Deutsche Bank

Non-Financial Report 2017

Corporate & Investment Bank

Many of our products and services have an indirect influence on the environment and society, by supporting our clients in creating economic growth and enabling them to provide services to the public, as well as by giving them access to new markets. It does this by launching a variety of environmental, social and governance (ESG) investment products.

Recognizing the importance of ESG matters for our clients, we implemented key knowledge groups to share best practices and know-how for products and services with a direct impact on ESG sustainability. Within our CIB division, there are competency centers for project financing linked to export credit agencies, often benefitting developing countries with infrastructure financing, as well as teams for financing renewable energy and for green bond issuance. In 2017, we strengthened our ESG research expertise with dedicated functions, and, for 2018, we plan for an extension of our sales capabilities to be able to better serve our institutional clients in ESG matters.

Economic Growth and Services for the Public

As a global bank, we need to be a trustworthy and professional partner to our clients, providing financial products and services to meet their individual needs, and connecting lenders and borrowers of capital globally. By linking public sector bodies and companies to financial institutions and private investors, we help to supply the capital resources needed to allow our clients to expand their business activities and drive innovation, thus helping the economy to grow and creating jobs.

In addition to our deposit-taking and lending activities, we provide access to capital markets for the public sector in about 50 countries. In this capacity, our CIB division supports the debt issuance and management processes for governments and sovereigns. As a strong and committed partner with global access to clients, we support countries’ Department of the Treasury to meet their budget demands and to efficiently manage debt issuance programs. Deutsche Bank also supports sub-sovereign institutions, agencies, municipalities, and covered bond issuers to efficiently raise capital on international capital markets.

Liquidity creation is a core function of banks and an economic service of substantial importance to the economy, affecting infrastructure and the society as a whole. Our clients in the public sector and financial institutions received more than € 240 billion of liquidity in terms of issuance volumes in 2017. Our influence with issuances is limited, but it does enable our clients to provide mortgages at attractive rates to retail clients, to fund infrastructure projects and to fulfil other services to the public.

Launching a Variety of ESG Investment Products

We partnered with Arabesque, an ethical investment specialist, to launch a series of investment products in anticipation of a surge in demand for socially responsible investments from clients. The products will track the returns of the Arabesque Prime and Systematic indices by applying a proven quantitative stock selection mechanism to ESG investing in a systematic and transparent manner.

Deutsche Bank is partnering with Arabesque, as it is a specialist asset management firm offering a strong ESG-framework, a quantitative focus, and a flexible offering. In combination with our financial expertise we jointly provide innovative ways to deploy capital in products that generate a financial return and have a positive impact on the environment and society.

Infrastructure Financing

Our social and developmental engagement across the globe is best reflected by the many realized transactions and financing projects that have had a positive impact on infrastructure, health care, and safety in local communities. The following selection represents a few of our projects in 2017.

Ruiru II Water Supply Project in Kenya: Supplying Drinking Water to Over 300,000 People

The Ruiru II Water Supply Project in Kenya aims to provide steadily available drinking water for people in the Nairobi area, including the construction of a 55 meter-high dam, the transportation of raw water, and a purification plant. In June 2017, we signed off funding of € 180 million financed under a public-private partnership involving both Deutsche Bank and the French Department of Treasury.

The main expected benefit from the project is reducing the current water demand deficit in accordance with the development and socio-economic needs of its citizens. A third-party expert’s assessment of the environmental and social impact of the dam concluded the project to be environmentally and socially sound, particularly in light of the mitigation measures addressing the displacement and relocation of people along the dam reservoir area.

Electricity Network in Yaoundé, Cameroon: Boosting Electricity Transmission Networks

Cameroon signed three credit agreements with Deutsche Bank in 2017 valued at a total of € 51.1 million to improve access to electricity for the population of Cameroon’s capital city. The loans will help the Central African nation strengthen and stabilize its electricity transmission networks in the city of Yaoundé through the construction of a 400 KV power transmission line linking Edéa and Yaoundé to the Nyom substation. The commercial financing for the reinforcement of the electricity network follows two other loans signed in 2016 with Deutsche Bank to finance the first phase of a project to enhance the tourist and economic value in Yaoundé.

Automatic Train Stop System, Argentina: Improving Safety on the Railway

In May 2017, a loan agreement of € 41.2 million was signed by the Government of Argentina to install an automatic train stop system on suburban lines. The technology will ensure safer transportation in Buenos Aires, which became critical after a large-scale train accident in the city in 2012. By introducing high-quality infrastructure safety, the Argentinian railway will improve, and the new system is also expected to lead to the alleviation of chronic traffic jams in Buenos Aires. The loan agreement is a landmark deal for the Argentine government, since it is the first loan it has raised in the past 20 years with an export credit agency of an OECD country. The loan is co-financed by Deutsche Bank and the Japan Bank for International Cooperation.

New Hospitals in Guayaquil and Machala, Ecuador: 85,000 Treatments in 2017

Also in May 2017, Deutsche Bank and the Instituto Ecuatoriano de Seguridad Social (IESS), the Ecuadorian social security and health provider, signed a loan of € 39.1 million for the partial financing of the construction and equipment of two hospitals in Guayaquil and Machala. This follows transactions in 2016 totaling € 104.1 million financed by Deutsche Bank.

In Guayaquil, the 450-bed hospital was built at a total project cost of € 166.5 million. Inaugurated at the end of March 2017, this is Ecuador’s largest hospital in terms of scale, technology, and medical specialties provided. Since then, more than 24,000 patients have been seen. In Machala, a new second-level hospital comprising 120 beds was built, replacing a 45-year-old, 62-bed hospital. These two hospitals have doubled the pre-existing infrastructure capabilities at more than 40,000 outpatient treatments and 45,000 emergency treatments.

Financing a Low-Carbon Economy

Public and private-sector collaboration will be critical to promoting and financing a shift towards a low-emissions global economy and climate friendly development. Energy efficient technologies and renewable energies are an essential part of this and significant investments will be required in the coming decades to finance these technologies. By signing the Paris Pledge for Action alongside over 400 private and public organizations in 2015, we made a commitment to contribute to the overall targets set by the Paris Agreement to limit global warming to 2°C above pre-industrial levels.

As with other industries, the financial sector is exposed to climate change. Accordingly, we seek to demonstrate how we contribute to the reduction of climate-related risks and how we support the transition to a low-emission economy through our core businesses. As a global bank, we can make an important contribution to raising the capital needed to implement the Paris Agreement, and we will continue to fully support clients in identifying innovative ways to manage their risk, attracting more investors, and achieving long-term objectives. Within our CIB division, the bank has established centers of competence allowing us to focus expertise for green bond issuances and for renewable energy financing, and to offer these products and services to all our clients.

Financing Renewable Energy

We help our clients to develop, acquire, and sell low-carbon businesses and assets. Indeed, we are one of the top European private-sector project financiers of clean energy, while our financing and advisory services support other low-carbon and clean-tech businesses. During 2017, we arranged approximately € 2.2 billion in project finance for renewable energy projects generating over 3,800 megawatts and ranging from full to partial financing of the entire project life cycle.

The bank was the sole lead arranger, structuring bank, hedging bank, agent and security trustee, and account bank for the € 168.9 million Sleaford Renewable Energy Plant in the UK. The deal was refinancing an operational straw-fired, 40 megawatt biomass power plant in the UK. The loan was arranged by Deutsche Bank through institutional private placement.

We acted as mandated lead arranger, structuring bank, bookrunner, swap coordinator, and technical agent for a € 136.3 million combined term loan and letter of credit facility for a pool of community solar and commercial photovoltaic (PV) systems. The portfolio consists of 31 systems located in four states in the US, with a cumulative capacity of 81.4 megawatts.

We also acted as joint global coordinator, co-mandated lead arranger, and co-bookrunner on the € 74 million, 19.5-year project bond financing for a solar PV portfolio in Spain, consisting of seven projects with a capacity of 18.2 megawatts, owned by Sonnedix Power Holdings. The bond was unrated and based on a similar structure of the precedent Vela Energy transaction rated BBB by Standard & Poor’s (S&P).

Across the world, we financed about 75 megawatts of renewable energy projects in Japan, totaling an underwriting volume of about € 190 million, as well as 3,250 megawatts in the Americas, totaling an underwriting volume of approximately € 1.3 billion.

Green Bonds

Green bonds are instruments whose proceeds are exclusively used to (re)finance assets or projects that meet a set of environmental criteria, such as renewable energy projects, low-carbon buildings, waste and pollution control solutions, or clean transportation projects. The first green bond was issued over a decade ago in 2007 by a public sector institution; however, the market experienced a significant turning point in 2014, when financial institutions and corporations also began funding their projects with green bonds. Today’s green bond market sees the private sector, in other words financials and corporates, as major issuers of these bonds.

The global green bond market grew at an impressive pace in 2017, reaching an issuance volume of over US$ 155.4 billion, an increase of 78% compared to 2016 (according to

Deutsche Bank has partnered with a number of global clients in landmark green bond transactions. Together with the African Development Bank, International Bank for Reconstruction and Development, and European Investment Bank, we realized large funding programs while also expanding the market, by enabling access to first-time issuers from new geographies. In 2017, we supported clients to issue more about € 10 billion in green bonds. Many of these transactions were of high strategic importance to the issuers, and moreover helped to advance and develop the green bond market itself. Examples of these transactions include the inaugural green bonds for Orsted (€ 0.75 billion and € 0.5 billion) and Enel (€ 1.25 billion), as well as the first green hybrid bond for TenneT Holding B.V. (€ 1.0 billion).

In addition to issuance activities, in 2014 we joined a coalition of major financial institutions that supports a set of voluntary guidelines for green bonds to finance environmental-friendly activities. The so-called Green Bond Principles are updated annually to take into account market developments and have been established as a market standard in the still nascent and self-governed green bond market.