Deutsche Bank

RATING

SECTOR

Financial Services

 

WEBSITE

CONTACT

Deutsche Bank AG
Taunusanlage 12
60325 FRANKFURT AM MAIN (for letters and postcards: 60262)
Germany

Tel.: +49 69 910-00

Fax: +49 69 910-34225

STOCK EXCHANGE

LISTING

  • Forbes #310 Global 2000 for 2021
  • Forbes World’s Best Banks 2021
  • BrandFinance Global Banking 500 (100) By Brand Finance 2021 – #79
  • BrandFinance Global Banking 500 (100) By Brand Finance 2020 – #79
  • BrandFinance Global Banking 500 (100) By Brand Finance 2019 – #70
  • The World’s Top 50 Most Attractive Employers By Universum 2019 – #24
  • BrandFinance Global Banking 500 (100) By Brand Finance 2018 – #47
  • The World’s Top 50 Most Attractive Employers By Universum 2018 – #23

EMPLOYEES

84,659

CHIEF SUSTAINABILITY OFFICER

Viktoriya Brand

AWARDS

  • 2021: The Asset Triple A Sustainable Capital Markets Regional Awards – Best Emerging Markets Bond Advisor
  • 2021: Best Emerging Markets Bond Advisor – The Asset Triple A Sustainable Capital Markets Regional Awards 
  • 2021: Best International Investment Bank, Indonesia – Finance Asia Country Award
  • 2020: “World’s Best Bank Transformation” – Euromoney 
  • 2020: Best Green Bond (two recognitions), Best Debt, Best Bond, Best Loan (NBFI), Best High-Yield Bond, Best Equity, Best Corporate Bond – The Asset Triple A Sustainable Capital Markets Regional Awards 2019

CONTENT SOURCE

FURTHER READING

Report created by Kavita Kripalani

Deutsche Bank

SECTIONS :  Sustainability Targets    Evaluation  •  Key Points  •  Overview

Company Activity

Deutsche Bank AG engages in the provision of corporate banking and investment services. It operates through the following segments: Corporate Bank, Investment Bank, Private Bank, Asset Management, Capital Release Unit, and Corporate and Other.

  • The Corporate Bank segment includes the global transaction bank as well as the German commercial clients division. The Investment Bank segment consists of origination and advisory businesses as well as fixed income currency sales and trading.
  • The Private Bank segment comprises the Private Bank Germany, private and commercial business international, and wealth management business units.
  • The Asset Management segment provides investment solutions to individual investors and institutions through the DWS brand.
  • The Capital Release Unit segment covers the equities sales and trading business.
  • The Corporate and Other segment includes revenues, costs, and their uses that are held centrally.

The company was founded by Adelbert Delbrück on March 10, 1870, and is headquartered in Frankfurt, Germany.

Company Sustainability Activity

Sustainability has become a central component of the Deutsche Bank’s strategy, which they set in July 2019. Since then they have made significant progress in embedding sustainability into their business practices, focusing on the following four dimensions: sustainable finance; policies & commitments; their own operations and through leadership and engagement.

In 2020, they set a target of achieving €200 billion in sustainable financing and ESG investment by year-end 2025 (excluding assets under management managed by their  Asset Management). They have also defined annual growth targets and will report annually on their overall progress toward the €200 billion target.

In 2020, they further improved their sustainability governance structure by establishing a Sustainability Committee. The committee, chaired by their  Chief Executive Officer (CEO), began its work in late October, 2020 and meets once a month. While the Sustainability Committee is the highest decision-making forum for all major sustainability initiatives, the Sustainability Council – established in 2018 – remains an important governance body. It does preparatory work for the Sustainability Committee’s decisions, coordinates their implementation, and oversees the workstreams aligned to the four dimensions of their sustainability strategy. The Council is composed of executives from across all four business divisions as well as all infrastructure functions and also meets on a monthly basis. 

Their Supervisory Board and their Management Board reinforced the bank’s sustainability ambition by tying their top-level executives’ compensation to further non-financial criteria from 2021 onwards. The awards have been extended with several ESG objectives such as the volumes for sustainable financing and ESG investments and reducing own power consumption in their buildings.

A sustainability rating index comprising five large rating agencies will also be considered in the Short-term Awards. Per the Shareholder Rights Directive II they will publish and propose amendments to the Management Board’s compensation framework to the 2021 Annual General Meeting. For the first time, they have published quantifiable targets for expanding their sustainable business activities.

Following the announcement of their sustainable finance target, they established a Sustainable Finance Framework. The Framework defines comprehensive rules for classifying their financing offers and products as sustainable and is aligned to the Green and Social Bond Principles of the International Capital Market Association as well as towards the EU Taxonomy. 

Deutsche Bank is continuously growing its involvement in sustainable finance. According to Dealogic, in 2020, they partnered with a number of global clients to support their sustainable bond transactions, such as green, social, sustainability, and sustainability-linked bonds.

Deutsche Bank helped its clients raise more than €83 billion of funding in sustainable bond instruments, of which they underwrote almost €16 billion. They climbed the League Table for Euro-denominated sustainable bonds and finished the year in sixth place, making them one of the fastest growing players in this strategic market.

Furthermore, in June 2020 they successfully placed their first green bond. It was issued under the Green Bond Framework, which is based on the Green Bond Principles of the International Capital Market Association (ICMA) and the EU Taxonomy developed by the European Union’s Technical Expert Group on Sustainable Finance. The framework enables them to finance green assets, including loans to and investments in companies, assets, and projects relating to renewable energy, energy efficiency, and sustainable buildings. 

Deutsche Bank has made significant progress with their rules and policies as they have adopted the Equator Principles and strengthened their Fossil Fuel Policy. They intend to end their global business activities with regard to financing as well as capital market transactions in coal mining by 2025 at the latest.

Their strengthened Fossil Fuel Policy will also support their commitment to align their credit portfolios with the goals of the Paris Agreement, which they entered by joining the German financial sector’s collective commitment to climate action in June this year. They committed to expanding the use of electricity from renewable sources for their  own operations from approximately 80% currently, to 100 % by 2025 globally. They remain committed to working on all dimensions of sustainability strategy and increasing their sustainable product and services offerings.

Highlights

  • Sustainable finance: Making sustainability an integral part of their client offerings, as well as offering products and services that help their  clients to transform business models towards a low-carbon future
  • In May 2020, they set themselves the target to increase the volume of sustainable financing and their portfolio of sustainable investments under management to over €200 billion by 2025
  • Policy and commitments: Integrating environmental and social considerations into the bank’s risk management framework. In doing so, they follow internationally recognised principles and standards
  • In June 2020, they articulated their commitment to align their lending portfolios to the targets set by the Paris Agreement
  • In addition, in July 2020, they expanded their fossil fuel policies and formally joined the Equator Principles Association
  • Continuously reducing their own environmental footprint: They have been operating carbon neutrally since 2012
  • As part of this commitment, they have been reducing their energy consumption and greenhouse gas emissions
  • Compared to 2010, they have reduced their energy consumption by more than 25% and cut their greenhouse gas emissions by half.
  • In 2019, about 80% of their electricity was from renewable sources and they have committed themselves to expand this to 100% by 2025

Targets

DEUTSCHE BANK’S CLIMATE GOALS 

  • Sustainable Finance target of 200 billion by 2025
  • End of global business activities in coal mining by 2025
  • End of financing new oil and gas projects in the Arctic region or new oil sand projects – effective immediately 
  • Introduction of methods for measuring climate impact by the end of 2022 
  • Solely use renewable electricity by 2025
 

Progress

Coal mining and Oil and Gas

  • In addition to their  current enhanced environmental and social due diligence process, they will review by the end of 2020 their:
    • existing exposure to the oil and gas sector globally
    • consideration of environmental and social performance
    • carbon intensity
    • transition plans
  • Based on this review, they will subsequently aim:
    • To reduce their exposure
    • To not finance: 
      • Oil or gas projects via hydraulic fracturing in countries with extremely high water stress
      • New oil or gas projects in the Arctic region; Arctic region being defined based on a 10°C July isotherm boundary, meaning the area does not experience temperatures above 10°C
      • New projects involving exploration, production or transport/ processing of oil sands 
        • Since 2016, they have had a policy in place prohibiting the financing of greenfield thermal coal mining and associated infrastructure, and they committed to reducing their coal lending exposure and set a three year reduction target of 20% in 2016. As of the end of 2019, they achieved that target, and they are now further committed to phasing out coal exposure by 2025 worldwide (including both lending and capital markets).

Coal power

  • Since 2016, they have had a policy in place prohibiting the financing of the development of new coal-fired power plants and the expansion of existing coal-fired power plants, irrespective of their location.
  • In addition to this commitment, they will review their coal power exposure, and for all clients depending more than 50% on coal – be it energy capacity or energy output – they will subject the provision of financial services to the availability of credible diversification plans.
  • Accordingly, they reviewed all clients in Europe and the US by the end of 2020 and have since gradually phased out existing exposure if there were no diversification plans in place.
    • Starting in 2022, they will extend this review and phase-out to Asia and selected developing markets. With this staged timing, they acknowledge the additional time required by some regions to prepare for the transformation.

Fossil Fuel Policy

  • The outlined changes to their fossil fuel policies announced in July 2020 underline their aspiration to contribute to climate protection and to the goal of the European Union to become net-zero-carbon by 2050.
    • These changes are in addition to their recently announced commitment to align the carbon intensity of their lending portfolios with the targets of the Paris Agreement, which they have pledged by joining the German financial sector’s collective commitment to climate action in June 20.

Asset Management (DWS) 

  • In 2019, their asset manager DWS reported 69.7 billion of ESG assets under management (AuM), the bulk of which (51.6 billion) is managed across active and passive mandates.
    • The remainder includes :
      • Sustainable investment funds/impact investments (715 million)
      • Real estate investments in certified green-labeled buildings (16.5 billion)
      • Infrastructure assets in renewable assets (862 million)
  • In 2019, DWS’s total assets under management (AuM) were 767.4 billion.

Activity in 2019/2020:

  • Introduction of Climate Transition Risk Scorings to identify risks and opportunities associated with the transition to a low carbon economy
    • Access to the scores is provided globally to DWS portfolio managers and analysts for liquid/listed assets
  • Publication of climate transition risk and water risk on a sector level
  • Introduction of “Smart Integration” into the investment platform, an advanced approach to ESG integration that leverages best-in-class research data from DWS’s proprietary ESG Engine
    •  “Smart Integration” enables DWS to specifically identify and objectively analyse the risks and opportunities associated with a transition to a low-carbon economy for each issuer.
  • Launch of the first DWS Invest QI Global Climate Action Fund, designed to meet the growing investor demand for strategies that aim to reduce carbon emissions
  • Extension of the ESG leaders low carbon product suite of exchange-traded passive funds with MSCI
  • Conversion of the DWS Invest Climate Tech into an ESG version 
  • Continued partnership with a significant corporate client by extending a clean energy fund to invest in climate solutions in China in the context of the China Clean Energy Fund
  • Promotion of retail distribution campaigns for DWS Invest Green Bond fund and DWS Invest SDG Global Equities fund to scale up capital market investment 
  • DWS’s first Group Sustainability Officer will start work in August 2020 and will focus on driving DWS sustainability strategy forward and putting ESG at the core of everything they do

Certificates

The company does not disclose this information.

UN Sustainable Development Goals

UN SDGs Compliance

The following section aligns current company-wide sustainability initiatives with the UN Sustainable Development Goals. Although not explicitly stated, Deutsche Bank has attempted to be compliant with SDGs.

SDG 5: Gender Equality

  • At year-end 2020, six, or 30%, of Supervisory Board members were women (2019: 35%).
    • This met the statutory requirement of 30% for publicly listed and co-determined German companies pursuant to gender quota legislation that took effect in 2015.

SDG 6: Clean Water and Sanitation

  • The mission of India’s not-for-profit Swades Foundation is to empower one million lives in rural India through 360-degree development across health, education, water and sanitation and economic development and create a development model that can be replicated at scale.

SDG 7: Affordable and Clean Energy

  • Furthermore, in June 2020 they successfully placed their first green bond.
    • It was issued under their Green Bond Framework, which is based on the Green Bond Principles of the International Capital Market Association (ICMA) as well as on the latest guidance on the EU Taxonomy developed by the European Union’s Technical Expert Group on Sustainable Finance.
    • The framework enables them to finance green assets, including loans to and investments in companies, assets, and projects relating to renewable energy, energy efficiency, and sustainable buildings.

SDG 8: Decent Work and Economic Growth

  • The mission of India’s not-for-profit Swades Foundation is to empower one million lives in rural India through 360-degree development across health, education, water and sanitation and economic development and create a development model that can be replicated at scale.

SDG 9: Industry, Innovation and Infrastructure

  • To drive change, accelerate the adoption of technologies into the bank and monetize on the above-mentioned market opportunities, the Bank has created the Technology, Data and Innovation (TDI) division.
    • While general digitalization and innovation activities happen within the business lines, this new centralized approach enables them to address key strategic challenges in a focused set-up, drive a culture of engineering and innovation and invest in mid to long-term digital services and new business models.

SDG 11: Sustainable Cities and Communities

  • Partnership with Swades Foundation
    • The mission of India’s not-for-profit Swades Foundation is to empower one million lives in rural India through 360-degree development across health, education, water and sanitation and economic development and create a development model that can be replicated at scale.

SDG 12: Responsible Production and Consumption

  • They are striving to use water and paper responsibly, to minimise the supply chain impact of their business operations and to reduce the amount of waste they generate.
  • Carbon emissions from travel have been reduced by 60%.
    • Carbon emissions from electricity consumption have been reduced by over 85%.
    • Total energy consumption has been reduced by 27%.
    • Total electricity consumption has been reduced by 35%.
    • They have reduced their energy consumption by implementing energy-efficiency measures.
      • About 80% of their electricity worldwide was from renewable sources in 2019.

SDG 13: Climate Action

  • By signing the Paris Pledge for Action in 2015, they articulated their commitment to contribute to the goals of the Paris Agreement.
    • They reinforced this statement by joining the German Financial Sector’s collective commitment to Climate Action in June 2020.
    • They welcome the European Union’s ambition of becoming carbon-neutral and will support efforts in advancing the European Commission’s action plan on sustainable finance as well as transitioning the economy, as laid out in the Commission’s EU Green Deal.

SDG 16: Peace, Justice and Strong Institutions

  • Anti-Financial-Crime (AFC) sets the framework to prevent money laundering, counter terrorist financing and other criminal activities (including but not limited to fraud, and bribery and corruption activities) and to ensure compliance with financial and trade sanctions.

SDG 17: Partnerships for the Goals

  • They have strategic partnerships within the financial sector and beyond.
  • As a member of the United Nations Environment Programme Finance Initiative, they have been looking into how they can partner with other banks to feature climate risks more prominently in their risk assessment process.
  • As one of the founding members of the Value Balancing Alliance, a network of international corporations, they are working on a standardized method to measure and monetize the environmental and social impact of their business activities along the entire value chain.

Evaluation

Deutsche Bank’s sustainability initiatives are in decent alignment with the UN Sustainable Development Goals. The company has some listings and many awards, but no substantive certificates.

Deutsche Bank expresses some mediocre targets, though they could be much more ambitious. For example, one target of introducing methods for measuring climate impact by the end of 2022 is a weak goal. There seems to be nothing stopping the company from measuring its impact. These vague goals with a lack of supporting details make their transparency questionable.

Deutsche Bank has certainly made progress in its sustainable business practices but still has much room for improvement. However, what is most concerning is its involvement in various scandals, including money laundering, bribery, interest rate manipulation, and unethical mortgage transactions. 

In addition, Deutsche Bank has invested $74.624 B in the fossil fuel industry since the adoption of the Paris Agreement. While the bank has been decreasing its investments steadily since 2019, its contribution to fossil fuels cannot be ignored.

Therefore, this company has been rated a D.

Analyst Outlook: Positive

The company has done some things right, like achieving carbon neutrality early on, completely ending all financing of new oil and gas projects in the Arctic region, and implicitly aligning with many SDGs. They are heading in the right direction toward becoming a sustainable company.

Unfortunately, the multitude of ethical issues involving the bank is egregious and does not bode well for their future behavior. Not only must they be more proactive toward sustainability, but they must also show significant efforts to rectify their wrongdoings in order to redeem their immoral reputation.

Deutsche Bank most certainly can obtain a higher rating. It is actively divesting from the fossil fuel industry and has goals to end global business activities in coal mining by 2025.

 

Key Points

  • Deutsche Bank achieved a CDP rating of “C” for Climate Change in 2020.
  • Their operations have been climate-neutral since 2012.
  • They’ve reduced their CO2 emissions by 60% since 2011 and almost 80%of their electricity comes from renewables.
  • Money laundering in Russia: While in the midst of negotiations with US authorities, another Deutsche Bank scandal, albeit much smaller, came to light in 2015. According to investigators’ finding, the bank had used stock transactions to launder $10 billion-worth of dirty money in Russian rubles. Since the transactions are in dollars, US authorities again intervened.
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