,Deutsche and other major banks say the addition of ESG metrics to more corners of finance will help spread sustainability.
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FRANKFURT: Deutsche Bank AG is in talks with a number of Turkish clients to ramp up funding it says will be tied to environmental, social and governance (ESG) metrics, as part of a wider plan to tap into an increasingly lucrative corner of finance.
Claire Coustar, Deutsche’s global head of ESG for fixed income and currencies and vice-chair of its Turkey unit, says she expects “a lot of positive stories” to come out of Turkey on the ESG front. She also notes that adding the label “will be very important going forward for bringing international investors into the country.”
Chief executive officer Christian Sewing has made clear he intends Deutsche Bank to gain a solid foothold in the rapidly expanding market for ESG.
That’s as Wall Street giants, including JPMorgan Chase & Co, announce plans to make ESG ubiquitous across their products, after recently attaching the label to derivatives. Some of the world’s biggest banks, including Deutsche, have also started experimenting with ESG hedges and repo agreements, including in emerging markets such as Turkey.
The proliferation of ESG products is raising questions about how well they actually contribute to social justice or a greener planet. Stricter European regulations have already forced the region’s financial industry to strip the ESG label off about US$2 trillion (RM8.48 trillion) in assets as concerns of greenwashing grow.
But Deutsche and other major banks say the addition of ESG metrics to more corners of finance will help spread sustainability.
Deutsche just agreed to a US$300mil (RM1.27bil) ESG repurchase agreement with Akbank TAS, Turkey’s second-biggest bank by market value.
“We would like to expand this to other financial institutions in Turkey and outside Turkey to have ESG-linked transactions in the financial or derivatives space,” Coustar said.
The bilateral deal sets targets for gender diversity, renewable energy use and a requirement to avoid providing funds to coal power plants. Both Deutsche and Akbank declined to provide further details of the agreement.
Orhan Ozalp, CEO of Deutsche Bank AS Turkey, says the Akbank deal is part of a goal to reach ESG-linked financing of 10 billion liras (US$1.2bil or RM5.09bil) by the end of the year.
“We are working on similar significant transactions.”
Deutsche, whose presence in Turkey started 112 years ago after the financing of the Istanbul-Baghdad railway, helped fund several infrastructure projects in the past decade including the Istanbul-Izmir highway, Ankara airport and a suspension bridge across the Dardanelles and connecting roads.
Overall, Deutsche Bank has set itself targets to facilitate €200bil (US$260bil or RM1.1 trillion) in sustainable finance and investments by the end of 2023, and has also linked top executives’ pay to those targets.