Interview / ESG

Werte / N°24

WERTE writer Helene Laube spoke via video conference with Markus Müller, Maria Haindl and Tuan Huynh about the challenges posed by sus- tainability – and the op- portunities offered

A lack of

sustainability

is also a

business risk

Deutsche Bank is increasingly aligning its business with

ESG criteria, meaning environmental and social factors as well as good corporate governance. Maria Haindl, Tuan Huynh and Markus Müller are the driving forces behind this transformation

at Deutsche Bank’s International Private Bank (IPB)

Why is there no getting around the subject of sustainability in the financial services sector?

Maria Haindl: We feel we have a responsibility towards society to ensure that money flows towards sustainable projects and busi- nesses. We believe it will be possible to have an impact only if com- panies, regulators and banks collaborate efficiently with one an- other. Banks are risk managers, so identifying the medium and long-term risks of failing to meet ESG criteria is part of our job.

Markus Müller: : First and foremost, we have to understand that sustainability, in broad terms, is a social necessity. Deutsche Bank is both part of society and part of the economy. Non-compliance with sustainability criteria – meaning the non-financial dimen- sions of our environment and economy – exposes us to risk. This risk, in turn, may have negative effects on social stability and there- fore on social equity. If we fail to recognise risk or let it get out of control, we are undermining the basis of our future business. Sus- tainability is at the heart of our strategy so that we can support our clients in the transition to more sustainability. We want to be a role model and make our contribution to a more environmentally friendly, more socially inclusive and better-run economy. ESG is not just some trend – it’s a structural change.


To what extent can any one bank encourage more sustain- able action?

Tuan Huynh: If we at Deutsche Bank were the only ones to focus on this issue, it might have some impact, but we're not so naive as to think we can achieve this transformation alone. On the con- trary, there is a need to raise awareness throughout the financial sector. Financial institutions can and must have a positive influ- ence on companies. It’s clear that this subject is gaining increasing momentum in the markets.

Müller: I do think that our influence will be important, not only

as a leading bank in Germany with strong European roots and a global network, but also because of our history and expertise in ad- vising both international and local private clients and arranging financing for corporate clients.


According to Bloomberg Intelligence, ESG assets under

management worldwide are set to rise in value to over

50 trillion dollars by 2025. Will that increase the pressure on companies seeking capital?

Huynh: If all asset managers work together, they can exert a

positive influence on companies by demanding that they meet

ESG criteria. If they don’t, we can tell them that we can’t buy their shares or bonds. This will have a corresponding effect on how they raise capital and that, in turn, means it has a positive impact and drives forward the transformation of society.


What exclusion criteria are there in investment

management, for example, for funds or wealth manage- ment mandates?

Haindl: Sustainability aspects are taken into account in the selec- tion of investment instruments and certain business practices and business segments are excluded. We’ve defined three areas in this regard. An absolutely rigid exclusion criterion is when companies or issuers violate laws or globally accepted standards. Then there are business segments that we exclude outright, like uranium pro- duction or weapons trading. The third category is revenue- related. Companies or issuers that earn more than five percent of their rev- enues in certain business segments are excluded. The segments in question include coal production or the provision of core compo- nents to the nuclear industry.


You're sending out a clear signal by making ESG standard: in future, your clients will have to opt out of an ESG

approach instead of opting into one. Why are you doing that now?

Haindl: In our opinion, sustainability will become the new normal – if it hasn’t become so already. We don’t believe it’s about choosing sustainability as an add-on, but that society has already reached a point where sustainability is the normal – or at least the desired – state of affairs.

Huynh: ESG is not simply an investment class; it's a completely new approach and a long-term issue. We want to make it as trans- parent as possible for our clients so they can see what impact their investments can have on environmental, social or governance as- pects. That's what we're working on at the moment.

Müller: It's not just about ESG products. We also need to consider how non-ESG products affect the environment and society.


Will you soon be offering your wealthy private clients only sustainable products?

Haindl: No. As an asset manager and risk manager, our role is to understand and support the needs of our clients – and that includes traditional investments. Naturally, we’ll be supporting clients who want to focus more strongly on sustainability criteria in the future. Each of our product categories will include an ESG option in future – including strategic asset allocation. In this way, we can help our clients make investments that reflect their values.


Do some clients doubt that they can make a difference when it comes to sustainable investments?

Haindl: There are still some people who say they can't make any difference on their own. But social awareness is definitely present. In such cases, my answer is always that together we can make a

difference and the more people that see that, the faster we can transform our society.


Critics say that no substantial change in course is

happening – it’s just a lot of sustainability PR. And NGOs complain that Deutsche Bank’s ESG strategy with its

200-billion euro goal for sustainable financing is not

ambitious enough.

Müller: At Deutsche Bank, we don’t simply do sustainability PR; we want to play a proactive role in shaping the global transition to a sustainable, climate-neutral and socially-inclusive economy. In May 2020, for the first time, we published quantifiable targets on how we want to broaden the sustainability of our business. We lis- ten to criticism in order to understand it. It’s the job of these NGOs to hold us to account. The most important aspect of our sustain- ability strategy is integrating an understanding of ESG along our entire value chain. We are supporting our clients in the changes that may result.

Huynh: We want to give companies that could be excluded from financing in the medium to long term because of their poor ESG performance an opportunity to review their business models and make themselves sustainable. We see that as our responsibility.


How much pressure can a financial institution like

Deutsche Bank exert on major clients – like oil companies – whose business models are not sustainable?

Huynh: Of course, we can’t bring about change on our own

– we need the support of our competitors.


Is the pandemic shifting the focus onto or away from

ESG criteria?

Müller: As an economist, I can tell you that the pandemic has

helped to sharpen this focus and act as a catalyst because we have begun thinking a lot more about what consequences our actions have – or do not have – within a global context. But the history of socio-economics shows that a situation has to last for a long time before society really starts to learn from it. I certainly hope we do, but that remains to be seen.

INTERVIEW

Helene Laube


ILLUSTRATION

Paula Sanz Caballero, Oriana Fenwick

“First and foremost,

we have to understand that sustainability is, on the

whole, a social necessity. Deutsche Bank is part

of society and part of

the economy”

Markus Müller

“Together we can make a difference. The more people that see that, the faster we can transform our society”

Maria Haindl

Markus Müller

Maria Haindl

Tuan Huynh

Markus Müller is Global Head of the Chief Investment Office of the Private Bank (PB). In his role he represents the house view on the capital markets, across all asset classes. He is also a member of Deutsche Bank’s Sustainability Council.

deutschewealth.com

Maria Haindl is the Head of Discre- tionary Portfolio Management (DPM) Products at the IPB. In this position, she is the driving force behind the bank’s ESG offerings and is restructuring its DPM product range. She is also Head of CIO and Investment Solutions Division for Germany.

deutschewealth.com

Tuan Huynh is the new Global Head of Discretionary Portfolio Management at the IPB and, in that capacity, is re- sponsible for aligning the DPM portfolio with the sustainability strategy. Huynh was previously Chief Investment Officer for Europe, including Germany, and Asia-Pacific for the IPB.

deutschewealth.com

“If all asset managers work together, they can exert a positive influence on companies by demanding that they meet ESG criteria”

A successful ESG strategy

Deutsche Bank’s International Private Bank (IPB) has made sig- nificant progress with its ESG strategy. In June, ESG assets under management already amounted to 9 billion euros. And IPB’s com- mitment also extends to other areas: it recently became the first bank to join the Ocean Risk and Resilience Action Alliance

(ORRAA) as a full member. The CIO Office also regularly issues ESG publications, including a special report on the importance of biodiversity and the results of a client survey on ESG. The survey showed that three quarters of clients would like their investments to achieve something positive. In May, Deutsche Bank launched

a new range of ESG funds for wealthy private clients in Germany. ESG training is available to all staff worldwide.

Tuan huynh

Learn more about

Deutsche Bank Wealth Management and the topics that matter to us and our clients alike.