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In the run-up to the UN Climate Change Conference in Paris, Allianz is announcing plans to integrate climate protection into its entire business portfolio. “Our knowledge of risk, our financial resilience and long-term investments horizon enable us to now offer more effective support for climate protection while making the most out of long-term opportunities for our customers”, says Oliver Bäte, CEO of Allianz SE. He will introduce the following four measures:
1. Transparency across entire investment portfolio
For the first time, Allianz investments will be analyzed across the entire portfolio using 37 environmental, social and corporate governance criteria. These include greenhouse gas emissions, energy efficiency, data protection and corruption.
Allianz invests more than 630 billion euros, mainly on behalf of the individuals it insures, of which over 90 percent are invested in fixed-income securities and equities. Based on the information provided by the rating agency MSCI ESG Research, transparency across the entire portfolio will be achieved by mid-2016, enabling a more targeted management of risks and opportunities. “When investing our customers' money, we focus on attractive returns that remain stable over the long term”, Andreas Gruber, chief investor of Allianz, explains. “In this respect, it is becoming increasingly important to take environmental and social risks into consideration early on. With our new approach, we can achieve greater transparency and ensure that our investment strategy will become even more sustainable in the future.”
2. Phasing out coal
Aware of the two-degree-target of the Paris climate negotiations as well as the economic risks involved, Mr Bäte announced that Allianz will stop financing coal-based business models. It will no longer invest in companies that derive more than 30 percent of revenue from coal mining or generate over 30 percent of their energy from coal. Equities amounting to 225 million euros will be divested by March 2016 while bonds amounting to 3.9 billion euros will be expiring.
3. Insuring climate risks in developing countries
Allianz plans to offer greater protection from climate change to those at risk in developing countries. It is already a leading micro-insurer, offering insurance policies for just a few cents to 57 million individuals. In Asia, Allianz is working on an insurance model for rice farmers based on satellite technology. In another business 125 million small-scale farmers are already reinsured in China and India. As part of the Munich Climate Insurance Initiative (MCII), Allianz and other insurers are designing new climate insurance approaches for over 400 million people in developing countries, a target set by G7.
4. Financing a low-carbon economy
By 2035, annual investments required for the move to alternative energy sources will have risen from the current value of 380 billion to 780 billion US dollars (IEA). This amounts to less than one percent of the total assets under management of pension funds and insurance companies (92 trillion US dollars). Allianz is one of the leading private investors in renewable energy, with more than 2.5 billion euros committed. “In the medium-term, we want to at least double our investments. Given unequivocally positive signals and reliable framework conditions for long-term investors, climate protection is unlikely to fail because of a lack of funding”, Mr Bäte emphasized.
Three NGOs, namely Germanwatch, Transparency International and WWF, have been involved with Allianz to develop and implement these measures.
Christoph Bals, Germanwatch's executive director for policy, explains: “As far as the voluntary commitment pledged by Allianz is concerned, there are three issues that make us prick up our ears. Firstly, it has made a start on using social and environmental criteria in a serious way, foregoing small marginal areas in favor of the segment in which most of the money is invested - life insurance. Secondly, it is signaling another important phenomenon, namely the beginning of the 'twilight time for coal' all around the world. Thirdly, the company proclaims its willingness to make a significant contribution towards financing the global move to alternative energy sources. The bilateral negotiations taking place between India and Germany on the subject of supporting the former in enhancing renewable energy and expanding its energy network should create the necessary framework conditions, as well as put the aforementioned willingness to the test.”
“The fact that Allianz is implementing ESG scoring for over 600 billion euros of its own investments is a strong anchor for the global capital market in turbulent times', says Caspar von Hauenschild, member of the Board of Management of Transparency International. 'The 2008 financial crisis and, most recently, a series of fundamental deficiencies in risk management and Compliance systems, as well as in Corporate Governance, have resulted in a severe loss of trust. As a result, our commitment to transparent Governance standards with the help of ESG scoring is also tantamount to a contribution to the process of regaining the trust that has been lost”, Mr von Haunschild said.
“WWF is pleased to see Allianz announce its move towards greater transparency and its wish to use its investment activities to avoid any adverse effects”, says Matthias Kopp, team leader of the Sustainable Finance team at WWF. “Allianz strives to integrate all of the above into its 'mainstream' business, a goal to which WWF has been lending its support since April 2015. Even though this process is far from complete, moving away from coal-based business models that lack transformation potential and improving the transparency of the sustainability elements in portfolios are important, nay essential, first steps. The next step will be setting a specific level of ambition for managing the Allianz investment business; for example in line with the transition to a low-emission economy, which will also serve as a yardstick against which to measure success and impact. This challenge is faced by pretty much the entire financial industry. For its part, Allianz has already laid a solid foundation.”
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