Stakeholder involvement in development of ESG Sensitive Business Guidelines
Since 2012, Allianz conducts regular "ESG Dialogues" with representatives of 6 globally active NGOs and civil society organizations. Within this format, we discuss drafts of guidelines under development and receive input from stakeholders external to Allianz
Read more in the Allianz sustainability report - Responsible Investor Chapter (published end of April 2016).
ESG Scoring Approach
In 2016 Allianz developed its ESG Scoring Approach that will be rolled out throughout the Group in 2017. The ESG Scoring is the instrument, Allianz uses to systematically evaluate and manage material ESG risks across fixed-income and equity portfolios in addition to typical financial information when evaluating assets. It was developed in conjunction with our Asset Managers AllianzGI and PIMCO, and also involved three NGOs (WWF, Transparency International, Germanwatch) for their views on which topics should be covered.
Based on the data from MSCI ESG Research, investments are assessed against 37 key environmental, social and corporate governance issues. These issues include for example greenhouse gas emissions, energy efficiency, data protection and corruption
We use the ESG Scoring ...
- to measure the ESG performance of our portfolios and monitor its development
- to give specific ESG-related requirements to our Asset Managers
- to include ESG in the analysis- and investment-process at asset manager level (AllianzGI and PIMCO)
This Scoring breaks down in three stages
- Analysis and development of threshold: As a starting point, MSCI ESG data are used to measure Fixed-Income and Equity Portfolios. The measurement is the basis for further analysis and results in a quantified “ESG Score” for the holdings within a portfolio. This provides the current ESG score of Allianz assets (status quo) and makes ESG quality measurable amongst portfolios. but also vs. the MSCI rating universe. Based on the analysis, we identify those investments which we deem “critical” in terms of ESG through the definition of the so called “ESG Threshold”.
- Implementation: The ESG Rating and Scoring information has been included in the asset manager systems. The threshold information will be implemented in our internal Management Information System MIS in 2017.
- Monitoring and Review: The Asset Manager stays responsible for management of ESG risks and opportunities”. Asset Managers are required to report on positions and investments below threshold on a quarterly basis. They have to follow a “Comply or explain” approach and therefore have to provide explanations for individual investments below the threshold . On top of that Allianz (AIM) centrally monitors ESG investments below threshold and has an overview of the ESG trend of portfolios.
Outcomes & Benefits
- Improved transparency and monitoring capability fully automated measurement of the ESG performance
- Clear expectations and boundaries: the “ESG-appetite” of Allianz Investment Management is expressed numerically through the “ESG threshold”
- Balanced approach: ESG is fully embedded in the investment process of the Asset Manager while the investment discretion of the Asset Manager remains intact. The approach leaves room for constant learning on ESG risks and opportunities.
Full integration in investment process: ESG is embedded in the investment process of the Asset Manager. Adherence to the ESG requirements is part of the central Asset-Manager review process (KPI Scorecard) and will influence performance- and compensation assessments.