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IPE special report May 2018

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Allianz expands climate strategy to align with 2°C target

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Allianz has announced an expanded climate strategy phasing out all proprietary investments in coal-based business by 2040 and divesting from a wider range of companies that fail to cut their greenhouse gas emissions to a level in line with a low-carbon economy. 

The insurer also announced it would halt all insurance coverage of coal-based business by that time.

The stated aim of its expanded policy was to ensure the 2°C target of the Paris Agreement was integrated in all of group’s relevant business activities, it said. 

Allianz’s expanded climate strategy involves a tightening of criteria for exclusion of coal-based businesses, as well as pushing companies in carbon-intensive sectors to cut their greenhouse gas emissions so they are aligned with the 2°C target.

Companies that do not succeed in doing so over the coming decades would be gradually removed from Allianz’s portfolio, the insurer said.

“This will be implemented for example by active dialogue with the companies and by requests for long-term climate protection targets, similar to the ESG scoring approach, which is already applied to companies with high ESG risks,” it added.

A spokeswoman for Allianz said the company had committed to the Science-Based Target Initiative, which meant decarbonising its corporate operations as well as the proprietary investment portfolio by 2050.

She said this meant expecting decarbonisation in line with science from the corporate issuers the insurer was invested in, but that it could not be more specific about details and sector-specific targets at this point in time. 

The insurer has also sharpened the criteria for exclusion of coal-based business models, for which a divestment policy was announced in 2015.

Currently, Allianz will not invest in a mining or energy company that derives 30% or more of its revenue or energy generation from coal. The insurer today announced it would be reducing this threshold in five-percentage-point steps to 0% by 2040.

The company also announced that it would no longer invest in energy companies that “put the two-degree target at risk by extensively building coal-fired power plants”.

Climate strategy breakthrough?

Climate think tank The 2° Investing Initiative said Allianz’s decision, along with the move to exit the coal insurance business, “marks a breakthrough in integrating climate criteria into investment and capital stewardship [and] engagement decisions that go beyond backwards-looking metrics to forward-looking indicators”.

According to the think tank, Allianz had become “one of the first, if not the first, major investor to publicly announce a forward-looking climate strategy that explicitly integrates the capital expenditure plans of companies”.

A spokeswoman said divestment volumes would depend on how companies would change their business models to phase out coal.

“Given that we pursue a strong ESG integration approach across our whole portfolio and already followed an ambitious coal policy since 2015, we think that measuring success on divestment volumes might be a bit misleading,” she added.

She said the company estimated foregoing around €50m in premiums per year as a result of the decision to stop insuring single coal-fired power plants and coal mines, whether they were operational or planned.

Allianz will work with the non-profit organisation Science-Based Target Initiative on the methods and targets that should underpin its climate strategy. The policy applies to the proprietary assets of Allianz Group, which amount to around €690bn, not to assets of third party clients managed by Pimco or Allianz Global Investors.

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