For the first time, Allianz Leben, the life insurance arm of Allianz in Germany, is ensuring the sustainability of its investments using a scoring system developed in cooperation with NGOs. "We want to invest in sound, future-oriented assets. And we want to know the risks and opportunities related to sustainability that we should be aware of for individual investments," says Andreas Lindner, head investor for Allianz Leben. Given the current low level of interest rates, Allianz Leben is targeting high-yield investments such as stocks, private finance, real estate, infrastructure and renewable energy. This approach secures good long-term returns for the clients of Allianz Leben, or Allianz Lebensversicherungs-Aktiengesellschaft. These investments now account for 20 percent of the total portfolio.
Economic sustainability due to ESG scoring
The scoring approach measures investments in over 8,000 companies and governments in terms of sustainability. The central element of the ESG scoring is the identification of the risks related to the sustainable development of the investments. This involves assessment of issuers of the assets based on 37 key areas such as greenhouse gas emissions, rated energy efficiency, occupational safety, data protection, corruption and money laundering: assessment focuses on ecological commitment (Environment = E), social responsibility (Social = S) and good governance (Governance = G).
A key point to emphasise is that the scoring system was developed jointly with the non-governmental organizations (NGO) Transparency International, World Wide Fund For Nature (WWF) and Germanwatch, in order to integrate an independent facet to the assessment which many customers rely on. The two major Allianz investment management companies, AllianzGI and PIMCO, rely on the ESG data and have committed themselves to implementing the new process for investments on behalf of Allianz.
Ongoing sustainability assessment of investments
For each of its investment managers, Allianz determines a specific ESG threshold. Investment managers may only purchase securities that rate below this threshold if sufficiently valid reasons exist to do so. With this approach, Allianz ensures that the new ESG rating process becomes an integral part of the investment process. The aim of the rating is not to strictly exclude an investment. Rather, the high claims on income for the old-age provision customers are secured and, in certain cases, a systematic exchange of the Allianz Investment Managers with the respective issuers will also take place discussing their ESG values.
"The actions and decisions we derive from the ESG scoring system are aligned with the economic interests of our customers. It is important to customers to achieve good rates of return on their investment, and customers are increasingly wanting to ensure that their money is placed in sustainable investment vehicles. And these are definitely not mutually exclusive scenarios," confirmed Lindner.
Allianz does however avoid certain investments as a matter of policy. For example, Allianz will not invest in certain areas: these include controversial weapons, food speculation and investment in companies that generate over 30 percent of their revenue from coal mining or in power generation where over 30 percent is derived from coal. "We do not believe that these investments make sense, either economically or from the perspective of sustainability," says Lindner.