Climate Change and the Financial Industry: An Agenda for Action

Michael Anthony, Allianz SE

March, 2007

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1. Facts on Climate Change

2. Allianz Response: Knowing and Understanding the risks

3. Allianz Response: Managing the risks and capturing the opportunities

Index of Slides

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Commitment

Allianz Responses: Knowing and Understanding the risks

"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

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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.

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Awareness to Action

Successful & expanding climate response…

Allianz Responses from Awareness

Allianz Austria launches climate friendly car insurance scheme

80 point Climate Action Plan assigns responsibility & timeframes to implement Climate Strategy

Allianz Group Climate Strategy to prioritize and focus developing Group response to climate risks / opportunities

Allianz Climate Core Group established to coordinate emerging Group climate activities

Allianz & WWF publish “Climate Change & the Financial Sector: An Agenda for Action”

From Awareness to Action…

Jan. ‘05 Oct. ‘05 Jan. ‘06 May. ‘06 March. ‘07

Allianz & WWF team up to analyze climate risks in Allianz’s business

Catalyst

June ‘05

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Research

Allianz Responses: Knowing and Understanding the risks

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.

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Research

Allianz Responses: Knowing and Understanding the risks

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.

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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).

Allianz Response: Managing the risks and capturing the opportunities

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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

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).

Allianz Response: Managing the risks and capturing the opportunities

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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.

Allianz Response: Managing the risks and capturing the opportunities

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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.

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Political Framework

Allianz Response

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.

“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 michael.anthony@allianz.com