Deutsche Bank Implements Stringent Rules for Coal Financing

Deutsche Bank AG is taking significant steps to expand its restrictions on coal financing, which has long been one of the primary sources of energy in its home market, Germany. This move is part of the bank's broader crackdown on high-emission sectors, reflecting its commitment to sustainability and carbon reduction.

Deutsche Bank joins the ranks of prominent banks like BNP Paribas SA, the European Union's largest lender, which has expanded its restrictions on fossil finance to include debt capital markets. The German unit of ING Groep NV is already in the practice of turning away high-emission clients each year.

One of the most significant challenges Deutsche Bank faces in achieving its 2050 net-zero goal is reducing the carbon footprint of its loan portfolios. Specifically, this pertains to the European residential real estate portfolio and the global corporate loan portfolio, which have the most substantial carbon impact, according to the bank's statement.

Deutsche Bank has already established targets for reducing financed emissions in industries such as oil and gas, automotive, power generation, and steel. In addition to its commitment to curtailing coal emissions, Thursday's announcement introduced new restrictions that will also impact the cement and shipping sectors. The bank is also planning to include aviation once the Rocky Mountain Institute publishes a net-zero-aligned decarbonization pathway for this industry.

It's important to clarify that financed emissions refer to the emissions associated with a financial institution's loans and investments in companies involved in activities that generate greenhouse gases. Deutsche Bank has disclosed emissions data covering approximately 60% of its total loan exposure. As of the end of 2022, this amounted to 34.4 million tons of CO2 equivalent per year.

In the context of coal, Deutsche Bank's commitment encompasses both thermal and metallurgical coal and builds upon its existing thermal coal policy. The bank's target includes a 49% reduction in absolute terms in the broadest measure of financed emissions, referred to as Scope 3, by 2030. By 2050, the bank's aspiration is a staggering 97% reduction in Scope 3 emissions. In the cement sector, the bank is focusing on a 29% reduction in Scope 1 and 2 physical emissions intensity by 2030, with an ultimate goal of achieving a remarkable 98% reduction by 2050.

Deutsche Bank has also provided a degree of flexibility for state-owned enterprises operating in countries with Just Energy Transition Partnerships. These are public-private initiatives designed to support the early retirement of fossil fuel assets. Under specific circumstances, these state-owned enterprises may still be eligible for finance from Deutsche Bank if they have a trajectory for phasing out thermal coal that aligns with the host country's commitments, even if those commitments differ from the bank's other coal policies.