Decoding the Banker's Sustainability Mandate

Amazing. Thank you so much. And it's great to have everyone here. And to the to um the point, it is becoming a bit more of a thorny issue once again, isn't it? The the idea of sustainability and banking.

So, I'm really excited that we're actually here to talk about this. Um and it's great to have a strong audience with us. So that this last year has really tested the resilience of banks and we've had a lot of public discourse about you know ambitions being kind of drawn back but then also certainly from my experience with the institutions we work with and and particularly here in the UAE there's a still a great deal of kind of strength and of operationalizing all of this. So I'm delighted to have um our panelists here just to talk about what ambition looks like, how we prepare for it, and what are we doing. So um if with that I'll kind of dive straight in.

Um Barbara, we're seeing a renewed focus on transition finance as a key tool to supporting the real economy to decarbonize, but we're still very early stages in terms of this experimentation. How is NYUAD working with professionals in the UAE to ensure they have a strong understanding of climate science and policy along financial expertise and how is Stern fostering that cross-disciplinary intersectoral collaboration within academia and industry on this topic?

Yes, thank you Heather. That's a very important question for us. How do we support and foster the pipeline of future talent for this region? Um we have welcomed our first full-time MBA class in January of this year and we will graduate the class of 2025 on this very stage tonight um for the first time and it's a um state-of-the-art general management education uh which comprises a set of 10 core classes and finance is one of them and then a variety of electives that students can choose from and um finance and banking is one of the specializations and next year in 2026 we plan on launching launching also a specialization in sustainability and this is driven by the market demand and the needs of the students that have asked for these for these kinds of uh topics to be taught. In addition to the um to the learning in the classroom which is very important of course needs to um be top quality two other aspects are very important for us at Stern.

One is um for us for the students to gain additional perspective. So they uh study in Abu Dhabi on the great campus on Saliad. Um but they also spend three months over the summer in New York where they can tap into the Stern network um choose from a variety of classes um get to know the nerf center of the financial industry and get a different global perspective um during their time in New York. And the second aspect is what we at Stern call IQ plus EQ. So of course they need to be aware of the latest knowledge and the top-notch skills in each subject area, but also you need to develop the leaders and the change makers of the future.

So develop a certain emotional and leadership capability to actually implement all of what they've they've learned and that is very important for us as well.

Amazing.

Maybe just one more aspect on the industry collaboration because this is something especially for an MBA program that is essential. So we have guest speakers that come into our classes. We have a variety of events outside of the classroom. Um lunch and learns uh fireside chats. We have adjunct faculty for specific electives coming to teach uh from their uh specific uh perspective.

Um and on a more institutional level um Stern is the partner of the Altera fund and we've launched their speaker series this year with the inaugural event um in New York and then just having had Bill Gates on Monday uh at Stern at NYU Abu Dhabi. Um so also at an institutional level Stern is very committed to bridging kind of this um still perceived gap of finance and sustainability and deliver kind of top-notch knowledge from the region for the region.

Amazing and and I I I like that expression still perceived because sometimes there it is a perception versus a reality piece isn't it? And that kind of moves on quite nicely to to Ezra in terms can you tell me how Deutsche Bank's actually approaching transition finance. How are you working with your your clients your hard to abate sectors? Is this a nice nice to have bit of bit of operations or is this very much business you know an integral part of the business model

I would say um it's essential. So uh at Deutsche Bank we established our initial transition finance framework back in uh 2023. And uh we have really established several things. One is divisional carbon budgets for our corporate bank and our investment bank. Then we establish net zero pathways for highintensity carbon sectors in our portfolio.

And last but not least, we linked part of our management board compensation to achieving those net zero pathways. And um in terms of where we are today, since the start of 2020 until the end of the third quarter this year, we have achieved 440 billion euros of sustainable finance volumes. And just very recently, we have announced our new target, which is to reach 900 billion euros cumulatively in sustainable and transition finance framework. How did we how are we going to do it? We've established a new framework in transition finance, an updated one where we are focusing on three parameters.

One is on an activity basis uh use of proceeds that reduce that enable reduction of greenhouse gases. The second parameter is more on entity level general corporate purpose but with credible transition plans and strategy. And finally at a third level sustainability linked solutions where interest levels or coupons are linked to the achievement of sustainability KPIs. So um in terms of our framework we have some minimum requirements such as net zero commitments or short-term target reductions in emissions from scope one, two and three. And we have also received external guidance.

We looked for example at the climate bond initiative and uh as a guideline to develop our methodology but we also received an external second party opinion from ISS corporate. So overall we're very excited to have this in place and this year alone we have enabled a number of our corporate clients in heavy emitting hard to evade industries to access capital markets to achieve decarbonization funding but also to help develop build out expand their renewable portfolios for folks bargain this year we have led 4.4 4 billion euro of issuance to support the R&D and production of electric vehicles and to increase resource uh efficiencies in this sector in the automotive sector. And then we actually also enabled three and a half billion euros of issuance in the power and utility sector by lead managing green European green bond in uh issuance for Ibardola and for EDP and Portugal and green bond issuance for Eon and Ha. We're particularly excited with the introduction of the climate bond guidelines by EKMA that will help to accelerate this market.

Fantastic. And um and Barbara, from a kind of UAE and a wider kind of GCC perspective, what does transition finance look like in practice? What sectors do you see kind of moving the fastest and which are the hardest to shift or how are people engaging with that process?

So I think there are some characteristics that are very specific to this region uh when it comes to transition finance. One is the massive governmentbacked investments um and um very different from many other parts of the world. The government thinks through the process really from A to Z. So along the entire supply chain, not funding individual um standalone projects. Uh but thinking really from A to Z through the entire um um uh process.

That's one. The other one is the large scale um renewable energy investments and all of that with blended finance. So a mixture of public and private capital being invested. Of course, there's still challenges like heavy industries such as aluminium or steel. they just require massive amounts of energy and there needs to be some kind of new mechanism and how to feed kind of that that need for energy through for example green hydrogen.

So that's a tricky one. But in other areas, there have been massive advancement. For example, in utilities and power, right? The technologies there, solar PV, you have the largest single-sight solar plant in the UAE providing energy. Um or also in the area of construction where green building standards require massive investments.

So there were some very um there massive particularities for that region and it's in a very good track to achieve its its climate targets, I guess.

Fantastic. and and Ezra just in terms of this what's what's the you know the financial sector has has really changed over these you know even just over the last kind of five six years it's been an extraordinary just to to watch the the evolution and um and kind of recognizing that this is this is something that we're kind of making up as we go along to a certain extent having to work together uh much more collaboratively. So what's the one shift that you believe that the financial sector needs to make in the next 12 months to really start to scale transition finance? Um and what's the most concrete action that Deutsche Bank will take in the year to help drive that?

Sure. So um in we believe uh that the financial sector has an important role to play in individual transaction in supporting transition finance through the development and utilization of new standards new frameworks. For example, I already referred to IKMA climate transition bond guidelines or uh transition loan principles by LMA. These are really important market standards. Likewise, the Singapore Asia taxonomy where Deutsche Bank had an active role when it was first published uh in uh 2023.

Uh that's again a very important taxonomy that encourages activities that are not yet green but are making a genuine science-based effort to reduce environmental impact. Um so there are many initiatives too long to list here given our time but these standards are important because it is the standardization in the market and it lends credibility to individual transaction which then encourages the wider adoption of transition label and that itself attracts demand and expands the market. So at Deutsche Bank we are actively supporting such initiatives and talking to our clients engaging deeper. We see transition as a way to engage deeper with our clients and bringing new issuance utilizing these guidance in collaboration with the various industry bodies and specifically for us what is exciting in this space in the next 12 months is the operationalization of our transition finance framework which comes into effect on 1 of January. We have also announced a new target that's related to nature.

We have an ambition to uh facilitate 300 transactions cumulatively over a two-year period that contribute to nature. And in the last COP, COP 30 in Bellain, we have actually signed a letter of intent with two rainforest countries in Latam together with three German corporates and an NGO partner that basically looks to develop high integrity rainforest carbon credits. What we're looking to do is under the Paris agreement, article 6.2, to really work with rainforest countries that are on a downward emission trend and to use the results that they achieve that are verified by United Nations to really attract private sector capital flows and turn those results into tradable outcomes. We're very excited with this initiative because it allows us and the you know the market to a new asset class which encourages reversal of deforestation and protection and preservation of rainforests.

Amazing. And funny that we didn't have a chance to to talk about this in the speakers room before but I was actually in BM with your colleagues for that and have been doing a lot on the article 6.2 And it really is an exciting kind of frontier of these new high integrity markets. And I think this is one of the areas where particularly the UAE can play a really big part

in helping you know essentially commoditizing putting a proper value on nature and that's a really exciting kind of forefront for us. Um and I guess so we're going to be running out of time very shortly and stuff. So I will a thank the panel and stuff but also express my I guess my gratitude um that for the discussion but also the fact that this is you know to your point the the demand is still there you know we get a lot of noise in the headlines and everybody likes a a you know a spicy headline as we know but um certainly from the engagement that I've seen with the corporate sector with academia with other NOS's people in the room here this This is this is an inevitability and the markets always tend to outlive political cycles fortunately. So thank you