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Deutsche Bank sets net zero targets for carbon-intensive sectors

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Deutsche Bank (ETR:DBK) has announced net zero targets for four carbon-intensive sectors as part of its strategy to reduce Scope 3 emissions.

  • Deutsche Bank has set net zero targets for four carbon-intensive sectors that are part of its portfolio.
  • It comes as part of the lender’s strategy to reduce its Scope 3 emissions.
  • The bank intends to reach its goals by advising clients and financing their transition plans.

Deutsche Bank has announced net zero targets for 2030 and 2050 in four carbon-intensive sectors, as it intends to reduce the amount of financed emissions significantly by 2030. 

Net zero targets in four key sectors

Clients in the four sectors – oil and gas, power generation, automotive, steel – account for 13% of financed emissions in Deutsche Bank’s €250 billion corporate loan book, as of December 2021. Financed emissions fall under Scope 3 categories for companies in the financial sector, such as Deutsche Bank, as they are generated from investments and lending to third parties.

The German lender has set a 23% reduction in Scope 3 upstream financed emissions by 2030, and 90% reduction by 2050 for investees in the oil and gas upstream sector. Those in power generation, instead, will be required to cut Scope 1 physical emission intensity by 69% by 2030 and by 100% by 2050.

Light duty vehicles in the automotive sector, such as cars, are now required to reduce tailpipe emission intensity by 59% by 2030 with a 100% reduction by 2050. Finally, the bank has established a 33% reduction in Scope 1 and 2 physical emission intensity by 2030 and 90% reduction by 2050 for companies in the steel industry.

The bank said that it will set further net zero targets for other carbon-intensive sectors throughout 2023. According to a report published in March 2022, 68% of global financed emissions are generated by three sectors which account for 3.6% of Deutsche Bank’s overall loan portfolio.

Deutsche Bank’s sustainability pledge

The lender said that its approach is in line with the United Nations Environmental Programme Finance Initiative and the Glasgow Financial Alliance for Net Zero principles and guidelines. Deutsche Bank is also a founding member of the Net Zero Banking Alliance, an industry group representing 40% of global banking assets, committed to aligning lending and investment portfolios with net-zero emissions by 2050.  

The bank has based its targets on the International Energy Agency’s net zero emission scenario which limits global warming to no more than 1.5°C above pre-industrial levels by 2100. The scenario includes the use of negative emission technologies, such as carbon capture and storage, to offset a small amount of emissions in certain sectors.

Deutsche Bank said it will continue to follow the Paris Agreement Capital Transition Assessment-based approach for the automotive, power generation and steel sectors, and has switched to a Scope 3 financed emission approach for the upstream oil and gas sector. The targets will be included into its existing governance structures and risk appetite frameworks.

Financing the transition

Deutsche Bank said that it plans to reduce its Scope 3 emissions by supporting a progressive and orderly phase-out of fossil fuel usage, while supporting lower carbon-intensity technologies and clients with credible transition plans. It will advise clients in carbon-intensive industries as well as financing their strategies to reach net zero emissions by 2050.

Chief sustainability officer Jörg Eigendorf said: “This is an important step to reduce the carbon footprint of our loan book progressively.”

He added: “We are focusing on supporting our clients on their net zero journey. This is a crucial element of our sustainability strategy.”

It is crucial that the financial services sector provides funding for the decarbonisation of high emitters. Climate-aligned investment has been mostly focused on ‘pure green’ activities, according to the G20’s Sustainable Finance Working Group, which means that some carbon-intensive companies have struggled to access the bank loans and capital markets they needed to become more sustainable. All sectors need to take part in the transition, and that includes providing the right tools to reduce emissions across the board.

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