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CONTRIBUTORS

David Zahn, CFA, FRM

Head of European Fixed Income,
Franklin Templeton Fixed Income

This year’s report reflects the Fixed Income Sustainability Team’s disciplined engagement approach, proprietary ESG insights, and commitment to integrating environmental and social considerations into investment decision making.

Executive Summary

Sustainable investing continues to evolve rapidly, with fixed income investors playing an increasingly influential role in driving market-wide progress. This report presents a comprehensive overview of Franklin Templeton Fixed Income’s 2025 engagement activities, highlighting how systematic dialogue with corporate, sovereign and supranational issuers informs our investment decisions and supports more resilient, transparent and sustainable capital markets. Our engagement efforts reflect a deliberate shift toward more targeted, higher-quality conversations that strengthen our understanding of material ESG risks and opportunities.

Across regions and sectors, we observed growing momentum on key sustainability themes, including decarbonisation pathways, nature conservation, social inclusion and improved sustainable disclosure. These thematic engagements enabled us to assess issuers’ strategic alignment with global climate objectives, evaluate governance practices and identify areas where enhanced reporting or operational progress is still required. Throughout the year, we also deepened our holistic approach, emphasising the interconnected nature of environmental and social outcomes and the importance of robust decision data for investors.

As sustainable finance enters a new phase defined by higher expectations, greater scrutiny and accelerating regulatory change, the message from our engagements is clear: credible progress demands transparency, ambition and consistent execution. By integrating these insights, we aim to be better positioned manage risk, identify resilient investment opportunities and capture long-term value in a rapidly transforming global economy.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

If you would like information on Franklin Templeton’s retail mutual funds, please visit www.franklinresources.com to be directed to your local Franklin Templeton website.

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