New transition plan includes sector-specific targets and earmarks billions for climate solutions.
Global financial services provider Allianz, a leading member of the UN-convened Net Zero Asset Owner Alliance (NZAOA), has published a climate transition plan spanning both its investment and insurance arms in a bid to shape the market and increase transparency on its net zero pathway.
The plan outlines the Munich-headquartered firm’s strategy across key business lines, with the investment arm targeting a 50% reduction in greenhouse gas (GHG) emissions by 2030 by imposing ambitious decarbonisation targets for select carbon-intensive sectors and investing €20 billion (US$21.8 billion) into climate solutions by the end of the decade.
“We have already achieved our first set of interim decarbonisation targets on the investment side, so we have amassed three years of experience in how to work against targets,” Udo Riese, Global Head of Sustainable Investing at Allianz Investment Management (AIM), which has US$800 billion in assets under management (AUM), told ESG Investor.
“The real challenge [in building a net zero transition plan] was figuring out how to communicate the granularity of our portfolio, such as how we internally define asset classes and work in those asset classes.
“This plan provides balance and an additional layer to our communications [with asset managers and companies],” he said, noting the plan is a contribution to Allianz’s desire for increased transparency.
“They [managers and companies] now know where we’re headed.”
Günther Thallinger, Member of the Board of Management of Allianz and Chair of the NZAOA, said the plan reflects Allianz’s “broad scope and impact as a global insurer, asset manager, investor, and employer”.
“Our intent is to create a ripple effect through our actions on these targets and via our partnerships.”
To successfully halve portfolio emissions by 2030, Allianz has set sector targets for investee companies across oil and gas, electric utilities, steel, and the automobile sector, in line with the International Energy Agency’s (IEA) Net Zero by 2050 Scenario.
Target coverage has been limited to companies included in the Transition Pathway Initiative (TPI) dataset, the plan noted, to address the “potential problem of inconsistency or unavailability of the production and emission data required for the calculation of carbon intensities”.
“Our ability to secure and compare the relevant data to track our transition progress is the kind of thing that requires some pragmatism when setting targets,” said Riese.
Allianz plans for Scope 1 and 2 emissions produced by steel companies and electric utilities’ dependence on coal to be phased out in line with the IEA’s net zero scenario.
Additionally, Allianz has only included Scope 3 in its sector targets for oil and gas and automobiles.
A hundred percent of its AUM in assessed oil and gas companies must set net zero targets across all three emission scopes by 2025, the plan said, further calling for automobiles to limit Scope 3 emissions in line with the IEA’s scenario.
“In theory, everyone agrees that Scope 3 emissions disclosure is very important,” said Riese.
“But investment decisions depend on solid data; you cannot work with estimated data. Whenever we feel we can access such data, we will include Scope 3 targets. We don’t want to disincentivise those who attempt to disclose [Scope 3] early.”
The insurance arm of Allianz is aiming for a 30% emissions reduction for its retail motor segment and a 45% reduction in GHG emissions intensity for its commercial insurance segment by 2030, while simultaneously growing revenues from transition solutions in its commercial insurance portfolio by 150% by the end of the decade.
“Our goal was to achieve a high consistency across the guidance for our customers and asset managers,” said Riese, noting that Allianz’s guidelines and positions on coal and oil and gas “do not distinguish between insurance and investments”.
The transition plan has been “heavily informed” by international frameworks like the Task Force on Climate-related Financial Disclosure (TCFD) framework and guidance on financial institution transition plans published by the Glasgow Financial Alliance for Net Zero (GFANZ), said Riese.
As a member of the NZAOA, Allianz also adheres to its target-setting protocol. The plan is further informed by the recommendations of the UN High-Level Expert Group on Net Zero Commitments of Non-State Actors.
Allianz considers a prospective investment to be a climate solution if its activities are aligned with crucial pieces of sustainable finance legislation, such as the EU Taxonomy and Sustainable Finance Disclosure Regulation (SFDR).
This can include green bonds, sustainable green buildings, and blended finance funds, but sovereign or sub-sovereign debt investments are considered out of scope for climate solutions, the transition plan said.
“Our focus on climate solutions starts with classic renewables – wind, solar – as well as technologies like large-scale battery storage and green hydrogen,” Riese told ESG Investor.
“Solutions are evolving very dynamically, which is why we will continue to observe the market and identify adequate opportunities.
“The list could look very different in the future.”
Impending regulation, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), is part of the reason Allianz felt motivated to produce a transition plan, Riese said, adding that “by showing early ambition, there is a chance to help shape the market, which is one of the benefits of being an early mover”.
UK-based insurer Aviva first published its climate transition plan in 2021, which targets a 25% reduction in the carbon intensity of its investments, £6 billion (US$7.4 billion) in green assets, and £2.5 billion in low-carbon and renewable energy infrastructure by 2025.
More recently, fellow UK-based insurer Phoenix Group published its transition plan, which includes a target to reduce the carbon emissions intensity of its listed equity and credit assets which it has control over by 25% by 2025.
“[Our] plan is a good starting point,” said Riese.
“Over the years, it will evolve alongside industry guidance and more accurate data.”