Leading financial institution Deutsche Bank announced new ESG (Environmental, Social and Governance) rules targeting the coal industry and the cement and shipping sectors.
The bank said it has new emission reduction targets that will affect the loans it offers to clients such as coal mining companies, cement, shipping and other industrial firms. Its chief sustainability officer told Reuters the bank now has a net-zero plan for 55 percent of the emissions it finances, meaning it wants to ensure more than half of all its clients’ emissions are off-set by green or renewable energy funding.
These new ESG rules will be added to its already existing regulations on the oil, gas, power generation, steel, and auto industries. Emissions from its oil and gas clients declined 29 percent in 2022.
However, Deutsche Bank won’t be calling them “ESG” rules. Instead, it will be following the finance industry-wide move of backing away from the politically loaded term while still pushing the same principles. BlackRock CEO Larry Fink said in June he was no longer using the term as it had become “weaponized,” and multiple investment firms reported their ESG-related funds were suffering amid widespread outcry against the movement.
Deutsche Bank is the biggest lender in Germany, a country with many so-called “polluting sectors” or industrial companies. It has come under fire from politicians, activists, and other pressure groups to impose environmental regulations on its activities and on its clients. It was loaning about $112.72 billion to corporations at the end of 2022, according to its records.
Deutsche Bank sets emissions targets for coal, cement, shipping clients https://t.co/ZRT2GrJ2Uk pic.twitter.com/M2yZsYfYVh
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“Once we have pathways, we can start to really manage it down,” Chief Sustainability Officer Jörg Eigendorf said.
Last year, Deutsche Bank started a “net zero forum” of senior executives to dissect the emissions of 25 million dollars in loans to big industrial corporations.
Eigendorf said 25 percent had been rejected and sent back to the drawing board, in part due to the companies having “weak” plans for how they will become net-zero emitters. Deutsche Bank said it is actively looking to see clients’ plans for curbing “Scope 3” emissions, which calculate all the emissions in a company’s supply chain from beginning to end.
“In one case, I said I don’t understand why this company is not committing to Scope 3 reporting with a clear timeline; it was rather an ambition… so we asked them to put a date in. And they did,” Eigendorf said.
Deutsche Bank aims to reduce absolute emissions from coal mining operations by 49 percent by 2030 and 97 percent by 2050.
It wants to reduce emissions from cement makers 29 percent by 2030 and 98 percent by 2050.
Finally, it wants its shipping industry clients to abide by the decarbonization “Poseidon Principles,” a list of decarbonization targets pushed by an NGO and increasingly followed by much of their shipping banks such as Citi, Societe Generale, and DNB.
This comes as the shipping industry already faces a downturn, with second-largest global shipping company Maersk warning that a huge recession in shipping demands is coming. (RELATED: Goldman Sachs Warns Shipping Recession is Coming)
In the video below, Patrick Bet-David explains why companies fear ESG ratings, the history behind the ESG system, and the institutions pushing it.
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