Deutsche Bank said it will increase its ESG financing and portfolio of sustainable investments to more than €200bn by 2025 to support the transition to a sustainable economy as it published its sustainability targets for the first time.
The bank also launched a "state of the art" sustainable financing framework that will allow it to issue its first green bond later this year, and also committed to using only renewable electricity by 2025.
It will also announce a new oil and gas policy by the end of the second quarter to give a clear framework for financing and investments, as pressure remains on banks to cut fossil fuel exposure.
Deutsche has set ambitious targets, but it has been slower than its peers in announcing ESG targets and setting up a new sustainability team, which was established in its capital markets division in late April.
“The target of €200bn in sustainable financing and ESG investments is ambitious compared to our peers,” said Deutsche Bank CEO Christian Sewing.
Scaling up ESG financing and sustainable investment to at least €200bn will include loans granted and bonds placed by Deutsche Bank until 2025, and sustainable assets managed for its private clients, but will not include €70bn of ESG assets managed by asset manager DWS.
Deutsche will use the EU’s taxonomy to define sustainable activities, and its own criteria when those are not available. It will detail its definitions by the end of the second quarter and report annually on its progress in its non-financial report.
To embed sustainability in its financing business, the bank will also sign up to the Equator Principles, which set environmental and social governance rules for conducting due diligence in project financing.
Pressure is mounting on banks to play a more active role in fighting climate change. Deutsche provided US$12bn of financing to the fossil fuel industry in 2019, according to the Rainforest Action Network, down from US$21.7bn in 2016.
Deutsche sees the banking sector playing a key role in transitioning the economy to achieve the targets of the Paris Climate Agreement and the UN's Sustainability Goals.
Since the start of the year, it has advised clients on 22 deals, and underwritten nearly €3.5bn of ESG bonds.
“We are driven by a very strong conviction to help shape the global change to a sustainable, climate-neutral and social economy,” Sewing said.
DEBUT GREEN BOND
Deutsche’s new framework will allow it to issuing its own green bonds and a debut deal is expected this year that will raise funds for developing renewable energy or energy efficiency projects, including green buildings.
The framework is based on ICMA’s green bond principles and the latest guidance on the EU’s taxonomy by its Technical Expert Group on Sustainable Finance, which could tighten existing standards. It also has a second-party opinion from ISS.
The bank will power its operations using only renewable energy by 2025, up from 80% globally at the end of 2019 as it continues to cut greenhouse gas emissions while moving to carbon neutrality.
Deutsche has cut energy consumption by more than a quarter since 2010 and buys verified emission reduction certificates to offset the remainder.