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Dr. Joachim Faber

08 August 2005
Dr. Joachim Faber

Dr. Joachim Faber is CEO of Allianz Global Investors and a member of the management board of Allianz Group, Munich. He joined Allianz in 1997 and has been working in his current position since January 2000. Prior to joining Allianz, Dr. Faber spent fourteen years working in various positions for Citicorp in Frankfurt and London.

Allianz recently published a joint report on climate change and its impacts on the financial sector in partnership with WWF. The report outlines specific steps for actions to better integrate risks from climate change into the business, banking and asset management business. Allianz marked the publication of the report, Climate Change & the Financial Sector: An Agenda for Action, with a pledge to grow investments in renewable energies by 300 to 500 million euros over the next five years.

In August 2005, The Climate Group talked to Doctor Faber about climate change in relation to the financial services industries:

You have recently produced a report on climate change and the financial services industry. Why is climate change so important to Allianz?

We expect climate change to influence the frequency and severity of natural catastrophes. This means, for example, more property damage which of course will affect our insurance business.

From the asset management point of view, climate change can potentially impact global economic performance and hence the value of investments.

But we also see a number of business opportunities arising from climate change. For the financial sector these include emissions trading, investment in renewable energies and other climate-friendly technologies, and new insurance products to help customers manage environmental risks.

Some people are still "on the fence" about climate change. What has most motivated Allianz to take action?

Our conviction is based on our experience. For example, our banking subsidiary, Dresdner Bank, has been a major facilitator in the EU Emissions Trading Scheme. It is already apparent to us that the scheme will have its winners and losers. The utilities sector and the carbon-intensive raw materials sector will be hit hardest. {CO2} emissions as a cost of production could increasingly cut into profits.

As an insurer, investor and credit lender, we simply cannot ignore this knowledge. This we owe to our customers and shareholders.

Exactly what is Allianz doing to mitigate these risks for its own businesses?

We believe that climate change risks are manageable. To manage these risks, we have commissioned a group-wide task force, called the "Climate Core Group", which will systematically examine climate change-related risks and opportunities in our business operations across all business lines.

The task force will act as a Center of Competence for the Board of Management and the business lines, and will cover all possible issues such as assessing the insurability of wind energy producers and introducing risk assessment tools like flood zoning and natural catastrophe modeling.

Climate change is a long-term issue, but capital markets are mainly interested in the short-term. Are your asset management customers really concerned about climate change?

Many customers still perceive climate change issues as being relevant to Socially Responsible Investment only. However, as fund managers, it is our duty to look at all risks that may be impacting our clients' 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.

So how will you factor climate change into your investment decisions?

We already use the knowledge available to us. And we will continue to build up our knowledge base of extra-financial information. Within the framework of the Carbon Disclosure Project, Allianz has asked the FT Global 500 companies for disclosure on their {CO2} emissions.

In addition, as founding member of the Enhanced Analytics Initiative, we have dedicated 5 percent of our broker commissions to brokers who factor extra-financial information like climate change-related issues into their research.

What are the next steps?

Our "Climate Core Group" will develop further tools for carbon risk screening and align them with our business and risk management processes.

Allianz will continue to invest in the renewable energy sector, and has even formed a special investment unit for that purpose. Not only will clean energies reduce {CO2} emissions, but we reckon that the business potential for European wind energy will double in the next five years.

We are also calling on governments to provide a clear and stable political direction on climate change-related issues, especially for the post-2012 EU Emission Trading Scheme. This would provide us with more reliability when gauging climate change-related risks for both our long-term investments and our credit lending.

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