Deutsche Bank AG (NYSE:DB) has announced escalated restrictions on financing coal, a key energy source in Germany, as part of a broader campaign against high-carbon sectors. The bank stated that companies without credible plans to reduce thermal coal's contribution to their revenue below half by 2025 would lose financing. For firms outside the OECD, the revenue threshold is set at 30% by 2030.
This policy change aligns with actions taken by other major banks, including BNP Paribas (OTC:BNPQY) SA and ING Groep (AS:INGA) NV's German unit, in their commitment to eradicating financed emissions by 2050. Deutsche Bank anticipates that from 2026, at least 90% of high-emitting clients in carbon-intensive sectors seeking new corporate lending transactions will have a net zero commitment.
The bank's primary challenge in achieving its 2050 net zero goal is reducing the carbon footprint of its loan portfolios. This includes the European residential real estate portfolio and the global corporate loan portfolio. The bank has set emission reduction targets for various industries and recently introduced new restrictions on cement and shipping sectors. It also plans to include aviation following the Rocky Mountain Institute's publication of a net zero-aligned decarbonization pathway.
According to InvestingPro data, Deutsche Bank has a market cap of 20.81B USD and a P/E ratio of 4.17, reflecting its low earnings multiple which is one of the InvestingPro Tips. The bank has shown impressive revenue growth, with a reported 8.7% increase in the last twelve months (LTM2023.Q2). This aligns with the InvestingPro Tip that Deutsche Bank's revenue growth has been accelerating.
Deutsche Bank has disclosed emissions data covering about 60% of its total loan exposure, which amounted to 34.4 million tons of CO2 equivalent per year at the end of 2022. Most of these emissions came from its €107 billion corporate loan portfolio, with the remainder from a €175 billion portfolio of loans secured by European residential real estate.
The bank's coal target includes both thermal and metallurgical coal and expands on an existing thermal coal policy. The bank aims for a 49% cut in financed emissions (Scope 3) by 2030 and a 97% reduction by 2050. In cement, it targets a 29% reduction in physical emissions intensity (Scope 1 and 2) by 2030 and a 98% reduction by 2050.
State-owned enterprises in countries with Just Energy Transition Partnerships may still be eligible for finance if they have a phase-out trajectory for thermal coal that aligns with their country’s commitments. The bank's Net Zero Forum reviews potential transactions over €25 million that would increase financed emissions in relevant sectors by more than 1%. In its first year, the forum assessed 41 transactions and recommended further actions in about 25% of cases before loans were granted.
Despite commitments from major US and European banks to eliminate financed emissions, progress has been slow. Deutsche Bank's CEO, Christian Sewing, reaffirmed the bank's commitment to fighting climate change and stressed the need to position itself as a sustainability leader. The bank's commitment to sustainability is reflected not only in its policies but also in its financial performance. InvestingPro data shows a 1-year price total return of 21.9% and a dividend yield of 2.25%, demonstrating the bank's ability to deliver value to its shareholders while pursuing its sustainability goals.
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