitigate healthrelated risks and to exchange best-practices and lift synergies. In parallel, the local Work Well and wellbeing managers1 manage all activities to promote health and wellbeing at country level, in accordance to local requirements and regulations as well as the Allianz Operating Model that is implemented across the Group to ensure that the HR function of each operating entity applies the same high standard of local health and safety management. In 2019, the efforts around employee wellbeing have been acknowledged multiple times on a global and local level, the highlights of which are listed below: • The World’s Most Attractive Employers (WMAE)/ Universum Awards 2019 in the insurance have ranked Allianz #1 Top in industry by business students; • Allianz Life USA won the 2019 Wellness by Design platinum award; • Allianz Indonesia won the Indonesia Most Admired Companies Award 2019: Dream Workplace for Millennials; • Allianz Malaysia was the 2nd runner up for the most popular Graduate Employer of the Year 2019 in Insurance industry; and • Allianz Philippine’s #DareToBeFit employee campaign was awarded as one of the best employee engagement campaigns in 17th Philippine Quill awards. work-related stress. This includes joint sports classes, fitness apps, mental health support and mindfulness trainings, to name a few. WORK WELL INDEX Introduced in 2015, the Work Well index (WWi) is how Allianz tracks progress. It is a scientifically-validated tool that measures work-related psychosocial stress based on ten equally weighted metrics. These metrics cover dimensions of demands, rewards, control, support and social capital. A higher index score is associated with less work-related stress. In 2019, a new dimension of “efficiency” was introduced in the Work Well Index and the index was renamed to Work Well Index+. Efficient processes, process improvements, and the resources needed to fulfill a specific job, are all fundamental in reducing stressed at work, and this dimension will continue to be measured within WWi+ from 2019. The 2019 WWi+ score was 66 percent, up from 64 percent in 2018 (recalculated including the new efficiency dimension introduced through WWi+). This result matched Allianz’s WWi+ ambition for 2021, indicating the success of Work Well initiatives. e-learnings and classroom seminars to help managers and employees understand and address stress within their teams 24/7 assistance hotlines for employees wellbeing as a regular topic of one-on-one conversations between managers and employees to identify the early signs of stress 1 The work well and well-being managers are responsible for driving the topics work well and well-being in the individual OEs. 52. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. Meeting customers’ needs and protecting their information is crucial to Allianz being the most trusted partner in insurance and investments. Customers expect their personal information to be treated with the utmost care and we take this responsibility extremely seriously. Digitalization comes with privacy risks. It is Allianz’s responsibility to protect customer privacy and we are closely involved with all stakeholders, e.g. industry associations, members of parliament, and authorities, on the update and modernization of European privacy legislation. The E.U. General Data Protection Regulation (GDPR), which became effective on 25 May 2018, has increased attention on the manner in which companies comply with data protection requirements. Companies that have been found to be deficient with respect to their data privacy practices have been fined, in some cases significant amounts, which has a direct financial impact. Moreover, defective data privacy practices can impinge on the rights and freedoms of customers and employees. Together, these consequences can lead to negative publicity. Allianz is dedicated to enhancing the maturity of the privacy program across Allianz Group, as we commit to provide Digital by Default services. To accomplish this goal, we aim to ensure that robust privacy controls are embedded in a privacy-focused culture, which support well-designed processing activities. STRENGTHENING OUR GLOBAL PRIVACY FRAMEWORK The Allianz Privacy Standard (APS) defines rules and principles for collecting and processing personal data. It sets out six privacy principles that all employees must respect, wherever they are in the world: due care; purpose specification; reasonable limitation; transparency and openness towards our employees and customers on where personal data is stored/used; choice and consent; and privacy by design. Allianz also publishes a Privacy Notice which clearly states what information it collects, and why. In 2018, the APS was accepted by our data protection authority as our Binding Corporate Rules (BCRs). These BCRs allow Allianz Group companies to lawfully transfer personal data from the European Economic Area to Allianz Group companies in other jurisdictions, where required for business purposes. The Allianz Privacy Framework provides: • a global standard for data privacy; • a Privacy Impact Assessment and risk management process; • integration with Information Security core functions; and • training for employees on the appropriate processing of personal data belonging to customers, employees and third-party partners. As the privacy program transitions from implementation to business as usual, compliance and audit activities will review privacy governance activities and processes across Allianz Group entities. These status assessments are used as basis to embed a more mature integration of privacy obligations in day-to-day business. Monitoring activities will include onsite visits, reviews of program documents, interviews and expert challenge calls. PRIVACY RISK MANAGEMENT Allianz considers the identification and management of privacy risks at the operational process level to ensure they are measured, monitored, and mitigated across Allianz core businesses. Privacy Impact Assessments (PIAs) of high exposure processes that use personal data enable the early identification of risks to ensure they are managed appropriately. In conjunction with training sessions, the PIA tool permits a more uniform approach to privacy risk assessment and mitigation across Allianz Group. Privacy risks are included in Allianz’s Integrated Risk and Control System (IRCS), which helps us measure and monitor privacy. SAFEGUARDING PERSONAL DATA The security of the personal data we hold is equally important. A robust Information Security Framework applies strict security processes, standards and tools globally. It defines minimum requirements based on the ISO 27001 standard for information security management. This includes a requirement for vulnerability assessments along the software development value chain (including penetration tests and security audits), monitoring of systems via multi-level security systems, and effective IT Security Management and Business Continuity Management. COMPLIANCE WITH INDUSTRY DEVELOPMENTS We keep abreast of regulatory and industry developments and aim to reflect these in Allianz’s operational and governance processes and procedures. During 2019, we continued efforts begun in 2016, as we worked with Allianz Group companies and other Group centers on the group-wide implementation of the APRP. As we approached full implementation of the APRP in the European Economic Area, we began the transition to a business-as-usual environment. SUSTAINABILITY IN OPERATIONS 04.2 DATA PROTECTION AND PRIVACY 53. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.2 DATA PROTECTION AND PRIVACY. ENGAGING WITH EMPLOYEES We engage with employees to build understanding of privacy requirements. In 2018, we deployed globally an interactive data privacy training in 20 languages which is mandatory for all employees involved in processing personal data, where legally required. New employees are on-boarded to this training shortly after joining, and in addition, in 2020, we will deploy a refresher privacy training. Together, this should ensure that data privacy knowledge is maintained across the organization. The Allianz Digital Privacy Guidelines have been deployed across all Allianz Group companies. They cover privacy-related topics impacting digital projects – both privacy by design (as part of new product and service design) and privacy by default (where individuals are given choices around the use and onward sharing of their personal data, and the initial settings restrict disclosure). In 2019, over 85 Allianz professionals came together for the fourth Allianz Privacy Summit to discuss new data privacy laws, data ethics, information security, digital business efforts and emerging issues impacting data privacy. Looking ahead, we will continue working to ensure compliance with GDPR and will update the Allianz Privacy Standard, functional rules, and privacy guidance to reflect regulatory changes and judicial decisions. We will also facilitate deeper engagement on privacy-related issues across the Group, including through ongoing data privacy training. 54. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. Allianz participates in regular, open exchange with political stakeholders to maximize its positive contribution to societal and industry-specific challenges. This includes holding events and dialogues with governments and representatives to explore societal issues and support policy development. SUPPORTING POLICY DEVELOPMENT Given the challenges facing society, it is vital that we work together across governments, institutions, sectors and companies to identify sustainable solutions. Allianz actively engages in political advocacy as part of the democratic process. We contribute expertise and knowledge and share insights to help tackle regulatory and societal challenges. Allianz’s outreach and political networking activities are undertaken in line with the Allianz Code of Conduct, which mandates minimum standards for contacts with representatives of politics, private sector and society. Allianz is a signatory of the European Union Transparency Register Code of Conduct1. OUTREACH AND POLITICAL NETWORKING Group Regulatory and Public Affairs (GRPA) is the center of competence for all Allianz regulatory and political activities globally. It supports operating entities with regard to regulatory and political strategy and oversees management of regulatory and political topics within the Group. Allianz is committed to democracy and has made financial contributions for many years to political parties that support the social market economy. In 2019, Allianz Germany contributed 20,000 Euro to the Christian Democratic Union of Germany (CDU), the Christian Social Union in Bavaria (CSU), the Social Democratic Party of Germany (SPD), the Green party and the Free Democratic Party in Germany (FDP) respectively. Every party’s youth organizations received a grant of 10,000 Euro to support their focus on social issues of the future. Because we donate below the German Bundestag reporting threshold of 50,000 Euro, we publish a press release outlining Allianz’s political donations. ALLIANZ’S POSITIONS One of the roles of GRPA is to develop and uphold Allianz’s position on relevant regulatory and societal issues. In 2019, these included: Digitalization and data security: Allianz supports the European Commission’s digital strategy which includes efforts to update the European competition rules facing new digital competitors, finding a European approach to artificial intelligence and tackling challenges regarding data ethics. Allianz actively contributes to public discussions with a special focus on practicability of regulation. Sustainable Finance: Allianz is convinced that the financial services industry has a duty to support the transition to a low-carbon, resource-efficient and sustainable economy by integrating sustainability considerations into business activities. Allianz actively engages in discussions and consultations around the establishment of an E.U. sustainability taxonomy as well as the integration of sustainability considerations into Solvency II and financial advice (Insurance Distribution Directive/Markets in Financial Instruments Directive II). Solvency II: While Solvency II has been functioning well since its introduction in 2016, Allianz believes that the legislative review 2020 should be used to provide some modifications to better reflect the economics and true risks of the long-term insurance business model. This would remove unwarranted restraints on insurers’ long-term old age provisioning solutions and better facilitate stable, long-term financing of the real economy. Allianz participates in corresponding consultations, impact analyzes and working groups. Conduct: Allianz is involved in the debate around ‘value for money’ as well as in discussions on the upcoming reviews of the Insurance Distribution Directive and the Markets in Financial Instruments Directive II. Allianz also contributes to discussions on the initiative ‘a new deal for consumers’. Capital Markets Union (CMU): Allianz supports and actively contributes to public discussions and consultations on the CMU’s objectives to create deeper, more integrated capital markets and foster long-term investments. As part of the CMU, Allianz welcomes the introduction of a Pan-European Pension Product (PEPP) and engages in the development process with relevant stakeholders. Insurance Capital Standards (ICS): Allianz supports the development of a global capital standard and believes that further work is required to ensure that current approaches result in globally acceptable solutions. We actively participate in the corresponding development processes. SUSTAINABILITY IN OPERATIONS 04.3 REGULATORY AND PUBLIC AFFAIRS 1 Source: European Commission: Transparency register. GRI 415-1 55. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. As the insurance industry continues to evolve, so do the needs and expectations of its customers. Allianz’s strong reputation is built on customers’ trust in its integrity. This trust depends on the quality of its products, the way it informs and advises customers, and the personal conduct and capability of its sales employees and representatives. CUSTOMER CENTRICITY Allianz is transforming into a company that revolves around its customers. Customer centricity – one of the five pillars of the Renewal Agenda – involves practicing relentless execution for customers while outperforming the competition. This means understanding customers’ emerging needs and adapting the business accordingly – radically simplifying and digitalizing products and processes, ensuring what we provide is relevant, and delivering superior value through excellent and caring customer service. The Allianz Customer Excellence Program is focused better understanding customers’ experiences by collecting qualitative, personal feedback. It uses a three-step model to understand and meet the needs of a diverse global customer base: measure, analyze, act. We collect direct customer feedback using proven and tested survey tools and methodologies and take action based on what we learn. Customer feedback shapes Allianz’s products, services and processes and enables it to offer easy and adaptable solutions. To gain a better understanding of customers’ needs and how well we are meeting them, we ask for direct feedback regarding the experience of dealing with Allianz and whether they would recommend us. We seek feedback at different stages of the customer journey, for example at point of sale, submitting a claim, or canceling/renewing a contract. SUSTAINABILITY IN OPERATIONS 04.4 CUSTOMER SATISFACTION. MEASURING CUSTOMER LOYALTY Allianz uses the globally recognized Net Promoter Score (NPS) as the key metric for measuring customer loyalty through their willingness to recommend the company. Applied regularly and according to global cross-industry standards, NPS allows benchmarking against competitors and industry peers. The target is for over 75% of Allianz Group business segments to score above market or in a loyalty leader position by 2021. In 2019, we achieved 70% against the target (2018: 74%). The decrease is due to four segments dropping their scores to achieve at market positions while two segments increased their scores to above market compared with the previous year. CUSTOMER EXCELLENCE Allianz’s Customer Excellence Program aims to take it ahead of the industry by systematically measuring customer experience, identifying areas for improvement and enhancing the drivers of satisfaction along the entire customer journey (as opposed to discrete touch points). By the end of 2019, 34 operating entities and three global lines around the world had applied the Customer Excellence approach. About 210 customer journeys1 worldwide have been optimized in the past five years. We are also building local capabilities and certified 29 Customer Excellence Masters and over 130 Customer Excellence Experts until 2019. CUSTOMER EXCELLENCE: WINNING HEARTS WITH WOW-MOMENTS In 2018 and 2019, we have started to embed a more continuous approach to monitoring and improving customer journeys by introducing the five-star rating program – a standard rating method allowing customers to state their satisfaction level on a five-point scale, and to do this on various touch-points along the claims journey. Whenever customers make a claim against us, after its settlement we ask them to rate their satisfaction on a five-star scale. If their rating is three stars or below we follow up to ensure we resolve whatever issue there may be, and prevent the same thing from happening with other customers. We aim at publishing all customer feedback online for full transparency, visible to our customers and prospective customers. FIVE-STAR RATINGS AT ALLIANZ SUISSE At Allianz Suisse we learned already from the huge amount of feedback that we received through this five-star rating program. First initiatives that were implemented are: very clear and improved Service Level Agreements in case of a claim as well as a major improvement on the communication towards our customers, e.g. automated status updates for the customer along the claims journey and revamped letters. Additionally, in the past customers had to identify themselves several times when they were passed to another person on the phone and as an improvement initiative, we implemented measures to make sure that this has to be done only once to keep the effort low for the customer. With more and more feedback that we receive through this continuous improvement program, we will further transform the experience of our customers. 1 A customer journey is the complete sum of experiences that customers go through when interacting with us as a company, instead of looking at just a part of a transaction or experience. 75% Target for Allianz Group business segments to score above market or in a loyalty leader position (by 2021) 70% Allianz Group business segments scored above market or achieved a loyalty leader position (in 2019) 56. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. Allianz’s success is built on the trust its customers, investors, employees and the public place in its performance and integrity. This trust depends on the personal conduct and capability of the management and employees of Allianz and their desire to jointly create value for all stakeholders. COMPLIANCE MISSION: The Compliance Function fosters a corporate culture of individual and collective responsibility for ethical conduct and adherence to the rules by: • enabling the business to understand and live by the rules and oversee that adequate and effective processes are in place to ensure adherence to them; • supporting the business in identifying, assessing and mitigating compliance risks; • maintaining a confidential channel to report concerns, acting on them and protecting those who speak up in good faith; and • interacting transparently and trustfully with regulators. The Code of Conduct of Business Ethics and Compliance is at the core of that corporate culture. It outlines the basic principles, values and standards of behavior that provide guidance for everyday decisions and conduct for all employees. ZERO TOLERANCE OF FRAUD AND CORRUPTION Allianz takes a zero-tolerance approach to fraud and corruption. At a minimum, that means Allianz is committed to complying fully with local and international anti-corruption and antibribery laws. Beyond just compliance, the Allianz anti-corruption program sets standards for a consistent and comprehensive group-wide approach in every jurisdiction. Aimed at employees and certain third parties with whom Allianz does business, the program and policy prohibit the offer, acceptance, payment or authorization of any bribe, or any other form of corruption, be it with the private sector or with government officials. Anti-corruption training is compulsory for all employees, with online and classroom training delivered in multiple languages. ANTI-MONEY LAUNDERING In accordance with applicable legal requirements, Allianz companies establish risk-based policies and procedures for the prevention of the compliance risks, money laundering and terrorism financing, on the basis of customer identification, verification and monitoring, as well as suspicious activity reporting. Allianz employs various screening and monitoring systems and processes to manage risks and to ensure compliance with anti-money laundering requirements and economic sanctions restrictions. RESPECTING ECONOMIC SANCTIONS AND EMBARGOES Allianz has global policies and procedures in place for compliance with trade and financial sanctions. These policies and procedures include, among others, requirements for the screening of customer and counterparty names against the sanctions lists provided by the U.N., E.U. and the U.S. Office of Foreign Assets Control (OFAC). Allianz’s global requirements also include an enhanced review requirement for high-risk transactions related to countries, sectors or parties subject to sanctions restrictions. Some of Allianz’s insurance coverage and other business can, due merely to the nature of the Allianz client’s underlying business transaction, relate to countries, sectors or parties subject to sanctions restrictions. For example, where permitted, Allianz may issue insurance for humanitarian services its clients may provide in sanctioned countries. The Allianz sanctions compliance program aims to ensure that Allianz respects all applicable sanctions restrictions, and that these high-risk transactions undergo enhanced scrutiny, as mentioned above. SUSTAINABILITY IN OPERATIONS 04.5 COMPLIANCE. GRI 102-16, 205-2 57. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.5 COMPLIANCE. GRI 206-1. COMPETITION Allianz believes that fair competition and access to the market drives innovation, stimulates growth and benefits the consumer. As a global player and a leading provider in its sector, Allianz has a responsibility to ensure that it acts in compliance with competition law. To meet this responsibility, Allianz has adopted the global Allianz Antitrust Program, consisting of the Allianz Antitrust Standard – which have been updated in 2018. It lays out a core set of principles and measures to be adopted across the Group in order to ensure compliance with antitrust law as well as the Allianz Antitrust Code, which was also updated in 2018, and provides for a set of core behavioral rules that employees must observe when dealing with competitors, customers and business partners. Allianz regularly provides classroom and online trainings to top management and exposed employees to refresh and develop their understanding of antitrust rules and how they affect their daily business. LEADERSHIP STRUCTURE It is the clear understanding and believe of Allianz that good corporate governance cannot be limited to only fulfill general legal obligations. Rather, good corporate governance forms an integral part of Allianz’s corporate culture and represents the basis on which to build trust. As a consequence, the Allianz Code of Conduct for Business Ethics and Compliance is fundamental to responsible corporate governance within Allianz. Allianz SE operates a two-tier Board system: the Supervisory Board comprises twelve members, including six shareholder representatives appointed by the Annual General Meeting, and six employee representatives appointed by the SE works council. The Supervisory Board oversees and advises the Board of Management on managing the business. The current Chairman of the Supervisory Board of Allianz SE is Michael Diekmann, the former CEO of Allianz, who took this position only after observing the legally required two-year ‘cooling off’ period. The Supervisory Board set the “Objectives of Allianz SE’s Supervisory Board regarding its composition” containing requirements relating to individual members of the Supervisory Board, a skills profile for the entire Board as well as a diversity concept. The Board of Management consists of ten senior executives appointed by the Supervisory Board for a maximum term of five years (re-appointments allowed). It is responsible, inter alia, for setting business objectives and the strategic direction as well as for coordinating and supervising the operating entities. The members of the Board of Management are jointly responsible for management and for complying with legal and regulatory requirements. MANAGING COMPLIANCE In 2019, the third cycle of the integrated compliance risk scoping and assessment activities were completed as part of the Allianz’s Integrated Risk and Control System. The risk-based focus of compliance control reviews and testing is continuously strengthened, and the IT solutions are improved to optimize and harmonize all activities across the Group and to ensure data quality. The compliance assurance approach includes baseline reviews to assess compliance of newly acquired entities, as well as risk-based targeted reviews of existing entities against compliance program requirements, and key control testing. ‘SPEAKUP’ Every employee that joins Allianz receives a link to the compliance portal that includes a welcome presentation highlighting the obligation of each employee to adhere to the Allianz Code of Conduct. It also encourages employees to report breaches and misconduct. Employees are offered multiple channels to raise (anonymously) any concerns to Compliance, via the SpeakUp! facility, Connect or, in some OEs, by way of a hotline. Compliance Officers can also be contacted in person. The Investigation Guideline provides direction to ensure incoming reports are handled appropriately. Allianz also continuously promotes a speak up culture as part of internal events and campaigns. 58. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. In times of international and globalized business landscapes, taxation of multinational companies has become more complex. This complexity gives rise to increased scrutiny of fair taxation and raised external expectations of tax transparency. As a member of the B Team, Allianz SE, together with a group of companies has developed and committed to adhere to the so-called ‘B Team Responsible Tax Principles’, a common framework of core principles and practical commitments for companies to demonstrate responsibility and sustainability in their tax approach. In 2019, Allianz’s income was taxed with 2.8 billion Euro to governments around the world. You can find a breakdown of income taxes per region in Table TAX–1 in section 06.6. Allianz published its second Tax Transparency Report in 2018, outlining its approach to being a responsible tax payer. The third Tax Transparency Report1 covering the reporting year 2019 will be published in May 2020. SUSTAINABILITY IN OPERATIONS 04.6 TAX TRANSPARENCY 1 The Allianz Tax Transparency Report 2019 contains disclosures related to GRI Standard 207. GRI 207. ALLIANZ GROUP TAX TRANSPARENCY REPORT 2019. Find our Tax Transparency Report 2019 in the Download Center on our website (available in early May 2020). In 2019, Allianz’s income was taxed with €2.8 bn related to governments around the world 59. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. For Allianz, protecting the environment is part of its core business. Allianz strives to raise environmental standards and drive decarbonization through its insurance and investment businesses. Climate change strategy and environmental management support efforts to reduce its impacts as a carbon neutral company. The Allianz environmental management system (EMS) provides clear standards and controls, supports environmental data collection and promotes transparent reporting of environmental impacts across the Group. It guides the monitoring and management of our carbon footprint and use of natural resources, such as water and energy, and reducing waste. Operational implementation of the EMS is monitored by the Group Environmental Officer and supported by the Board of Management of Allianz SE. In 2019, 95 percent of employees were included under the scope of the EMS (2018: 94 percent) (see Table ENV–1). Further information on our Group Environmental Guideline can be found here. The Allianz SE headquarters in Munich has been certified to the international environment management standard ISO 14001 since 2017. In July 2019, Allianz Germany achieved ISO 14001 certification for its Allianz Campus in Unterföhring. CARBON REDUCTION STRATEGY The carbon reduction strategy for corporate operations is designed to reduce greenhouse gas (GHG) emissions from Allianz Group operations through energy-efficient planning, construction and operation of buildings, buying green electricity and using carbon efficient vehicles. In May 2018, Allianz joined the Science-Based Targets initiative (SBTi). We have committed to set long-term climate targets for Allianz’s proprietary investments and business operations in line with the Paris Agreement’s climate goal. In 2019, Allianz SE also signed up to the second iteration of the City of Munich’s Klimapakt program, reaffirming its commitment to help the city meet its climate targets. GHG EMISSIONS Allianz’s most material GHG emissions arise from its energy consumption, business travel and paper use. It has committed to reduce GHG emissions by 30 percent per employee by 2020, against a 2010 baseline. By the end of 2019, GHG emission had been reduced by 35 percent per employee (2018: 27 percent). These further reductions are mainly the result of energy efficiency improvements through data center consolidation, an increase in the share of renewable power, and reductions in air and private car travel. In 2020, we will develop our next set of GHG emission targets up until 2025, in line with the latest climate science. Full details of our CO₂ emission disclosure, including by Scope 1, 2, and 3 emissions, are provided in Table ENV–2. REDUCING ENERGY CONSUMPTION Allianz’s target is to reduce energy consumption in its office buildings per employee by 30 percent by 2020, compared with 2010. We exceeded our 2020 target, with a 37 percent cut in 2019 (2018: 34 percent). This is mainly due to local data center closures in Germany and France. Details of Allianz’s energy consumption can be found in Table ENV-3. RENEWABLE ENERGY Allianz has committed to source 100 percent renewable power for its group-wide operations by 2023 as a signatory to the RE100 initiative. With operations in more than 70 countries, we have started to engage deeply with suppliers and landlords to achieve it. In 2019, 49 percent of the electricity we used came from renewable, low-carbon sources (2018: 45 percent) (see Table ENV–3). Allianz U.S. Life in North America switched to renewable electricity from local wind farms and all data centers in U.S. and Europe are now powered by 100 percent renewable energy. SUSTAINABILITY IN OPERATIONS 04.7 ENVIRONMENTAL MANAGEMENT 2019 2018 2017 17.0 16.1 15.3. Change in energy consumption from office buildings gigajoules per employee 2018 2019 2017 2.7 2.7 2.4. Change in CO₂ emissions tons of CO₂ per employee. GRI 302-4, 305-5. HARNESSING WIND POWER IN TURKEY Allianz Turkey has invested in two wind turbines to provide electricity for its headquarters in Istanbul, taking us one step closer to meeting Allianz’s long-term goal for using 100 percent renewable energy sources. With the capacity to generate over 6,000 kilowatts annually, the expected payback period for the investment is five years. 60. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.7 ENVIRONMENTAL MANAGEMENT 2017 2018 2019. Change in paper consumption grams per policy 117.2 96.4 76.0. GRI 301-1. CUTTING GHG EMISSIONS FROM BUSINESS TRAVEL. Business travel in 2019 accounted for 37 percent of GHG emissions from operations (2018: 37 percent). Allianz encourages its employees to travel only for business-critical reasons and for client-related meetings exceeding three hours. In 2019, we launched a new travel booking tool for our Germany-based operating entities that shows the carbon footprint of business trips by air travel. Furthermore, we continue to improve the GHG performance of the vehicle fleet. CARBON-NEUTRAL SINCE 2012 Allianz has been carbon-neutral since 2012 by investing in projects that offset its operational emissions. In 2019, we retired 334,033 carbon credits by investing in low-carbon initiatives, each credit accounting for one metric ton of carbon. The savings in emissions are independently measured and certified once a year. Investments. Wildlife Works Carbon LLC We hold a 10 percent share in WWC, the world’s leading developer of Reducing Emissions from Deforestation and Forest Degradation (REDD) projects. This investment supports forest protection in Kenya and the Democratic Republic of Congo (DRC). The Kenyan Kasigau Corridor REDD project aims to offset 1 million tons of carbon emissions per year, while the DRC REDD+ project achieves an average of 5.7 million tons of carbon reductions per year. Rimba Raya We began investing in this REDD project in Borneo, Indonesia, in 2013. By helping to prevent the deforestation of nearly 65,000 hectares of peat swamp forest, the world’s largest project of its kind aims to avoid more than 130 million tons of carbon emissions. PAPER REDUCTION Efforts to reduce paper consumption are underpinned by the increasing shift towards digital communication with customers and embedding paperless ways of working in Allianz offices. Allianz’s target is to reduce paper use by 40 percent per policy by 2020 against a 2014 baseline. By the end of 2019, we had achieved a reduction of 53 percent (2018: 41 percent), putting us well on track to achieve the 2020 target (also see Table ENV–9). WATER Minimizing water use is a principle commitment under the Group Environmental Guidelines and is of particular relevance in areas at risk of water-stress. Because Allianz’s water consumption is not significant driver of our environmental impact, we do not have a specific water reduction target. However, we work to reduce water consumption in Allianz offices through employee awareness campaigns and by investing in waterless facilities and other water-efficient technologies (also see Table ENV–7). WASTE We seek to minimize the waste we generate and to re-use or recycle materials wherever possible (see Table ENV–8). Allianz employees also actively support local clean up activities. Once again, Allianz partnered with World Cleanup Day in 2019. Over 20 Allianz entities took part in the campaign, which encourages employees, customers and the general public to unite to clean up their local environment. 61. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.8 RESPONSIBLE PROCUREMENT. GRI 102-9. The mission of Global Sourcing and Procurement (GSP) is to provide best value for money and a win-win situation for sustainability in the procurement areas of IT systems and services, insurance, marketing and communications support, facility services and logistics, building maintenance and projects, lease cars and business travel, and other professional services. ALIGNING SUSTAINABLE VENDOR CODES OF CONDUCT PRIOR TO CONTRACTING Allianz requires all suppliers above a certain spend threshold to meet the standards set out in the Allianz Vendor Code of Conduct and procurement policies1. Standards are aligned with International Labor Organization (ILO) standards including avoidance of modern slavery, human rights, non-discrimination, environmental protection and sustainability in the supply chain, and the U.N. Global Compact (UNGC). Questions related to environmental management are a prerequisite to sourcing and contracting in the procurement system registration process. Low-value and one-off contract suppliers are currently out of scope. As not all suppliers accept the Allianz Vendor Code of Conduct, we apply alternative approached to managing risk such as allowing them to reference industry codes of conduct like the Electronic Industry Citizenship Coalition (EICC) or Bundesverband Materialwirtschaft , Einkauf und Logistik (BME). In 2019, 97 percent of global suppliers, representing a total spend of 1.8 billion Euro, committed to the Allianz Vendor Code of Conduct. Global Sourcing and Procurement and the Group ESG Office continued their collaboration regarding the improvement of processes to conduct ESG assessments for potentially critical vendors. INFLUENCE DEMAND DECISIONS EARLY IN THE AWARDING AND ORDERING PHASE GSP challenges whether a particular demand can be avoided, reduced or substituted with a more sustainable solution as sustainability concerns are increasingly important to business functions. Due to this trend we will likely see the rise of carbon footprint information become an additional awarding criteria to identify sustainable options. GSP also configured some ordering systems to present the most sustainable solutions first. For example, recycled printer paper is promoted over non-recycled printer paper, and selecting train tickets instead of airplane tickets is encouraged through a travel tool, which shows the carbon footprint of each trip to encourage sustainable behaviors. Car fleet policies across the Group are also being revised to reduce the use of combustion engines and fossil fuels. The challenges include the potential higher costs of sustainable solutions, which cannot always be managed through procurement negotiations, meaning the most sustainable provider is not always ensured. Globalization of the Group’s operating model also means there is increased demand for international travel and a wider delivery network. This cannot be completely balanced through use of 1 Includes suppliers with a spend volume greater than €250,000. collaboration technology such as video conferencing, web conferencing or telephone conferences. PROMOTING SUSTAINABLE SOLUTIONS Allianz supports solutions that improve the sustainability of its operations and core processes, such as digital signatures and paperless customer claims in frame contracts or admission as Group IT standards. Substituting existing solutions with more sustainable solutions can take time and we apply a step-wise approach to integrate more sustainable solutions. FOSTERING USING 100% RENEWABLE ENERGY AND REDUCING ENERGY CONSUMPTION Allianz’s strategic data centers now use certified renewable electricity. We consolidate facility space where opportunities exist and substitute LEDs for traditional light bulbs, reducing energy consumption. Energy consumption from suppliers’ cloud services is so far not in scope. The way forward here is to conduct periodic controls with major cloud service providers like Amazon Web Services and Microsoft Azure in the future. 62. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. According to the World Economic Forum’s Annual Global Risk Report, social instability and increasing polarization of societies pose a growing global risk. Many people remain excluded from the economic, social and political opportunities that enable them to participate fully in society. At Allianz, we believe social inclusion – particularly among children and youth – must be encouraged to tackle challenges arising from social instability and increasing polarization of societies. Allianz contributes to social inclusion through its Corporate Citizenship programs. Furthermore, through its 13 foundations around the world, Allianz contributes to a wide range of philanthropic activities. Operating entities are encouraged to measure the outcomes of Corporate Citizenship activities on society and the business by using an input-output-outcome-impact framework. In 2019, Allianz Group corporate citizenship activities reached over 660,000 beneficiaries1 worldwide, including some 290,000 children and youths1. Launched in 2016, Allianz’s Encouraging Future Generations Program aims to address social inequality impacting children and young people. In 2018, Allianz committed to increase its reach to children and youths by 20 percent by 2020 (baseline 2018) through Corporate Citizenship Programs. ENCOURAGING FUTURE GENERATIONS PROGRAM OBJECTIVES • Using Allianz’s expertise to contribute positively to social inclusion in humanitarian, intercultural and economic areas. • Caring about one of the most vulnerable groups – children and young people – so that they can grow with confidence. • Increasing the number of children and youth in education, training and employability by 2020. • Enabling strategic partnerships and engagement using innovative formats. • Promoting Allianz as a trustworthy company by creating visibility for projects and social responsibility. The program focuses on three key areas: FUTURE GENERATIONS AWARD Launched in November 2017, the Investment Ready Program ‘Encouraging Future Generations’, developed by Allianz and Impact Hub, is a powerful acceleration program designed to enable purpose-driven entrepreneurs to foster social inclusion among children and youth. The program supports successful applicants to make their business investment-ready. In addition, it links them with Allianz mentors and experts. The support it provides is valued at around 20,000 Euro for each social venture. The winning finalist of the program had the chance to receive a 40,000 Euro grant to scale up their business.. Key outcomes for participants include improving their business models and strategy and receiving support to create a sustainable growth and investment plan. SUSTAINABILITY IN OPERATIONS 04.9 CORPORATE CITIZENSHIP 1 Numbers compiled are based on estimations from Allianz operating entities. Leveraging Allianz’s expertise to support SOS Children’s Villages, which is the beneficiary of money raised through the annual Allianz World Run. Empowering local Allianz entities to work together with civil society to bring innovative solutions to help communities in which they operate through the Allianz Social Innovation Fund. Supporting social entrepreneurs around the world to enable them to scale up ideas that overcome barriers in youth employment and education through the Allianz Future Generations Award. In 2019, the second cycle of the program invited eight new social ventures from Germany, Greece, Spain and Indonesia. Read more about the successful projects online. ALLIANZ SOCIAL INNOVATION FUND. The Allianz Social Innovation Fund was launched in 2017 to enable innovation in local corporate citizenship partnerships. Funding is available for Allianz entities to support impactoriented social programs involving external social partners that contribute to child and youth development. Since its launch, the Social Innovation Fund has provided 0.5 million Euro to projects in over 20 countries. Find out more about the projects we support around the world. THE ALLIANZ SOS CHILDREN’S VILLAGES PARTNERSHIP Allianz launched its long-term partnership with SOS Children’s Villages International (SOS CVI) in 2015. The purpose of the partnership is to reduce the impacts of natural and humanmade disasters and increase the resilience of children and young people by focusing on two key areas: emergency preparedness and response and youth employability. The partnership actively addresses societal challenges and harnesses opportunities to create resilient future generations through exchange and dialogues, knowledge sharing, corporate volunteering and fundraising. In 2019, we further increased our joint reach to children and youth through eight additional partnerships, six in new countries: Burkina Faso, Hungary, Brazil, Sri Lanka, Ivory Coast and Morocco. These include 4 YouthCan! partnerships, which aim to further strengthen our contribution to youth development and employability. Read more about the Allianz SOS Children’s Villages partnership on our website. 63. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 04.1 Human resources Inclusion and diversity. Training and development. Employee engagement. Health and wellbeing 04.2 Data protection and privacy 04.3 Regulatory and public affairs 04.4 Customer satisfaction 04.5 Compliance 04.6 Tax transparency 04.7 Environmental management 04.8 Responsible procurement 04.9 Corporate citizenship 05 Allianz’s climate-related financial disclosure. Risk 06 Data and performance. SUSTAINABILITY IN OPERATIONS 04.9 CORPORATE CITIZENSHIP. EMERGENCY PREPAREDNESS IN ACTION Through the support of Allianz, SOS Children’s Villages International has been able to develop and start the roll-out of its global Emergency Preparedness Program, which turns SOS Children’s Villages into safe ports of call for locals in the event of a catastrophe. This work paid off when deadly Cyclone Idai hit Mozambique in March 2019. As the cyclone approached the coastal city of Beira, children and staff at SOS Children’s Village Beira gathered at designated safe areas, equipped with water, torches and other emergency supplies. The children at the village were safe and the homes suffered relatively little damage. In contrast, the storm devastated the city of more than 500,000 people. Sadly, many of the village workers lost family members and homes in the cyclone. Allianz SE donated relief funds to support psychological and health care support, food, water, and sanitation facilities after the cyclone. “With Idai, we were all forced to put into practice what we learned. It was amazing to see the children taking the initiative. After the storm, they also helped to clean up the Village.” Baptista Boa Director of the SOS Children’s Village Beira. THE ALLIANZ WORLD RUN In 2019, the fourth Allianz World Run took place. It is an annual employee engagement and fundraising event with SOS Children’s Villages as the charity partner. An impressive 12,313 runners from 98 countries clocked up more than 1.6 million km, the equivalent of running 40.97 times around the globe, making it the most successful run to date. The money raised helped to support vulnerable children in some of the most neglected countries in the world facing disasters. Specially, five SOS Emergency Response projects were supported in ‘forgotten crises’ areas in Chad, Burkina Faso, Nigeria, Bangladesh, and the Ukraine. These projects provide child protection and trauma healing measures, nutritional and health care support, education materials and classroom equipment for vulnerable children and families. Find out more about the Allianz World Run. “The Allianz World Run 2019 proved once again how powerful our community is when we all move into the same direction. During the last three months, we made a difference not only in our own lives but also in the lives of others, contributing to securing the future of children in SOS Children’s Villages, the explorers of tomorrow.” Oliver Bäte CEO Allianz SE Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 64 05 ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE. In our corporate reporting on climate change, we are applying the recommendations developed by the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). The TCFD’s four-pillar framework provides guidance on how companies can disclose and address risks and opportunities from a changing climate. To drive best practice, we strive to continuously enhance our reporting and business practices. GRI 103-2, 103-3, 201-2 Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 65. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.1 HIGHLIGHTS. In recent years, Allianz has laid strong foundations for the development of its climate change strategy. This includes committing to the Science Based Target initiative (SBTi), further strengthening our approach to exiting coal-based business models, implementing the TCFD recommendations and enhancing our systematic approach to investee engagement. (1) After the release of the landmark Special Report on Global Warming of 1.5°C by the Intergovernmental Panel on Climate Change (IPCC) in October 2018, we thoroughly reviewed the implications on our corporate response. Consequently, we increased our ambition from “well below 2°C” and are now committed to pursuing efforts to limit global warming to a maximum of 1.5°C by the end of the century, postulated as the high ambition level of the Paris Agreement. In 2019, we updated our carbon reduction target to align with 1.5°C-compatible pathways and adjusted our coal phase-out plan accordingly. (2) At the Climate Action Summit in New York in September 2019, the United Nations (U.N.) launched the Net-Zero Asset Owner Alliance (AOA). The AOA consists of the world’s largest pension funds and insurers. Members commit to reduce greenhouse gas (GHG) emissions of their investment portfolios to net-zero by 2050, taking responsibility of their share in limiting global warming to 1.5°C compared to pre-industrial times. Allianz helped to set up the group, collaborating with the Finance Initiative of United Nations Environment (UNEP FI), the Principles for Responsible Investment (PRI), WWF and the Mission 2020 campaign. In addition, Allianz chairs the AOA and leads several working groups within. (3) In the run up to our portfolio decarbonization targets as part of the AOA, we are starting to report on climate-related indicators for our proprietary listed equity portfolio, including carbon footprint indicators. (4) The Board of Management remuneration is tied to the attainment of sustainability- and climate-related targets, including the successful delivery of our climate change strategy and oversight of implementation of our different climate-related commitments, including the AOA. A particular focus lies on the quantitative reductions targets for GHG emissions. For 2020, we aim to set public long-term and intermediary climate targets for our proprietary investments and business operations in line with the Paris Agreement’s goal to limit global warming to 1.5°C. Furthermore, we will continue to scale up our engagement of corporates and policy-makers on climate strategies in line with our ambition. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 66. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.2 GOVERNANCE 05.2.1 OVERARCHING AND BOARD-LEVEL GOVERNANCE Allianz SE has a divisional Board structure based on functional and business responsibilities. Business-related divisions reflect our segments Property-Casualty, Life/Health, Asset Management, and Corporate and Other. In 2019, they were overseen by five Board members. The following divisions focus on Group functions, along with business-related responsibilities: Chairman of the Board of Management; Finance, Controlling and Risk; Investment Management; Operations and Allianz Services; Human Resources, Legal, Compliance, and M&A; Business Transformation. For further information on Board of. Management (BoM) members and their responsibilities, please refer to the Allianz Group Annual Report 2019, page 56. The highest governing body for sustainability-related issues is the Group ESG Board. Meeting quarterly, it is comprised of three Allianz SE BoM members as voting members, one BoM member as standing guest voting on operations topics, and key departments being represented. On a case-by-case basis, further participants from Group Functions and operating entities participate. The ESG Board is responsible for sustainability and climate-related topics and oversees the Allianz Group Climate Change Strategy. It steers the whole corporate responsibility agenda, including for example positioning on Sustainable Finance as well as approving and steering external climate and ESG-related commitments and initiatives. Furthermore, it is responsible to ensure alignment of the ESG agenda with Allianz’s business operations, especially by validating with Group functions such as Group Risk and Group Compliance. It also oversees the integration of climate and ESG aspects into all core lines of business and central Group processes. The ESG Board is constituted as an advisor to the BoM of Allianz SE, informing and involving the BoM on relevant topics and activities at least twice a year. Additionally, it reviews and recommends decisions to be taken by the BoM and relevant Board committees. Group Functions and operating entities directly update the ESG Board on material sustainability issues through their representation on the ESG Board or by invitation. Within the Group and beyond the ESG Board, diverse functions and committees steer sustainability topics within their scope of influence, on business and management-level, supported by specific ESG Task Forces (see 05.2.2). The Group Finance and Risk Committee (GFRC) consists of members of the BoM and oversees risk management and monitoring, including sustainability and climate risks. It also serves as an escalation point based on analysis and deliberations within the ESG Board. Risks identified as emerging and/ or significant are addressed either in the GFRC or the Group Underwriting Committee (GUC). The GUC consists of Members of the BoM, the Group Chief Risk Officer, Chief Underwriting Officers, and other executives of the Group. It monitors the underwriting business as well as its risk management and strategy and develops an underwriting policy. The BoM reports regularly and comprehensively to the Supervisory Board on business development, the company’s financial position and earnings, planning and achievement of objectives, business strategy, and risk exposure. Climate-related issues are part of these regular updates where relevant. Climate & ESG Governance at Allianz. SUPERVISORY BOARD. BOARD OF MANAGEMENT GFRC. GROUP ESG BOARD. Composition. Voting 3 BoM members5 (on all topics) 1 BoM member (on operations) +Non voting • AGCS • GCORE • Group Compliance • Group Chief Risk Officer • AIM. Tasks • Regular reporting on ESG to SE Board of Management on ESG/climate/CR matters • Coordination on relevant Group ESG matters • Decisions on future ESG standards. ESG TASK FORCES • Cover specific sustainability matters • Include representatives of Group centers and OEs • Sponsored by BoM members or senior executives. GROUP ESG OFFICE (within GCORE-CR) • Full-time support to ESG Board • ESG Integration into business. Group Functions Operating Entities3 1 GCORE 2 AIM 3 OEs 4 Allianz Global Corporate & Speciality 5 Responsible for i) Investment Management, ESG (Chair); ii) Asset Management, US Life Insurance; iii) Finance, Controlling, Risk (see also section 02.8) ALLIANZ INVESTMENT MANAGEMENT2 GROUP COMPLIANCE. GROUP RISK. GROUP COMMUNICATIONS AND CORPORATE RESPONSIBILITY¹ AND OTHERS. ALLIANZ GI PIMCO. ALLIANZ ASSET MANAGEMENT. GLOBAL LINES/ INSURANCE OPERATING ENTITIES. AGCS4. ALLIANZ RE. EULER HERMES. INSURANCE OES Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 67. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.2 GOVERNANCE 05.2.2 BUSINESS AND MANAGEMENT-LEVEL GOVERNANCE. Group functions. The Allianz Group Corporate Responsibility department, and particularly the Group ESG Office, including a team dedicated to Climate Integration, is responsible for orchestrating the integration of ESG and climate aspects into core investment and insurance activities. It also acts as the secretariat of the ESG Board and meets regularly with its chair. Further functions are reporting on non-financial matters and support operating entities in integrating the Group’s strategic approach and policies. To develop projects and proposals for ESG and climate integration into all our lines of business, Allianz set up crossfunctional ESG Task Forces in late 2019; see also section 02.8. These consist of ESG specialists and representatives of relevant local operating entities, global lines, and Group functions. Each is sponsored by either a member of the BoM or a senior executive. Bi-monthly ESG Sponsor Meetings ensure alignment between the different task forces. Additional bodies and functions within the Group monitor and analyze market, technological as well as regulatory trends and developments and share insights with relevant stakeholders. Further information can be found in the Allianz Group Annual Report 2019. Insurance and investment functions. Key insurance operating entities, our internal asset managers Allianz Global Investors and PIMCO, and the investment management function Allianz Investment Management (AIM) have well-established dedicated climate and ESG functions and practices, which eventually also report to BoM level. At AIM, the Investment Management Board (IMB) oversees the implementation of the climate and ESG strategy for Allianz’s proprietary investment portfolio of 795 billion Euro1. This includes regular discussions and decisions around operationalizing the portfolio decarbonization and sciencebased target setting, analyzes on asset stranding in climate scenarios, as well as dedicated engagement on climate aspects. Within AIM, climate and ESG is steered at IMB level with a Managing Director in charge of the implementation. The implementation of science-based emission reduction targets for our proprietary investments and operations is run by a task force expanding across all relevant investment and operational departments and entities. It comprises more than 50 employees, including executive functions and reporting to the BoM members responsible for investments and operations as well as to the ESG Board. Moreover, several units also have dedicated competence centers on promoting low-carbon technologies from an insurance and investment perspective: Allianz Capital Partners, Allianz Global Investors, Allianz Global Corporate & Specialty, Allianz Climate Solutions, and others. For more details on our corporate responsibility governance see section 02.8 in our Sustainability Report 2019 and the Allianz ESG Integration Framework. 05.2.3 REMUNERATION AND CLIMATE COMPETENCE The BoM’s remuneration is tied to the attainment of sustainability- and climate-related targets, including the successful delivery of our climate change strategy and oversight of implementation of our different climate-related commitments. A particular focus lies on the quantitative reduction targets for GHG emissions. Our long-term climate ambition and targets are decided at ESG Board level and cascaded to all relevant functions tasked with delivering on these targets. For more details on our Remuneration Report see here. Allianz is also applying a variety of instruments to foster ESG and climate competency at Board, senior executive, and employee level aside of the governance described above: • An annual Sustainability Forum conference, broadcasted globally and with Board member presentations • Briefings for top management • Biannual ESG Roundtable of investment functions • Trainings for underwriters and investment-related functions like sales agents • Trainings for employees. 1 Based on economic view. Compared to accounting view it reflects a volume increase due to switch from book-to-market values and changed asset scope (e.g. including FVO, trading and real estate own-use). 2 Task force established in early 2020. GROUP ESG BOARD. ESG TASK FORCES. ESG SPONSORS. Bi-monthly meetings to ensure alignment between task forces • Group centers and OE representatives • Each sponsored by BoM member or senior executive. OE Collaboration. Corporate Responsibility Disclosure. Sustainable Finance Regulation. Environmental Management. Societal Impact. ESG Integration in Underwriting2. ESG Integration in Investments2. Sustainability Ratings2. ESG integration in communication and in branding/marketing2 Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 68. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.3 STRATEGY 05.3.1 OUR STRATEGIC RESPONSE TO CLIMATE CHANGE The Allianz Group Climate Change Strategy has been first published in 2005 – since then it steers the uptake of climate-related risks and opportunities in our insurance and investment business. It has been regularly updated and is overseen by the ESG Board. The Strategy focuses on three areas: 1. We anticipate the risks of a changing climate by: • systematically considering climate criteria in insurance and investment business, • no longer financing coal-based business models and no longer providing insurance for construction and/or operation of single coal-fired power plants and coal mines, • fully phasing out coal-based business models across proprietary investment and P&C insurance portfolios by 2040, at the latest, • engaging with policymakers to drive sustainable finance and achieve the Paris Agreement’s goals, and • ensuring active dialogue with investee companies on climate strategies. 2. We care for the climate-vulnerable by: • supporting our customers to reduce risks and minimize damage and compensating those who have suffered losses, • working with peers, governments and the civil society to manage climate risks and ‘close the protection gap’, and • supporting scientific research and innovation that improves society’s understanding of climate-related risks. 3. We enable the low-carbon transition by: • pioneering insurance of low-carbon technologies and, for instance, insuring renewables in more than 60 countries, • strategically investing in low-carbon assets, including renewable energy, green buildings, and green bonds, • setting long-term climate goals for our proprietary investments and business operations, in line with ‘1.5°C-aligned net-zero emission by 2050’ pathways, and • joining forces with other asset owners through the U.N.-convened Net-Zero Asset Owner Alliance (AOA) to collaboratively support companies in their low-carbon transition. 05.3.2 CLIMATE-RELATED RISKS AND OPPORTUNITIES We believe that climate change will materially affect economies and therefore our lines of business. Arising risks and opportunities can be seen already today and will increase over mid- and long-term. These can for instance be acute and chronic physical impacts on property or human health such as warming temperatures, extreme weather events, rising sea levels, intensifying heatwaves and droughts or a change in vector-borne diseases. Risks and opportunities also result from the crosssectoral structural change stemming from the transition towards a low-carbon economy. These include changes in climate policy, technology, or market sentiment, and impact thereof on the market value of financial assets, as well as impact resulting from climate change litigation. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 69. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.3 STRATEGY. Impact on our business and impact of our business Allianz Group is exposed to a variety of risks. The largest general risks in terms of their contribution to Allianz’s risk profile are market risks, especially equity risk, credit and credit spread risks driven by assets backing long-term liabilities. Furthermore, Property-Casualty premium and reserve risks resulting from natural and man-made catastrophes as well as from claims uncertainty need to be considered. Climate change, as a multi-faceted phenomenon, is influencing these risks in varied ways. Vice versa, choices made about how Allianz conducts its business can impact on the climate and global warming, e.g. by investing in or insuring low-carbon and emission-reducing activities. Climate change impacts Allianz’s business in two key ways: firstly through insurance policies, e.g. covering health impacts and other losses, property damage, and secondly through changes in the sectors and business models it underwrites. Furthermore, Allianz is affected as a large-scale institutional investor. It has significant stakes in various economies, companies, infrastructure and real estate that are, or will be, affected by the physical impact of climate change and by the transition to a low-carbon economy, which can directly influence the ability of assets to generate long-term value. Below is an illustration of how climate change risks translates into financial impact for investments, applicable to short-term as well as longer-term developments. In early 2019, the Chief Risk Officer Forum has published a report on the implications of climate change on the insurance industry. From Allianz, several authors contributed to the report ‘The Heat Is On’, which can be accessed here. Exemplary Illustration of Climate Risks Translation for Investors. CLIMATE-RELATED CHANGES OPERATING ASSET IMPACTS. INVESTOR IMPACT RISK CATEGORY IMPACT ON MITIGATING LAYER ON COMPANY/ PHYSICAL ASSET LEVEL FIRST ORDER SECOND ORDER. PHYSICAL. ACUTE FIRSTORDER HAZARD/ RISK Like extreme weather, heat stress, etc. SECONDORDER RISK Like soil moisture deficit, coastal erosion etc. • Operations • Value chain • Markets. ADAPTIVE CAPACITY OF COMPANIES (diversified value chain, substitutes, sufficient stock, insurance, capex, efficiencies, etc. IMPACT ON CORPORATE PERFORMANCE. IMPACT ON FINANCIAL ASSET PERFORMANCE • Direct in case of real-asset investments • Indirect in case of listed equity, corporate bonds, government bonds, funds, etc. • Indirect in case of macroeconomic/ sectoral implications. CHRONIC FIRSTORDER HAZARD/ RISK Like changing temperature patterns or rising sea levels, etc. TRANSITION. Policy and Legal. Technology. Market. Reputation. LITIGATION. Litigation for (enabling) GHG/emissions/ failure to mitigate. Litigation for insufficient disclosure, adaptation, etc. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 70. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.3 STRATEGY. Financial impact of climate change Building on our previous internal finding that our proprietary investment portfolio and especially the listed equity asset class is most sensitive to climate transition scenarios, Allianz further analyzed this risk exposure. Allianz Research calculated the macroeconomic negative impact of increasing regulatory intensity on the global industry at nearly 2.5 trillion USD over the next ten years, while identifying opportunities for a variety of sectors. The analysis focused on the most important measures of climate policy currently enacted or under discussion. These measures can be grouped into the following categories: Carbon pricing, energy mix and efficiency mandates, mobility regulations, industry-specific taxes, fines and levies. Cost and business ramifications are however considered in a contained manner. They depend on emissions’ costs, regulation and policy dynamics. The ultimate risk is a complete loss of value of certain assets or entire businesses. According to report findings, the energy sector will be hit the hardest with an estimated cost of 900 billion USD. The steel sector follows with a cost of 300 billion USD. Air and marine transport faces costs of 55 billion USD. Other sectors at risk include automotive, chemicals, pulp and paper, retail and machinery/manufacturing. The report also presents a heat map, showing transition risk severity for the next twenty years, as well as drivers and mitigating factors for the different sub-sectors. An extract of the results is shown below. The full report with all results can be accessed here. The findings of this macroeconomic analysis have also been used for internal analysis, for example on the proprietary investment portfolio. In 2020, we will continue to expand our analyzes and assessments on physical, transition and litigation risks and opportunities for our business. Asset and Business Value Impact under Transition Scenarios (Source: Allianz 2019, excerpt) GLOBAL 2ºC 1.5ºC 2020 2025 2030 2035 2040 2020 2025 2030 2035 2040. ENERGY Integrated Oil and Gas (M) (M) (M) T. ENERGY Oil and Gas Storage and Transportation. ENERGY Coal and Consumable Fuels T, P T, P T, P T, P. MATERIALS Fertilizers and Agricultural Chemicals (T) (T) (T) (T) (T) (T) (T) (T) P. MATERIALS Aluminium. MATERIALS Steel. INDUSTRIALS Industrial Conglomerates. INDUSTRIALS Airlines (T) P (T) P. CONSUMER DISCRETIONARY Auto Components. CONSUMER DISCRETIONARY Automobiles P P, T T P P P, T P, T. UTILITIES Electric Utilities P (M) P P P (M) P P. UTILITIES Renewable Electricity T T T T. Risk enhancer: Risk mitigator: Risk: P = policy (P) = policy Low. T = substitution technology (T) = little substitution technology Medium. M = related market forces (M) = countering market forces High. Very high Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 71. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.3 STRATEGY 05.3.3 OUR RESPONSE The management of risks and opportunities resulting from climate change is part of our overall business strategy. Measures we take include: developing and adjusting financial products and services; improving decision-making, policies and processes; the setting of targets and limits; managing our operational climate footprint; as well as engaging with internal and external stakeholders. Our Response – Long-term ambition and the Asset Owner Alliance As a major outcome of incorporating the assessment of climate-related risks and opportunities into our business strategy, we committed to set ourselves long-term emissions reduction targets for our proprietary investment portfolio and for our business operations. To this end, we joined the Science Based Targets initiative (SBTi) in May 2018. After the release of the landmark Special Report on Global Warming of 1.5°C by the Intergovernmental Panel on Climate Change (IPCC) in October 2018, we thoroughly reviewed the implications on our corporate response. Consequently, we increased our ambition from “well below 2°C” and are now committed to pursue efforts to limit global warming to a maximum of 1.5°C by the end of the century, postulated as the upper ambition level of the Paris Agreement as well as the European Union’s long-term climate strategy. As a result, we updated our target ambition to 1.5°C-compatible pathways for carbon reductions and adjusted the coal phase-out accordingly. In 2019, Allianz helped to set up the UN-convened Net-Zero Asset Owner Alliance (AOA), together with the Finance Initiative of United Nations Environment (UNEP FI), the Principles for Responsible Investment (PRI), WWF and the Mission 2020 campaign. In addition, Allianz chairs the AOA and leads several working groups within. At the end of 2019, it consisted of 16 asset owners with almost 4 trillion USD Assets under Management. Members of the AOA commit to reduce GHG emissions of their proprietary investment portfolios to net-zero by 2050. Asset owners within the AOA are already engaging portfolio companies and are committed to setting intermediary targets for the years 2025, 2030 and beyond to ensure their portfolios decarbonize in a timely manner. The AOA will report publicly and to the UN Secretary General on progress against these targets. The AOA intends to use state-of-the-art tools and aligns with other initiatives to emphasize: • Investor ambition and target-setting at portfolio-level • Contribution to methodologies which can be applied across the sector • Impact on the real economy and emissions – to the extent to which methodologies can be developed • Implementation via a holistic ESG approach for measuring and managing associated impacts • Joint engagement and monitoring based on authoritative and credible scientific input, to ensure consistency of messaging and necessary ambition. Over the next three years, asset owners have committed to carry out and disclose portfolio baseline assessments and develop climate strategies and action plans, including trajectories. Members are already collaborating to define best practice to reduce GHG emissions by engaging with portfolio companies and governments on public policies. The first quantitative joint AOA report will be published by December 2023, with individual member announcements of portfolio targets for 2025 being planned for 2020. Our Response – Managing transition risks We conduct detailed analysis in particularly energy-intensive sectors on emission profiles, possible proto-decarbonization pathways, and necessary technology shifts. The results are used for portfolio carbon analysis, the definition of decarbonization pathways, our corporate engagement process as well as management decisions. In 2019, we ran pilot portfolios on climate-related target-setting and steering which allowed us to identify data gaps, derive monitoring and steering approaches and metrics as well as potential investment management actions. Building on these insights, we are developing ways to monitor and steer the portfolio transition as part of the AOA. Furthermore, Allianz Investment Management is now working to close data gaps by sourcing own data. As an early step, Allianz has not financed coal-based business models since 2015. Equity stakes have been divested, fixed income investments made before that are in run-off, and no new investments have been allowed since then. Moreover, Allianz does not offer insurance for coal power plants or mines and requires all companies from both our Property & Casualty (P&C) insurance as well as proprietary investment portfolio to fully phase out coal by 2040 at the latest. If companies do not present a credible strategy to transition away from coal at a pace which is compatible with the scientific pathways of limiting global warming to 1.5°C, we are excluding them from our business. To this end, we developed a specific methodology with a third-party provider to create a dataset applicable to both insurance and investment business. Our criteria are being further tightened over time and explained in more detail in our public Statement on Coal-based business models. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 72. Our Response – Seizing opportunities Our business strategy includes systematically leveraging opportunities for financing a low-carbon and climate-resilient future, e.g. by investing in renewable energy, energy efficiency in real estate, and electric vehicle infrastructure, by providing insurance solutions to protect against physical climate impacts and to support low-carbon business models. For our proprietary investments, the ESG Functional Rule for Investments provides the foundation of integrating climate-related issues. It comprises Asset Manager Selection and systematic integration of climate and ESG factors into our investment decisions. Read more in our ESG Integration Framework. We are strategically investing in low-carbon assets for more than a decade now. This includes renewable energy, certified green buildings, and green bonds (see also the chapter Metrics). Through our Sustainable Solutions program, Allianz provides products and services that create shared value by improving people’s lives and/or delivering a positive environmental impact. Allianz is a pioneer in insuring low-carbon technologies. As part of our Sustainable Solutions approach we provide standardized and tailor-made insurance products and are insuring renewables in more than 60 countries. In 2019, we started analyzing technological and natural negative-emission solutions to accompany our net-zero commitment. Moreover, we are assessing how to use our expertise in investments in and insurance of renewable energy to achieve our RE100 target and tap potential business opportunities. While working to combat global warming and climate change, we also aim to reduce the impacts of climate risks. Here, we incentivize preventive measures to increase customers’ resilience and compensate for climate-related damages. Examples include Risk Consulting services offered by AGCS, our active support of the InsuResilience Global Partnership, or our work with the German Corporation for International Corporation (GIZ) to pilot innovative insurance solutions in emerging and developing countries. For more details on these and other examples, please see chapters 03.1 and 03.2 in our Sustainability Report 2019. Our Response – Active company dialogue, joining forces and targeted engagement Allianz Group is engaging investee companies as well as insurance clients in a variety of channels and formats. Besides the Group ESG Office also Allianz Investment Management has a dedicated engagement function for our proprietary investments. In addition, our internal asset managers Allianz Global Investors and PIMCO as well as our industrial insurer Allianz Global Corporate and Specialty are active stewards on climate-related matters. Our shareholder voting rights are exercised by Allianz Global Investors on our behalf. Details on voting policy and voting records can be found online. Allianz Global Investors conducts voting activities in line with their Global Corporate Governance Guidelines and generally supports proposals that encourage company boards and management to increase their transparency on and consideration of sustainability issues deemed material to the long-term performance of the company. Allianz Global Investors votes and engages on behalf of Allianz SE and all other asset management clients, and thus considers all clients in their approach. Please see details on Allianz Global Investors voting policy and records here. By leveraging the expertise of several units and departments, we want to create an impact in the real economy and encourage companies to define and implement climate strategies following scientific findings. By actively encouraging companies to set measurable climate targets that are transparently pursued, for example by joining the SBTi, we aim to not only reduce emissions in our proprietary investment portfolio but eventually in the real world. For more details on our engagement approach please see chapter 03.2 in our Sustainability Report 2019. For proxy voting records of AllianzGI, please refer to their overview web page. We are also joining forces with other asset owners in encouraging companies to implement such pathways. Our participation in the Transition Pathway Initiative (TPI), the engagement platform Climate Action 100+ as well as the Principles for Responsible Investment (PRI) connects us with like-minded investors and offers platforms for collaborative engagement. The AOA strives to be the hinge between these existing engagement platforms, asset owners, target verification initiatives and tools, as well as policy-makers. Besides helping to drive decarbonization through our insurance and investment business, we continually work towards improving the environmental performance of our own operations through active dialogue and engagement. In operationalizing our commitment through the RE100 initiative to source 100% renewable power for our group-wide operations by 2023, we have started to engage deeply with our suppliers and landlords and collaborate with peers and the RE100 initiative to achieve this target. Our long-established carbon reduction strategy to manage the emissions from our own operations also builds on the exchange and engagement with service providers, suppliers, and employees and includes adjusting internal processes and policies. Additionally, we require all vendors in our supply chain above a certain spend threshold to meet the standards of the Allianz Code of Conduct and include environmental and climate issues in a vendor screening. For further information please see our ESG Integration Framework. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.3 STRATEGY Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 73. Partnerships, memberships and financial industry engagement As signatories of the UN Global Compact, the Principles for Responsible Investment and the U.N. Principles for Sustainable Insurance (PSI) as well as founding member of the Finance Initiative of the UN Environment Programme (UNEP FI), we strive to further a systemic response to the U.N. Sustainable Development Goals and the Paris Agreement. Allianz is a board member of the PSI and Thematic Advisor on Climate Change of the Investment Committee of UNEP FI. Through our work with the G7 Investor Leadership Network (ILN) and Institutional Investors Group on Climate Change (IIGCC) as well as through our memberships in The B Team, the World Economic Forum Alliance of CEO Climate Leaders and others, we are encouraging other companies – both within our sector and beyond – to step up and improve their climate strategies and their climate disclosure as well as further develop our own. Beyond previously-mentioned initiatives with a strong decarbonization focus (AOA, SBTi, TPI and Climate Action 100+), Allianz is partnering with international organizations to drive climate-smart investment and insurance. One example is the Sustainable Development Investment Partnership (SDIP) to scale the use of blended finance in sustainable infrastructure investments in developing countries, an initiative coordinated by the World Economic Forum with support from the OECD. Another example is our three-year strategic alliance with the German Corporation for International Cooperation (GIZ) aiming at “Closing the Protection Gap” around climate risks in developing countries. We are also an active member of climate-related industry associations and initiatives like the Munich Climate Insurance Initiative, the Climate Finance Lab, the Accelerating Sustainable Finance initiative, the Geneva Association, ClimateWise, RE100, and others. For more details see section 06.2 of our Sustainability Report 2019 on our Memberships and Partnerships. Developing approaches on climate-related financial disclosure for insurance portfolios. As part of the PSI, together with 21 other insurance companies, Allianz is developing new approaches on risk assessment tools designed to enable the insurance industry to better understand the impacts of climate change scenarios on their lines of insurance business. The pilot will make use of the latest climate science, including some of the most advanced, forward-looking climate scenarios available. This shall help the industry to pioneer climate risk disclosures for insurance business in line with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD). Results are expected towards Q4 2020. 05.4 STRATEGY RESILIENCE, STRESS TESTS AND CLIMATE SCENARIO ANALYSIS. Climate change considerations are an integral part of our insurance and investment strategy which is informed by regular stress tests and additional climate-related scenario analyzes. We perform, for instance, sensitivity and scenario analyzes with time horizons up to 2050 and including scenarios ranging from 1.5°C to 4°C with internal models and with external tools. While material time horizons naturally differ depending on specific lines of business under consideration, the range of scenarios we apply allows to better assess the variety of risks and opportunities associated with climate change. We rely on both our own and on third-party scenarios provided by renown institutions such as the IPCC, IPR, EU, IEA or IRENA. We always aim to use a number of different scenario providers and scenarios for our analyzes to better reflect the range of potential future developments and reduce the sensitivity to individual scenario narratives and assumptions. To this end, it proved most useful to have access to an increasing number of scenarios in general and those aligned with 1.5°C pathways. When we conduct scenario alignment analyzes, we are adjusting our scenario selection with the guidance being developed within the AOA which will focus on 1.5°C scenarios with no or low emission overshoot. When conducting outside-in impact scenario analysis, we use a broader range of scenarios in terms of temperature outcomes. We apply scenarios for instance in analyzing decarbonization challenges and pathways of sectors and assets, potential stranded assets and technology developments across different sectors. Furthermore, we are using scenario data and analysis to develop forward-looking criteria for our investment decisions with regard to carbon-intensive business models as well as low-carbon opportunities. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.4 STRATEGY RESILIENCE, STRESS TESTS AND CLIMATE SCENARIO ANALYSIS Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 74. Further examples of the application of scenario analysis include: • Prospect and existing infrastructure assets undergo a thorough diligence along evaluation criteria taking into account an asset’s GHG emissions and potential impact on capital expenditures and performance. Assets are required to have a clear and time-lined strategy on how it will adapt to a decarbonizing world. • Allianz Real Estate conducted an energy and carbon performance overview of the direct real estate portfolio, including indicative decarbonization targets. • Allianz co-led with the PSI the development of an ESG guide to non-life underwriting, including a risk heat map for economic sectors which also covers climate-change related risk assessments. We will continue to scale up our efforts on stress-testing and scenario analysis. In 2020, we plan to increase these practices as part of our risk governance and will continue to conduct asset and portfolio scenario analysis for our direct infrastructure and real estate investments. For more details see for instance the ESG guide for non-life underwriting here. SCENARIO ANALYSIS IN ASSET MANAGER MANDATES: In early 2019, Allianz engaged with an asset manager with whom we hold a separate managed account as well as commitments to energy funds. Together with the asset manager – a specialized energy credit investor – portfolio projections were developed along with an investment portfolio pathway that is in line with an energy transition to keep global temperature rise at levels aligned with the Paris Agreement goals. Scenarios used in this context were IEA SDS and B2DS, Greenpeace Energy Revolution as well as scenarios drawn from the EU 2050 Long-Term Climate Strategy. Allianz will continue engaging with this and other asset managers, providing impetus to further develop their ESG efforts. This kind of approach can serve as a feasible and scalable model for institutional investor engagement to develop consistent decarbonization pathways and investment strategies accordingly. As a result, asset managers then engage with the companies they invest in as well as their peers to implement best practice criteria in their industry. CASE STUDY. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.4 STRATEGY RESILIENCE, STRESS TESTS AND CLIMATE SCENARIO ANALYSIS Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 75 05.5.1 OVERARCHING RISK GOVERNANCE As a general principle at Allianz, the responsibility for the ‘First Line of Defense’ rests with business managers in the related undertaking. They are responsible for both the risks taken and the returns from their decisions. Our ‘Second Line of Defense’ consists of independent global oversight functions. These are Risk, Actuarial, Compliance and Legal, which support the Board in defining the risk frameworks within which the business can operate. Group Audit forms the ‘Third Line of Defense’, independently and regularly reviewing risk governance implementation and compliance with risk principles, performing quality reviews of risk processes, and testing adherence to business standards, including the internal control framework. Climate-related risks are addressed as part of an overarching qualitative and quantitative risk reporting and controlling framework. Early-warning indicators are monitored and regularly reported to senior management through risk dashboards, risk capital allocation and limit consumption reports, where climate aspects become material. Supplemented by quarterly updates, senior management decides on a risk management strategy and related actions. One key tool is the Allianz Risk Capital Model, which amongst others, assesses natural catastrophe events for the upcoming year on subsidiary and Group level. Another instrument is the yearly Top Risk Assessment with the goal to identify and remediate significant threats to financial results, operational viability, reputation and the delivery of key strategic objectives, regardless of whether they can be quantified or not. Not only does this include immediate risks for the company, but also emerging risks, which may arise from technological development, new or changing environmental risks or socio-demographic changes. Climate-related factors are included in Top Risk Assessments conducted both on the level of operating entities as well as the Group. Additionally, relevant emerging risks are discussed by the GFRC or the GUC and following that, underwriting opportunities or mitigation measures might be implemented where necessary. For more details on these risk management processes please see the Risk and Opportunity Report on page 76-92. of the Allianz Group Annual Report 2019. 05.5.2 NATURAL CATASTROPHE RISK GOVERNANCE The Group uses a group-wide risk management framework which is also applicable for natural catastrophes. Each operating entity is responsible for controlling its exposure to individual catastrophes and defining its local reinsurance requirements, based on its local risk appetite and capital position. The respective cover is then provided by Allianz SE or one of its subsidiaries. At the Group level, the BoM reviews and approves the risk appetite. The reinsurance division is then responsible for designing and implementing Group catastrophe protections within given exposure limits. These covers take various forms and aim to protect the Group against excessive losses from major natural catastrophes. We are using special modeling techniques for natural catastrophes which combine portfolio data (geographic location, characteristics of insured objects and their values) with simulated natural disaster scenarios to estimate the magnitude and frequency of potential losses. Where such stochastic models do not exist, we use deterministic, scenario-based approaches to estimate potential losses. Experts at Allianz Reinsurance – including meteorologists, hydrologists, geophysicists, geographers and mathematicians – model around 50 natural catastrophe scenarios for Allianz Group, with data captured using best-in-class standards, mapping a range of perils and regions. The results provide the basis for group-wide risk monitoring, risk limits and subsequent business decisions. The top three perils contributing to natural catastrophe risk for Allianz Group as of 31 December 2017, 2018 and 2019 were: windstorms in Europe, floods in Germany, and earthquakes in Australia. Furthermore, we are conducting selected stressscenario analysis on natural catastrophe risks like hail or windstorms to be used in risk steering. Our natural catastrophe models are regularly updated according to newest scientific information. We are continuously improving the inclusion of global natural catastrophe hazard information, including climate, into underwriting decisions. 05.5.3 CLIMATE AND ESG RELATED RISK GOVERNANCE In addition to addressing climate-related risks as part of our overarching qualitative and quantitative reporting and controlling framework described above, a variety of comprehensive policies and processes foster integration of climate-related risks and opportunities. Our ESG approach integrates climate- and sustainability-related considerations by applying group-wide corporate rules and ESG instruments across all our underwriting, investment and asset management activities. These guidelines, such as the Allianz ESG Functional Rule for Investments, are regularly updated and also part of the Allianz Standard for Reputational Risk and Issues Management, which establishes a core set of principles and processes for the management of reputational risks and issues within the Group. The publicly available third edition of the Allianz ESG Integration Framework further increases transparency around our internal processes and guidelines related to our ESG approach. We also rely on external providers for data related to climate, ESG and reputational risks. As an additional layer, building on the explanations in the Governance chapter, the Climate Integration team within the Corporate Responsibility department as well as the ESG Task Forces work on early identification, measurement and business integration of risks as well as of opportunities arising from physical climate change and the low-carbon transition. Examples include regulatory activity around climate change. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.5 RISK AND OPPORTUNITY MANAGEMENT Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 76 and sustainable finance, the integration of ESG and climate considerations in business processes as well as particular projects and others. Substantial topics are channeled to the ESG Board to inform strategic decision-making. Risk and opportunity considerations are supplemented by additional processes, including: • The annual Allianz Risk Barometer by Allianz Global Corporate & Specialty, a survey amongst corporate clients, brokers, industry trade organizations, risk consultants, underwriters, senior managers and claims experts, in total collecting more than 2,700 responses from 102 countries and 22 industry sectors. Climate change, as a cross-cutting risk driver, climbed again in the ranking reaching its highest-ever position (#7). It naturally links to natural catastrophes (#4) as a key risk to property business, but also gains increasing importance in shaping emission-intensive industries in terms of transition risks. Business interruption as another overarching topic, with potential triggers also found in climate-related events, ranked highest together with cyber incidents. • The Global Claims Review, which analyzes more than 470,000 claims in over 200 countries and territories. This Review found wind storms as the only natural catastrophe event to appear in the top 10 causes of loss. Natural catastrophes in total account for 5% of claims in number and 13% of total value of all claims and represent some of the largest exposures to the energy as well as property and engineering segments. Environmental- and climate change-related liability issues are seen to potentially increase in future. • In addition, Allianz is a member of the Emerging Risks Initiative in the CRO Forum. This group defines climate change as a trend which might result in emerging risks for non-physical climate risk. • Our NGO Dialogue, which provides ad hoc and scheduled exchanges with NGOs on sustainability matters. • A regular materiality assessment of emerging ESG and climate issues and opportunities. • On-going dialogues with policy-makers, NGOs and academia on key economic, governmental, environmental and societal issues, including climate change to contribute to solutions for a sustainable tomorrow. For our proprietary investments, the ESG Functional Rule for Investments provides the foundation of integrating climaterelated issues. It comprises asset manager selection and systematic integration of climate and ESG factors into our investment decisions. Our portfolio-wide ESG assessment processes and data, including a variety of climate and carbon data (see chapter Metrics), enables continuous monitoring and steering of performance at security and portfolio level. For listed assets, we use ESG scores and climate indicators to manage ESG risks and opportunities in our proprietary portfolio. If certain assets score below defined thresholds, further investigation is mandatory under central monitoring, leading to a variety of potential measures, including engagement with the respective companies. For more details on our activities as a sustainable insurer and investors, see chapters 03.1 and 03.2 in our Sustainability Report 2019. 05.6 METRICS AND TARGETS. Our approach to the low-carbon transition will be steered by our commitment to set science-based emission reduction targets as well as to reaching net-zero emissions in our proprietary investment portfolio by 2050. To this end, we will set ourselves long-term and intermediary emissions reduction targets for our business operations as well as our proprietary investment portfolio in line with the Paris Agreement’s target of limiting global warming to 1.5°C. We expect publication of carbon reduction targets for our investment portfolio as part of the AOA towards the end of 2020, since the target-setting methodology for financial institutions is yet to be defined by sectoral initiatives like SBT for Financial Institutions within the SBTi. The carbon footprint of our proprietary listed equity portfolio is newly included in our disclosure this year. Going forward, we will be publishing metrics, targets and our performance related to our AOA membership. Currently, we are expecting this to cover the asset classes listed equity, corporate bonds and real estate and potentially also sovereign bonds. The AOA is also striving to have engagement-related targets. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.6 METRICS AND TARGETS Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 77 05.6.2 METRICS To monitor, assess and steer climate-related aspects of the economy, Allianz uses a variety of indicators across the different lines of business. Our complete list of sustainability-related KPIs can be found in section 06. Investment portfolio composition On the investment side it is helpful to contextualize, for instance, our commitment to the U.N.-AOA with mainstream financial information like the spread across different asset classes, jurisdictions and sectors. This information can be accessed via the FY 2019 annual report documents, for instance the financial supplement and the corresponding analyst presentation here. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.6 METRICS AND TARGETS 05.6.1 TARGETS AND TARGET PERFORMANCE. TARGETS 2018 PROGRESS & ACHIEVEMENTS 2018 TARGETS 2019 PROGRESS & ACHIEVEMENTS 2019 TARGETS 2020 AND BEYOND. Investment strategy • Investigate further alignment of investment strategy with a 2ºC target • Committed to Science Based Targets initiative in May 2018 • Set long-term climate targets for proprietary investments and business operations in line with well below 2ºC • Run pilot portfolios on climate-related targetsetting and steering • Actively contributed to setting up U.N.-convened Net-Zero Asset Owner Alliance (AOA), a group of asset owners committed to reduce the GHG emissions of their investment portfolios to net-zero by 2050 • Ran pilot portfolios on climate-related target-setting and steering, results used in operationalization of AOA commitment • Raised our carbon reduction target ambition to align with 1.5°C-compatible pathways. • Set long-term and intermediary climate targets (2025) for proprietary investments in line with 1.5ºC as soon as AOA has defined framework for target-setting (expected for Q4 2020) • Thereafter, regularly report on progress and review targets at least every five years in line with Paris Agreement Article 4.9 • Reduce GHG emissions of proprietary investment portfolio to net-zero by 2050. Coal phase-out • Implement a group-wide divestment from coal-based business models • Decided to no longer insure single-site coal-fired power plants and coal mines that are being operated or planned as of 2018 • Further strengthened the coal exclusion approach in investments in 2018 • Tightened restrictions on coal, introduced a longterm action plan for coal until 2040 • Divested additional 61.5 million Euro in equities and put an additional 906.7 million Euro in fixed income in run-off • Update coal exclusion lists with most recent market data • Fully phase out coal-based business models across our proprietary investments and property-casualty portfolios by 2040 at the latest along well below 2ºC pathway • Worked on the implementation of coal exclusion approach in proprietary investments and P&C underwriting • On-boarded data provider specifically for identifying companies with coal-based business models • Divested additional 14 million Euro in equities and put another 236 million Euro in fixed income investments in run-off • Adjusted our coal phase-out plan to be aligned with our increased ambition of 1.5°C compliance • Fully phase out coal-based business models across our proprietary investments and P&C portfolios by 2040 at the latest along 1.5ºC pathway • Reduce threshold for coal-based business models for P&C insurance as well as investment portfolios from current 30% to 25% as of 31 December 2022 • Engage with companies in proprietary investment as well as P&C portfolios to move away from coal. Scenario analysis for insurance • Initiate PSI project to develop new approaches on climate risk assessment tools for the insurance industry • Gathered with 21 other insurance companies under the roof of PSI to develop new approaches on climate risk assessment tools for the industry and secured third-party support • Final report of PSI project expected by Q4 2020 Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 78. Listed equity carbon-related indicators incl. carbon footprint As of this reporting year, we are introducing disclosure on our listed equity portfolio. Within our entire portfolio, listed equities are the asset class we found most exposed to transition risks in previous analyzes. We are therefore providing general listed equity portfolio indicators as well as emission-related indicators. We are expecting to enhance this disclosure in upcoming reporting cycles, also in light of our upcoming AOA targets and reporting. * ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.6 METRICS AND TARGETS. Methodology and scope The portfolio carbon footprint is calculated based on the following measures for scope 1+2 emissions in line with the GHG Protocol. Emission-related data is provided by MSCI. ABSOLUTE PORTFOLIO CARBON FOOTPRINT: ∑ n €investmenti * issuer’s emissionsi i = 1 issuer’s enterprise valuei. RELATIVE PORTFOLIO CARBON FOOTPRINT (I.E. PORTFOLIO CARBON FOOTPRINT PER EUR INVESTED): ∑ n €investmenti * issuer’s emissionsi i = 1 issuer’s enterprise valuei. Portfolio market value. WEIGHTED AVERAGE CARBON INTENSITY (I.E. PORTFOLIO WEIGHTED AVERAGE CARBON INTENSITY PER EUR INVESTED): Portfolio weighted average carbon intensity per revenue = n ∑ i = 1. Portfolio weighti issuer’s emissionsi issuer’s salesi. Enterprise value is defined as the sum of the market capitalization of common stock at fiscal year end, the market capitalization of preferred equity at fiscal year-end, and the book values of total debt and minorities’ interests minus the cash and cash equivalents held by the enterprise. Enterprise value is sourced from Bloomberg. Mutual Equity Funds and similar products like ETFs are out of scope of FY2019 reporting, which represent 5.8 billion Euro in the global Allianz Equities Portfolio. We estimate the absolute emissions of these products at around 1.3 million tonnes CO2e, based on the emissions of the MSCI ACWI index. We expect to include reporting on the carbon footprint of these products in FY2020 reporting. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 79. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.6 METRICS AND TARGETS. LISTED EQUITY PORTFOLIO INDICATORS Indicator Unit 2019 2018 Δ y-o-y. Equities Portfolio AuM € bn 39.53 32.93 +20.0% Share of total AuM % 5.0% 4.7% +0.3%p Absolute Emissions mn t CO₂ 3.904 4.012 -2.7% Relative Emissions t CO₂/€ mn invested 98.76 121.84 -18.9% Weighted Average Carbon Intensity t CO₂/€ mn invested 155.42 177.76 -12.6% Emission data coverage of equities AuM % 99.8% 99.5% +0.3%p all values as of December 31. While our equity portfolio increased in value by 20% from 2018 to 2019, mostly driven by price performance, absolute emissions fell by 2.7%. This is a good result when compared with the global growth in emissions in recent years. Our two relative indicators have improved quite significantly, but a notable contribution comes from the general growth in company valuations. Because relative indicators are sensitive to changes in either direction in both company valuation and company sales, we believe absolute emissions are the most meaningful measure of the carbon performance of our portfolio. In addition, our current emission scope is 1+2 and thereby does not consider emissions in the wider value chain, which can be significant for many sectors. While data quality for scope 3 emissions is still low, we believe there is merit in sector-specific scope 3 indicators and data to determine if companies and their products are on a pathway consistent with our 1.5°C ambition. We are working to develop these indicators also as part of the AOA. SECTOR-SPECIFIC LISTED EQUITY PORTFOLIO INDICATORS Indicator Unit 2019 2018 Δ y-o-y. Total AuM in 5 sectors with highest owned absolute emissions in equities portfolio € bn 6.01 5.29 +13.7% Absolute Emissions of 5 sectors with highest owned absolute emissions in equities portfolio mn t CO₂ 2.584 2.611 –1.0% Number of issuers in 5 sectors with highest owned absolute emissions in equities portfolio 381 315 +21.0% Of these: SBTi Signatories 35 28 +25.0% SBTi Targets Set 22 17 +29.4% Under engagement by Climate Action 100+ 58 52 +11.5% Split of sectors with highest owned absolute emissions in equities portfolio Oil & Gas Producers Sector AuM € bn 1.96 1.98 –1.0% Share of equity AuM % 5.0% 6.0% –1.0%p Absolute Emissions mn t CO₂ 0.780 0.775 +0.7% Relative Emissions t CO₂/€ mn invested 398.10 391.40 +1.7% Chemicals Sector AuM € bn 1.96 1,70 +15.7% Share of equity AuM % 5.0% 5.2% –0.2%p Absolute Emissions mn t CO₂ 0.501 0.542 –7.7% Relative Emissions t CO₂/€ mn invested 255.21 319.70 -20.2% Construction & Materials Sector AuM € bn 1.13 0.74 +52.8% Share of equity AuM % 2.9% 2.2% +0.7%p Absolute Emissions mn t CO₂ 0.517 0.312 +65.5% Relative Emissions t CO₂/€ mn invested 458.52 423.26 +8.3% Industrial Metals & Mining Sector AuM € bn 0.17 0.16 +4.7% Share of equity AuM % 0.4% 0.5% –0.1%p Absolute Emissions mn t CO₂ 0.428 0.577 –25.8% Relative Emissions t CO₂/€ mn invested 2,524.17 3,560.70 –29.1% Electricity Sector AuM € bn 0.79 0.71 +11.2% Share of equity AuM % 2.0% 2.2% –0.2%p Absolute Emissions mn t CO₂ 0.357 0. 404 –11.5% Relative Emissions t CO₂/€ mn invested 451.71 567.85 –20.5% all values as of December 31. In addition to the above figures, it is noteworthy that only 10 of almost 3,000 issuers in our equity portfolio account for 40% of the absolute emissions of the portfolio, while only accounting for 7% of the AuM. This also explains why we believe that the engagement of investee companies to decarbonize portfolios is essential. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 05.1 Highlights 05.2 Governance Overarching and board-level governance. Business and management-level governance. Remuneration and climate competence 05.3 Strategy Our strategic response to climate change. Climate-related risks and opportunities. Our response 05.4 Strategy resilience, stress tests and climate scenario analysis 05.5 Risk and opportunity management Overarching risk governance. Natural catastrophe risk governance. Climate and ESG governance 05.6 Metrics and targets Metrics. Business operations. Risk 06 Data and performance 80. Investment and insurance metrics (list not exhaustive) • Revenue generated from our sustainable solutions, including the number of products offered: 1.33 billion Euro, 203 products • Total sustainability-themed investments, including climate aspects: 29.4 billion Euro • Amount of green assets in the portfolio, all with growth aspirations: – Debt and equity investments in renewable energy: 7.2 billion Euro, an increase by 0.4 billion Euro from 2018 – Number of renewable energy parks in portfolio: 99 – Capacity of renewable energy parks in portfolio: 1.95 GW – Debt and equity investments in green buildings: 14.6 billion Euro – Investments in green bonds: 5.6 billion Euro • In 2015, we stopped financing coal-based business models. Amount of securities affected: – Fixed-income securities in run-off: 5.9 billion Euro – Fixed-income securities added to run-off in 2019: 236.0 million Euro – Total equity securities divested: 340.5 million Euro – Equity securities additionally divested in 2019: 14.0 million Euro • Volume of Sustainable and Responsible Investments (SRI) for our third-party assets: 157.7 billion Euro. Furthermore, we analyze our investment portfolio with a broad range of climate- and carbon-related data and indicators from sources like MSCI ESG, TPI, Influence Map, Carbon Tracker and SBTi (list not exhaustive). The indicators are absolute and relative carbon footprint information, fossil fuel reserves including potential emissions, carbon performance, risk and risk management indicators, low-carbon opportunities scores and decarbonization targets. For more details on our climate and sustainability-related metrics and targets see section 06 of our Sustainability Report 2019. 05.6.3 BUSINESS OPERATIONS. Allianz continually strives to improve the environmental and climate performance of its business operations. A group-wide Environmental Management System provides the framework, including 47 KPIs related to, amongst others, GHG emissions per employee, electricity consumption, share of renewable energy and number of carbon certificates used to offset remaining emissions to be carbon-neutral. More information on our environmental management can be found in section 04.7. ALLIANZ’S CLIMATE-RELATED FINANCIAL DISCLOSURE 05.6 METRICS AND TARGETS. As part of the Allianz Sustainability Report, an assurance review of our climate-related financial disclosure was conducted by our auditor. 81. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information 06 DATA AND PERFORMANCE 82. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. CLIMATE INTEGRATION Topic Targets 2019 Progress and Achievements 2019 Targets 2020 and beyond Reference Sections / Data Table. CLIMATE STRATEGY • Set long-term climate targets for our proprietary investments and business operations in line with the Paris Climate Agreement’s goal to limit global warming to well below 2°C. • In the first half of 2019, we will run pilot portfolios on climate- related target-setting and steering which will ideally allow us to identify data gaps, derive monitoring and steering approaches and metrics as well as potential investment management actions. • Actively contributed to setting up the UN-convened Net-Zero Asset Owner Alliance, a group of asset owners committed to reduce the GHG emissions of their investment portfolios to net-zero by 2050, consistent with a maximum temperature rise of 1.5°C. • In the first half of 2019, we ran pilot portfolios on climate-related target-setting and steering which allowed us to identify data gaps, derive monitoring and steering approaches and metrics as well as potential investment management actions. The results of this will now be used in the operationalization of the Asset Owner Alliance commitment. • Set long-term and intermediary climate targets for our proprietary investments and business operations in 2020 in line with the Paris Climate Agreement’s goal to limit global warming to 1.5°C. • Reduce GHG emissions of proprietary investment portfolio to net-zero by 2050. Sections 02.2; 05. PSI COLLABORATION ON CLIMATE RISKS • Together with the UN Principles for Sustainable Insurance, we will furthermore develop new approaches on climate risk assessment tools for the insurance industry. This shall enable a better understanding of the impacts of climate change scenarios on the different lines of insurance business. • Gathered 21 insurance companies under the roof of the UN Principles for Sustainable Insurance to jointly develop new approach on climate risk assessment tools for the industry and secured 3rd-party support. • Publish final report of Principles for Sustainable Insurance project expected by Q4 2020. Section 03.1.1. CLIMATE RISK INSURANCE • Develop flood insurance product for public assets in Accra, Ghana. • Insurance product to protect public assets against floods in Accra, Ghana, developed within the framework of our three-year strategic alliance with GIZ. • Propose flood insurance for public assets in Accra, Ghana; propose integrated risk management including flood insurance to SMEs in industrial zones in Morocco. Section 03.1.2. COAL-BASED BUSINESS MODELS • Update coal exclusion lists with most recent market data. • Fully phase out coal-based business models across our proprietary investments and property-casualty (P&C) portfolios by 2040 at the latest. • Worked on the implementation of our coal exclusion approach in proprietary investments and P&C underwriting. • On-boarded data provider specifically for identifying companies with coal-based business models. • Divested an additional 14.0 million Euro in equities and put another 230 million Euro in fixed income investments in run-off. • Fully phase out coal-based business models across our proprietary investments and P&C portfolios by 2040 at the latest. • Reduce the threshold for coal-based business models for P&C insurance as well as investment portfolios from current 30% to 25% as of 31 December 2022. • Engage with companies in proprietary investment as well as P&C portfolios to move away from coal. Section 03.2.1 Table ESG–10. RENEWABLE ENERGY • Increase debt and equity investments in renewable energy in the mid-term. • Investments of 7.2 billion Euro (2018: 6.8 billion Euro) in renewable energy. Section 03.2.2 Table ESG–8 • Achieve 100% green electricity for our operations by 2023 within Allianz Group. • Achieved a share of 49% green electricity of total electricity used (2018: 45%) within Allianz Group. • Achieve 100% green electricity for our operations by 2023 within Allianz Group. Section 04.7 Table ENV–5 ENERGY CONSUMPTION • Reduce energy consumption by 30% per employee by 2020 compared to 2010 within Allianz Group. • Achieved a reduction of 37% in 2019 (2018: 34%) compared to 2010 within Allianz Group. • Reduce energy consumption by 30% per employee by 2020 compared to 2010 within Allianz Group. • In 2020, we will develop our next set of environmental targets up until 2025. Section 04.7 Table ENV–3. GREENHOUSE GAS (GHG) EMISSIONS PER EMPLOYEE • Reduce CO2 emissions by 30% per employee by 2020 compared to 2010 within Allianz Group. • Achieved a reduction of 35% in 2019 (2018: 27%) compared to 2010 within Allianz Group. • Reduce CO2 emissions by 30% per employee by 2020 compared to 2010 within Allianz Group. • In 2020, we will develop our next set of CO2 emission targets up until 2025, in line with the latest climate science. Section 04.7 Table ENV–2. NFR, Group Annual Report 2019, p. 441. PAPER CONSUMPTION • Reduce paper consumption by 40% per policy compared to 2014 by 2020 within Allianz Group. • Achieved a reduction of 53% in 2019 (2018: 41%) compared to 2014 within Allianz Group. • Reduce paper consumption by 40% per policy by 2020 compared to 2014 within Allianz Group. • In 2020, we will develop our next set of environmental targets up until 2025. Section 04.7 Table ENV–9 1 Additional details can be found in the Group Annual Report 2019, Combined Separate Non-Financial Statement (NFR). DATA AND PERFORMANCE: 06.1 OUR TARGETS AND ACHIEVEMENTS 83. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. SOCIAL INCLUSION Topic Targets 2019 Progress and Achievements 2019 Targets 2020 and beyond Reference Sections / Data Table. STRATEGY • Develop measurement tools to address robust numbers for beneficiaries. • Began reporting on the number of beneficiaries. • Set clear Business and Social KPIs and measurement systems to track outcome. Sections 02.3; 04.9 • Further develop the Social Pillar strategy to connect with the business and its operations. • Under the sponsorship of one Board Member and direction from the ESG Board a Task Force was formed to further continue the work. • Develop and announce the improved Social Pillar approach and connection with the business and its operations. Sections 02.3; 04.9. SOS CHILDREN’S VILLAGES • Increase partnerships with SOS Children’s Villages to 31 countries by 2021. • Increased our joint reach by fostering eight new partnerships in six new countries. • Continue expansion of partnerships with SOS Children’s Villages to 31 countries by 2021. Sections 02.3; 04.9 • Continue to support overall SOS disaster preparedness and response in 2019. • Supported implementation of SOS disaster preparedness and response in 2019. • Continue to support SOS disaster response and assess needed support for disaster preparedness. Sections 02.3; 04.9 • Further expand YouthCan! partnerships to more countries. • Further strengthened our participation by fostering four new YouthCan! partnerships. • Continue to expand YouthCan! partnerships in 2020. Sections 02.3; 04.9 • The fourth Allianz World Run raised 300,000 Euro for SOS Children’s Villages. Sections 02.3; 04.9 ENCOURAGING FUTURE GENERATIONS PROGRAM • Continue with Social Innovation Fund to encourage operating entities to on-board with the strategy. • Expand the focus on employee engagement with the Social Innovation Fund. • Since its launch, the Social Innovation Fund (SIF) has provided 0.5 million Euro to projects in over 20 countries to foster local partnerships and benefit society through innovative solutions for children and youth. • Re-purpose the Social Innovation Fund together with OEs regarding conclusion of the renewed Social Pillar approach. • Re-launch the Social Innovation Fund in 2020. Sections 02.3; 04.9 • The second Encouraging Future Generations Day is planned to include various stakeholders to address Allianz’s social strategy and create dialog among key stakeholders. • The second Encouraging Future Generations Day was successfully completed with over 100 external stakeholders and over 1,000 views on YouTube broadcast. • Combine the Encouraging Future Generations Day with the annual Sustainability Forum to increase efficiency in reach and consistency among stakeholders. Sections 02.3; 04.9 • Encouraging Future Generations Day to serve as the final pitch day for the Investment Ready Program participants where one will win the 40,000 Euro grant from Allianz. • Successfully concluded the second cycle of the Investment Ready Program. • Partnerships of the first cycle were concluded as of March 2019. • Re-purpose the Allianz Future Generations Award together with OEs regarding conclusion of the renewed Social Pillar approach. • Re-launch the Allianz Future Generations Award in 2020. Sections 02.3; 04.9. EMERGING CONSUMERS • Continue expansion in the emerging consumers market Africa, Asia and Latin America. • Continued to expand our access to emerging consumers with new digital offerings by collaborating with insurtechs, mobile network operators, mobility platforms, and other digitally operating partners. Following the investment in 2017, the strategic partnership with BIMA was further deepened in 2019 when we started underwriting BIMA portfolios in several markets. • Continue expansion in Africa, Asia, and Latin America and to support a growing number of emerging consumers. Section 03.1.5 Table ESG-6. DATA AND PERFORMANCE: 06.1 OUR TARGETS AND ACHIEVEMENTS 84. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. SOCIAL INCLUSION CONTINUED Topic Targets 2019 Progress and Achievements 2019 Targets 2020 and beyond Reference Sections / Data Table. EMPLOYEE VOLUNTEERING PROGRAM • Online Mentoring Program to be rolled out on a global scale with 100 youth and mentors. • Under the sponsorship of one Board Member a Task Force was formed to redefine the community engagement and strategically position at Allianz. • Improve global approach and communicate to OEs. • Develop a framework to support OEs in elevating community engagement activities on local level. Sections 02.3, 04.9 Table CC-2. BUSINESS INTEGRATION Topic Targets 2019 Progress and Achievements 2019 Targets 2020 and beyond Reference Sections / Data Table. PSI INDUSTRY STANDARD • Launch global consultation on final draft for ESG insurance industry standard. • Launched final consultation on ESG standard for the insurance sector with UNEP FI PSI. • UNEP FI PSI to publish ESG standard for insurance industry by Q1 2020 and update industry standard on an annual basis. Section 03.1.1. ESG ENGAGEMENTS • Conducted 49 engagements with investee companies on ESG grounds. Section 03.2.1 Tables ESG-12; ESG-13; ESG-14; ESG-15 ESG INTEGRATION • Review referral and assessment process. • 602 transactions referred and assessed for ESG risks. • Continued to train underwriters and relevant employees on our ESG screening processes. • Continue to implement and improve our ESG screening process into insurance, investment and procurement transactions. Sections 02.4; 03.1.1; 03.2.1 Tables ESG-1; ESG-2; ESG-3. SUSTAINABLE INVESTMENTS • Increased our proprietary sustainability-themed investments to 29.4 billion Euro from 25.1 billion Euro (17.1% increase). • Increased our third-party sustainable investment assets under management to 157.7 billion Euro from 146.8 billion Euro in 2018. Section 03.2.2 Table ESG-8. ESG IN REAL ESTATE • Developed ESG Guidance for Real Estate Investments to further drive ESG risk management for real estate transactions. • Continue global carbon accounting and reporting project to improve environmental reporting across its portfolio. Section 03.2.3 Table ESG-8 SUSTAINABLE SOLUTIONS • Offered 203 sustainable insurance and asset management solutions (2018: 172). • 1.33 billion Euro revenue generated through Sustainable Solutions. • Continue to increase our sustainable solutions offer worldwide. Section 03.4 Tables ESG-4; ESG-5; ESG-6. HUMAN RIGHTS • Continue to apply ESG Sector Guidelines and Human Rights Guidelines for sensitive countries into all business lines and core processes dealing with insurance and investment decisions. • Conduct annual review for U.K. and Group Modern Slavery Statements in 2019. • Develop human rights guidance within PSI ESG in underwriting project for property-casualty insurance in 2019. • No issues were raised regarding human rights issues in accordance with the Modern Slavery Act in 2019. • The consultation draft for the PSI-ESG in Underwriting project that includes human rights-relevant criteria was published in February 2019. • Continue to apply ESG Sector Guidelines and Human Rights Guidelines for sensitive countries into all business lines and core processes dealing with insurance and investment decisions. • Conduct a review of U.K. and Group Modern Slavery Statement in 2020. • Publish a full first version of the PSI-ESG in Underwriting Guidance for property-casualty insurance by the second quarter of 2020. Section 02.4 Allianz ESG Integration Framework. VENDOR CODE OF CONDUCT • 97% percent of global suppliers, representing a total spend of 1.8 billion Euro, committed to the Allianz Vendor Code of Conduct. Section 04.8. DATA AND PERFORMANCE: 06.1 OUR TARGETS AND ACHIEVEMENTS 85. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. OTHERS1. Topic Targets 2019 Progress and Achievements 2019 Targets 2020 and beyond Reference Sections / Data Table. EMPLOYEE MATTERS – IMIX • 73% IMIX score in 2021 within Allianz Group. • 73 % IMIX score in 2019 within Allianz Group 2018: 71%). • We are well on track to achieve our 2021 targets for the Allianz Group and continue to roll out global initiatives with the goal to maintain, if not further improve, the results. • 73% IMIX score in 2021 within Allianz Group. Section 04.1 Table HR-10. NFR, Group Annual Report 2019, p.492. GLOBAL NPS PERFORMANCE, ALLIANZ GROUP • 75% of Allianz Group business segments of our entities score above market or in a loyalty leader position in 2019 (2018: 75%). • In order to ensure that our global ambitions 2019 will be met, dedicated ”NPS activation workshops” will be organized in the first half of 2019 with all OEs in scope to identify performance gaps and define concrete action plans. • 70 % of the business segments of Allianz Group’s entities scored above market or in a loyalty leader position (2018: 74 %). This drop in share of outperforming segments is due to four segments having decreased to “at market,” while two improved from an “at market” to an “above market” position. • 75% plus of Allianz Group business segments of our entities score above market or in a loyalty leader position in 2021. • In order to ensure we will meet our global ambitions for 2021, dedicated ”NPS activation workshops” will continue to be organized in 2020 with all OEs in scope to identify performance gaps and set up concrete action plans. Section 04.4 Table NPS-1. NFR, Group Annual Report 2019, p.462. DATA PRIVACY CONCEPTS • Continued efforts that began in 2016 as we worked with Allianz Group companies and other Group centers on the group-wide implementation of the Allianz Privacy Renewal Program (APRP). • Began the transition to a business-as-usual environment since we approached full implementation of the APRP in the European Economic Area. • Accordingly, the emphasis and, along with it, resources have been shifted from the implementation of the privacy program to monitoring activities, including onsite reviews. These efforts focus on the maturation of our group-wide privacy activities. • Implement the APRP across all Allianz Group companies by mid-2020. • Target a sample of Allianz OEs for data privacy reviews in 2020. Section 04.2. NFR, Group Annual Report 2019, p.472. COMPLIANCE • Completion of the 3rd cycle of the integrated compliance risk scoping and assessment activities as part of the company’s Integrated Risk and Control System (IRCS) processes. • Review and simplify the current risk scoping and maturity assessment processes. • Completion of the 3rd cycle of our integrated compliance risk scoping and assessment activities as part of Allianz’s IRCS. • Complete the 4th cycle of the integrated compliance risk scoping and assessment activities as part of the company’s IRCS process in 2020. • Continue to focus on assessing the effectiveness of the implemented mitigating measures via the risk and maturity assessment. Section 04.5. NFR, Group Annual Report 2019, p.502 1 These targets and achievements are related to other parts of our corporate strategy, i.e. the Renewal Agenda or our HR approach. 2 Additional details can be found in the Group Annual Report 2019, Combined Separate Non-Financial Statement (NFR). DATA AND PERFORMANCE: 06.1 OUR TARGETS AND ACHIEVEMENTS 86. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. Below is an excerpt of some of our memberships and partnerships. Memberships Founders Circle, The B Team Investor Signatories, ClimateAction100+ (CA100+) Founding Member, Climate Leadership Council (CLC) Member, ClimateWise Member, The Global Innovation Lab for Climate Finance Member, Institutional Investors Group on Climate Change (IIGCC) Member, Insurance Development Forum (IDF) Member, InsuResilience Global Partnership Member, Investment Leaders Group (ILG) Member, Investor Leadership Network – A G7 initiative (ILN) Member, Munich Climate Insurance Initiative (MCII) Member, Portfolio Decarbonization Coalition (PDC) Signatories, Principles for Responsible Investment (PRI) Signatory, Principles for Sustainable Insurance (PSI) Member, RE100 Member, Science Based Targets initiative (SBTi) Member, Stifterverband der Deutschen Wissenschaft Signatory, UN Global Compact (UNGC) Founding Member, UNEP Finance Initiative (UNEP FI) Member, World Economic Forum Alliance of CEO Climate Leaders Founding Member, U.N.-convened Net-Zero Asset Owner Alliance (AOA) Member & Co-chair, U.N.-convened Global Investors for Sustainable Development (GISD) Alliance Supporter, Transition Pathway Initiative (TPI) Supporter, Task Force on Climate-related Financial Disclosures (TCFD) Partnerships Partnership with the German Corporation for International Cooperation (GIZ) Partnership with Impact Hub Munich (concluded as of March 2019) Partnership with SOS Children‘s Villages International Partnership with World CleanUp Day. DATA AND PERFORMANCE: 06.2 MEMBERSHIP AND PARTNERSHIPS. GRI 102-12, 102-13, 102-40 87. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. This section contains data related to the ESG performance of Allianz Group. Data in this section is part of the Sustainability strategy and governance and Sustainability in core business activities sections. Table ESG–1 ESG REFERRALS AND ASSESSMENTS As of December 31 2019 2018 2017. Insurance 474 470 539 Investments 64 52 43 Procurement1 58 109 n/a Other 6 0 1. Total 602 631 583. Table ESG–3 ESG REFERRALS AND ASSESSMENTS BY SENSITIVE BUSINESS AREA As of December 31 2019 2018 2017. Proceed Proceed with mitigation Do not proceed Total Proceed Proceed with mitigation Do not proceed Total Proceed Proceed with mitigation Do not proceed Total. Agriculture, Fisheries and Forestry 22 14 1 37 9 13 0 22 11 15 1 27 Animal Testing 1 0 2 3 2 0 0 2 0 0 0 0 Animal Welfare 0 0 0 0 3 1 0 4 2 2 0 4 Betting and Gambling 3 3 0 6 6 1 0 7 6 3 0 9 Clinical Trials 10 11 0 21 9 7 0 16 13 11 2 26 Defense 26 18 2 46 26 21 5 52 31 22 5 58 Human Rights 6 12 4 22 4 16 3 23 7 8 0 15 Hydro-Electric Power 11 7 3 21 6 11 1 18 11 10 2 23 Infrastructure 47 33 9 89 45 38 36 119 58 61 10 129 Mining 19 63 13 95 21 61 7 89 34 75 8 117 Nuclear Energy 2 3 2 7 3 0 0 3 4 6 1 11 Oil and Gas 24 39 4 67 19 29 3 51 24 38 2 64 Sex Industry 1 0 0 1 0 0 0 0 0 0 0 0 Procurement Transactions1 58 0 0 58 109 0 0 109 n/a n/a n/a n/a Other ESG and Reputational Issues 91 30 8 129 74 32 10 116 61 31 8 100. Total 321 233 48 602 336 230 65 631 262 282 39 583 1 Procurement activities have only been included in the scope of the ESG referral and assessment process since 2018. Table ESG–2. ESG REFERRALS AND ASSESSMENTS: ASSESSMENT OUTCOMES % share of total referrals. As of December 31 2019 2018 2017. Proceed 53.3 53.2 44.9 Proceed with mitigation or additional conditions 38.7 36.5 48.4 Do not proceed 8.0 10.3 6.7. DATA AND PERFORMANCE: 06.3 ESG PERFORMANCE DATA. GRI 412-3 88. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. Table ESG–4 REVENUES FROM SUSTAINABLE SOLUTIONS1 € mn. As of December 31 2019 2018 2017. Sustainable Insurance Solutions2 927.8 881.0 456.6 Insurance solutions with a sustainability component 364.3 371.2 389.8 Emerging Consumer Solutions3 40.7 26.4 27.7. Total 1,332.9 1,278.6 874.0. Table ESG–5 NUMBER OF SUSTAINABLE SOLUTIONS As of December 31 2019 2018 2017. Sustainable Insurance Solutions2 97 94 93 Insurance solutions with a sustainability component 35 37 37 Emerging Consumer Solutions3 28 16 17 Sustainable Asset Management Solutions2 43 25 23. Total 203 172 170. Table ESG–6 EMERGING CONSUMER BUSINESS As of December 31 2019 20184 2017. Gross Written Premiums (GWP) € mn 410.1 310.3 256.4 thereof from consolidated entities5 € mn 40.7 26.4 27.7 thereof from non-consolidated entities € mn 369.4 283.9 228.8 No. of in force insured people 49,369,411 44,110,068 58,734,168 thereof from consolidated entities5 9,988,707 7,072,399 7,381,796 thereof from non-consolidated entities 39,380,704 37,037,669 51,352,372 GWP per customer €/cust. 8.31 6.98 4.37. Table ESG–7 ESG IN ASSET MANAGER SELECTION % As of December 31 2019 2018 2017. Share of asset managers being PRI signatories or having an ESG policy in place 99 99 99. Table ESG–8 SUSTAINABILITY INVESTMENTS Proprietary Investments € bn. As of December 31 2019 2018 20176. Renewable Energy Investments 7.2 6.8 5.6 thereof: Infrastructure Equity 4.3 3.8 3.7 thereof: Infrastructure Debt 2.9 3.0 1.9 Certified Green Buildings 14.6 13.3 11.4 thereof: Equity Investments 11.7 10.9 8.8 thereof: Debt Investments 2.9 2.4 2.6 Green Bonds 5.6 3.6 2.5 Sustainability bonds 1.0 0.4 n/a Social bonds 0.8 0.8 n/a Other 0.2 0.2 0.2. Total 29.4 25.1 19.7. Table ESG–9 RENEWABLE ENERGY INVESTMENTS7. As of December 31 2019 20182 20172. Number of wind farms 90 87 78 Number of solar farms 9 8 7. Total number of facilities 99 95 85 Total generating capacity of renewables investments8 GW 1.95 1.92 1.83. DATA AND PERFORMANCE: 06.3 ESG PERFORMANCE DATA 1 Our current data collection process does not allow for a complete tracking of revenue data. Revenues included are subject to data availability. 2 Please note that the 2017 and 2018 figures have been restated due to a change in scope. 3 Please note that the 2017 and 2018 figures have been restated due to a change in scope to match the requirements of GRI disclosure 102-45. 4 Please note that the 2018 emerging consumer data has been restated. 5 Please see note 44 to the Consolidated Financial Statements of Allianz Group Annual Report 2019. 6 2017 data has not been part of the assurance scope. 7 Please note that the data only includes closed transactions. Signed projects are excluded. 8 Total generating capacity excludes the US Tax Equity investments. 89. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. Table ESG–10 DIVESTMENT FROM COAL-BASED BUSINESS MODELS Proprietary Investments € mn. As of December 31 2019 2018 2017. Cumulative action since November 2015 Fixed income investments to run-off or already disposed 5,942.7 5,706.7 4,800.0 Listed equities divested 340.5 326.5 265.0 Additional action Additional fixed income investments to run-off 236.0 906.7 900.0 Additional listed equities divested 14.0 61.5 40.0. Table ESG–11 ESG ENGAGEMENT OVERVIEW As of December 31 2019 2018 20171. Number of active engagements 49 12 13. Table ESG–12 ESG ENGAGEMENT BY SECTOR As of December 31 2019. Oil and Gas 33 Metals and Mining 5 Steel and Cement 4 Chemicals 3 Construction and Engineering 2 Other 2. Table ESG–13 ESG ENGAGEMENT BY REGION As of December 31 2019. Europe 18 Asia-Pacific 12 North America 15 Emerging Markets 4. Table ESG–14 ESG ENGAGEMENT TOPICS As of December 31 2019. CO2 Emissions and Management 40 Health and Safety 9 Toxic Emissions and Waste 8 Product Safety 3 Biodiversity and Land Use 2 Other 2. Table ESG–15 ESG ENGAGEMENT OUTCOMES As of December 31 2019. Engagement closed successfully 4 Engagement on-going 44 Engagement closed with restrictions 1. Table ESG–16 SUSTAINABLE INVESTMENTS FOR THIRD-PARTY ASSETS Third Party Assets € bn. As of December 31 2019 2018 2017. Allianz Global Investors € bn 56.1 40.9 14.7 Integrated ESG strategies2 € bn 31.0 26.8 n/a SRI strategies3 € bn 23.3 12.3 13.0 Impact strategies4 € bn 1.8 1.8 1.7 PIMCO5 € bn 101.6 105.9 117.6. Total 157.7 146.8 132.3. DATA AND PERFORMANCE: 06.3 ESG PERFORMANCE DATA 1 2017 data has not been part of the assurance scope. 2 Integrated ESG strategies include material ESG risk concerns into investment analysis and security selection in order to improve risk/return profile with an unconstrained investment universe (‘comply or explain’) and active stewardship program. 3 SRI strategies are ’best-in-class’ strategies that aim at constructing portfolios with superior sustainability credentials in order to generate superior long-term performance. 4 Impact strategies involve investments in order to generate intentional environmental and societal outcomes aligned with SDGs that are measured against specific extra-financial KPIs. For 2019, the figure also includes newly-created category “SDG-aligned / Sustainability-themed”, which selects securities whose business largely contribute to positive environmental and societal change towards one or multiple SDGs. 5 Please note that the data for 2017 and 2018 has been restated due to a change in definition of SRI assets at PIMCO. 90. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. DATA AND PERFORMANCE: 06.4 ENVIRONMENTAL PERFORMANCE DATA. Our reporting on environmental data generally follows the GRI Standards of the Global Reporting Initiative. The Group’s carbon footprint is oriented towards the Greenhouse Gas (GHG) Protocol’s Corporate Accounting and Reporting Standard. For data compilation, Allianz further applies the standards developed by the Association of Financial Institutions for Environmental Management and Sustainability (Verein fur Umweltmanagement und Nachhaltigkeit in Finanzinstitutionen ‘VfU’) as they are tailored to financial services institutions. Detailed guidance for environmental data compilation is further defined in internal guidelines for environmental reporting and in the publicly available explanatory notes. Data in this section is part of the Sustainability in operations (Environmental management) section. Table ENV–1 EMS COVERAGE As of December 31 2019 2018 2017. Share of employees in scope by our environmental management system (EMS) % 95 94 91. Table ENV–2 GREENHOUSE GAS EMISSIONS As of December 31 2019 2018 2017. Scope 1 – Direct GHG emissions t CO₂ 42,011 46,734 51,838 Scope 2 – Indirect GHG emissions (market-based) t CO₂ 142,563 159,181 167,888 Scope 2 – Indirect GHG emissions (location-based) t CO₂ 224,315 239,132 257,488 Scope 3 – Other indirect GHG emissions t CO₂ 149,459 167,533 159,7191. Scope 1-3, GHG emissions total t CO₂ 334,033 373,448 379,4461. Total GHG Emissions per employee t/empl 2.4 2.7 2.7 Overall GHG reduction per employee since 2010 Target -30% by 2020 % -35 -27 -27. Table ENV–3 ENERGY CONSUMPTION1. As of December 31 2019 2018 2017. Energy consumption from our office buildings GJ 2,156,963 2,240,060 2,391,123 Energy consumption from our data centers GJ 379,351 396,338 392,055. Total energy consumption GJ 2,536,314 2,636,398 2,783,178 Energy consumption from office buildings per employee GJ/empl 15.3 16.1 17.0 Energy reduction from office buildings per employee since 2010 Target -30% by 2020 % -37 -34 -30. Table ENV–4 ENERGY SOURCES As of December 31 2019 2018 2017. Electricity % 70.7 72.2 70.9 Fossil fuels % 14.0 14.1 16.4 Long-distance heating % 14.9 13.5 12.4 Other sources (incl. energy from own sources including photovoltaic, internal waste heat) % 0.3 0.2 0.3. Table ENV–5 RENEWABLE ELECTRICITY. As of December 31 2019 2018 2017. Renewable electricity GJ 872,929 859,862 882,222 Renewable electricity as a share of all electricity sources Target 100% by 2023 % 49 45 45 1 We are in the process of consolidating our global data center real estate. The reported energy consumption relates to our strategic data centers in Europe, the U.S. and Singapore. Up to the end of this consolidation program, the energy consumption from some local data centers will be included in the energy consumption reported for office buildings. GRI 302-1, 302-3, 302-4, 305-1, 305-2, 305-3, 305-4, 305-5 91. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. DATA AND PERFORMANCE: 06.4 ENVIRONMENTAL PERFORMANCE. Table ENV–6 BUSINESS TRAVEL As of December 31 2019 2018 2017. Total travel km 918,693,524 941,564,230 952,221,036 Road travel (incl. rental, fleet, and private cars) % 34.8 38.3 40.7 Air travel % 54.8 53.9 51.5 Rail travel % 10.3 7.9 7.8 Travel per employee km/empl 6,509 6,749 6,776. Table ENV–7 WATER CONSUMPTION As of December 31 2019 2018 2017. Total water consumption m³ 1,883,352 1,830,782 1,940,030 Drinking water % 91.1 87.6 86.6 Rain water % 0.4 0.4 0.3 Natural water % 8.6 12.0 13.1 Water consumption per employee m³/empl 13.3 13.1 13.8. Table ENV–8 WASTE As of December 31 2019 2018 2017. Total waste t 19,396 19,575 21,474 Waste Incinerated % 39.8 40.3 39.5 Waste Recycled % 40.5 39.9 40.7 Waste to Landfills % 19.6 19.8 19.4 Special Waste Treatment % 0.1 0.1 0.3 Waste per employee kg/empl 137 140 153. Table ENV–9 PAPER CONSUMPTION As of December 31 2019 20181 20172. Total paper consumption t 10,161 12,332 14,866 Recycled Paper % 40 40 41 FSC-labeled paper % 59 50 50 Paper consumption per policy g/policy 76 96 117 Paper reduction since 20143. Target -40% by 2020 % -53 -41 -28 1 Please note that number of policies in 2018 has been restated, please see our explanatory notes. 2 Please note that the data for paper use, related emissions and number of policies in 2017 have been restated, please see our explanatory notes. 3 Please note that the data for paper use and number of policies in 2014 have been restated, please see our explanatory notes. GRI 301-1, 301-2, 303-1, 303-5, 306-2 92. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. DATA AND PERFORMANCE: 06.5 HUMAN RESOURCES PERFORMANCE DATA. This section contains data related to the human resources performance of Allianz Group. Data in this section is part of the Sustainability in operations (Human resources) section. All data is based on core business unless otherwise noted. Table HR–1 EMPLOYEE OVERVIEW. As of December 31 2019 2018 2017. Total number of employees (core business)1 143,642 142,327 140,399 thereof: men % 48.7 48.8 48.2 thereof: women % 51.3 51.2 51.8 Total number of employees (core and non-core) 147,2682 142,460 140,553. Table HR–2 EMPLOYEES BY REGION3. As of December 31 2019 2018 2017. Germany 38,412 38,089 40,149 France 13,888 14,467 14,893 United States 8,329 8,112 7,996 United Kingdom 9,956 6,540 6,814 Italy 6,289 6,356 6,563 India 6,845 5,969 4,878 Australia 5,470 5,294 5,525 Spain 4,488 4,376 3,556 Brazil 2,720 3,269 3,355 Austria 3,088 3,213 3,410 Other 47,783 46,775 43,414. Total 147,268 142,460 140,553. Table HR–3 EMPLOYMENT RELATIONSHIPS. As of December 31 2019 2018 20174. Full-time employees5 120,557 120,167 n/a % 86.8 87.3 86.9 thereof: male 64,948 64,313 n/a % 53.9 53.5 53.4 thereof: female 55,609 55,854 n/a % 46.1 46.5 46.6 Part-time employees5 18,376 17,521 n/a % 13.2 12.7 13.1 thereof: male 3,822 3,877 n/a % 20.8 22.1 19.8 thereof: female 14,554 13,644 n/a % 79.2 77.9 80.2 Trainee ratio6 % 2.3 2.5 2.9. As of December 31 2019 20186 20176. Permanent employees7 132,682 131,198 n/a % 92.4 92.2 91.6 thereof: male % 49.2 n/a n/a thereof: female % 50.8 n/a n/a Temporary employees 10,960 11,129 n/a % 7.6 7.8 8.4 thereof: male % 43.0 n/a n/a thereof: female % 57.0 n/a n/a 1 Figures based on the number of employees in Allianz’s core business, which includes all companies in and related to the insurance and asset management business, including our Banking activities in Germany, France, Italy and Central and Eastern Europe. The figures do not include fully consolidated companies that are considered as pure financial investments and companies classified as held for sale. 2 Total contracted headcount number includes acquisition of Liverpool Victoria Insurance in U.K. 3 Total number of employees with an employment contract of all affiliated companies (core and non-core business). 4 Absolute figures were first reported in 2018 as part of the requires for GRI 102-8. Absolute figures for 2017 not available. 5 Based on active headcount. 6 Trainees are employees at the beginning of their career participating in a trainee program, i.e. undergoing practical training designed to facilitate their development of knowledge and skills, e.g. apprentices, trainees, interns and working students, and with a formal arrangement (e.g. employment contract or third-party agreement with a school or university). 7 Data collection for gender breakdown started in reporting year 2019. GRI 102-8 93. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. Table HR–3 continued EMPLOYMENT RELATIONSHIPS As of December 31 2019 2018 20171. Permanent employees 132,682 131,198 Asia-Pacific 17,036 15,951 Eastern Europe 8,223 8,877 Germany 40,027 38,970 Middle East & Africa 4,659 3,567 North America 8,702 8,543 Rest of Western Europe 51,588 52,796 South America 2,447 2,494 Temporary employees 10,960 11,129 Asia-Pacific 1,652 1,480 Eastern Europe 526 526 Germany 3,174 3,163 Middle East & Africa 1,393 1,288 North America 37 38 Rest of Western Europe 4,123 4,595 South America 55 39. Table HR–4 AGE STRUCTURE % of employees. As of December 31 2019 2018 2017. All employees (core business) % of 24 or under 7.0 7.2 7.2 % of 25-34 28.1 28.0 27.2 % of 35-44 27.0 26.9 27.1 % of 45-54 24.0 24.4 25.0 % of 55-64 13.3 12.9 12.9 % of 65 or over 0.6 0.6 0.6 Average age years 40.6 40.6 40.8 Allianz SE Board of Management2 % of below 30 0.0 % of 30-50 30.0 % of above 50 70.0. DATA AND PERFORMANCE: 06.5 HUMAN RESOURCES PERFORMANCE DATA 1 Data collection started in reporting year 2019. 2 Board members include only the Board of Management of Allianz SE. GRI 405-1 94. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. DATA AND PERFORMANCE: 06.5 HUMAN RESOURCES PERFORMANCE DATA. Table HR–5 EMPLOYEE TURNOVER % As of December 31 2019 2018 2017. Employee turnover rate 16.5 16.6 14.1 Turnover rate (men) 16.3 15.8 13.1 Turnover rate (women) 16.4 16.9 15.1 Turnover rate by region Asia-Pacific 24.2 26.7 24.8 Eastern Europe 19.9 21.9 22.6 Germany 7.8 7.4 5.9 Middle East & Africa 26.6 24.7 13.9 North America 13.3 12.0 13.7 Rest of Europe 19.5 19.4 15.8 South America 15.8 23.3 14.2. Table HR–6 EMPLOYEE RECRUITMENT As of December 31 2019 2018 2017. Total recruitment (external and internal) 24,829 24,702 21,890 Total recruitment (share of men) % 49.7 48.4 47.3 Total recruitment (share of women) % 50.3 51.6 52.7 Total recruitment by region Asia-Pacific % 28.7 29.6 25.3 Eastern Europe % 12.7 15.0 12.7 Germany % 10.0 8.9 8.6 Middle East & Africa % 33.0 37.0 23.6 North America % 15.4 15.4 13.4 Rest of Europe % 19.1 20.2 18.8 South America % 14.4 13.4 12.8. Table HR–7 DIVERSITY % of total employees (core business) As of December 31 2019 2018 2017. Women in Allianz SE Board of Management1 % 20.0 n/a n/a Women in executive positions2 % 29.9 28.9 27.7 Female managers3 % 37.9 37.8 37.6 Share of women in core business % 51.3 51.2 51.8 Number of nationalities represented in executive positions4 64 54 54. Table HR–8 SICKNESS-RELATED ABSENTEEISM average days per employee. As of December 31 2019 2018 2017. Overall average 8.1 8.4 8.4 Average days by region Asia-Pacific 3.9 4.0 4.4 Germany 11.5 12.3 12.3 Middle East and Africa 3.6 3.2 2.4 Eastern Europe 6.8 7.0 7.6 North America 2.0 1.9 2.1 South America 3.0 3.1 3.0 Rest of Europe 8.6 8.6 8.3. Table HR–9 TOTAL ABSENTEEISM As of December 31 2019 2018 2017. Total absenteeism lost days days 1,110,895 1,134,910 1,141,720 Absenteeism – coverage of employees % 100 100 100 1 Data collection started in reporting year 2019. 2 Includes women in all executive positions below the Board of Management. 3 Includes women functionally responsible for other staff, regardless of level, e.g. division, department and team managers. 4 Figures calculated by including all executive positions below the Board of Management. GRI 401-1, 405-1 95. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. Table HR–10. EMPLOYEE TRAINING As of December 31 2019 2018 2017. Total expenses for employee training € mn 84.7 87.7 90.8 Training expenses per employee € 613 646 670 Average training days days 3.3 3.0 3.0 Staff days 3.2 3.0 3.0 Managers days 3.4 3.1 3.1 Employees undergoing at least one training session % 75.2 69.9 70.9 Staff % 73.5 68.6 69.6 Managers % 84.8 78.5 79.8. Table HR–11 ALLIANZ ENGAGEMENT SURVEY 2019 2018 2017. Number of employees invited to participate in the Allianz Engagement Survey (AES) 123,505 121,913 122,282. Number of OEs invited to participate in the AES 62 56 60 AES Participation rate % 84 81 84 Work Well Index (used until 2018)1 % n/a 66 66 Work Well Index (used since 2019) % 66 64 n/a Employee Engagement Index % 72 70 72 Inclusive Meritocracy Index (IMIX) % 73 71 72. DATA AND PERFORMANCE: 06.5 HUMAN RESOURCES PERFORMANCE DATA. GRI 404-1 1 The WWI+ was introduced in the fall of 2018 and replaced the WWI for 2019 AES. 96. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. Table TAX–1 INCOME TAXES BY REGION € mn. As of December 31 2019 2018 2017. Americas 414 513 883 Asia-Pacific 204 190 171 Europe 2,138 1,976 1,864 Other 20 17 22. Total 2,776 2,696 2,941. Table CC–1 CORPORATE CHARITABLE DONATIONS1 € mn. As of December 31 2019 2018 2017. Corporate giving total (Cash contributions) € mn 24.2 25.8 20.0. This section contains data related to the other sustainability-related performance indicators of Allianz Group. Table CC–2 CORPORATE VOLUNTEERING2 hours. As of December 31 2019 2018 2017. Volunteering hours hours 115,057 77,268 80,435. Table CS–1 CUSTOMER SATISFACTION % As of December 31 2019 2018 2017. Net Promoter Score (NPS) greater than local market average or loyalty leadership in their market % 70 74 60. DATA AND PERFORMANCE: 06.6 ADDITIONAL SUSTAINABILITY PERFORMANCE DATA. GRI 201-1 1 Our current data collection process does not allow for a complete tracking of donations data. Donations included are subject to data availability. 2 Our current data collection process does not allow for a complete tracking of volunteering hours. Volunteering hours included are subject to data availability. 97. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. DATA AND PERFORMANCE: 06.7 REPORTING PARAMETERS, SCOPE AND MATERIALITY. Detailed references to our approach to each of these disclosures can be found in the GRI Content Index. GRI STANDARDS DISCLOSURES AND TOPICS MATERIAL TOPIC1 LEVEL OF MATERIALITY FOR STAKEHOLDERS AND/OR REPORT USERS. GRI 102 (General Disclosures) Materiality processes. Ethics. Sustainable and responsible supply chains CR strategy, approach and governance. Sustainability data, KPIs and targets. GRI 205 (Anti-corruption) Ethics. GRI 206 (Anti-competitive Behavior) GRI 301 (Materials) Environment (including environmental management and renewables) GRI 302 (Energy) GRI 303 (Water and Effluents) GRI 305 (Emissions) GRI 401 (Employment) Responsible treatment/engagement employees. Employees and workplace. GRI 403 (Occupational Health and Safety) Employees and workplace. GRI 404 (Training and Education) GRI 405 (Diversity and Equal Opportunity) Employees and workplace. Diversity and equal opportunities. GRI 408 (Child Labor) Sustainable and responsible supply chains. GRI 409 (Forced or Compulsory Labor) GRI 412 (Human Rights Assessment) Human rights. Environmental and social products (integrating ESG in insurance and investments) GRI 415 (Public Policy) Public policy positions and engagement Social and political unrest. GRI 417 (Marketing and Labeling) Customer satisfaction. GRI 418 (Customer Privacy) Data Privacy 1 Based on the outcomes of our strategic and reporting materiality analyzes. Reflecting our ambition of being the most trusted financial institution, we reflect our values of integrity, competence and resilience in our reporting. We continue with our focus on reporting online, cross-linking to the sustainability section of our website, the People Fact Book, the Tax Transparency Report, and our Annual Report, offering further extra financial information. Content of the report is focused on the key requirements of our stakeholders and sustainability rating and benchmarking providers. The primary target audience of the content of this report are rating providers, analysts, investors and NGOs. Furthermore, this report contains key insights for our other stakeholder groups such as customers and employees. This report makes links to other documents, disclosing our approach and reporting on our progress. Our Sustainability Report has been prepared in accordance with the Global Reporting Initiative (GRI) Standards – core option. The GRI Content Index, available as an appendix to this report is accessible through our website. MATERIAL TOPICS AND ASPECTS. The key topics to be included in Allianz’s Sustainability Report were shaped by our materiality analysis, which satisfies the GRI Principles for Defining Report content (sustainability context, materiality, completeness, and stakeholder inclusiveness). To ensure alignment with GRI Standards, we mapped the outcomes of our stakeholder consultation and materiality assessment with our solutions to the GRI Standards topics. Based on the material issues identified by our materiality analysis, we have mapped the issues to GRI disclosures and identified the upstream and downstream boundaries (see disclosure 103–1 for each material topic in the GRI Content Index). GRI 102-40, 102-42, 102-43, 102-44, 102-46, 102-50, 102-51, 102-52, 102-54 98. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. DATA AND PERFORMANCE: 06.7 REPORTING PARAMETERS, SCOPE AND MATERIALITY. In addition to our strategic materiality assessment, we furthermore include topics of interest to our main audiences as determined through our reporting content assessment. The level of materiality score is based on the underlying data of the respective assessments. SCOPE OF REPORTING. Our 2019 Sustainability Report relates to the entire Allianz Group. All measures, activities and key figures refer to the 2019 fiscal year (01 January 2019 to 31 December 2019), unless otherwise stated. This is our 19th annual Sustainability Report. Unless otherwise stated, we take operational control as the boundary for reporting. An increasing number of Allianz subsidiaries now publish their own sustainability reports, which are available for download on our website. In addition to the material topics matched to the GRI topics, we have identified and reported on the following topics in the report. ADDITIONAL DISCLOSURES AND TOPICS MATERIAL TOPIC1 REFERENCE LEVEL OF MATERIALITY FOR STAKEHOLDERS AND/OR REPORT USERS. Core Business Customer innovation SR, p. 17. Natural disasters SR, p. 26. Cyber risks SR, p. 27. Safety risks SR, p. 12; 54. Tackling safety issues for our customers SR, p. 12; 54. Demographic change AR, p. 66; 77. Health SR, p. 50. Customer Satisfaction Customer innovation SR, p. 17. Ensuring fair treatment of claims and customers SR, p. 54. ESG Opportunities Management Climate change SR, p. 9; 24; 67-72. Environmental and social products (sustainable insurance and asset management products; sustainable and responsible investing) SR, p. 29-40. Natural catastrophes and disaster response SR, p. 25; 26; 74. ESG Risk Management Climate change SR, p. 9; 24; 67-72. Environmental and social products (integrating ESG in insurance and investments) SR, p. 12; 22-23; 29-32; 34. Human rights SR, p. 12; 22; 32; 40; 60. Natural catastrophes and disaster response SR, p. 25; 26; 74. Animal welfare standards SR, p. 12 1 Based on the outcomes of our strategic and reporting materiality analyzes. GRI 102-53 99. Allianz Sustainability Report 2019 01 Introduction 02 Sustainability strategy and governance 03 Sustainability in core business activities 04 Sustainability in operations 05 Allianz’s climate-related financial disclosure 06 Data and performance 06.1 Our targets and achievements 06.2 Membership and partnerships 06.3 ESG performance data 06.4 Environmental performance data 06.5 Human resources performance data 06.6 Additional sustainability performance data 06.7 Reporting parameters, scope and materiality 06.8 Independent Practitioner’s report on a Limited Assurance Engagement on Sustainability Information. TO ALLIANZ SE, MUNICH. We have performed a limited assurance engagement on the disclosures in the Sustainability Report of Allianz SE, Munich (hereinafter: “the Company”), for the period from 1 January to 31 December 2019 (hereinafter: “Report”). RESPONSIBILITIES OF THE EXECUTIVE DIRECTORS. The executive directors of the Company are responsible for the preparation of the Report in accordance with the principles stated in the Sustainability Reporting Standards of the Global Reporting Initiative (hereinafter: “GRI-Criteria”). This responsibility of Company’s executive directors includes the selection and application of appropriate methods of sustainability reporting as well as making assumptions and estimates related to individual sustainability disclosures, which are reasonable in the circumstances. Furthermore, the executive directors are responsible for such internal control as they have considered necessary to enable the preparation of a Report that is free from material misstatement whether due to fraud or error. INDEPENDENCE AND QUALITY CONTROL OF THE AUDIT FIRM. We have complied with the German professional provisions regarding independence as well as other ethical requirements. Our audit firm applies the national legal requirements and professional standards – in particular the Professional Code for German Public Auditors and German Chartered Auditors (“Berufssatzung für Wirtschaftsprüfer und vereidigte Buchprüfer“: “BS WP/vBP”) as well as the Standard on Quality Control 1 published by the Institut der. Wirtschaftsprüfer (Institute of Public Auditors in Germany; IDW): Requirements to quality control for audit firms (IDW Qualitätssicherungsstandard 1: Anforderungen an die Qualitätssicherung in der Wirtschaftsprüferpraxis – IDW QS 1) – and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. PRACTITIONER’S RESPONSIBILITY. Our responsibility is to express a limited assurance conclusion on the disclosures in the Report based on the assurance engagement we have performed. Within the scope of our engagement we did not perform any procedures on external sources of information or expert opinions, referred to in the Report. We conducted our assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised): Assurance Engagements other than Audits or Reviews of Historical Financial Information, issued by the IAASB. This Standard requires that we plan and perform the assurance engagement to allow us to conclude with limited assurance that nothing has come to our attention that causes us to believe that the disclosures in the Company’s Report for the period from 1 January to 31 December 2019 have not been prepared, in all material aspects, in accordance with the relevant GRI-Criteria. In a limited assurance engagement the assurance procedures are less in extent than for a reasonable assurance engagement and therefore a substantially lower level of assurance is obtained. The assurance procedures selected depend on the practitioner’s judgment. Within the scope of our assurance engagement, we performed amongst others the following assurance procedures and further activities: • Obtaining an understanding of the structure of the sustainability organization and of the stakeholder engagement. • Inquiries of personnel involved in the preparation of the Report regarding the preparation process, the internal control system relating to this process and selected disclosures in the Report. • Performance of site visits on a sample basis as part of the inspection of processes for collecting, controlling, analyzing and aggregating selected data. • Identification of the likely risks of material misstatement of the Report under consideration of the GRI-Criteria. • Analytical evaluation of selected disclosures in the Report. • Comparison of selected disclosures with corresponding data in the consolidated financial statements and in the management report. • Evaluation of the presentation of the selected disclosures regarding sustainability performance. ASSURANCE CONCLUSION. Based on the assurance procedures performed and assurance evidence obtained, nothing has come to our attention that causes us to believe that the disclosures in the Company’s Report for the period from 1 January to 31 December 2019 have not been prepared, in all material aspects, in accordance with the relevant GRI-Criteria. INTENDED USE OF THE ASSURANCE REPORT. We issue this report on the basis of the engagement agreed with the Company. The assurance engagement has been performed for purposes of the Company and the report is solely intended to inform the Company as to the results of the assurance engagement. The report is not intended to provide third parties with support in making (financial) decisions. Our responsibility lies solely toward the Company. We do not assume any responsibility towards third parties. Munich, 22 April 2020. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft. Hendrik Fink ppa. Annette Daschner Wirtschaftsprüfer (German Public Auditor) DATA AND PERFORMANCE: 06.8 INDEPENDENT PRACTITIONER’S REPORT ON A LIMITED ASSURANCE ENGAGEMENT ON SUSTAINABILITY INFORMATION 100. Allianz Sustainability Report 2019. Imprint Copyright © Allianz SE 2020. Publisher Allianz SE Group Communications and Corporate Responsibility Königinstraße 28 80802 Munich Germany www.allianz.com/sustainability corporate.responsibility@allianz.com. Project responsibility Nico Ahn Group Communications and Corporate Responsibility Allianz SE. Design, concept and production Radley Yeldar, London, U.K. ry.com. We would like to thank all of our colleagues and partners who have helped us to create this report. Date of publication: 29 April 2020. Photo credits Page 11: Claire Ladavicius (SOS Children’s Villages International) Page 26: Hayley Slater (Allianz Australia) Cautionary note regarding forward-looking statements The statements contained herein may include statement of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results performance or events to differ materially from those expressed or implied in such statement. The company assumes no obligation to update any forward-looking statement. We welcome your views We warmly invite all our stakeholders to provide feedback and comments on our Sustainability Report: corporate.responsibility@allianz.com. Click here to view the GRI Content Index. Click here to view the Explanatory Notes. ALLIANZ PEOPLE FACT BOOK 2019. THE HOME FOR THOSE WHO DARE. For more information on Allianz Group, see the Annual Report 2019. For more information on key Human Resources facts and figures, achievements in 2019 and an outlook for 2020, see the Allianz People Fact Book 2019. GRI 102-53 Allianz SE. Group Communications and Corporate Responsibility Königinstraße 28 80802 Munich Germany www.allianz.com/sustainability