Deutsche Bank has for the first time published quantifiable targets for expanding its sustainable business activities covering the ESG (environmental, social, governance) space and aims to support the transformation towards a sustainable economy. This continues the growing ESG trend among financial institutions, undimmed by the COVID-19 crisis, following just a week after the publication of Citi’s first ESG report.
By the end of 2025, Deutsche Bank says it will increase its volume of ESG financing plus its portfolio of sustainable investments under management to over €200bn in total.
“We are driven by a very strong conviction to help shape the global change to a sustainable, climate-neutral and social economy,” says Deutsche Bank CEO Christian Sewing. “The target of €200bn in sustainable financing and ESG investments is ambitious compared to our peers. However, we are starting from a good base because, as a globally active financing house, we can serve the growing demand of our clients for sustainable investment products by ourselves.”
The minimum volume of €200bn within six years includes loans granted by 2025 and bonds placed by Deutsche Bank during this period. It also includes sustainable assets managed by the Private Bank as of the end of 2025. Deutsche Bank is thereby following the standards used in the industry. The ESG assets of around €70bn managed by asset manager DWS as of the end of 2019 are not included in these calculations.
When defining which activities it will classify as sustainable, the bank says it will be guided by the EU Taxonomy - the European Union’s ESG standard. In areas where the EU has yet to develop its own standards, Deutsche Bank will rely on its own transparent criteria. The bank will report annually on the progress towards achieving this target in its Non-Financial Report. It will also disclose more details on its definition of sustainable finance by the end of the second quarter 2020.
Since the beginning of 2020, the bank has advised clients on 22 transactions, placing ESG bonds with an underwriting volume of nearly €3.5bn. These included green bonds, social bonds, sustainable bonds and bonds linked to sustainability criteria. Deutsche Bank is currently number 10 in the global ranking for sustainable bonds, according to Dealogic.
Foundations laid for first green bond
Deutsche Bank says it has established a comprehensive framework and can, with immediate effect, raise funds for refinancing by issuing its own green bonds. This will enable the bank to raise funds for further developing renewable energy sources or for projects aimed at boosting energy efficiency. As previously announced, the bank aims to issue its first green bond sometime this year, subject to market conditions.
“Green” assets include loans and investments in companies, assets or projects that focus on renewable energy, energy efficiency and so-called green buildings that are built according to environmental and sustainability standards. Deutsche Bank’s Green Bond Framework is based on the Green Bond Principles of the International Capital Market Association (ICMA) as well as on the latest guidance in the EU Taxonomy developed by the European Union’s Technical Expert Group on Sustainable Finance.
The independent consulting firm Institutional Shareholder Services ESG (ISS ESG) has reviewed the bank’s Green Bond Framework and issued an expert opinion, confirming not only the bank’s exemplary conduct but its consistency with the UN Sustainable Development Goals. As part of its evaluation, the consulting firm assessed the bank’s ESG performance, giving it “Prime” status (C rating). This ranks Deutsche Bank in eighth place among 281 companies that have been assessed in the category financial institutions/banks and capital market.
Electricity consumption to come solely from renewable sources by 2025
Deutsche Bank also has a blueprint to make its operations more sustainable. By 2025 at the latest, Deutsche Bank aims to power its operations entirely using renewable energy. At the end of 2019, nearly 80% of the bank’s electricity across the world came from renewable energy sources. This step is consistent with its policy of transitioning to carbon neutrality and of reducing emissions of primary greenhouse gases.
The bank’s business operations have been climate neutral since 2012. The energy efficiency measures the bank implemented in 2010 have enabled it to reduce its energy consumption by more than a quarter. In order to offset the remaining carbon emissions, the bank buys Verified Emission Reduction certificates.
Progress made with guidelines for financing business
To anchor the topic of sustainability throughout the company, Deutsche Bank says it will sign up to the Equator Principles - a set of environmental and social governance rules for project financing due diligence.
Furthermore, the bank expects to be able to adopt a new oil and gas policy by the end of the second quarter, which will provide a clear framework for financing and investments in this area.
Deutsche Bank says it is convinced that the banking sector has a decisive role to play in the transformation of the economy in order to achieve the targets of the Paris Climate Agreement and the UN Sustainability Goals. The bank notes that it has supported numerous sustainability programmes in the past, starting with UN Global Compact in 2000 through to its signing of the UN Principles for Responsible Banking in September 2019.
Global green technology market to hit US$44.61bn
The Deutsche Bank announcement comes as a new report* from Allied Market Research has highlighted the growth of the global green technology and sustainability market. The report says that the global green technology and sustainability market was estimated at US$6.85bn billion in 2018 and is expected to hit US$44.61bn by 2026, registering a CAGR of 26.5% from 2019 to 2026.
Drivers, restraints, and opportunities
Increase in environmental awareness and concerns, rise in consumer and industrial interest for the use of clean energy resources, and growth in use of RFID sensors fuel the growth of the global green technology and sustainability market. On the other hand, high product and solution costs associated with green technology and sustainability solutions restraint the growth to some extent. However, initiatives to tackle climate change and air pollution is expected to usher in an array of opportunities in the near future.
The Internet of Things segment to dominate by 2026
Based on technology, the Internet of Things (IOT) segment held the major share in 2018, generating to more than one-fourth of the global green technology and sustainability market. This is attributed to the advent of green networks in IoT connectivity. On the other hand, the artificial intelligence and analytics segment is expected to grow at the fastest CAGR of 28.8% by the end of 2026. This is due to the increase in adoption of analytics technology due to its exquisite features such as energy forecasting, energy efficiency, and energy accessibility propels the growth of the segment.
The green building segment to lead the trail during the study period
Based on applications, the green building segment accounted for around one-fifth of the global green technology and sustainability market revenue in 2018, and is projected to rule the roost till 2026. This is attributed to the increase in development of green building application and lowering down the costs of construction. Simultaneously, the crop monitoring segment is expected to cite the fastest CAGR of 29.9% during 2019–2026. The green technology is providing an alternative way to improve the national economy without damaging the environment, which leads to the growth of the segment.
North America generated the major share in 2018
Based on region, North America contributed to more than one-third of the global green technology and sustainability market share in 2018, and is anticipated to maintain the lion’s share throughout the forecast period. The leveraged advanced energy-saving technologies from the recent past and high number of green building initiatives in this region has augmented the growth of the market. At the same time, the Asia-Pacific region would showcase the fastest CAGR of 27.6% till 2026. This is attributed to the emergence of new technologies and trends associated with the green technology.
* Allied Market Research - “Green technology and sustainability Market by Technology (Internet of Things (IoT), Cloud Computing, Artificial Intelligence and Analytics, Digital Twin, Cyber Security, and Blockchain) and Applications (Green Building, Carbon Footprint Management, Weather Monitoring and Forecasting, Air and Water Pollution Monitoring, Forest Monitoring, Crop Monitoring, Soil Condition/Moisture Monitoring, Water Purification, and Others): Global Opportunity Analysis and Industry Forecast, 2019–2026”
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