Deutsche Bank promises to reduce funding for the coal, oil and gas industries. This Monday, the institute released expanded guidelines for doing business with the fossil energy industry. According to the bank, it says it will end all coal mining commitments by 2025 – and companies financed by it, which burn coal on a large scale, will review their transformation plans for climate-friendly electricity generation. In the oil and gas sector, the bank wants to completely exclude the financing of certain projects.
“The guideline is designed in such a way that it sets ambitious goals and at the same time we can support our long-standing customers,” said CEO Christian Sewing. It would “support the EU’s goal of being carbon neutral by 2050.”
Environmentalists, on the other hand, criticized that the new guidelines were not far-reaching enough. Even under the stricter requirements, groups with climate-damaging business models such as RWE or ExxonMobil could be Deutsche Bank customers. In addition, other large financial institutions or investors would have adopted far stricter restrictions.
Who is financing the global energy transition?
For some time now, some financial groups have been putting pressure on companies to make their business models more climate-friendly. This does not happen so much out of altruism – but above all out of concern for your own profits. On the one hand, the money houses fear further destabilization of the global economy and their own businesses due to climate change. On the other hand, they hope for profits by financing a global energy transition.
Deutsche Bank no longer wants to accept any new customers whose coal mining accounts for more than half of their sales. It plans to end existing business relationships with such companies by 2025. The bank, on the other hand, does not want to automatically exclude electricity producers who have more than 50 percent coal in electricity generation or power plant capacity, but instead want to check how these companies want to implement the energy transition.
Europe’s largest coal-fired power supplier RWE, for example, could benefit from this – provided the group succeeds in convincing Deutsche Bank of its future plans. The company Uniper, which split off from E.on, does not have to fear that Deutsche Bank will terminate the cooperation. Its coal share is less than 50 percent.
Some of the world’s leading coal producers such as BHP Billiton, Anglo American or Glencore could also fall through the net – because they also produce other raw materials and the coal content is therefore below 50 percent. Deutsche Bank could also continue to finance companies that are building new coal-fired power plants, open-cast mines or coal ports.
Other big banks are stricter
This means that Frankfurt is lagging behind other major banks. The French BNP Paribas, for example, already excludes coal mining companies with a coal share of more than 20 percent of sales or an annual production of ten million tons of coal. The Royal Bank of Scotland requires companies with more than 15 percent coal to have an exit plan. Norway’s oil fund, the largest sovereign wealth fund in the world, has announced that corporations such as Glencore and RWE will be completely removed from the portfolio and their shares sold because of their climate-damaging business.
“The fact that Deutsche Bank wants to limit fossil fuels is a step forward that we welcome,” said Regine Richter from the environmental organization Urgewald. “From a climate perspective, however, it is far from being large enough. In 2020, significantly more ambition is needed.” Urgewald has been a pioneer for divestment for years – that is, for large investors to withdraw money from the fossil energy sector and to switch them to climate-friendly projects and companies.
A spokesman for Deutsche Bank, however, said: “This is a first important step.” In the oil and gas industry, the institute no longer plans to finance oil sands projects or drilling in the Arctic. It also excludes fracking projects in countries where there is a lack of water. To this end, Deutsche Bank wants to examine all business partners from the oil and gas industry by 2020 to find out what CO2 savings plans they have. And based on that, set yourself a “ceiling for total exposure” in this sector in a second step.
“If the reduction targets become good, the new oil and gas guidelines are a real start,” said Urgewald expert Richter. However, Deutsche Bank has so far avoided any specification of where the upper limit will be.