Climate Statement August, 2020 - Deutsche Bank
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FOREWORD
Why we’re issuing a Climate
Statement
Deutsche Bank has been very active on climate-relat-
ed issues over the last 12 months and is continuing
to implement changes across all businesses.
Deutsche Bank was early to recognise through to how we encourage our employees to iden-
the fight against climate change as a tify with our drive towards greater sustainability.
major challenge of our time. The renowned climate expert Stefan Rahms
Our own business operations torf provides an introduction to the topic. In an
have been climate neutral since 2012 – interview our CEO Christian Sewing explains the role
making us one of the first financial ser- that climate protection plays in our business model.
vice providers to embark on this path. In addition, senior managers from the bank describe
But this was only the beginning. As a how our commitment to sustainability is changing
signatory to the Paris Pledge for Action their day to day jobs.
in 2016, the bank made an explicit Our Group Sustainability team has supported
commitment to contribute to achieving and coordinated this transformation for many years
the targets of the Paris Climate Agree- and together with the Sustainability Council chaired
ment. In July 2019, Deutsche Bank by Christian Sewing, it is laying the groundwork for
made a broader, long-term commitment the bank-wide transformation to pick up pace. Our
to sustainability, placing it at the heart aim with this statement is to communicate this irre-
of its business strategy. Even though we versible shift towards climate protection and sustain-
have focused on this issue for years, we ability which we are experiencing within our bank and
have made significant progress over the observing among our clients and those around us. We
last 12 months. We have set ourselves hope you will find it informative and interesting.
specific targets for sustainable business
and formulated bank-wide criteria for
what we define as sustainable. As a Viktoriya Brand
signatory to the German financial sec- Head of Group Sustainability
tor’s commitment on climate action we
have pledged to structure our lending
portfolios in line with the targets of the
Paris Agreement on Climate Change. At
the same time we have tightened our
policy governing business activities in Viktoriya Brand: ”We are expe-
riencing an irreversible shift ›
the fossil fuels sector.
towards climate protection
This Climate Statement outlines
and sustainability within the
how our bank contributes to sustainable bank and in the environment
and climate-friendly economic activity. in which we operate.”
It covers the entire spectrum from sus-
tainable finance and managing climate
risk and our own carbon footprint rightOur approach Our Carbon Footprint
Sustainability approach and climate change 8 A win-win-win situation 44
A smaller carbon footprint, more modern workplaces, lower costs – Jörg Salzer
»Giving up is not an option for me« 10 demonstrates that a green approach makes sense on many counts.
Professor Stefan Rahmstorf is one of the most prominent campaigners
seeking to educate people about the fight against climate change. Our own carbon footprint 46
We see it as an integral part of our responsibility as a corporate citizen to
»We’re ideally positioned for sustainability as a bank« 12 minimise the environmental impact of our business operations.
Christian Sewing talks about climate strategy and climate targets.
Employee Engagement
Our sustainability and climate risk governance 17
Sustainable Finance We’re all members of the project team
Nicola Gill is Deutsche Bank’s Global Head of Internal Communications.
She wants to convince as many employees as possible to go green.
50
Deutsche Bank: part of the green revolution 20 Water creates life anew 52
Henrik Johnsson, Global Co-Head of Capital Markets, discusses the reasons why the Rosette D’souza, COO Finance Center India, explains how Deutsche Bank is
short-term expense of transitioning to a green economy will be worth it in the long run. building sustainable rural communities with Swades Foundation.
»If we don’t act now, we’ll have passed up an opportunity« 23 What if we told you we could change the way 4.5 million 54
Gerald Podobnik is Chief Financial Officer of our Corporate Bank and a member of the people think about sustainability ... overnight?
German government’s Sustainable Finance Advisory Council. Hackathon winner Peter Suggitt builds an app to help you track – and
lower – your carbon footprint.
Sustainable finance – examples 26
32
Thought Leadership
Carbon-intensive sectors
Climate Risks »We are looking for allies«
Jörg Eigendorf, Head of Communication and Sustainability,
on the important role of networks
58
»We need to make the climate risk assessment 36 Thought leadership – memberships and initiatives 61
clear and explicit«
Chris Jaques, Head of Enterprise Risk Portfolio Management and Stress Testing,
on the challenge of creating a framework for climate risk from scratch.
Climate Risks The Deutsche Bank Collection 62
The further development of our climate risk management framework 38
is a key pillar of our approach to Sustainability and Climate Change. Imprint 64
6 7Sustainability approach Based on our long-standing commit-
ments, in July 2019, sustainability has
become a central component of our
electricity was from renewable sources and we
have committed ourselves to expanding this
to 100% by 2025.
and climate change corporate strategy, "Compete to win”.
To embed sustainability holistically
→ Thought leadership: Being a leading voice
in the public debate on climate change and
sustainable growth as well as actively engag-
throughout the bank, we are focusing ing in regulatory discussion and innovative
Deutsche Bank’s commitment to sustain on four dimensions: initiatives.
ability is long-standing. Early on, in 2000, → Sustainable finance: Making As a member of the Banking Environment
sustainability an integral part of Initiative (BEI), in 2019, we collaborated in
we committed ourselves to the Ten Princi- our client offerings, as well as
offering products and services
Bank 2030, a project that set out to under-
stand how banks can accelerate the financing
ples of the UN Global Compact as one of the that help our clients to trans- of a low-carbon economy and develop a vision
form business models towards a for climate-progressive banks. Deutsche Bank
early signatories, and we are a member low-carbon future. is also represented in the Sustainable Finance
of the United Nations Environment Pro- In May 2020, we set ourselves
the target to increase the volume
Advisory Council, inaugurated in 2019 by the
German Federal Government to support the
gramme Finance Initiative (UNEP FI). As a of sustainable financing and our
portfolio of sustainable invest-
development of a national sustainable finance
strategy. Moreover, in 2020, we launched
signatory to the United Nations’ Principles ments under management to dbSustainability, a dedicated sustainability re-
over 200 billion euros by 2025. search platform providing thought-provoking,
for Responsible Banking as well as its → Policy and commitments: Inte- value-added and aligned content spanning
Principles for Responsible Investment, the grating environmental and social
considerations into the bank’s
thematic, macro, quantitative and individual
company analysis (dbresearch.com).
bank is committed to responsible banking risk management framework.
In doing so, we follow interna- Sustainability covers a broad spectrum of environ-
and investment practices. tionally recognised principles mental and social matters, with climate change be-
and standards. In June 2020, we ing one of the defining challenges of our time. As a
articulated our commitment to leading global financial institution, we recognise the
align our lending portfolios to the role we have to play in addressing this challenge and
targets set by the Paris Agree- helping to shape the global change to a sustainable,
ment. In addition, in July 2020, climate-neutral and social economy.
we expanded our fossil fuel
policies and formally joined the By signing the Paris Pledge for Action in 2015, we
Equator Principles Association. articulated our commitment to contribute to the
→ Our own environmental foot- goals of the Paris Agreement. We reinforced this
print: Continuously reducing our statement by joining the German Financial Sector’s
own environmental footprint. We collective commitment to Climate Action in June
have been operating carbon neu- 2020. We welcome the European Union’s ambition
trally since 2012. As part of this of becoming carbon-neutral, and will support efforts
commitment, we have been re- in advancing the European Commission’s action
ducing our energy consumption plan on sustainable finance as well as transitioning
and greenhouse gas emissions. the economy, as laid out in the Commission’s EU
Compared to 2010, we have Green Deal. ›
reduced our energy consump-
tion by more than 25% and cut
our greenhouse gas emissions by
half. In 2019, about 80% of our
8 9»Giving up is not an
option for me«
Stefan Rahmstorf is
a climatologist and
departmental head at
the Potsdam Institute
for Climate Impact
Research and Profes-
Professor Stefan Rahmstorf is one of the most sor of Ocean Physics
at the University of
prominent campaigners seeking to educate people Potsdam. His main
areas of research
about the fight against climate change. are climate changes
in the history of the
earth and the role of
the oceans in climatic
activity.
“The Doomsday Glacier has reached tipping point”
was the headline of a news story in February of this experience the painful consequences confronting those who deny reality with pseudo-ar-
year. It is one of mightiest glaciers in the Antarctic. of climate change if humanity does not guments. The subject of his undergraduate thesis
A research project now aims to establish whether it take rapid action. Global CO2 emissions was the theory of relativity. He always wanted to be
has already passed this tipping point, meaning that need to be halved in just the next ten a naturalist but it turned out not to be astrophysics
all its ice will melt. Since the glacier holds back the years (in order to then reduce them after all: “I wanted to work on something that is not
entire mass of ice that makes up the West Antarctic continuously towards zero) if global only academically interesting but that is useful to
Ice Sheet, the consequences would be dramatic. If it warming is to be halted at well below mankind.”
were to drift into the ocean, writes the Süddeutsche two degrees. If this warming exceeds His voice and those of many other scientists
Zeitung newspaper, “it would even put Hamburg un- two degrees – compared to pre-in- are being heard, slowly but surely. “Very many young
derwater.” Stefan Rahmstorf retweeted that article, dustrial levels – the consequences of people have understood how dire our situation is,”
sharing it with his 50,000-plus followers. FACTS ABOUT CLIMATE climate change can no longer be kept Rahmstorf says. And the impression he gained at the
This is only one of many almost inconceiv- CHANGE in check. If instead the Paris Agree- last World Economic Forum in Davos was that “atti-
able scenarios for the impact of climate change. The volume of CO2 in the atmosphere is ment is observed, then sea levels will tudes have also changed in the financial world.” After
The departmental head at the Potsdam Institute currently higher than it has ever been in rise more slowly, coastal towns will be all, every individual can do something. Rahmstorf
for Climate Impact Research uses direct language the last three million years. rescued, famine crises and catastroph- doesn’t own a car and doesn’t use fossil fuels like gas
to reach as many people as possible. His creed is to ic droughts, and probably even wars, heating at home. Instead, he has solar panels on his
make clear statements instead of using long-wind- Never during the last 120,000 years has will be averted. People often don’t roof and consumes just half of the power they gener-
ed jargon: “Believing in soothing fairy tales is not a the global temperature been higher than it realise that: “The main objective is not ate for his own household. “The most important thing
solution. You need to calmly face up to inconvenient is today. to protect the environment but, first is to get involved in climate-related policymaking pro-
facts as well.” and foremost, to prevent an existential cesses. And of course to choose green investments
For example: the acts already perpetrated by At the end of the last ice age, global sea crisis for mankind,” says Rahmstorf. that apply the strictest criteria, letting your money
mankind will have consequences for all time. “Our levels rose by 120 metres after warming of The professor, who is also work for a sustainable future.” Ultimately though, says
CO2 emissions are a cumulative phenomenon, which between 4 and 5 degrees. Today there is interested in ocean physics, is truly Rahmstorf, the fight against climate change has to
means that CO2 collects in the atmosphere and still enough ice on earth to raise sea levels tireless in his campaign to raise aware- be a concerted effort between consumers, politicians
remains there,” says Rahmstorf. The effect of this: by another 65 metres. ness about this topic. Whether on and the business community.
“50,000 years from now the level of emissions we Twitter, Instagram or Facebook, in his Achieving this end requires the general
Photo: Nick Cubbin
have already generated will still be so high that the Around 100 per cent of modern-era global “Klimalounge” blog, or as a speaker public to be educated – that is his staunchly held
next natural ice age will fail to occur.” warming has been man-made. The figure and regular contributor to the German belief. Rahmstorf will therefore continue to conduct
But you don’t have to look that far into the is probably even slightly higher than that news magazine Der Spiegel, he shares lectures, give interviews, tweet and write blog posts.
future. What we can already say is that anyone not because natural processes have helped information supported by scientific “Giving up is not an option that I could justify to the
yet old enough to collect their pension will › counteract the warming a little. facts and reports and is not above world or my children.” ›
10 11We’re ideally positioned
for sustainability as a bank
Christian Sewing talks about climate
Christian Sewing: “We play a
targets as part of Deutsche Bank's crucial role: we can and must
help companies to do business
sustainability strategy. more sustainably.”
The coronavirus pandemic has diverted public at- DEUTSCHE BANK’S
tention away from the fight against climate change.
Has the topic become less important?
CLIMATE GOALS
No, on the contrary. The coronavirus is making →S ustainable Finance target
us aware of certain things for the first time. We’re of 200 bn euros by 2025
all suddenly realising what it feels like when the
air is cleaner and how valuable it is when nature
→E nd of global business
is more intact. Moreover, the fear of major disas- activities in coal mining by and social bonds for our clients target. And so now we have a yardstick against
ters has increased as a result of the coronavirus 2025 with a volume of roughly 4.2 billion which we can measure ourselves, and the trans-
pandemic. This will also be reflected in policy- euros. parency to see how we’re doing in the individual
→E nd of financing new oil
making. So climate change is an issue that will businesses quarter by quarter.
grow rather than diminish in importance. and gas projects in the For the first time, Deutsche Bank has
Arctic region or new oil issued specific targets. Is this primarily Then why is the bank only reporting once a year
What does this mean for banks? a signal to the outside world, or is it instead of every quarter?
sand projects - effective
Specifically, this means that simply observing directed inhouse? I want to see for myself first exactly how quickly
from the sidelines isn’t an option; we have to immediately To me, the signal to our staff is we obtain the figures at the end of the quarter,
promote the topic ourselves. On the one hand, → I ntroduction of methods for much more important. This target is what the data quality is and where we need to
because political thinking with regard to sus- measuring climate impact the product of an interplay between improve the process. The goal must be to have
tainability is increasingly reflected in how we the businesses. All their represent- an automatic process in place: from the granting
are regulated as banks. But on the other hand,
by the end of 2022 atives on the Sustainability Council of sustainable loans and issuing of sustainable
mainly because we understand that we as a bank →S olely use renewable were asked to submit growth plans bonds right through to sales and marketing,
have a responsibility and the opportunity to take electricity by 2025 and to demonstrate the contribu- including financial reporting.
action. We play a crucial role: we can and must tions they can make. We then val-
help power companies, airlines and carmakers to idated the plans with market data How does your target compare to those of your
do business more sustainably. and our market share. We have a peers?
good base, as we’ve been trending We’re very good by comparison. It’s not just
How? upwards in sustainable finance and about how high the target is, but also about the
We’re the gateway to the capital market. We have investments for two years already. timescale in which we aim to achieve it. We have
the necessary investment capital. In the first We’re therefore very confident no reason to be shy about either the absolute
half of 2020, we have placed environmental › that we can achieve this ambitious figure or the timescale. ›
12 13› One single figure doesn’t make a have specific targets for our own overing our business with energy firms. There
c
strategy. How are you incorporating business operations. And fourth, we commit ourselves to not finance new pro-
sustainability into your business thought leadership – that is, we jects in the Arctic region or oil sand projects. In
strategy? look at how we can shape discourse addition, we pledged ourselves to end our global
When we talk about sustainability, with our actions. We’ve made business activities in coal mining by 2025. Since
we think in four categories. First, for progress on every count. The target 2016, we reduced our involvement in financing
us as a bank it’s about sustainable of 200 billion euros only applies to of coal mining companies, comfortably exceeding
finance, that is, the sustainable the sustainable finance – just like our 2016 goal of 20 percent.
financing solutions and financial issuing our own first green bond.
investments we provide to our For you as CEO, what’s the aim of this sustainability
clients. Second, we also have to say How was the issuance this May? drive? Is it more about showing that the bank
what we intend to do – our inhouse It was a big success – it was multi- is aware of its responsibility in this context, or do
guidelines and policies. Then we ple times oversubscribed. This was you see it as a business model that brings
another key element of our sustain- revenues and profit?
ability strategy with which we aim to It’s both. Of course, we consider it our duty that
cover the entire value chain – from Deutsche Bank is a responsible corporate citizen.
loan approval to structuring and But we also see it as a tremendous opportunity
design and then on from marketing for the bank to grow. And we have the best pos-
right through to refinancing. sible foundation in place: our business divisions
– primarily our Investment Bank and our Corpo-
The challenge is
What about Deutsche Bank’s inhouse rate Bank – can generate the kind of assets that
policies? Deutsche Bank is facing our institutional and private clients want to invest
criticism for still doing business with in. As a global financier with a loan book of more
energy firms from the coal, oil and gas than 440 billion euros, we have an advantage over
sectors. all other European banks.
to help companies
What annoys me about this criti-
cism is that it’s only ever black or So there’s no danger of this sustainability drive
white, along the lines of: it’s an oil costing shareholders because turnover and profit
company, so doing business with it could drop?
cut their CO2 emis-
shouldn’t be allowed. That’s a bit I don’t think so. If we say “no”, it does of course
like saying no one’s allowed to fill cost revenues initially. But that’s no different to
their car up any more because it’s what we do every day when we’re assessing our
bad for the environment. What we risks in other areas of the bank. We don’t want to
need is a transformation that not enter into any kind of business that means a high
sions as quickly as
only makes sense but is also realis- risk for our clients, the environment or society –
tic. We want to help companies cut and that’s why we have guidelines and policies
their CO2 emissions as quickly as which we continue to refine. I do think, though,
possible. That’s the real challenge, that there’s a more important factor: the transi-
and we sense this whenever we tion to a low-carbon economy offers great op-
possible«
speak to our clients who come to us portunities to those who embark on it. After all,
for advice. climate-friendly business is increasingly impor-
tant to clients and investors – and it’s something
But there must be some lines of busi- our colleagues are noticing in their meetings with
ness that the bank should already have clients and investors every day. I expect that in
stopped pursuing? just a few years sustainability ratings will be just
Yes, there are. And that’s why we as important as traditional credit ratings from
have bank-wide policies – also agencies like Fitch, Moody’s and S&P. ›
14 15› Clients and investors will closely monitor whether is governed by uniform and reliable
Our sustainability and
Deutsche Bank’s own operations are climate-friend-
ly. How much progress has the bank made
on this count?
conditions. And we’ll only manage
it if lawmakers, regulators and also
private companies all work together
climate risk governance
We’ve come a very long way, although I have to closely. Here, too, we as a bank want
admit that it’s easier for us than for many tradi- to be part of the solution. That’s why We have been strengthening our governance
tional industrial companies when it comes to our
carbon footprint. Our operations have, in fact,
we maintain an ongoing dialogue with
politicians, business representatives, for managing and overseeing sustainability
been climate-neutral since 2012; we’ve reduced
our CO2 emissions by 60 per cent since 2011
trade associations and non-govern-
mental organisations. ›
matters, including those particularly related
and almost 80 per cent of our electricity comes to climate change.
from renewables. We use certificates to offset
the rest. But we can do more, which is why we’ve
set specific targets for our own business opera-
tions. One of these is that by 2025 we intend to The Group-wide Sustainability Coun- Climate-related risks to the bank’s infrastructure,
power our operations exclusively using electricity cil, established in 2018, acts as the employees, and key processes are monitored by our
from renewable energy sources. We’re working main advisory body to the Manage- Non-Financial Risk Committee, another sub-com-
on making changes to our company car fleet ment Board on current and emerg- mittee of the bank’s Group Risk Committee.
that will benefit the environment, and we aim ing sustainability topics. Chaired by
to reduce our business travel by air. And when Christian Sewing, our Chief Executive Group Sustainability, our central sustainability
we look at our branches and offices, there’s still Officer, the council is composed of function, is responsible for developing and coor-
plenty we can do to help the environment: for senior representatives from relevant dinating the bank’s strategic approach to sustain
example, how much paper we use. This is where business and infrastructure functions. ability. Sustainability-related governance struc-
we’re counting on our employees worldwide, on tures, policies and processes, as well as dedicated
their ideas and on their involvement. Mandated by our Group Risk Commit- sustainability teams in our business divisions, help
tee, the Enterprise Risk Committee us to anticipate client demands and continually
Will the Management Board be setting the rules assumes the overall responsibility for expand our ESG offerings.
here? holistic climate risk management. This
The Management Board doesn’t want to have to includes overseeing the development Our Management Board and our Supervisory Board
continually issue decrees on what climate-friend- of a climate risk framework, as well as are regularly updated on sustainability, with a par-
ly operations look like. We prefer to rely on every- the approval of sectoral risk appetite ticular focus on sustainable finance. ›
one joining in. One example here is that we got limits and restrictions to manage cli-
rid of disposable coffee cups and plastic contain- mate risks to the bank.
ers at all our locations in Germany last year. That
was a fantastic initiative! Potential reputational risks from client
transactions, including those linked to
Over the past decade, the financial industry’s repu- climate-related issues, are governed
tation has been severely dented. In the fight against by our Group-wide reputational risk
climate change, why on earth should framework. The Group Reputational
policymakers and society trust banks? Risk Committee is responsible for
It can’t be achieved without banks. Our balance ensuring oversight, governance and
sheets give us a unique lever, which we can management of these risks. Chaired by
deploy to support the transition towards a more our Chief Risk Officer, the committee
climate-friendly and more social world. We want receives quarterly updates on environ-
to fulfil this responsibility. But we won’t manage it mental and social issues, including on
on our own – not as Deutsche Bank and not as an climate change. It is a sub-committee
industry. We need standards so that competition of the Group Risk Committee.
16 17Deutsche Bank: part of
the green revolution
Henrik Johnsson, Global Co-Head of Capital
Markets, discusses why the short-term expense Henrik Johnsson: “In future, when
an investor buys debt, he’ll consid-
of transitioning to a green economy will be worth er the company’s credit and ESG
ratings equally”
it in the long run.
The Covid-19 pandemic still has countries around model.” He cites coal as a clear exam- because people really care about this by green bonds jumped from 1 billion US dollars in
the world in its grip. In its aftermath, the global ple: big energy companies are divesting issue. Not making a concerted effort 2012 to 35 billion in 2014; and over 80 billion dollars
economy will come out of lockdown into a financial their coal assets and many investors to cater to the green needs of this new raised by 2016. In 2019, global green bond issuance
crisis. As the focus turns to rebuilding, what place won’t invest in it. Looking ahead, the generation means companies risk be- topped more than 190 billion dollars. Deutsche Bank
will sustainable finance hold in the economy? same could happen to oil, power gener- coming obsolete.” not only holds a leading position as an advisor to
“People talk about the green revolution, and ation, combustion engines etc. others in this business, it just successfully placed its
I definitely think it’s coming,” says Henrik Johnsson, “A lot of our clients are tran- DOES CLIMATE PROTECTION own first green bond in the market. Underlining its
Global Co-Head of Capital Markets. “Has it only been sitioning to a low-carbon-footprint EQUAL GREEN BONDS? sustainability strategy, the bank recently set ambi-
paused by Covid-19, or will the pandemic accelerate model, and they have to do it quickly, or Ten years ago, Deutsche Bank helped tious targets to increase its volume of ESG financing,
it? I’m not sure – but I am sure that it will not reverse they could disappear.” the World Bank issue the first green plus its portfolio of sustainable investments under
its trajectory.” The advent of Covid-19 disrupt- bond. “We were a pioneer in sustain- management, to over 200 billion euros in total by the
Johnsson, who has worked in sustainable fi- ed this transition for many clients, but able finance, creating what was then end of 2025.
nance for the past five years, believes this revolution Johnsson believes it will return to the a very specialised, niche offering that This demand for green financial products has
may be costly, but that the costs of transitioning to a forefront post pandemic, particularly as saw a maximum three or four issues now expanded into new financial instruments called
green economy are balanced by its long-term goals: the new generation of investors refocus per year, with relatively small volumes,” ESG (Environmental, Social and Governance) bonds,
increased prosperity, longer life spans by reducing on green investing. Johnsson says. SDG (Social Development Goal) bonds and Factor
pollution, better impacts on the environment and “If you’re 25 and you’re starting The Swede, who joined bonds, which are more comprehensively aligned with
social progress. to save for a pension online, you’ll have Deutsche Bank as an intern in 2001, the UN’s Sustainable Development Goals.
“In 2019, we saw companies and issuers of ten alternatives for bond funds to put looks back to 2017 when Debt Capital “A company issuing a traditional green bond
capital waking up to the fact that their social and your money into – and young people Markets (DCM) started focusing on sus- would need to find a specific portfolio of green
environmental activity isn’t about PR, it’s about their consistently choose the environmental- tainable finance as investors discovered assets on the balance sheet and issue debt on those
entire business models long-term,” he explains. “If the ly friendly options,” Johnsson says. it was easy to raise funds that invest assets,” Johnsson explains. “The proceeds from that
demand for environmentally responsible investment “This is what I find most exciting: in green assets. “Suddenly, we started debt could only be used for specific projects that
continues to grow at this pace, a company in, let’s say, it’s no longer about companies getting a seeing much more demand for green must be validated by a third-party provider.”
the energy sector won’t be able to raise capital if it good headline for their ESG efforts, it’s and ESG products,” says Johnsson, ESG/SDG and Factor bonds, on the other
doesn’t make significant ESG changes to its business about changing a company’s behaviour explaining that the total amount raised hand, are not limited to specific projects but instead ›
20 21»If we don’t act now,
we’ll have passed up an
› linked to specific climate change key performance That is why Deutsche Bank is
opportunity«
indicators (KPIs). A company can raise as much as it working to standardise products to
wants and use it for whatever it wants, as long as in-
vestors are willing to buy. But if the company misses
make it easier to analyse and com-
pare companies – balancing this need
Gerald Podobnik is Chief Financial Officer
its KPIs, it pays a financial penalty via the coupon on for cohesion with the impact on the of our Corporate Bank and a member of the
its debt increasing. businesses. Johnsson is hopeful that
Deutsche Bank issued one such bond last ESG standardisation will become as German government’s Sustainable Finance
year for Enel, an Italian power generating company
that also drills for oil. The 2.5 billion US dollar bond
commonplace – and as important – as
credit ratings are now. Advisory Council.
is the first SDG from a corporate of significant scale. “Sustainability is five or ten
There is a substantial financial penalty if Enel fails years behind credit ratings,” he says,
to achieve the goals attached to the bond, which explaining how credit agencies came Mr Podobnik, up until just a few years
include creating renewable capacity of more than 55 together years ago to build a framework ago, the whole “sustainable finance”
per cent in four- and seven-year increments. for analysing different companies. Now, concept was seen as more of a market-
This doesn’t mean that green bonds will businesses need to present informa- ing ploy. Has that changed?
become obsolete. They are good for investors in that tion in this way in order to receive a That definitely came into it in the
they are measurable, trackable and have an under- credit rating. Standardisation is the way beginning. The first issuers wanted
standable, upfront set of criteria. However, there forward for ESG, Johnsson says: “In to send a message: look at us, we’re
aren’t nearly enough green bonds available to satisfy future, when an investor buys debt, he’ll committed to operating sustainably.
investor demand, which is why there has been such a consider the company’s credit and ESG But the Paris Climate Agreement,
big increase in volumes of ESG and Factor bonds. ratings equally. It’s a work in progress, the supplementary One Planet
With more flexible instruments like these, but this is where we’re headed.” › Summit in 2017 and ultimately the
banks and issuers can create things like Covid bonds European Commission’s Sustain
that fund hospitals or provide essential goods to able Finance Strategy gave the
families in need. Fourteen billion US dollars of Covid idea a tremendous boost. From
bonds has been issued so far, including one co-man- that moment on, everyone noticed
aged by Deutsche Bank for USA Capital Corporation, that it had been given a regulatory
with proceeds going towards affordable housing, framework. And that in turn sped
renewable energy and Covid-19 relief. up its development.
“My team and I are proud to work on ESG
deals,” Johnsson says. “It’s also about being part of That means the marketing phase is
something good.” behind us?
Yes, because investors are gradually
IT’S NOT EASY BEING GREEN … changing their behaviour as well.
The biggest challenge in sustainable finance now is Firms are coming under increasing
finding common KPIs that entire industries accept. pressure to embed sustainability Gerald Podobnik: “Companies have
to deliver vastly improved and more
“Look at the oil industry – all of the oil majors are criteria in their governance prac-
transparent reporting on how they
now transitioning their business models, but using tices. More and more institutional plan to become more sustainable”
different KPIs as the criteria,” Johnsson says. “This investors use sustainability criteria
makes it difficult for investors to compare the differ- to manage their portfolios and
ent efforts. It’s not cohesive.” are enquiring after sustainability ›
22 23› ratings. Retail investors are now also warming to climate rating could be exempted
the topic. There are studies showing that firms from fulfilling certain requirements.
with a stronger focus on ESG (Environmental,
Social and Governance) criteria are also more re- What else needs to be done for
silient in times of crisis. That’s a strong message. companies to operate more sustain
ably?
Deutsche Bank aims to facilitate 200 billion euros Companies have to deliver vastly
A climate stress
of sustainable financing and investments by 2025. improved and more transparent re-
Why weren’t we faster setting such targets? porting on how they plan to become
We had been criticised for not having any spe- more sustainable – and of course
cific targets. However, we wanted to adopt an on what they have already achieved
orderly, structured and clear approach. We also as well. After all, it’s standards
test for banks
wanted to use the European Union’s sustainabil- and scalability that make capital
ity standard, the EU Taxonomy, as the basis for markets work. What I mean is: there
developing understandable criteria. It simply has must be quantifiable and compara-
to be clear which activities help towards reaching ble metrics to identify how sustain-
our targets and which ones do not. For topics ably businesses operate. If we as
would be a good
such as renewable energies, sustainable produc- banks have to be evaluated, then
tion or sustainable farming, the criteria are based we must also be able to classify the
on internationally recognised standards and so business of our clients accordingly.
are quite easy to define. And this requires standards similar
For other areas, the EU stipulations are quite to those for financial reporting.
complex, but they provide a very good framework
idea«
for how the assessment should be conducted. You’re a member of the German
There are other areas, especially in the social government’s Sustainable Finance
sphere, where we had to stipulate the crite- Advisory Council. Is progress being
ria ourselves. In the next step, we had to then made on this count?
assess what we already have in our portfolio The EU is currently revising its
that complies with our inhouse taxonomy. Doing directive on non-financial reporting
so demonstrated how much we had already for companies. We’re on the right
achieved. The consultancy ISS ESG has scruti- track with that. And on the govern-
nised our ESG criteria and ranked us eighth of ment’s Sustainable Finance Adviso- priority is to look after the economy nominated in my personal capacity. And I’m re-
281 firms in the category financial institutions/ ry Council, our objective is to make and think the climate should take quired to draw a strict distinction between the two
banks and capital market. Germany a leading light in this field. second place. We see things differ- roles. But leaving that aside: when we talk to our
Its members are representatives ently, however: we have to make the corporate clients, their interests are always up-
Yet you’re calling on politicians to create more from the financial sector and the transformation into a more sustain- permost in our minds when we consider applying
incentives for the financial sector to smooth the way real economy, civil society and ac- able economy, one that is much sustainable criteria. We are currently seeing two
for sustainable finance. Why is that necessary? ademia. We are convinced that the more resilient to the risks of climate trends shaping entrepreneurial developments:
The only way to help the financial sector make current crisis provides an opportu- change, for example. If we fail to act digitalisation and sustainability. Those who fail to
a huge shift towards sustainable finance in a nity to take interventionary action to during this crisis, then we will have take a strategic view early enough will suffer long-
short space of time is by offering incentives and link growth and sustainability. The passed up an opportunity. term consequences. So we always strive to ensure
through regulatory requirements. The question is energies and resources we mobilise that acute problems are also addressed with a
also how to get all banks pulling in this direction. now will have long-lasting effects. As a banker who always has to view to long-term success. When the coronavirus
As a big bank, we are already being watched by So we also have to help to solve represent the interests of his corporate crisis began, we all saw that parts of our econo-
the capital market, analysts and investors. Small- long-term challenges – chiefly the clients, don’t you find yourself my lack resilience. This shows how important a
er or regional banks, however, are not – they transformation to a climate-neu- wrestling with the conflict between sustainably oriented economy can be. As a bank,
would need some easing of capital requirements, tral economy. That’s the direction sustainability and economic efficiency? we can provide a decisive boost by supporting
for example. A climate stress test for banks we aim to take. Of course, there’s On the government’s advisory coun- sustainability from every angle – for example by
would also be a good idea: those with a good no shortage of people whose first cil, I don’t represent the bank; I was issuing our own green bonds. ›
24 25Sustainable finance Examples for sustainable
The OECD estimates that until 2030, more finance 2019
than 6 trillion euros of investment will be
required every year to fight climate change
globally. Naturally, as a global financial inter-
Corporate Bank and This positive trend is continuing in 2020. In the year
mediary, we have a role to play here, by de- Investment Bank to 31 May 2020, Deutsche Bank advised clients on
22 transactions, placing sustainable bonds with an
veloping investment products and financing underwriting volume of nearly 3.5 billion euros, rank-
solutions and by providing advice to compa- In 2019, we helped clients across the
globe to raise 4.5 billion euros through
ing Deutsche Bank number 10 in the global ranking
for sustainable bonds (May 2020; source: Dealogic).
nies on how they can make the transition to issuing ESG bonds, including green For example, Deutsche Bank acted as joint bookrun-
bonds, social bonds, sustainable bonds ner on BASF’s inaugural 1 billion euro green bond,
more sustainable business models. and bonds linked to sustainability crite- and as joint lead manager of two 500 million euro
ria. Of that, 3.7 billion euros was raised Climate Awareness Bond taps issued by the Europe-
through issuing dedicated green or sus- an Investment Bank.
tainability-linked bonds, most of which
had a strong focus on solutions mitigat- Further, in 2019, we acted as coordinator for eight
Building on our long-standing expertise and In May 2020, we issued our first own ing or adapting to climate change. For sustainability-linked loans including the German
involvement in financing sustainable economic green bond with a volume of 500 mil- example, in 2019, we provided support companies Continental, LANXESS and Zeppelin,
activities, in May 2020, we announced the target to lion euros. Based on our Green Bond to: the British company NEPI Rockcastle and the US
generate at least 200 billion euros in sustainable Framework, the proceeds will be used company Crown, where we led the first leveraged
financing and ESG investments by our Private Bank to support the development of renew- → The Italian utility company Enel sustainability-linked loan agreement in the US
as at the end of 2025. The target of 200 billion able energy, energy efficiency projects, to introduce a new format known market.
euros does not include our asset manager DWS. and so-called green buildings. The as a sustainability-linked bond.
As a listed company, DWS sets its own targets and framework follows the ICMA Green It was the first-ever public bond In the area of infrastructure development financing,
already has around 70 billion euros of sustainable Bond Principles and the EU Technical format to attach contractual in 2019, we were mandated lead arranger and sole
assets under management, per year-end 2019. We Expert Group’s latest guidance on consequences to the fulfilling of rates hedge arranger for the largest offshore wind
have also signed the climate commitment of the the EU Taxonomy and will continue certain predefined sustainability transaction in Asia Pacific at deal closure. The 82
German financial sector. By doing so, we pledge to to evolve following the development key performance indicators. billion new Taiwanese dollars (2.3 billion euro equiv-
gradually align our lending portfolios with the goals of these principles and standards. → Assicurazioni Generali in issuing alent), 640 megawatt Yunlin offshore wind farm
of the Paris Agreement. Our Green Bond Framework and the the first green-subordinated project financing, developed by a consortium led by
corresponding Second Party Opinion benchmark transaction by a Wpd AG, provided a viable financing template for
We have developed an internal Sustainable Fi- provided by ISS ESG are disclosed on financial institution in Europe. large-scale offshore wind projects to facilitate the
nance Framework to establish a bank-wide con- our Investor Relations website. › → Vattenfall in issuing their inaugu- gradual phase-out of nuclear energy and coal-fired
sistent definition of what constitutes sustainable ral green bond, and Republic of power generation in Taiwan.
finance. It links to the EU taxonomy for environ- Indonesia in issuing their second
mental criteria but also includes social criteria we green sukuk bond, a sharia-com- We have been active in financing renewable en-
have set up following international principles, such pliant investment in renewable ergy projects since the mid-2000s, when projects
as the International Capital Market Association energy and other environmental reached industrial scale. In 2019, we arranged full
(ICMA) Social Bond Principles. Our Framework, assets. or partial finance for such renewable energy projects
including the Second Party Opinion by Institutional totalling around 2.5 billion euros and generating
Shareholder Services ESG (ISS ESG) is publicly over 2,200 megawatts. ›
available.
26 27Key highlights 2019 Private Bank
In € bn Overall volume 2019 Overall volume 2018 Deutsche Bank contribution
In 2019, we began offering an equity construction loan BHW Express Darlehen was made
ESG bonds >22 >8 Supported ESG bond transactions fund to our Private Bank clients that available throughout the first quarter of 2020 at a
Bond issuances with dedicated use of (fund raising) invests in companies that contribute reduced rate of interest applicable to such sustain
proceeds for sustainable causes, be it
green, social, sustainable or linked to to the objectives set out in the United able modernisation projects. Based on the success
dedicated sustainability KPIs Nations Sustainable Development of this product in the market, BHW is currently work-
Goals (SDGs). After the launch of the ing on KlimaDarlehen – a form of lending designed
Sustainability-linked loans >50 >10 Participated in over 20 (2018: 9) equity fund, we generated gross inflows particularly for sustainable energy construction
Instruments and/or facilities incentivising sustainability-linked loans
borrower’s achievement of ambitious, of approximately 248 million euros projects.
predetermined sustainability KPIs (equivalent to around 22% of gross
flows into equity thematic funds). Ad- In Wealth Management, we manage assets under
Financing of renewable energy 2.5 1.2 Arranged full or partial project ditionally, we started offering a green ESG mandates of nearly 500 million euros. Currently,
projects finance
bond fund whose target is to invest into we have 19 ESG funds on our global approved list.
bonds to support environment-related Client assets in ESG funds grew by 56% in 2019. ›
Financing infrastructure projects >3.4 n/a1 Arranged or participated in
infrastructure finance
projects. For our international private
with strong development credentials
and positive contribution to local and commercial business, we active-
communities ly recommended four thematic ESG
funds to clients in Belgium. This took
1
Overall volume not reported in 2018; please refer to Non-Financial Report 2018, p. 33 for individual examples.
the total number of recommended ESG
funds to nine.
BHW, Deutsche Bank’s building
society, is keen to further expand
its core business area of real estate
modernisation and strongly supports
In line with our broader strategy to grow and expand our clients in financing sustainable
our ESG products and solutions to all client groups, energy modernisation. To this end, the
we are strengthening divisional and regional struc-
tures to anchor a holistic approach to sustainability.
We have allocated additional ESG resources both in
our Investment Bank and Corporate Bank, including
a newly created sustainable finance team within
Capital Markets. The team will support our clients
and our global coverage teams to better understand
the impact of ESG on market access and business Key highlights 2019
development. Additionally, we have established
In € m 2019 2018
an ESG Competence Team in our Corporate Bank,
acting as a specialist partner for product develop- State-subsidised mortgages (loan volume)1 490 360
ment and client coverage, to ensure that Corporate for financing agreements of low-energy houses or for construction and mod-
ernisation projects that meet higher energy standards than those required by
Bank customers have access to ESG advisory and Germany’s Energy Saving Ordinance
sustainability-related commercial banking products
that support them in their sustainability transition. Discretionary ESG mandates in Wealth Management (AuM)
500 500
We have also appointed a regional Head of ESG (Based on a best-in-class approach, with certain sectoral exclusions and utilising
MSCI ESG rating criteria)
to develop and coordinate our ESG business strat
egy across all business divisions in the Asia-Pacific 1
Total volume of state-subsidised mortages through cooperation with Germany’s nationwide development bank Kreditanstalt für Wiederaufbau in 2019: €1.2 bn.
region. ›
28 29Asset Management (DWS)
In 2019, our asset manager DWS reported 69.7 bil- class research data from DWS’s extending a clean energy fund report published by the UK campaign group Share-
lion euros of ESG assets under management (AuM), proprietary ESG Engine. “Smart to invest in climate solutions in Action, DWS finished among the leading asset man-
the bulk of which (51.6 billion euros) is managed Integration” enables DWS to China in the context of the China agers globally in voting on shareholder resolutions
across active and passive mandates. The remain- specifically identify and ob- Clean Energy Fund. linked to climate change. ›
der includes sustainable investment funds/impact jectively analyse the risks and → Promotion of retail distribution
investments (715 million euros); real estate invest- opportunities associated with a campaigns for DWS Invest Green
ments in certified green-labelled buildings (16.5 bil- transition to a low-carbon econo- Bond fund and DWS Invest SDG
lion euros); infrastructure assets in renewable assets my for each issuer. Global Equities fund to scale up
(862 million euros). In 2019, DWS total assets under → Launch of the first DWS Invest capital market investment.
management (AuM) were 767.4 billion euros. QI Global Climate Action Fund, → DWS’s first Group Sustainability
designed to meet the growing Officer will start work in August
ACTIVITY IN 2019/2020 INCLUDED investor demand for strategies 2020 and will focus on driving
→ Introduction of Climate Transition Risk that aim to reduce carbon emis- DWS sustainability strategy
Scorings to identify risks and opportunities sions. forward and putting ESG at the
associated with the transition to a low carbon → Extension of the ESG leaders core of everything we do.
economy. Access to the scores is provided low carbon product suite of
globally to DWS portfolio managers and ana- exchange traded passive funds DWS has piloted ESG Key Perfor-
lysts for liquid/listed assets. with MSCI. mance Indicators, for example on CO2
→ Publication of climate transition risk and → Conversion of the DWS Invest emissions and information on climate
water risk on a sector level. Climate Tech into an ESG ver- change indicators of a fund, to give
→ Introduction of “Smart Integration” into the sion. investors transparency on the ESG
investment platform, an advanced approach → Continued partnership with a contributions of the DWS Invest SDG
to ESG integration that leverages best-in- significant corporate client by Global Equities fund. Furthermore,
DWS continues to develop its ESG
methodology, especially with regard
to carbon and climate risk sensitivity,
opportunities from impact investing
and the SDGs, by integrating them into
the ESG Engine.
Key highlights 2019
To further strengthen its commitment
In € bn 2019 2018
to ESG in real estate investments, DWS
ESG assets under management 69.7 47,1 aims at halving carbon emissions by
Classification follows the methodology of the Global Sustainable Investment Alliance
2030 against the reference year 2017
for its entire portfolio of European of-
Thereof
fice properties held by funds managed
ESG within Active investments 40.7 28,9 by the European real estate business.
Portfolios based on client-specific exclusions for institutional clients, retail and
institutional assets managed according to uniformly defined investment stand- This is estimated to result in an annual
ards or client-specific derivations, particular sustainability themed ESG prod- reduction of 61,000 metric tons of car-
ucts, and third-party initiated mutual funds applying external ESG approach
bon dioxide emissions – the equivalent
of taking approximately 24,000 diesel
ESG within Passive investments cars off the road and saving around 23
10.9 3,3
Exchange traded funds or products, passively managed funds for institutional
clients million litres of diesel.
ESG within Alternatives When engaging with corporates, DWS
18.1 14,9
Sustainable investment funds/impact investments, Real Estate, places greater emphasis on a board’s
infrastructure investments
responsibility for ESG. According to a
30 31Carbon-intensive sectors Oil and gas
In addition to our current enhanced
environmental and social due dili-
Our commitment to sustainable finance gence process, we will review by end
also includes questioning our involvement in of 2020 our existing exposure to the
oil and gas sector globally, consider-
certain sectors, including those that are ing environmental and social perfor-
mance, carbon intensity, and transi-
carbon-intensive. tion plans. Based on this review, we
will subsequently aim to reduce our
exposure.
Additionally, we will not finance:
In this context, the general provisions of our Envi-
Coal power →O il or gas projects via hydrau-
ronmental and Social Risk Framework define pro- lic fracturing in countries with
cedures and responsibilities for risk identification, extremely high water stress
assessment, and decision-making. The Framework Since 2016, we have had a policy in →N ew oil or gas projects in the
also covers deal-independent risk screening, the place prohibiting the financing of the Arctic region; Arctic region
identification of companies with a controversial development of new coal-fired power being defined based on a 10°C
environmental and social (ES) profile and the plants and the expansion of existing July isotherm boundary, mean-
definition of sensitive sectors, and specifies the coal-fired power plants, irrespective ing the area does not experi-
requirements for ES due diligence including criteria of their location. In addition to this ence temperatures above 10°C
for mandatory referral to Group Sustainability, our commitment, we will review our coal →N ew projects involving explo-
central sustainability team. power exposure, and for all clients de- ration, production or transport/
pending more than 50% on coal – be it processing of oil sands
The due diligence process regarding project energy capacity or energy output – we
finance is based on the IFC Performance Stand- will subject the provision of financial Financing means the lending and
ards underlying the due diligence process of the services to the availability of credible capital market, where the majority of
Equator Principles. To confirm our commitment, diversification plans. Accordingly, the use of proceeds is explicitly linked
Deutsche Bank formally joined the Equator Princi- we will review all clients in Europe to the listed projects.
ples in July 2020. and the US by the end of 2020 and
gradually phase out existing exposure
The following restrictions are in place to reduce our if there are no diversification plans in Fossil fuel policy
climate risk exposure and focus the provision of place. Starting in 2022, we will extend
financial services to companies in transition. this review and phase-out to Asia and The outlined changes to our fossil
selected developing markets. With this fuel policies announced in July 2020
staged timing, we acknowledge the ad- underline our aspiration to contribute
Coal mining ditional time required by some regions to climate protection and to the goal
to prepare for the transformation. of the European Union to become
Since 2016, we have had a policy in place prohib- net-zero-carbon by 2050. These
iting financing of greenfield thermal coal mining changes are in addition to our recent-
and associated infrastructure, and we committed to ly announced commitment to align
reducing our coal lending exposure and set a three- the carbon intensity of our lending
year reduction target of 20% in 2016. As of the end portfolios with the targets of the Paris
of 2019, we achieved that target, and we are now Agreement, which we have pledged by
further committed to phasing out coal exposure by joining the German financial sector’s
2025 worldwide (including both lending and capital collective commitment to climate
markets). action in June 2020. ›
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