Through an exclusion list approach the investment universe becomes smaller. Is this a problem when it comes to diversification? Is it broad enough?
Our exclusion guideline excludes companies which are involved in controversial weapons business. Currently no other sector is excluded and therefore our potential for diversification is still broad enough.
What targets and timeline do you have for implementing UNPRI on the investment side?
We just signed UNPRI. We take the topic seriously and are fully aware of our responsibility as a big player. Being one of the larger players we see the chance that we might make it easier to establish ESG in the market. As a large and global organisation we need to consider the differences in regions and asset classes. Additionally we do have high responsibility towards our stakeholders and overall society as our decisions can have major impact, simply by the pure size of investments that fall under our ESG guidelines. Therefore implementing a consistent ESG strategy is more complex compared to niche players or dedicated SRI funds. UNPRI implementation will never be “finalised” as this is a long-term journey and we are currently at the beginning of this learning path.
Within equities sustainability can be implemented quite easily. How do you implement ESG in your bond portfolio?
Our exclusion guideline on controversial weapons covers shares and corporate bonds. Other ESG topics will be analysed within the next two years. Additionally we do not invest in government bonds, direct investments in government owned businesses or other securities directly or indirectly issued by governments deemed to be controversial by the ESG Advisory Board and the Allianz Group Finance Committee. Fixed income, index-related and passive instruments are certainly those areas where further research needs to be done in the years to come.
And how do you implement ESG in other asset classes like private equity?
Direct private equity investments are covered by our exclusion guideline for controversial weapons.
And what about real estate?
Allianz Real Estate (ARE) has launched a sustainability programme with a focus on three topics: creating transparency by collecting relevant property information, assessing the current sustainability performance and setting improvement targets on asset and portfolio level. Minimum sustainability standards now apply for the core processes of investment and asset management. This includes the application of sustainability criteria in the decision-making process for new investments and metrics to measure the sustainability performance of its real estate portfolio. Furthermore, ARE actively engages with its tenants to further enhance the sustainability performance of its buildings and at the same time help tenants to reduce their running costs. Green building certifications will be a target in refurbishments projects or newly built properties. For existing commercial properties in our portfolio we use the Green Rating method to assess the current performance and the improvement potential.
Since autumn you have invested in forest protection projects in developing countries. Why is that and what do you expect from these investments?
In addition to Allianz’s voluntary commitment to reduce carbon emissions from its business operations, from 2012 onwards Allianz will neutralise its remaining emissions by directly investing in carbon projects that generate certificates. Only some of the certificates will be required to ensure the carbon neutrality. The others can be sold to generate a financial return next to climate related benefits.
What exactly are the projects that you support?
Investments include Wildlife Works Carbon LLC (WWC): Allianz is furthering forest protection in developing and emerging countries through the acquisition of a 10% share in WWC, an organisation that develops Reducing Emissions from Deforestation and Forest Degradation (REDD) projects. The first project is a 208,000 hectare forest in south-east Kenya, which acts as a corridor between two national parks. During the 30-year lifetime of this project, up to 36 million metric tonnes of carbon dioxide emissions will be avoided, generating the equivalent number of carbon credits. By investing in WWC, Allianz is highlighting REDD projects as an attractive investment option since they combine a high level of social and ecological responsibility with competitive returns for investors.
Investments include also C-Quest Capital LLC (CQC): Allianz is financing an energy efficiency programme implemented by CQC in India. The programme replaces incandescent light bulbs in private households with more energy-efficient compact fluorescent lamps (CFLs). Approximately 8.5 million light bulbs will be replaced, reducing residential energy consumption and avoiding 3.7 million metric tonnes of carbon dioxide emissions over a 10-year period.
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