Our commitment to sustainable finance also includes questioning our involvement in certain sectors, including those that are carbon-intensive.
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In this context, the general provisions of our Environmental and Social Risk Framework define procedures and responsibilities for risk identification, assessment, and decision-making. The Framework also covers deal-independent risk screening, the identification of companies with a controversial environmental and social (ES) profile and the definition of sensitive sectors, and specifies the requirements for ES due diligence including criteria for mandatory referral to Group Sustainability, our central sustainability team.
The due diligence process regarding project finance is based on the IFC Performance Standards underlying the due diligence process of the Equator Principles. To confirm our commitment, Deutsche Bank formally joined the Equator Principles in July 2020.
The following restrictions are in place to reduce our climate risk exposure and focus the provision of financial services to companies in transition.
Since 2016, we have had a policy in place prohibiting financing of greenfield thermal coal mining and associated infrastructure, and we committed to reducing our coal lending exposure and set a three-year reduction target of 20% in 2016. As of the end of 2019, we achieved that target, and we are now further committed to phasing out coal exposure by 2025 worldwide (including both lending and capital markets).
Since 2016, we 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, we will review our coal power exposure, and for all clients depending more than 50% on coal – be it energy capacity or energy output – we will subject the provision of financial services to the availability of credible diversification plans. Accordingly, we will review all clients in Europe and the US by the end of 2020 and gradually phase out existing exposure if there are no diversification plans in place. Starting in 2022, we will extend this review and phase-out to Asia and selected developing markets. With this staged timing, we acknowledge the additional time required by some regions to prepare for the transformation.
Oil and gas
In addition to our current enhanced environmental and social due diligence process, we will review by end of 2020 our existing exposure to the oil and gas sector globally, considering environmental and social performance, carbon intensity, and transition plans. Based on this review, we will subsequently aim to reduce our exposure.
Additionally, we will 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
Financing means the lending and capital market, where the majority of the use of proceeds is explicitly linked to the listed projects.
Fossil fuel policy
The outlined changes to our fossil fuel fuel policies announced in July 2020 underline our 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 our recently announced commitment to align the carbon intensity of our lending portfolios with the targets of the Paris Agreement, which we have pledged by joining the German financial sector’s collective commitment to climate action in June 2020.