Allianz has pledged to increase its private equity investment in renewable energies by €300m to €500m in the next five years.
The German-based financial services giant, active in private equity through Allianz Private Equity Partners and Allianz Capital Partners, made the commitment in the run-up to this week’s G8 summit, which is nearing an agreement to combat climate change.
Joachim Faber, head of Allianz Global Investors; Andrew Torrance, CEO of Allianz Cornhill; and Otto Steinmetz CRO of Dresdner Bank outlined the plan at the launch of a new report urging the financial industry systematically to screen climate change risks.
“Climate change creates significant costs for the financial industry,” said Joachim Faber, Allianz AG board member and CEO of Allianz’s asset management arm, Allianz Global Investors. “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.”
To tackle climate change risks strategically, Allianz said it would address the issue at board level and examine carbon risks in banking, asset management and insurance. It has commissioned a Climate Core Group, headed by Otto Steinmetz, Dresdner’s chief risk officer, to head the development of the project.
Allianz is one of the largest private equity investors in Europe and the single largest investor in the asset class in Germany. It currently has about 1% of its €350bn investment portfolio in private equity, but plans to raise that percentage.
“We plan to further increase the volume of private equity investment and are limited only by the quality and sustainability of the investment opportunities offered to us. However, it is important to stress that it is not our goal to allocate 5% to 7% of our total investment to private equity as the US pension funds do,” Paul Achleitner, Allianz AG CFO, said in a recent statement.
Allianz may effect the increase through economies of scale by opening up its Allianz Private Equity Partners (APEP) fund to selected outside clients. Private investors already have access to APEP’s product knowledge by investing in ALCAS, a newly created private equity umbrella fund whose commitments are selected by APEP.
Allianz has been moving towards off-board trading commitments, where value is less susceptible to fluctuation, since 1996. Public equities currently account for 15% of its investment volume, but in the next five years the proportion will fall to around 10%.
Since the adoption of the strategy, Allianz has invested €4.9bn in private equity. It currently holds investments worth €3.3bn. Of this, €1bn is invested directly through Allianz Capital Partners (ACP), while a further €2.3bn is invested indirectly through Allianz Private Equity Partners (APEP). The firm currently holds stakes in 80 funds.