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Climate Change and the Financial Industry: An Agenda for Action Michael Anthony, Allianz SE March, 2007 Index of Slides 1. Facts on Climate Change 2. Allianz Response: Knowing and Understanding the risks 3. Allianz Response: Managing the risks and capturing the opportunities © Copyright Allianz 2 Allianz Responses: Knowing and Understanding the risks Commitment "The insurance industry has always played a key role in helping business and society understand new risks. We provide an early warning, if you will. Allianz believes it is already seeing signs that climate change is a serious emerging risk, and we expect it to remain a top-tier issue for the insurance industry for many decades to come.” - Clement Booth, Allianz SE board member “Many customers still perceive climate change issues as being relevant to Socially Responsible Investment only. However, as asset managers, it is our duty to look at all risks that may be impacting our client’s investments. In the end, carbon risk will be a market risk. So we must balance the short term with the long term risks. Climate change is no exception.” - Joachim Faber, Allianz SE board member and CEO of Allianz Global Investors © Copyright Allianz 3 1. About Allianz Leveraging our Products, Services and Global Reach Allianz is a leading global financial services provider, present in more than 70 countries with more than 170,000 employees. The international group is led by the holding company, Allianz SE (Munich). Allianz serves more than 60 million customers worldwide, with comprehensive range of products and services across 3 business lines Insurance Banking Asset Management We think our global reach and our ability to provide integrated financial solutions that enable the transition towards a low carbon economy position us centrally to tackle rising global calls for climate action. © Copyright Allianz 4 Allianz Responses from Awareness Awareness to Action Successful & expanding climate response… Jan. ‘05 Allianz & WWF team up to analyze climate risks in Allianz’s business Catalys t © Copyright Allianz June ‘05 Allianz & WWF publish “Climate Change & the Financial Sector: An Agenda for Action” Oct. ‘05 Jan. ‘06 May. ‘06 Allianz Climate Core Group established to coordinate emerging Group climate activities Allianz Group Climate Strategy to prioritize and focus developing Group response to climate risks / opportunities 80 point Climate Action Plan assigns responsibility & timeframes to implement Climate Strategy March. ‘07 Allianz Austria launches climate friendly car insurance scheme From Awareness to Action… 5 Allianz Responses: Knowing and Understanding the risks Research Allianz & the Worldwide Fund for Nature (WWF) have partnered to transform the financial sectors response to climate change. Published “Climate Change & the Financial Sector: An Agenda for Action” in 2005. Published “Climate Change & Insurance: An Agenda for Action” in 2006 Upcoming June 2007 report “The Geopolitics of Climate Change” will look at the implication of climate change in Europe's neighboring countries. Upcoming sector analysis, will examine the costs of climate change for different industries in Europe. © Copyright Allianz 6 Allianz Responses: Knowing and Understanding the risks Research Key results from Allianz/WWF reports in 2005 & 2006 Financial Industry needs to systematically screen climate risks. Extent and frequency of natural catastrophes will increase with warming climate - a substantial risk to the insurance sector. Proactive companies can reduce risks and capture new opportunities like services for carbon trading markets. Financial industry plays a pivotal role in mitigating climate risks and transitioning to a clean energy, low carbon world. The financial industry needs to better address the growing impacts of climate induced damages. Insurance needs to find ways to incorporate future climate impacts into today’s risk models. © Copyright Allianz 7 Allianz Response: Managing the risks and capturing the opportunities Business Cases (Overview) Allianz is a leading insurer in Germany for renewable energy solutions Allianz’ banking arm, Dresdner Bank, is the leading service provider for the rapidly growing European emissions trading market. Allianz Global Investor’s “Ecotrends Fund”, which invests in renewable energy, collected > €1 B in less than a year in Europe, US and Asia Allianz Capital Partners is investing parts of life insurance premiums into wind farms across Europe (€500 M in next 5 years). © Copyright Allianz 8 Allianz Response: Managing the risks and capturing the opportunities Business Case for Insurance In our global industry insurance business alone, 40 percent of damages are due to storms and floods. The insurance industry traditional assesses risk based on historic data. Insurers need to account for future weather related risks Allianz Global Corporate and Specialty uses Google Earth to visualize regional risks. Premiums might rise in some geographical areas Customers increasingly demand “green” products that not only cover their risks but also reward their environmental behaviour Allianz introduced green product schemes in the US and Austria © Copyright Allianz 9 Allianz Response: Managing the risks and capturing the opportunities Business Case for Banking Dresdner Bank has become a leading player in the European emission trading Dresdner Bank and Gazprombank recently announced a joint venture (Carbon Trade and Finance SICAR S.A.) to invest in projects that generate CO2-certificates which Dresdner sells to the investors. Dresdner Bank also provides guidance to investors and policymakers worldwide on the development of the carbon emission trading market. © Copyright Allianz 10 Allianz Response: Managing the risks and capturing the opportunities Business case for investment In spring 2006, AGI launched the Allianz RCM Global Eco Trends Fund which invests in companies with exposure to Eco-Sectors, collecting more than 1 billion euros in less than a year. The funds exposure to sectors like EcoEnergy (e.g. alternative energy and energy efficiency) represents a innovative investment vehicle to acknowledge climate conscious investment value. In 2005 Allianz Specialised Investments was founded to invest 500 million euro in renewable energies, mainly wind. Allianz estimate: Market of renewable energy to grow worldwide to Euro 250 billion until 2020. © Copyright Allianz 11 Allianz Response Political Framework Allianz actively supports the EU targets for 20% CO2 reduction by 2020, as well as a binding target of 20% share of renewables in energy mix. Allianz has also called upon the U.S. Congress for a binding CO2-reduction target as well as the introduction of a cap-and-trade system similar to the European Trading Scheme. Binding targets are particularly relevant for us as an investor to create the necessary investment security. © Copyright Allianz 12 “Climate change creates significant costs for the financial industry. In the interest of our clients and shareholders we are obligated to take these risks into account when making decisions on insurance underwriting, investments or lending credit.“ Joachim Faber, Allianz SE Board Member and CEO of Allianz Global Investors www.allianz.com/climate [email protected]