By Matt Christensen
Global Head of Sustainable and Impact Investing,
Allianz Global Investors
Global Head of Sustainable and Impact Investing,
Allianz Global Investors
Engaging with companies to protect the climate and biodiversity
As investors, we believe it is critical to have a constructive discussion with investee firms on issues such as their impact on climate change. Engagement is an important element in our ambition to decarbonise portfolios and contribute to our net-zero targets, which reflect those set by Allianz Group.
In our engagements we push companies to achieve targeted outcomes. Ideally, we engage with representatives of the board, executive management or other senior decision makers to ensure there is buy-in from senior leadership on their climate strategy and action plans. We also define clear objectives for our engagements: for example, we challenge companies to commit to a net-zero pathway by 2050 including short- and medium-term targets. We also want them to report transparently and credibly on progress.
Standing out from the crowd on issues that matter
Many asset managers engage with companies, so what do we do differently? In short, our engagements follow a focused, active approach to sustainability where we are vocal on topics that matter to us. Our approach is based on high expectations of the companies we invest in, the proprietary engagement infrastructure we have built, and close alignment with key sustainability-related issues identified by our Sustainability Research team.
We have built an in-house digital sustainability data tool, called “SusIE”, with an engagement-specific module. This enables colleagues across our investment platform to input and access shared insights from engagement activity to inform their investment decisions.
We are not formulaic in our approach to engagements. Instead, by using our own theme-specific engagement frameworks we can target issues with a high sustainability impact, including biodiversity and climate risks as well as human rights. These frameworks use input from our Sustainability Research team and provide a structured approach to guide our engagements with companies on a specific theme. They also allow consistent evaluation.
Taking the example of biodiversity as an issue where we want to drive sustainable change in investee companies, we start by understanding the myriad biodiversity issues associated with different business activities to be able to assess a company’s impact on these issues.
Using our proprietary research as input for our engagements gives us greater conviction about the outcomes of these engagements and informs our voting decisions. This ensures a consistent stewardship approach.
Raising our voice
We also consider appropriate measures to escalate, such as pre-announcing our votes and co-filing shareholder resolutions. In 2023 and 2024, pre-announcing our voting intentions has been a valuable tool in highlighting key themes of concern for our holdings. It helps to draw the attention of the market, clients or other companies to a particular issue.
For example, ahead of shareholder votes at the annual general meetings of Home Depot and PepsiCo, we publicly signaled our support for requests that the two companies conduct biodiversity dependency and impact assessments. Where relevant, we expect companies to conduct a biodiversity assessment, adopt appropriate risk management strategies and report on their progress regularly, whether in a standalone report or within existing disclosures.
One of our most notable recent engagements has been with McDonald’s. As one of the biggest buyers of beef and pork in the world, its supply chain uses large amounts of water, and yet McDonalds was not publicly disclosing water-related targets. This is significant as global water use is rising faster than population growth, with water shortages predicted to become a significant problem in the coming decades.
In 2023 we co-filed a shareholder resolution together with Dutch pension manager PGGM as lead filer and the New York State Common Retirement Fund asking McDonald’s to establish time-bound quantitative goals to reduce water usage across its supply chain.
Following intensive engagements over several months, McDonald’s made new formal commitments to provide additional water-related disclosures and a timeline for the introduction of a strategy to address its water consumption in water-stressed areas. Our dialogue with the company continues.
Advancing our engagement strategy
To deliver on our strategic priority of decarbonising portfolios we aim to increase the reach of our engagements. In 2023, we increased our engagement activity across all listed asset classes – with a particular focus on corporate bonds – to a total of 481 engagements in 32 locations around the world.
To build on this in the coming years, it is vital that colleagues across the investment platform are part of the effort, in addition to the work of our dedicated Stewardship Team. We have enabled colleagues in roles outside of the Stewardship Team to identify, prepare for, conduct, conclude and follow up on engagements. This is enabled by our SusIE engagement module where all investment professionals can contribute based on their dialogues with investee companies.
We also intend to:
- Expand the reach of our escalation strategies across regions and themes, by further pre-announcing our votes and building out our approach to co-filing resolutions in the 2025 voting season.
- Leverage additional collaborative engagements complementing our own activities and increase engagements on new themes, such as working conditions and pay via the Platform Living Wage Financials.1
- Undertake dedicated stewardship work for certain sustainability-oriented funds and broaden engagements in our fixed income investments.
A holistic approach to decarbonisation
With climate-related investment objectives a high priority for many of our clients, active stewardship is one of several approaches we use to support them in decarbonising their portfolios. Together with our climate-linked thematic investment strategies and private-market impact investments, we are fulfilling our own commitments to mitigate climate risks and advance the climate transition, while reflecting the ambitions of Allianz’s sustainability strategy.
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About Allianz
The Allianz Group is one of the world's leading insurers and asset managers with around 128 million* private and corporate customers in nearly 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 776 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage about 1.9 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance industry in the Dow Jones Sustainability Index. In 2024, over 156,000 employees achieved total business volume of 179.8 billion euros and an operating profit of 16.0 billion euros for the group.
* Including non-consolidated entities with Allianz customers.
** As of December 31, 2024.
** As of December 31, 2024.
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