WERTE writer HeleneLaube spoke via videoconference with MarkusMüller, Maria Haindl andTuan Huynh about thechallenges posed by sus-tainability – and the op-portunities offered
A lack of
is also a
Deutsche Bank is increasingly aligning its business with
ESG criteria, meaning environmental and social factors as well asgood corporate governance. Maria Haindl, Tuan Huynh andMarkus 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 sustainabilityin the financial services sector?
Maria Haindl: We feel we have a responsibility towards society toensure 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 andlong-term risks of failing to meet ESG criteria is part of our job.
Markus Müller: : First and foremost, we have to understand thatsustainability, in broad terms, is a social necessity. Deutsche Bankis both part of society and part of the economy. Non-compliancewith sustainability criteria – meaning the non-financial dimen-sions of our environment and economy – exposes us to risk. Thisrisk, 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 ofcontrol, we are undermining the basis of our future business. Sus-tainability is at the heart of our strategy so that we can support ourclients in the transition to more sustainability. We want to be a rolemodel and make our contribution to a more environmentallyfriendly, more socially inclusive and better-run economy. ESG isnot 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 focuson this issue, it might have some impact, but we're not so naive asto think we can achieve this transformation alone. On the con-trary, there is a need to raise awareness throughout the financialsector. Financial institutions can and must have a positive influ-ence on companies. It’s clear that this subject is gaining increasingmomentum 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 aglobal network, but also because of our history and expertise in ad-vising both international and local private clients and arrangingfinancing 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 pressureon 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 theirshares or bonds. This will have a corresponding effect on how theyraise capital and that, in turn, means it has a positive impact anddrives 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 andbusiness segments are excluded. We’ve defined three areas in thisregard. An absolutely rigid exclusion criterion is when companiesor issuers violate laws or globally accepted standards. Then thereare 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 inquestion 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 doingthat 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 choosingsustainability as an add-on, but that society has already reached apoint where sustainability is the normal – or at least the desired –state of affairs.
Huynh: ESG is not simply an investment class; it's a completelynew 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 theirinvestments 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 considerhow non-ESG products affect the environment and society.
Will you soon be offering your wealthy private clients onlysustainable products?
Haindl: No. As an asset manager and risk manager, our role is tounderstand and support the needs of our clients – and that includestraditional investments. Naturally, we’ll be supporting clients whowant 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 ourclients make investments that reflect their values.
Do some clients doubt that they can make a differencewhen it comes to sustainable investments?
Haindl: There are still some people who say they can't make anydifference 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 cantransform our society.
Critics say that no substantial change in course is
happening – it’s just a lot of sustainability PR. And NGOscomplain that Deutsche Bank’s ESG strategy with its
200-billion euro goal for sustainable financing is not
Müller: At Deutsche Bank, we don’t simply do sustainability PR;we want to play a proactive role in shaping the global transition toa sustainable, climate-neutral and socially-inclusive economy. InMay 2020, for the first time, we published quantifiable targets onhow 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 NGOsto hold us to account. The most important aspect of our sustain-ability strategy is integrating an understanding of ESG along ourentire value chain. We are supporting our clients in the changesthat may result.
Huynh: We want to give companies that could be excluded fromfinancing in the medium to long term because of their poor ESGperformance an opportunity to review their business models andmake 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
Müller: As an economist, I can tell you that the pandemic has
helped to sharpen this focus and act as a catalyst because we havebegun thinking a lot more about what consequences our actionshave – or do not have – within a global context. But the history ofsocio-economics shows that a situation has to last for a long timebefore society really starts to learn from it. I certainly hope we do,but that remains to be seen.
Paula Sanz Caballero, Oriana Fenwick
“First and foremost,
we have to understand thatsustainability is, on the
whole, a social necessity.Deutsche Bank is part
of society and part of
“Together we can makea difference. The morepeople that see that, thefaster we can transformour society”
Markus Müller is Global Head of theChief Investment Office of the PrivateBank (PB). In his role he represents thehouse view on the capital markets, acrossall asset classes. He is also a member ofDeutsche Bank’s Sustainability Council.
Maria Haindl is the Head of Discre-tionary Portfolio Management (DPM)Products at the IPB. In this position, she isthe driving force behind the bank’s ESGofferings and is restructuring its DPMproduct range. She is also Head of CIOand Investment Solutions Division forGermany.
Tuan Huynh is the new Global Head ofDiscretionary Portfolio Managementat the IPB and, in that capacity, is re-sponsible for aligning the DPM portfoliowith the sustainability strategy. Huynhwas previously Chief Investment Officerfor Europe, including Germany, andAsia-Pacific for the IPB.
“If all asset managerswork together, they canexert a positiveinfluence on companiesby demanding that theymeet 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 undermanagement already amounted to 9 billion euros. And IPB’s com-mitment also extends to other areas: it recently became the firstbank to join the Ocean Risk and Resilience Action Alliance
(ORRAA) as a full member. The CIO Office also regularly issuesESG publications, including a special report on the importance ofbiodiversity and the results of a client survey on ESG. The surveyshowed that three quarters of clients would like their investmentsto 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.