Mr. Ewald, Allianz is investing in forest protection for the first time. Why?

Martin Ewald: We've acquired a ten-percent stake in Wildlife Works Carbon (WWC), the leading developer of what are known as "REDD" projects (Reducing Emissions from Deforestation and Forest Degradation). These projects aim to slow worldwide deforestation in developing and emerging countries.

Allianz considers REDD an attractive investment option because it opens up access for us to major growth markets, and will generate competitive returns through the sale of CO2 certificates. Besides our equity interest in WWC, we've also secured the rights to emission certificates from WWC projects in Kenya, with which we will neutralize a portion of Allianz's CO2 footprint starting in 2012.

Through our internal CO2 targets, we'll continue to reduce our emissions, and beginning in 2012 we'll be compensating all our emissions by investing in climate protection projects.

How does REDD work, and what can it do for climate protection?

Ewald: Global deforestation is advancing alarmingly and is now responsible for 17 percent of the world's greenhouse gas emissions. The REDD mechanism supported by the United Nations is intended to halt that change by attributing a financial value to the CO2 stored in trees and the forest floor, and thus creating an economic incentive to protect and preserve forests.

The CO2 that is saved from being emitted when a forest is protected can be traded in the form of CO2 certificates. Thus protecting a forest can become an interesting investment case. REDD is playing a key role in the international negotiations for a post-Kyoto protocol, and may even be officially recognized as a way of combating climate change at the climate conference in Durban at the end of this year.

Allianz is not just acquiring CO2 certificates – it's also investing in the project developer, WWC. Why?

Ewald: WWC is currently the world's leading developer of REDD projects. We've been impressed with its many years of experience and the exceptional economic, social and ecological quality of its projects. WWC developed the world's first REDD projects that received CO2 certificates, and is now building up a portfolio of REDD projects in various African countries.

REDD has immense worldwide potential, and by investing in WWC we want to gather experience in this promising market at an early stage, and benefit from the opportunities it offers. Conversely, we can contribute our knowledge in certificate trading and international climate negotiations.

What investors will be interested in REDD? What comes next? What do the politicians say?

Ewald: REDD is an increasingly attractive investment class for institutional investors, and especially financial investors. Demand for sustainable investments has risen sharply in the past few years because of their long-term investment horizon and high level of social impact. The number of companies and private individuals who would like to neutralize their emissions on a voluntary basis will also grow in the long term, increasing the demand for emission certificates.

If REDD is included in the obligatory CO2 markets under a post-Kyoto protocol, demand for REDD projects would see another substantial surge. For that reason, here we expect the international community to make a clear declaration of confidence in REDD, because climate protection goals cannot be achieved otherwise. Our investment puts us in a pioneering role, and demonstrates that this approach is marketable. That signal in turn can make it easier for politicians to establish better background conditions for REDD.

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