Investing sustainably - our approach Sustainability is becoming increasingly relevant in our lives. We are increasingly using Environmental, Social and Governance (ESG) factors to determine whether investments and products are sustainable. This includes sustainable financing and investments or responsible management of natural resources within a company, as well as good governance and fostering diversity. X-markets offers investors the opportunity to pursue returns with different investment solutions while also taking into account environmental, social and governance considerations. In order to develop investment solutions, Deutsche Bank has implemented an internal framework for structured securities with sustainability characteristics. As a member of the German Derivatives Association (DDV), Deutsche Bank’s approach is in line with the DDV Sustainable Finance Code of Conduct, which sets product and transparency standards for structured securities with sustainability characteristics for issuers in the German market and the target market concept developed by the German Banking industry. Deutsche Bank Framework In order to design investment solutions that are aligned with an investor’s sustainability preferences, Deutsche Bank concentrates on three different aspects: issuer, product structure and choice of underlying. Deutsche Bank as issuer Deutsche Bank has been committed to sustainability for many years. Sustainability is a central element of Deutsche Bank’s strategy and one of its management priorities. Deutsche Bank’s sustainability strategy focuses on four pillars: (i) sustainable financing and investments; (ii) policies and commitments; (iii) people and business operations; and (iv) thought leadership and stakeholder engagement. Deutsche Bank’s sustainability strategy is a holistic approach aimed at maximizing the Bank’s contribution to the goals set by the Paris Climate Agreement and the United Nations’ Sustainable Development Goals. Deutsche Bank supports several internationally-recognised principles and standards, such as the 10 principles of the UN Global Compact (which it has supported since 2000) and the UN Principles for Responsible Banking (which it has supported since 2019). To learn more about Deutsche Bank’s engagement please click here. As a founding member of the Net Zero Banking Alliance, Deutsche Bank undertakes to reduce emissions caused through its own operations as well as its portfolio to net zero by 2050 at the latest. In addition, Deutsche Bank has set itself targets for its own operations. It aims to reduce its total energy consumption by 20% compared to 2016 and to obtain 100% of its energy from renewable sources by 2025. Deutsche Bank reports extensively on its commitments and progress on sustainability in its non-financial report. Deutsche Bank, as a financial institution, is regularly analyzed and classified by several recognized credit rating agencies in relation to its ESG practices. To learn more about Deutsche Bank’s ESG Ratings, please click here. Product structures It is important to note that not every product design contributes to achieving sustainable goals. In particular speculative leveraged products with short duration such as warrants and knock-out products, are not considered suitable for Deutsche Bank issuances of financial instruments which align with investor’s sustainability preferences. Furthermore, Deutsche Bank does not consider reverse structures, i.e. products profiting from falling prices or a negative price development of the underlying which may undermine sustainability goals, as appropriate for investors with sustainability preferences. Choice of the underlying As part of its internal framework Deutsche Bank has set out minimum requirements driving the selection of underlyings for products designed to meet an investor’s sustainability preferences. One of the following two strategies must be applied to select a suitable underlying. Strategy A1 Best-in-class strategy The underlying shall achieve a minimum MSCI ESG rating of A2. At the same time, underlying assets that are active in the following areas are excluded: controversial weapons nuclear weapons Furthermore, underlyings whose turnover exceeds certain thresholds in the following areas are excluded: production of arms power coal extraction of oilsand tobacco Strategy B1 Extended minimum exclusions (can only be applied to green bonds and green certificates) According to this strategy no MSCI ESG minimum rating is required but the minimum exclusions criteria are even more restrictive than those defined in Strategy A. Underlyings that are active in the following areas shall be excluded: controversial weapons nuclear weapons In addition, no revenue shall be generated from the following areas: extraction of oilsand tobacco Thresholds for turnover in the following areas are even more stringent: production of arms power coal For both strategies, minimum exclusions criteria under the DDV Code of Conduct, will be taken into account. Furthermore, companies with serious breaches of the UN Global Compact will not be considered as a suitable underlying. For issuers of sovereign debt, a minimum MSCI ESG rating of A is required (e.g. government bonds). Commodities are generally excluded as underlyings for products with sustainability preferences. 1 For indices/funds that do not meet the minimum criteria, there is the possibility that an internal committee will approve an underlying in individual cases, if other equivalent characteristics speak in favour of its sustainability. 2 If no rating is available, it is possible for an internal committee to approve an underlying in individual cases if other equivalent characteristics speak in favour of its sustainability. Green bonds and certificates “Green Bonds and Green Certificates”, are a sub-set of products that are characterized by the fact that the proceeds from the issuance of the securities are used to finance specific activities focussed on the transformation to a more climate-friendly and low emissions economy’. The proceeds from these issuances will be used to fund sustainable projects such as increasing the use of renewable energy. In 2020, Deutsche Bank published a Green Finance Framework that provides the basis for Deutsche Bank’s issuance of such "green" products. This Framework is based on the "Green Bond Principles" of ICMA (The International Capital Market Association). This Framework was audited by ISS ESG (Institutional Shareholder Services) in December 2020. The relevant documentation can be found at the following link. Categorization of products with sustainability characteristics All products that meet the criteria described above are then categorized by Deutsche Bank with respect to an investor’s sustainability preferences as follows: a) Products for investors with environmental objectives: This product category is intended for investors who wish to pursue investments that are classified as environmentally sustainable under the European Taxonomy Regulation. Investors invest in these products to finance in part or in full environmentally sustainable economic activities that contribute to achieving the targets set by the 2015 Paris climate agreement. Such products can therefore be suitable for investors who want to contribute towards a sustainable economic system and a climate-neutral world by 2050. b) Products for investors with sustainability objectives: This second category of products may be suitable for investors who have broader sustainability goals and wish to pursue investments that classify as sustainable investments under the European Sustainable Finance Disclosure Regulation (SFDR.). This Regulation covers not only climate protection but also other environmental and social issues, such as waste recycling/prevention, the preservation and protection of biodiversity, and the fight against social injustice. c) Principal Adverse Impacts for investors: These products are relevant for investors, who wish to invest in products that take into account the adverse impacts of investment decisions with a view to reducing any harm in the following areas: greenhouse gas emissions biodiversity water waste social and employee matters Please note that at this time, Deutsche Bank is only able to offer products that meet category (c) of an investors sustainability preferences (i.e. those that take into consideration the principal adverse impacts described above). Such products are currently limited to Greens Bonds but it expects to be in a position to offer products that can satisfy the remaining limbs (A) and (B) in the near future. Overview of rules for classification of structured securities with sustainability characteristics Sustainable products Deutsche Bank relies on third party ratings and data providers as part of its sustainable investment framework. ESG ratings and data providers are not currently subject to any specific regulatory or other regime or oversight. Providers use differing methodologies and data points which may render ratings or data incomparable between agencies. Furthermore, methodologies used by ratings and data providers may be subject to change.