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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 provided for general informational purposes only and should not be considered individualized investment advice, a recommendation or a solicitation to adopt any investment strategy. It does not constitute legal or tax advice. Franklin Templeton accepts no liability for losses arising from use of this material.

The views expressed are those of the investment manager as of the publication date and may change without notice. These opinions and analyses are based on certain assumptions, including market conditions that may change. They may differ from those of other portfolio managers or from the firm as a whole.

This material is not intended to provide a complete analysis of all material facts regarding any country, region or market. No assurance can be given that any forecast, projection or prediction regarding economies or financial markets will be realized. References to specific securities are for illustrative purposes only and should not be interpreted as recommendations or a solicitation to buy, sell, or hold any security.

Any research or analysis in this material has been prepared by Franklin Templeton for its own purposes and is provided incidentally. While the information included is believed to be reliable, its accuracy and completeness cannot be guaranteed, and it is subject to change without notice.

Past performance does not guarantee future results, or any profit or gain. All investments involve risks, including possible loss of principal.

Franklin Templeton offers environmental, social and governance (ESG) capabilities, though not all strategies or products incorporate ESG as part of the investment process.

Investment strategies and services may not be available in all jurisdictions. Please consult your financial professional or Franklin Templeton contact for further information.

Brazil: Issued by Franklin Templeton Brasil Ltda. Canada: Issued by Franklin Templeton Investments Corp. Offshore Americas: In the United States, this publication is made available by Franklin Templeton. United States: Issued by Franklin Templeton. Investments are not FDIC insured; may lose value; and are not bank guaranteed.

Europe: Issued by Franklin Templeton International Services S.à r.l., 8A, rue Albert Borschette, L-1246 Luxembourg. Poland: Issued by Templeton Asset Management (Poland) TFI S.A.; Rondo ONZ 1; 00-124 Warsaw.  Saudi Arabia: Issued by Franklin Templeton Financial Company, 13512 Riyadh, Saudi Arabia. Regulated by CMA. License no. 23265-22. South Africa: Issued by Franklin Templeton Investments SA (PTY) Limited, which is authorised by the FSCA as a Financial Service Provider (No.44475). Switzerland: Issued by Franklin Templeton Switzerland Ltd, Talstrasse 41, CH-8001 Zurich. Middle East & Africa (ex South Africa): Issued by Franklin Templeton Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority. Address: Franklin Templeton, The Gate, East Wing, Level 2, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E. Tel: +971(04) 428 4100. United Kingdom: Issued by Franklin Templeton Investment Management Limited (FTIML), registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL.

Australia: Issued by Franklin Templeton Australia Limited (ABN 76 004 835 849) (Australian Financial Services License Holder No. 240827), Level 47, 120 Collins Street, Melbourne, Victoria 3000. Hong Kong: Issued by Franklin Templeton Investments (Asia) Limited. Japan: Issued by Franklin Templeton Japan Co., Ltd. South Korea: Issued by Franklin Templeton Investment Advisors Korea Co., Ltd. Malaysia: Issued by Franklin Templeton Asset Management (Malaysia) Sdn. Bhd. & Franklin Templeton GSC Asset Management Sdn. Bhd. Singapore: Issued by Templeton Asset Management Ltd. (UEN) 199205211E. 2 Central Boulevard, IOI Central Boulevard Towers, West Tower #34-01, Singapore 018916.

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