SECOND PARTY OPINION (SPO)

Sustainability Quality of the Issuer and Asset Pool

Deutsche Bank AG

16 April 2020

© 2020 | Institutional Shareholder Services and/or its affiliates

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S E C O N D P A R T Y O P I N I O N

Sustainability Quality of the

Green Bond Asset Pool

Overall Evaluation of the Green Bond

Deutsche Bank AG (Deutsche Bank) commissioned ISS ESG to assist with its Green Bond by assessing three core elements to determine the sustainability quality of the Bond:


  1. Deutsche Bank’s Green Bond framework – benchmarked against the International Capital Market Association’s (ICMA) Green Bond Principles (GBPs).

  2. The asset pool – whether the projects aligned with ISS ESG’s
    issue-specific key performance indicators (KPIs) (See Annex 2).
  3. Deutsche Bank’s sustainability performance, according to the ISS ESG Corporate Rating.

ISS ESG ASSESSMENT SUMMARY

SPO SECTION

SUMMARY

EVALUATION1

Part 1:

The issuer has defined a formal concept for its Green

Positive

Bonds regarding use of proceeds, processes for project

Performance

evaluation and selection, management of proceeds and

against GBPs

reporting. This concept is in line with the ICMA GBPs.

The overall sustainability quality of the asset pool in terms

of sustainability benefits, risk avoidance and minimisation

is good based upon the ISS ESG Green Bond KPIs. The

Green Bond KPIs contain a clear description of eligible

Part 2:

asset categories which include: solar energy, wind energy,

biomass and energy efficiency (LED lighting).

Sustainability

quality of the The use of proceeds categories included in the asset pool

asset pool have a significant contribution for some, and limited contribution for others to SDGs 7 ‘Affordable and clean energy’ and 13 ‘Climate action’. The environmental and

social risks associated with those assets have been well managed.

The issuer itself shows a medium sustainability

Part 3:

performance and has been given a rating of C, which

classifies it as ‘Prime’ by the methodology of the ISS ESG

Issuer

Corporate Rating.

sustainability

It is rated 6th out of 285 companies within its sector as of

performance

16.04.2020. This equates to a high relative performance,

with a Decile Rank2 of 1.

Positive

Status: Prime

Rating: C

Decile Rank: 1


  1. ISS ESG’s evaluation will remain valid until any modification of the Green Bond Framework or addition of new assets into the asset pool by the issuer and as long as the Corporate Rating does not change (last modification on the 24.03.2020). The controversy check of the underlying assets was conducted on the 16.03.2020.

  2. Rank relative to industry group. 1 indicates a high relative ESG performance, while 10 indicates a low relative ESG performance.


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S E C O N D P A R T Y O P I N I O N

Sustainability Quality of the

Green Bond Asset Pool

Contribution of the Green Bond to the UN SDGs

Based on the assessment of the sustainability quality of the green bond asset pool and using a proprietary methodology, ISS ESG assessed the contribution of the Deutsche Bank’s green bond to the Sustainable Development Goals defined by the United Nations (UN SDGs).

This assessment is displayed on 5-point scale (see Annex 2 for methodology):

Significant

Limited

No

Limited

Significant

Obstruction

Obstruction

Net Impact

Contribution

Contribution

Each of the bond’s Use of Proceeds categories has been assessed for its contribution to, or obstruction of, the SDGs:

USE OF PROCEEDS

CONTRIBUTION OR

SUSTAINABLE DEVELOPMENT GOALS

OBSTRUCTION

Wind Energy

Significant

contribution

Significant

Solar Energy

contribution

Biomass

Limited

Contribution

Limited

Energy efficiency

Contribution

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Sustainability Quality of the

Green Bond Asset Pool

ISS ESG SPO ASSESSMENT

PART I: GREEN BOND PRINCIPLES

1. Use of Proceeds

An amount corresponding to the net proceeds from any Green Bond issued under the Framework shall be used to finance Deutsche Bank’s Green Asset Pool (the Green Asset Pool). The pool is composed of both loans to and investments in corporations, assets or projects, which supports the transition to a clean, energy-efficient and environmentally sustainable global economy and are in line with the requirements of this Framework (Eligible Green Assets). Deutsche Bank commits on a best efforts basis to reach full allocation within one year following each Green Bond issuance.

In order to be eligible for inclusion in the Green Asset Pool, the loan or investment must fall in at least one of the sectors described in the table below (Eligible Sectors). In case of general corporate loans, at least 90% of the turnover of the corporation needs to be attributable to Eligible Sectors and fulfil the respective requirements. In addition to outlining the required eligibility criteria, the table below also maps the Eligible Sectors to the relevant GBP category and the SDGs.

Loans or investments in corporations, assets or projects related to renewable energy projects, including, but not limited to, wind (onshore/offshore), solar (photovoltaic/concentrated solar power) and biomass.

Energy

Eligibility requirements under current version of the EU Taxonomy to be

considered:

Renewable

– Asset / Project loans: Over-arching,technology-agnostic emissions threshold of

93.7 %

100g CO2e / KWh declining to 0gCO2e/kWh by 2050 for all sorts of electricity

production (life cycle impact for producing 1 kWh of electricity)

– Biomass specific: facilities operating above 80% of GHG emissions-reduction in

relation to the relative fossil fuel comparator set out in RED II increasing to

100% by 2050

Loans or investments in corporations, assets or projects related to the

development and implementation of products or technology that reduce the

Efficiency

use of energy. Examples include but are not limited to: energy efficient lighting

6.3 %

(e.g. LEDs), energy storage (e.g. fuel cells), improvement in energy services (e.g.

smart grid meters).

Energy

Eligibility requirements under current version of the EU Taxonomy to be

considered:

– Energy efficiency is mentioned across various activities, as such no general

threshold can be applied, and decisions need to be made on a case-by-case

basis depending on the sector and activity specific background

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Sustainability Quality of the Green Bond Asset Pool

Green Buildings

Exclusions

Loans or investments in assets or projects related to the construction of new buildings, operation of existing buildings or renovation of existing buildings (with a minimum energy efficiency upgrade) in the commercial real estate sector.

Construction of new commercial buildings which meet at least one of the following criteria:


  • Certification with a minimum of LEED “Gold”, BREEAM “Very Good”, or where needed, any other certification that is comparable to the above thresholds

  • Buildings in the top 15% of low carbon buildings in the respective country (if benchmarks exist)

Renovation of existing buildings which meet the following criteria:


  • Energy savings of at least 30% in comparison to the baseline performance of the building before the renovation

Buildings that are used for the purpose of occupation by fossil fuel extraction ormanufacturing of fossil fuel activities are explicitly excluded.

Eligibility requirements under current version of the EU Taxonomy to be considered:


  • New buildings (initially): net primary energy demand of the new construction
    must be at least 20% lower than the primary energy demand resulting from therelevant ‘nearly zero-energy building’ requirements.
  • Renovation: when compliant with energy performance standards set in the applicable building regulations for major renovations transposing the Energy Performance of Buildings Directive, or achieving energy savings of at least 30% in comparison to the baseline performance of the building before the renovation

Deutsche Bank explicitly excludes non-committed or non-performing exposures, as well as loans to businesses or projects that are involved in the following operations from being eligible for the Green Asset Pool:


  • Activities related to the exploration and production of fossil fuels

  • Nuclear and nuclear related technologies

  • Weapons, alcohol, tobacco, gambling, and adult entertainment

  • Deforestation and degradation of forests

In addition to the requirements specific to the Eligible Sectors, all loans originated by Deutsche Bank that are potentially eligible for inclusion in the Green Asset Pool are tested against the bank’s Environmental and Social Policy Framework (ES Policy Framework). The ES Policy Framework evaluates potential environmental and social risks that could arise from transactions or interactions with clients, and with specific principles and guidelines determine the best course of action.


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Sustainability Quality of the

Green Bond Asset Pool

Opinion: ISS ESG considers the Use of Proceeds description provided by Deutsche Bank’s Green Bond Framework aligned with the GBPs and with the Technical Screening Criteria defined by the EU Taxonomy3. Environmental benefits are defined and described. Additionally, the sustainability objectives defined in the framework align with the sustainability strategy of the issuer.

2. Process for Project Evaluation and Selection

To identify Eligible Green Assets that are in line with the Eligible Sectors and related criteria defined in the “Use of proceeds” section, Deutsche Bank follows a three-step process: i. green asset screening and pre-selection, ii. internal validation, and iii. external verification.

Step 1: Green asset screening and pre-selection

For each of the Eligible Sectors, Deutsche Bank has put in place category-specific selection criteria that are used by the respective originating business areas to identify eligible items in their portfolio. The selection criteria are in accordance with conditions outlined in section 2.2 Use of proceeds and might be extended by the currently still evolving criteria around the do-no-significant-harm assessment as proposed through the EU Taxonomy in the future.

Step 2: Internal validation

Assets that are pre-selected through the respective originating business areas subsequently need to be validated by the Deutsche Bank Green Bond Forum (the Forum). The Forum acts to ensure compliance of pre-selected assets with the Framework and has full discretion to object to the inclusion of any asset, ultimately blocking them from being included in the Green Asset Pool in case of relevant concerns.

The Forum consists of selected representatives from Group Sustainability, Treasury and Origination/Front Office and convenes in at least quarterly intervals to vote unanimously on the inclusion of newly added green assets, as well as potential adjustments to the Framework’s selection criteria. Potential future changes of the framework’s selection criteria will not affect the treatment of Eligible Green Assets retroactively, i.e. Eligible Green Assets that went successfully through the pre-selection and validation steps will not be affected by ex-ante framework changes and will remain in the Green Asset Pool. Ex-post removal (other than through maturity or sale of the asset) or substitution of assets from the Green Asset Pool is generally possible if new information concerning Eligible Green Assets emerge which warrant their removal from the Green Asset Pool. A process for such removal will also be overseen by the Forum, again requiring unanimous voting by its members before any actions are permitted.

Step 3: External verification

A reputable verifier is mandated to evaluate on an annual basis the compliance of the Green Asset Pool with the requirements set by this Framework. Any issue regarding one or multiple green assets in the pool raised by the verifier in this process can lead to the ex-ante exclusion of the respective asset(s), following the exclusion process through the Green Bond Forum as described in step two.

Opinion: ISS ESG considers the Process for Project Evaluation and Selection provided by Deutsche Bank’s Green Bond Framework as aligned with the GBPs. Deutsche Bank has a documented step by

3 According to the Taxonomy Technical Reportas of March 2020.


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Sustainability Quality of the

Green Bond Asset Pool

step process to determine that projects fit within defined categories. Additionally, assets need to be validated by the Deutsche Bank Green Bond Forum to ensure compliance of pre-selected assets with the Framework, reflecting best market practice.

3. Management of Proceeds

An amount corresponding to the net proceeds of any Green Bond issued by Deutsche Bank under the Framework, irrespective of the legal form of the instrument, will be used to finance Deutsche Bank’s Green Asset Pool. The Eligible Green Assets stem from all different Eligible Sectors as defined in section 2.2 Use of proceeds, subject to the asset selection and evaluation process. The Green Asset Pool is expected to grow in size over time as further sectors are added to the Framework.

Eligible Green Assets selected and validated by the Forum are documented in the Deutsche Bank Green Asset Inventory (the Inventory), which represents the technical mapping of the Green Asset Pool. The Inventory is populated based on information provided by all parties involved in the asset selection process. Flagging assets to be documented in the Inventory is a mere designation and does not imply any change in ownership, pledge or lien for benefit of third parties or change in assignment to legal entity, branch or division.

Deutsche Bank strives, at any point in time, to maintain a larger total amount of Eligible Green Assets than the total net proceeds of all green bonds outstanding. To maintain a buffer of Eligible Green Assets in the Inventory over green bond net proceeds, Deutsche Bank is dedicated to substitute maturing loans or other financings with an appropriate alternative as timely as practically possible. The Inventory is routinely monitored by Deutsche Bank’s Treasury unit to detect potential shortfalls. Should a shortfall occur, Treasury will direct, at its own discretion, the shortfall amount towards its liquidity portfolio, consisting of cash and/or cash equivalents, and/or other liquid marketable instruments.

Opinion: ISS ESG finds that Management of Proceeds proposed by Deutsche Bank aligns with the GBPs, as Deutsche Bank strives to maintain a larger total amount of eligible green assets than the total net proceeds of all green bonds outstanding. Additionally, the issuer commits to reach full allocation within one year after issuing, reflecting best market practice.

4. Reporting

As long as there is any Green Bond outstanding, Deutsche Bank is committed to publish relevant information and documents regarding our Green Bond activities in a dedicated Green Bond Report, which will be made available on the investor relation website on an annual basis4. The report is split in two parts (i) the allocation reporting and (ii) the impact reporting, whereby each report will contain details including, but not limited to:

4www.db.com/ir/

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Sustainability Quality of the

Green Bond Asset Pool

Allocation reporting


  • Confirmation that the use of proceeds of Green Bonds outstanding are in alignment with the eligibility criteria set by the Framework

  • The total amount of outstanding Green bonds and the share of proceeds used for financing or
    re-financing purposes
  • The amount of net proceeds allocated within each Eligible Sector, as well as the balance of net proceeds not yet allocated to Eligible Green Assets (if any)

  • Illustrative examples describing Eligible Green Assets to which Green Bond net proceeds have been allocated, which are subject to confidentiality commitments to clients

Impact reporting

Subject to feasibility and data availability, the impact reporting will focus on the following information:


  • Asset-specific
    results (where possible) and related environmental impact indicators (such as CO CO2 emissions avoided)
  • Asset category aggregated results and related environmental impact indicators (such as CO2 emissions avoided)

An overview of selected impact indicators for the respective categories to be financed are outlined in the appendix of the Framework. In case other Eligible Sectors will be added in the future, the Framework update would also include the addition of the respective impact reporting indicators for those asset categories.

Opinion: ISS ESG finds that the reporting proposed by Deutsche Bank Green Bond Framework is in line with the GBPs. Deutsche Bank is transparent on the expected level of use of proceeds reporting and has defined clear targets for its impact reporting.

External review

The Second Party Opinion will be made available on Deutsche Bank’s investor relations webpage5.

In order to ensure sustained compliance of all issued bonds with the methodology set out in this Framework, Deutsche Bank will further appoint ISS Corporate Solutions or any other party as successor for ISS Corporate Solutions as an annual verifier.

5www.db.com/ir/

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Sustainability Quality of the

Green Bond Asset Pool

PART II: SUSTAINABILITY QUALITY OF THE ASSET POOL

Wind Energy

As a Use of Proceeds category, wind energy has a significant contribution to the SDG 7 “Affordable energy and clean energy” and SDG 13 “Climate action”.

Additionally, when considering the deeper ESG management, wind energy can be associated to other SDGs.

The table below presents the findings of an ISS ESG assessment of the assets (re-) financed against KPIs and the association with SDGs based on a mapping methodology.

A S S E S S M E N T A G A I N S T I S S E S G K P I

A S S O C I A T I O N

W I T H T H E S D G S

Site selection


  • 100% of assets are not located in key biodiversity areas (Ramsar sites, IUCN protected areas
    I-IV).
  • 100% of assets underwent environmental impact assessments at the planning stage.

Community dialogue

70% of assets feature community dialogue as an integral part of the planning process (e.g. sound information of communities,


  • community advisory panels and committees, surveys and dialogue platforms, grievance mechanisms and compensation schemes). No information is available on the remaining asset.

Environmental aspects of construction and operation

70% of assets meet high environmental standards during the


  • construction phase (e.g. noise mitigation, minimisation of environmental impact during construction work). For the remaining asset, no information is available.

    70% of assets provide for measures to protect habitat and wildlife
  • during operation of the power plant (e.g. measures to protect birds and bats). For the remaining asset, no information is available.

Working conditions during construction and maintenance work

70% of assets provide for high labour and health and safety


  • standards for construction and maintenance work (e.g. ILO core conventions). The remaining asset is based in the United States,


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