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Treasury & Capital Markets
Deutsche Bank issues first green bond to boost sustainability strategy
Proceeds of issue to be used exclusively for bank’s own sustainable projects
The Asset 4 Jun 2020

IT may have been late in coming, but Deutsche Bank finally joined the green bond bandwagon, pricing a 500 million euro (US$561.80 million) offering as it further builds its sustainability strategy. The proceeds of the six-year issue, announced on June 2, will be used exclusively to refinance the bank’s own sustainable projects, such as the expansion of renewable energies. In mid-May, Deutsche Bank established the necessary framework for a green bond and also set itself concrete sustainability targets.

Deutsche Bank CEO Christian Sewing says issuing its own green bonds, which pay a coupon of 1.375%, is a further building block of the bank’s sustainability strategy. “As one of the few global financing houses, we can and want to help shape the transformation to a low-carbon economy,” he points out. “Green bonds for our own account and for our customers are an important instrument in this respect".

Deutsche Bank’s green bond framework defines the assets with which the bond is backed and what the proceeds may be used for. “Green” assets include loans and investments in companies, assets or projects in the fields of renewable energy, energy efficiency and so-called green buildings, which are constructed according to ecological and sustainable standards.

The bank’s framework follows the principles for green bonds of the International Capital Market Association (ICMA) – an industry association of capital market participants that has been the standard-bearer in the sustainable bond market since 2014. In addition, the framework also follows the latest guidelines of the technical expert group on EU taxonomy, the future classification system for sustainable investments within the European Union.

The independent consulting firm Institutional Shareholder Services 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.

Deutsche Bank in May this year announced its sustainability objectives and published for the first time quantifiable targets to expand its sustainable business covering the ESG (environmental, social, governance) space, aiming to support the transformation towards a sustainable economy. By the end of 2025, the bank will increase its volume of ESG financing, plus its portfolio of sustainable investments under management, to over 200 billion euros in total.

The minimum volume of 200 billion euros 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 70 billion euros managed by asset manager DWS as of the end of 2019 are not included in these calculations.

In Asia-Pacific (APAC), Deutsche Bank’s ESG initiatives will be spearheaded by Kamran Khan, who was appointed in May this year to the newly-created position of head of ESG for the region. He will be responsible for developing and coordinating the regional business strategy around ESG across all of the bank’s business divisions in APAC.

Since the beginning of 2020, the bank has advised clients on 22 transactions, placing ESG bonds with an underwriting volume of nearly 3.5 billion euros. These included green bonds, social bonds, sustainable bonds and bonds linked to sustainability criteria.

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.

To anchor the topic of sustainability throughout the company, Deutsche Bank 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.

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