Deutsche Bank – Responsibility

Monocultural farming/ Palm oil

Demand for palm oil has increased rapidly over the past decade due to dietary changes and the fact that it is now also used as biofuel. Global palm oil production is predicted to be double the 2000 level by 2030 and triple by 2050.

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Palm oil production and industry

Growth of the palm oil industry has positive economic benefits, especially for Asian countries seeking entry to global markets. However, the production of palm oil raises environmental and social challenges.

Deforestation for palm oil plantations (which is sometimes illegal) destroys habitats and threatens extinction of some species as well as contributing to damaging greenhouse gas emissions. As well as raising environmental concerns, the creation of massive monoculture plantations creates conflicts with local communities including involuntary resettlement and violation of land rights.

To address these concerns and promote sustainable palm oil production, Deutsche Bank introduced a set of guiding principles for palm oil industry transactions in 2012. As a minimum, clients active in this sector are required to provide a certification plan for their plantation or mill in accordance with the Roundtable on Sustainable Palm Oil (RSPO) criteria.

The RSPO standard was established in 2004 and is widely supported by international consumer goods manufacturers and financial institutions. The bank also engages with clients during the certification process when requested.

We have also collaborated with other banks to explore how we can support efforts by the consumer goods industry to drive deforestation out of companies’ supply chains.  This initiative goes beyond palm oil and covers soft commodities such as timber, soy and beef which together account for about 50 percent of global deforestation.

How Deutsche Bank decides about its business relationships – a case study

Triggered by alleged environmental and social issues linked to deforestation and community conflicts reported by NGOs, we reassess a business releationsship with a client active in agribusiness, especially palm oil production in Asia.

ES risk
evaluation
Apply specific guidance we established for monoculture farming.

Take various aspects into consideration, including:
  • RSPO membership and certification
  • Commitment to non-deforestation and protection of forests with high conservation value and no fire usage
  • No land grabbing
  • Approach for community engagement
Initiate the collaboration with a group of peers in the financial industry.
Findings and
actions
Client has sound management system in place that includes:
  • RSPO membership with target to complete the certification in Asia by 2015/2016
  • An implemented set of policies pertaining to sensitive topics
Despite some efforts by the client to increase sourcing volume of sustainably grown palm oil from local thrid-party suppliers, issues exist, e.g.:
  • Lacking control over supply chain
  • Insufficient policy roll-out/implementation outside of Asia
Deutsche Bank and other banks with substantial business ties to the client agree to collaborative engagement. Key areas of engagement include:
  • RSPO application and monitoring mechanisms
  • Management of supply chain
  • Implementation of new policies
Discussion with NGOs on the topic as well as broader dialogue with research institutions and academic experts on issues associated with palm oil production.
Decisions and follow-up Maintain the business relationship but continue to engage client with our peers and maintain broader discussions on issues associated with palm oil production.

Infrastructure Journal

Statement on our involvement with Bumitama Agri Group

Deutsche Bank´s holdings of Bumitama Agri Group were shareholdings of two Asian DWS funds only. In the meantime the shareholdings by these funds were reduced close to zero. The responsible investment managers in the respective business units are aware of the issues in respect of Bumitama Agri Group. Although the current holding is negligible they will further survey these issues and their findings will of course influence any investment decision. Generally before we make a decision on a potential investment we perform various ESG related tests. In determining the ESG performance and attached risks of companies our investment team uses specialized external data providers (e.g. Sustainalytics, MSCI etc.), sell-side research or other relevant public information. The emphasis we place on the various dimensions of a company’s ESG performance is determined by the specific mandate we oversee for our clients.

March 31, 2014

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