In an effort to help drive the transformation to a sustainable economy, Deutsche Bank, Germany’s biggest lender, plans to end its global business activities in coal mining by 2025.
The bank made the commitment in its recently published revised fossil fuel policy, which covers financing as well as capital market transactions. Previously, the bank had set itself a three-year objective of reducing its loan exposure to coal-fired power plants by 20%, which it achieved at the end of 2019.
Deutsche Bank has also signed the Equator Principles – a risk management framework for assessing the environmental and social risk of financing projects. The principles ensure that strict environmental and social standards are applied during the project development and construction process, and include follow-up monitoring. Having already adopted the World Bank’s International Finance Co-operation performance standards, the German bank’s due diligence process is already indirectly in line with the Equator Principles in the majority of cases.
“Our new fossil fuels policy sets us a strict framework for our business activities in the oil, gas and coal sector,” says chief executive officer Christian Sewing, who also chairs Deutsche Bank’s sustainability council. “It will allow us to play our part in protecting the climate and helping the EU to achieve its goal of being climate neutral by 2050.”
The policy will also help to fulfil the German financial sector’s collective commitment to climate action, which the bank signed in June this year, pledging to align its credit portfolios with the goals of the Paris Agreement. This includes a commitment to introducing methods of measuring climate impact by the end of 2022 and regulating them in accordance with national and international climate targets.
Deutsche Bank is also reinforcing its commitment to not finance any new coal-fired power plants. The revised policy contains new guidelines for coal power that prescribe how the bank must treat business activities with energy companies that are more than 50% dependent on coal, measured either in terms of their energy generating capacity or the amount of energy they actually generate.
The bank will only offer financing to these companies in future if they present credible diversification plans, and it will review its client relationships in this context in Europe and the US by the end of 2020.
In Asia, the review will start in 2022. By starting later in Asia, the bank is allowing for the fact that the transformation in Asia will take longer owing to the region’s high dependency on coal power.
The German lender will also limit its financial services in the oil and gas sector by no longer financing oil and gas projects that use hydraulic fracturing in countries with scarce water supplies, new oil and gas projects in the Arctic region, and new oil sand projects (involving exploration, production, transport or processing).
As well, Deutsche Bank will review all of its global business activities in this sector by the end of 2020, with the aim of subsequently reducing these.