Our statement for the Annual General Meeting 2021 of Deutsche Bank
Dear Shareholders,
In 2015, Deutsche Bank vowed to support the Paris Agreement [1]. However, since then, Deutsche Bank’s actions have not matched its rhetoric.
Since the Paris Agreement was signed, Deutsche has been a major financier of coal, oil and gas. According to the Banking on Climate Chaos report, between 2016-2020, Deutsche provided US$30.438 billion to companies responsible for expanding fossil fuels [2]. These investments seriously undercut Deutsche Bank’s claims to support climate protection.
The Intergovernmental Panel on Climate Change (IPCC) has been clear that limiting global warming to 1.5ºC avoids many of the more severe impacts that would occur at 2ºC of warming [3]. At 2ºC of warming, 37% of the world’s population will be exposed to severe heat at least once every five years, the Arctic will experience ice-free summers at least once every 10 years, more than 99% of coral reefs will decline and there will be significant consequences for plant and animal species [4]. In short, global warming of 2ºC will cause serious ecological collapse and social upheaval.
According to the International Energy Agency (IEA), limiting global warming to 1.5ºC “calls for nothing less than a complete transformation of how we produce, transport and consume energy” [5]. In the IEA’s landmark new net zero emissions scenario (NZE), the Agency sets out a Paris Agreement-aligned global pathway for decarbonisation. Significantly, the IEA specifically warns against any investment in new coal mining projects (including expansions), as well as new oil and gas fields:
- Coal: “No new coal mines or extensions of existing ones are needed in the NZE as coal demand declines precipitously. Demand for coking coal falls at a slightly slower rate than for steam coal, but existing sources of production are sufficient to cover demand through to 2050.” [6]
- Gas: “No new natural gas fields are needed in the NZE beyond those already under development. Also not needed are many of the liquefied natural gas (LNG) liquefaction facilities currently under construction or at the planning stage.” [7]
- Oil: “The trajectory of oil demand in the NZE means that no exploration for new resources is required and, other than fields already approved for development, no new oil fields are necessary.” [8]
The scenario models significant and rapid declines in the use of coal, oil and gas:
| Share of Global Energy Supply (%) | |||
|---|---|---|---|
| 2020 | 2030 | 2050 | |
| Renewables | 12 | 30 | 67 |
| Biomass | 4 | – | – |
| Nuclear | 5 | 8 | 11 |
| Natural Gas (Unabated) | 23 | 21 | 3 |
| Natural Gas (CCS) | 0 | 2 | 8 |
| Oil | 29 | 25 | 8 |
| Coal (Unabated) | 26 | 12 | 1 |
| Coal (CCS) | 0 | 1 | 3 |
| Total | 100 | 100 | 100 |
The publication of this scenario should prompt Deutsche Bank to immediately review and strengthen its Environmental and Social Policy Framework. Currently, that framework permits Deutsche Bank to fund the expansion of the fossil fuel industry (coal, oil and gas). However, as the IEA has made clear, “[t]here is no need for investment in new fossil fuel supply in our net zero pathway” [10].
Example Whitehaven Coal
One Deutsche Bank investment that is particularly out of line with the Paris Agreement is its February 2020 AU$30 million loan to Australian coal mining company, Whitehaven Coal. Whitehaven’s pure play coal business model is predicated on the failure of the Paris Agreement.
In the last financial year, more than 80% of Whitehaven’s revenue was sourced from selling thermal coal [11]. Whitehaven is currently planning to spend around AU$2 billion on new coal mines and expansions, including the new Vickery and Winchester South coal mines and the Narrabri coal mine expansion [12]. These new and expanded mines would see the company producing around twice as much coal as it does today by 2030 [13]. Whitehaven justifies these expansionary plans by referencing coal demand scenarios that are consistent with the failure of the Paris Agreement [14].
Whitehaven also has a long and chequered history of destructive impacts on local communities and ecosystems. The company has repeatedly broken environmental conditions put in place to govern its operations, including by contaminating nearby streams and excessive air pollution [15]. In December 2020, Whitehaven pleaded guilty to 19 charges brought against it by the New South Wales resources regulator for unauthorised vegetation clearing, unauthorised drilling of bores and failing to rehabilitate drill sites [16].
For years, local farmers have raised concerns that Whitehaven’s coal mines have been unlawfully taking water without a licence, including during severe drought. The state water regulator has since commenced prosecution against Whitehaven Coal over these allegations [17]. Even where Whitehaven has lawfully obtained its water, it has done so at the expense of local farmers by outbidding them on the water trading market [18].
Environmental and Social Policy Framework
Deutsche Bank’s Environmental and Social Policy Framework states:
Any transaction in coal mining requires enhanced ES review and, potentially, discussion within a regional Reputational Risk Committee.
In addition:
— We will not provide any financing for greenfield thermal coal mining;
— We will not finance new greenfield coal-related infrastructure, regardless if related to new or existing mines;
In 2016 we committed to reducing our coal lending exposure and set a three-year reduction target of 20%. Per end of 2019, we achieved that target and now further commit to phase out coal exposure by 2025 worldwide (including both lending and capital markets).
Whitehaven’s proposed Vickery coal mine appears incompatible with this Framework, because:
- The Independent Planning Commission–the relevant consent authority for significant developments in the Australian state of New South Wales–describes the Vickery coal mine as, “in a de facto sense … a greenfield coal development” [19];
- Whitehaven has stated that the Vickery mine will produce at least 40% thermal coal – likely more as the remaining coking coal “can be used as premium quality thermal coal” [20] and;
- The proposed Vickery mine includes infrastructure such as a coal handling and processing plant, train load out facility, rail loop and rail spur line, water supply bore-field and pipeline and other associated infrastructure [21].
It is clear that further financing (including refinancing) for Whitehaven Coal would very likely breach Deutsche Bank’s Environmental and Social Policy Framework. Given Deutsche’s pre-existing loan to Whitehaven, this represents a material governance and reputation risk. To alleviate shareholder concerns about these risks, Deutsche Bank must confirm that it will not refinance Whitehaven’s current loan and commit to not participating in any further financing for the company before its 2025 coal divestment deadline.
Sources
[1] Deutsche Bank, How the Paris Climate Agreement has changed the bank (11 December 2020).
[2] Rainforest Action Network, Banking on Climate Chaos: Fossil Fuel Finance Report (2021) p 38-39.
[3] IPCC, Special Report: Global Warming of 1.5ºC (2018).
[4] Ibid
[5] IEA, Net Zero by 2050: A Roadmap for the Global Energy Sector (2021) p 13.
[6] Ibid p 103.
[7] Ibid p 102.
[8] Ibid p 101.
[9] Ibid p 195.
[10] Ibid p 21.
[11] Whitehaven Coal, Annual Report 2020 (2020) p 73
[12] See Queensland Coordinator General, Winchester South project (2021); Whitehaven Coal, Narrabri Underground Mine Stage 3 Extension Project: Environmental Impact Statement (2020) p ES-6; Whitehaven Coal, Vickery Extension Project: Environmental Impact Statement (2018) p 2-10.
[13] Whitehaven Coal, Annual Report 2020 (2020) p 10.
[14] Whitehaven Coal, Sustainability Report 2020 (2020) p 28.
[15] Jake Sturmer (ABC News), Whitehaven Coal documents showing environmental breaches raise concerns (4 August 2017).
[16] Elouise Fowler (The Sydney Morning Herald), Whitehaven pleads guilty, faces $20m in fines (11 December 2020).
[17] Lisa Cox (The Guardian), NSW mine could face multimillion-dollar fine for allegedly breaching water law (2 July 2020).
[18] John Ellicott (The Land), Farmers say they are priced out of water auctions by miners (1 March 2019).
[19] Independent Planning Commission, Vickery Extension Project SSD 7480: Issues Report (30 April 2019) p 35.
[20] Independent Planning Commission, Vickery Extension Project SSD 7480: Statement of Reasons for Decision (12 August 2020) 43.
[21] Ibid p 8.
