Case Study

Allianz: A sensitive business area

Allianz Group is a world-leading provider of insurance and asset management products in more than 70 countries. Allianz strives to incorporate ESG factors into its core business processes and has a central ESG Office, based in its global headquarters in Munich. In 2014 it received the Gold Class Sustainability Award from RobecoSAM in recognition of its excellent sustainability performance.

Animal welfare as a sensitive business area

To help manage its direct investments and underwriting – constituting around €600 billion of assets – Allianz defines 13 ‘sensitive business areas’ where it believes there is significant risk
to its lines of business. Animal welfare is one of these areas.

“Farm animal welfare is an important reputational issue, and over time reputational issues can also become increasingly financially material. If relevant companies do not manage animal welfare then customers may shy away from their product, the company may incur fines or lose its license to operate. These are all financially material risks to investors.”

Allianz ESG expert

Allianz will screen transactions against these sensitive area guidelines, although their intention is not to exclude any business by default but to ensure that each risk is analysed on a case-by-case basis to see how and if the risk can be mitigated. These areas were defined after dialogue with a wide range of stakeholders.

Although animal welfare is not an issue with as much ‘traffic’ as areas such as human rights, defense or hydro-electric power, it remains an important consideration for the Group.

So how does it work in practice?

When Allianz does its due diligence on a potential transaction in a sensitive business area then it has publicly-available guidelines to highlight key risks. If an ESG risk is detected, then a mandatory referral process is triggered. This means Allianz undertakes additional due diligence and particular ESG experts will review the detected risks feeding their results back to the front-office team to ensure that informed decisions are made on a local and/or at Group level. Ultimately, if there is a clear breach of guidelines then Allianz can discontinue the transaction. Allianz regularly reviews its ESG guidelines and has them approved at Board level.

Regarding animal welfare, factors such as conditions of confinement, or the company’s use of antibiotics will be considered in the due diligence.

Key criteria that are checked for in the animal welfare area include:

  • Poor conditions of confinement and transportation
  • Evidence of routine mutilation
  • Inappropriate use of chemicals and medicines

More transparency required

Allianz stated that much more transparency is required in the market at large on this issue. “Both investors and consumers need more systematic information to help them make the right decisions. For investors – we need clear, comparable indicators on animal welfare management in order to help us make good decisions. For consumers there is a complexity of supply that is very frustrating. For example, you can have a Danish pig, medicated in Spain and slaughtered in Italy but all the consumer sees is ‘Italian pork’, with no knowledge of its history or whether its transportation was cruel.”

“If consumers get frustrated they act and this can change markets and impact on long-term returns. So transparency is a fundamental step.”

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