Deutsche Bank looks to make its mark on sustainable finance which is on the rise and has amplified its pace since the onset of the pandemic crisis.
The bank, which admits to having been criticised for lagging behind peers on setting ESG targets, sent a strong signal on Tuesday with the launch of a maiden €500m 6NC5 green bond which was nine times subscribed.
Deutsche published its first ever ESG quantifiable targets in May. The firm aims to execute €200bn in sustainable financing and investments by 2025.
The target includes bonds placed and loans granted by Deutsche, as well as sustainable assets managed by its private bank.
The firm has based its own ESG standards on the EU Taxonomy for matters relating to renewable energies, sustainable production or sustainable farming.
However it had to develop its own criteria for areas where the EU has yet to develop its own standards, such as the social sphere.
“The consultancy ISS ESG has scrutinised our ESG criteria and ranked us eighth of 281 firms in the category financial institutions/banks and capital market,” Gerald Podobnik said, the chief financial officer of Deutsche’s corporate banking arm.
Deutsche Bank sits in 10th place in Refinitiv's global ranking of bookrunners for ESG bonds this year. The bank says it has advised clients on 22 transactions since the beginning of the year, placing ESG bonds with an underwriting volume of nearly €3.5bn.
Sustainability criteria are no longer seen as a gimmick but rather as integral part of investor strategies.
“More and more institutional investors use sustainability criteria to manage their portfolios and are enquiring after sustainability ratings. Retail investors are now also warming to the topic,” Podobnik said.
As a result, companies are coming under increasing pressure to integrate sustainability criteria in their governance practices. Studies show firms with stronger ESG focus are also more resilient in times of crisis, according to Podobnik.
Looking ahead, Deutsche Bank says further regulatory advances are needed to ensure the financial sector makes a rapid and effective shift towards sustainable finance.
The bank believes the political sphere has a key part to play in the process through incentives and regulatory requirements, especially when it comes to helping smaller or regional banks make the shift towards sustainable finance.
“A climate stress test for banks would also be a good idea: those with a good climate rating could be exempted from fulfilling certain requirements,” Podobnik said.
Deutsche Bank also calls for standardisation in the way companies evaluate and report on their sustainability strategy.
“There must be quantifiable and comparable metrics to identify how sustainability businesses operate,” Podobnik said.