Deutsche Bank supports guidelines for green bonds

In January 2014, Deutsche Bank joined a coalition of 13 major financial institutions in supporting a set of voluntary guidelines for ‘green bonds’ to finance environmentally friendly activities.

Green Bonds

Raising capital to benefit the environment

Green Bonds offer a novel way to unlock the capital for projects that benefit the environment and society. They use the debt capital markets to raise funds for investment in developments such as renewable energy, energy efficiency and clean water. These bonds were initially issued by multilateral organizations such as the World Bank, but companies have become increasingly active.

Continued growth in this market requires clear definitions. At the beginning of 2014 Deutsche Bank joined twelve other major financial institutions in supporting the Green Bond Principles which provide a framework for integrity and transparency of this product. They set out requirements for designating, disclosing, managing and reporting on capital raised from a Green Bond. This ensures that the funds will make a difference for people and the environment.

The clarity provided by the Green Bond Principles helped the market to grow quickly. 80 financial institutions and issuers became signatories during 2014. A total of 35 labeled Green Bond issuers raised a total of USD 36.6 billion in 2014, up from just USD 11 billion in 2013. The Green Bond market is forecasted to to again exceed 2014 issuance in 2015. Deutsche Bank was involved in several Green Bonds.

Using the debt capital markets is a priority to finance the low-carbon transition. Globally there was $385bn of renewable energy investments in 2014. This must double by 2020 and quadruple by 2030 if the world is to avoid the negative impacts of a global temperature increase of more than 2˚C. The planet is now on track for a 4˚C+ temperature increase which the World Bank says would be catastrophic (“a 4C scenario is potentially devastating”). Financial institutions can help society and their clients to invest in forward-looking environmental technology. According to estimates, the switch to a greener economy will require annual investments of USD 1 trillion – a significant business opportunity.

Deutsche Bank is also one of two other lead managers for the European Investment Bank’s first Climate Awareness Bond in 2014. The CHF 350 million bond is the EIB's first to be issued in Swiss Francs. Climate Awareness Bonds raise funds from fixed income investors to support EIB lending for renewable energy and energy efficiency.

Other signatories to the principles include Bank of America, Citigroup, Crédit Agricole CIB, JPMorgan Chase, BNP Paribas, Daiwa, Goldman Sachs, HSBC, Mizuho, Morgan Stanley, Rabobank and SEB.

“As a carbon neutral bank, Deutsche Bank believes that the new Principles will play an important role in unlocking the green market capital necessary to finance the transformation to a cleaner and more sustainable future.”

Unlocking the green market capital

USD 346 billion

estimated market size for climate change related bonds.

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