Achieving Sustainability

Interview with Giles Money and Alex Bibani

Launched in 2003, the Allianz Global Sustainability fund was one of the first global sustainability funds, and AllianzGI is proud of this long track record and the firm’s pioneering stance in this area. Portfolio Managers Giles Money and Alex Bibani have been working together for over five years, and Giles has been running sustainable portfolios since 2005. Here, they join us to give a better understanding of the Global Sustainability strategy.

Q: First, why does sustainability matter for you? And how does that shape your investment philosophy? 

Giles: As active equity investors, our mission is to invest for, and deliver to clients, market-leading returns by participating in the commercial success of well-governed companies. We believe the key to such success in the 21st century relies upon alignment with positive societal and environmental outcomes. And we are not the only ones who believe that: 84% of millennial investors prioritise investment with an ESG (environmental, social, and governance) focus. Moreover, as wealth gets progressively transferred to GenZ and millennials, this way of thinking will increasingly become the norm. 

Alex: A consequence of this thinking implies, for us, taking a critical look at the investment universe. In order to access sustainable growth, certain sectors – so-called “stranded assets” – are best avoided. This includes unsustainable sectors related to, for example, thermal coal or combustion engines, but also sectors that risk becoming obsolete due to technological developments, such as travel agencies or print media, for instance. On the other hand, sectors that aim to shape the energy transition, such as electric vehicles (EVs), or spearhead innovative technologies, such as cloud computing, stand to benefit over the longer term.






Q: Could you tell us a little about what makes the Allianz Global Sustainability fund unique?

Giles: In terms of its uniqueness, I would focus on our investment process. We rely on stock picking as our primary driver of investment returns, and we seek to avoid taking on too much factor risk – a common challenge for sustainability funds. Furthermore, this process is based on a five-to-ten-year outlook, seeking to identify companies that are mispriced relative to their long-term potential.

Alex: Indeed, and to this end we focus on three factors that could contribute to mispricing. First, good quality growth companies are sometimes undervalued because people are looking at the next two to three years, rather than five-to-ten. Companies like this represent between 50 and 100% of the portfolio at any time. Second, the market can dislike certain companies for cyclical reasons; these companies make up between 0 and 25% of the portfolio and represent our value component. Third, some quality growing companies are currently undergoing significant change or restructuring; these companies also make up between 0 and 25% of the portfolio.1


Q: Building on this, what else distinguishes the fund from other offerings in the market?

Giles: Given this distinctive investment approach, we are less style-oriented than some of our peers, and, as mentioned, we seek to avoid factor risk. The fund is relatively concentrated – with about 40 to 60 stocks1 – and limits its investment universe through hard exclusions, then using a best-in-class approach that leverages a range of data providers to address potential discrepancies in ESG data. This allows for differentiated returns, driven by conviction equity holdings, and the fund shows good performance versus its peer group.

Alex: A further differentiator is the depth of expertise on our team, and the support they receive from our dedicated sustainability units whose responsibility extends across the entire business. In addition, we have very experienced teams on the ground in Asia, a key advantage given our global positioning. These teams, plus the investment process described above, make our fund highly differentiated in the market.


Q: You mentioned your exclusionary/best-in-class approach to stock picking. Could you elaborate a little?

Giles: Our process starts by excluding any companies deriving significant revenues from, for instance, thermal coal, alcohol, gambling, or weapons. Our dedicated team of global sustainability analysts then score the remaining equity universe according to sector-relevant ESG criteria. This approach thus enables us to invest in companies with industry-leading ESG management, as well as those that are committed to improving their ESG performance going forward. Our portfolio managers then combine this ESG analysis with the output of our fundamental research team, resulting in a balanced portfolio of companies with both superior financial and ESG characteristics.

Alex: This approach allows us to benefit from both concentration and diversification and gives us a deep understanding of our investments from both ESG and fundamental perspectives.

Furthermore, we actively engage with companies to help improve their ESG performance – not just those currently in the portfolio but also others in which we see potential and opportunity, but currently fall short of our stringent criteria.

We take our responsibility as an active manager very seriously, both in terms of stewarding our clients' assets and seeking to encourage the best ESG performance possible from companies we engage with.


Q: Finally, what are the key points you would want anyone considering investing in the Allianz Global Sustainability fund to consider?

Giles: First, I would point to two of the differentiating factors discussed above – our pioneering approach and long track record in this area, as well as our engaged stock picking process and the support it receives from specialist teams across the business. Alongside this, I would emphasize the role that our fund plays in facilitating the sustainable transition. By investing in companies that are pioneering sustainable technologies – and business models – and engaging with them to encourage the best performance, we believe we are paving the way for a more sustainable economy in the years to come.

1 This is for guidance only and not indicative of future allocation.

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  • Allianz Global Investors Fund (“AGIF”)

    • Allianz Global Investors Fund (“AGIF”) as an umbrella fund under the UCITS regulations has within it different sub-funds investing in fixed income securities, equities, and derivative instruments, each with a different investment objective and/or risk profile.

    • All sub-funds (“Sub-Funds”) may invest in financial derivative instruments (“FDI”) which may expose to higher leverage, counterparty, liquidity, valuation, volatility, market and over the counter transaction risks. A Sub-Fund’s net derivative exposure may be up to 50% of its NAV. 

    • Some Sub-Funds as part of their investments may invest in any one or a combination of the instruments such as fixed income securities, emerging market securities, and/or mortgage-backed securities, asset-backed securities, property-backed securities (especially REITs) and/or structured products and/or FDI, exposing to various potential risks (including leverage, counterparty, liquidity, valuation, volatility, market, fluctuations in the value of and the rental income received in respect of the underlying property, and over the counter transaction risks). 

    • Some Sub-Funds may invest in single countries or industry sectors (in particular small/mid cap companies) which may reduce risk diversification. Some Sub-Funds are exposed to significant risks which include investment/general market, country and region, emerging market (such as Mainland China), creditworthiness/credit rating/downgrading, default, asset allocation, interest rate, volatility and liquidity, counterparty, sovereign debt, valuation, credit rating agency, company-specific, currency  (in particular RMB), RMB debt securities and Mainland China tax risks. 

    • Some Sub-Funds may invest in convertible bonds, high-yield, non-investment grade investments and unrated securities that may subject to higher risks (include volatility, loss of principal and interest, creditworthiness and downgrading, default, interest rate, general market and liquidity risks) and therefore may adversely impact the net asset value of the Sub-Funds. Convertibles will be exposed prepayment risk, equity movement and greater volatility than straight bond investments.

    • Some Sub-Funds may invest a significant portion of the assets in interest-bearing securities issued or guaranteed by a non-investment grade sovereign issuer (e.g. Philippines) and is subject to higher risks of liquidity, credit, concentration and default of the sovereign issuer as well as greater volatility and higher risk profile that may result in significant losses to the investors. 

    • Some Sub-Funds may invest in European countries. The economic and financial difficulties in Europe may get worse and adversely affect the Sub-Funds (such as increased volatility, liquidity and currency risks associated with investments in Europe).

    • Some Sub-Funds may invest in the China A-Shares market, China B-Shares market and/or debt securities directly  via the Stock Connect or the China Interbank Bond Market or Bond Connect and or other foreign access regimes and/or other permitted means and/or indirectly through all eligible instruments the qualified foreign institutional investor program regime and thus is subject to the associated risks (including quota limitations, change in rule and regulations, repatriation of the Fund’s monies, trade restrictions, clearing and settlement, China market volatility and uncertainty, China market volatility and uncertainty, potential clearing and/or settlement difficulties and, change in economic, social and political policy in the PRC and taxation Mainland China tax risks).  Investing in RMB share classes is also exposed to RMB currency risks and adverse impact on the share classes due to currency depreciation.

    • Some Sub-Funds may adopt the following strategies, Sustainable and Responsible Investment Strategy, SDG-Aligned Strategy, Sustainability Key Performance Indicator Strategy (Relative), Green Bond Strategy, Multi Asset Sustainable Strategy, Sustainability Key Performance Indicator Strategy (Absolute Threshold), Environment, Social and Governance (“ESG”) Score Strategy, and Sustainability Key Performance Indicator Strategy (Absolute). The Sub-Funds may be exposed to sustainable investment risks relating to the strategies (such as foregoing opportunities to buy certain securities when it might otherwise be advantageous to do so, selling securities when it might be disadvantageous to do so, and/or relying on information and data from third party ESG research data providers and internal analyses which may be subjective, incomplete, inaccurate or unavailable and/or reducing risk diversifications compared to broadly based funds) which may result in the Sub-Fund being more volatile and have adverse impact on the performance of the Sub-Fund and consequently adversely affect an investor’s investment in the Sub-Fund. Also, some Sub-Funds may be particularly focusing on the GHG efficiency of the investee companies rather than their financial performance which may have an adverse impact on the Fund’s performance.

    • Some Sub-Funds may invest in share class with fixed distribution percentage (Class AMf). Investors should note that fixed distribution percentage is not guaranteed. The share class is not an alternative to fixed interest paying investment. The percentage of distributions paid by these share classes is unrelated to expected or past income or returns of these share classes or the Sub-Funds. Distribution will continue even the Sub-Fund has negative returns and may adversely impact the net asset value of the Sub-Fund.  Positive distribution yield does not imply positive return.

    • Investment involves risks that could result in loss of part or entire amount of investors’ investment.

    • In making investment decisions, investors should not rely solely on this [website/material].

    Note: Dividend payments may, at the sole discretion of the Investment Manager, be made out of the Sub-Fund’s capital or effectively out of the Sub-Fund’s capital which represents a return or withdrawal of part of the amount investors originally invested and/or capital gains attributable to the original investment. This may result in an immediate decrease in the NAV per share and the capital of the Sub-Fund available for investment in the future and capital growth may be reduced, in particular for hedged share classes for which the distribution amount and NAV of any hedged share classes (HSC) may be adversely affected by differences in the interests rates of the reference currency of the HSC and the base currency of the respective Sub-Fund. Dividend payments are applicable for Class A/AM/AMg/AMi/AMgi/AQ Dis (Annually/Monthly/Quarterly distribution) and for reference only but not guaranteed.  Positive distribution yield does not imply positive return. For details, please refer to the Sub-Fund’s distribution policy disclosed in the offering documents.

     


    Allianz Global Investors Asia Fund

    • Allianz Global Investors Asia Fund (the “Trust”) is an umbrella unit trust constituted under the laws of Hong Kong pursuant to the Trust Deed. Allianz Thematic Income and Allianz Selection Income and Growth and Allianz Yield Plus Fund are the sub-funds of the Trust (each a “Sub-Fund”) investing in fixed income securities, equities and derivative instrument, each with a different investment objective and/or risk profile.

    • Some Sub-Funds are exposed to significant risks which include investment/general market, company-specific, emerging market, creditworthiness/credit rating/downgrading, default, volatility and liquidity, valuation, sovereign debt, thematic concentration, thematic-based investment strategy, counterparty, interest rate changes, country and region, asset allocation risks and currency (such as exchange controls, in particular RMB), and the adverse impact on RMB share classes due to currency depreciation.  

    • Some Sub-Funds may invest in other underlying collective schemes and exchange traded funds. Investing in exchange traded funds may expose to additional risks such as passive investment, tracking error, underlying index, trading and termination. While investing in other underlying collective schemes (“CIS”) may subject to the risks associated to such CIS. 

    • Some Sub-Funds may invest in high-yield (non-investment grade and unrated) investments and/or convertible bonds which may subject to higher risks, such as volatility, creditworthiness, default, interest rate changes, general market and liquidity risks and therefore may  adversely impact the net asset value of the Fund. Convertibles may also expose to risks such as prepayment, equity movement, and greater volatility than straight bond investments.

    • All Sub-Funds may invest in financial derivative instruments (“FDI”) which may expose to higher leverage, counterparty, liquidity, valuation, volatility, market and over the counter transaction risks.  The use of derivatives may result in losses to the Sub-Funds which are greater than the amount originally invested. A Sub-Fund’s net derivative exposure may be up to 50% of its NAV.

    • These investments may involve risks that could result in loss of part or entire amount of investors’ investment.

    • In making investment decisions, investors should not rely solely on this website.

    Note: Dividend payments may, at the sole discretion of the Investment Manager, be made out of the Sub-Fund’s income and/or capital which in the latter case represents a return or withdrawal of part of the amount investors originally invested and/or capital gains attributable to the original investment. This may result in an immediate decrease in the NAV per distribution unit and the capital of the Sub-Fund available for investment in the future and capital growth may be reduced, in particular for hedged share classes for which the distribution amount and NAV of any hedged share classes (HSC) may be adversely affected by differences in the interests rates of the reference currency of the HSC and the base currency of the Sub-Fund. Dividend payments are applicable for Class A/AM/AMg/AMi/AMgi Dis (Annually/Monthly distribution) and for reference only but not guaranteed.  Positive distribution yield does not imply positive return. For details, please refer to the Sub-Fund’s distribution policy disclosed in the offering documents.

     

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