“Cities are key players in lowering carbon emissions”
Transforming cities into sustainable urban spaces requires multiple efforts. Claire Coustar, our Global Head of Sustainable Finance, in the Fixed Income and Currencies (FIC) business, explains what role financial markets can play and what Deutsche Bank is already doing.
Claire, cities are often seen as a great enabler for reducing carbon emissions. How exactly?
That’s absolutely right. Cities are one of the main contributors to global carbon emissions. That means that they are key players in lowering carbon emissions. First, they have purchasing power, for example when they construct or renovate buildings or procure new public transport. This is when cities can opt to buy sustainable materials and products. Second, cities can impose powerful policies and make the transition to net zero an integral part of urban planning.
Do you have something specific in mind?
In the UK housing-sector for example, homes produce more carbon emissions every year than all of the country’s cars. That is mainly due to gas heating and poor insulation. So Cities can influence planning requirements, support home solar panel schemes, promote energy efficient insulation and combine affordable housing policies with good energy standards. They can use energy-saving street lighting, create green areas and expand the infrastructure for electric vehicle (EV) charging.
In the UK (…), homes produce more carbon emissions every year than all of the country’s cars
What can financial markets do to support these transformation efforts?
There are many ways in which financial markets can help. Sustainable bonds or loans are a good example. With green and sustainable funding, the issuer – it might be a city, municipality or a state – will use the proceeds to finance projects that help to combat climate change. Having access to different financial markets can be a powerful transformation tool for cities and different regions.
Could you explain that last thought?
Take the United States, for example, they have a huge securitisation market and a very sophisticated capital market, including a broad municipal market in which Deutsche Bank is active. The broader securitisation markets allows more granular climate loans such as residential solar and EVs to obtain adequate financing. This, in turn, drives the development of climate friendly investments. By comparison, Europe is primarily a bank-funded market.
What about developing countries?
We have seen a surge in emerging market countries developing green taxonomies. The city of Johannesburg was one of the first municipalities in 2014 to list a green bond on the local stock exchange. A more recent example is Chile’s first sustainability-linked sovereign bond. Last year Belize used a debt for nature swap. In such a swap, investors buy the debt of a developing country at favourable condition. In return, the country guarantees to engage in nature conservation projects.
The demand for financing this transition is huge, but very often government policies do not support investment flows
It seems like we have the instruments to drive impact. So what is missing to shift the whole economy towards impact?
The demand for financing this transition is huge, but very often government policies do not support investment flows. So facilitating policies, such as residential renewable permitting, defined milestones for the exit out of diesel vehicles, or incentives for renovations, need to align with the growing capital and investment flows directed to support green investment.
How does the shift towards a green economy change the way we work at Deutsche Bank?
The way we do business is changing fundamentally right now. We have set ourselves ambitious volume targets for sustainable financing and part of that includes supporting our clients as they finance the transition. Our due diligence with regard to climate and ESG matters is also more involved than it was, let’s say, 12 months ago.
The way we do business is changing fundamentally right now
Have you personally ever seen such a fundamental shift?
I have certainly never seen the kind of shift we are seeing right now. The financial crisis also had some huge implications, primarily for the financial markets, though. The current development is changing the whole economy along with our clients’ entire value chains. Helping them to manage this transition is a challenging and exciting task.
The interview was conducted by Georg Berger.
About Claire Coustar
Claire Coustar is Global Head of ESG and Sustainable Finance for Deutsche Bank’s Investment Bank - Fixed Income & Currencies. Claire joined in 2003, and during her tenor she has held various positions, including Head of Emerging Market Structuring. Prior Claire held various positions at Merrill Lynch.
Claire represents Deutsche Bank in the Net Zero Banking Alliance, is a member of the Group Sustainability Council, and represents the Investment Bank on Deutsche Bank’s Green Bond Forum.
… is fascinated by new technology that could speed up our journey to net zero. Huge changes are necessary and he wonders how all of it will be financed.
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