War, inflation slowing ESG projects: Deutsche CEO

Deutsche Bank chief executive officer Christian Sewing said the war in Ukraine and inflation globally have delayed its clients' environmental, social and governance (ESG) projects even as the long-term shift to sustainability is now "irreversible".

Over the last six months, "each and every management needs to plan for the time being from quarter to quarter", he said at the 17th Asia-Pacific Conference of German Business in Singapore on Sunday (Nov 13). "In the priority setting, it may be that certain sustainability and ESG projects have been delayed by a quarter, or by two quarters."

Financing for green initiatives totalled US$410 billion so far in 2022, a 16 per cent decrease from the same period last year, amid geopolitical uncertainty and faster inflation. Deutsche Bank helped arrange 3.4 per cent of the funding, according to Bloomberg league table data.

ESG is a "clear opportunity" for European banks, Sewing said. 

"We know it's not a secret that we are lagging actually US banks a lot," he added. "But when it comes to sustainability, the Europeans do not need to hide anymore," he said, noting that Europe as a region is ahead in sustainable technology, manufacturing and financing.

With Asia grappling with its reliance on coal, and the US beset by ESG politicisation, Europe has emerged as the leader on sustainable finance. The European Union has some of the most advanced regulations, from its green taxonomy to disclosure rules for ESG funds.

While that has given its financial firms a head start, Sewing warned against more rules that could bog companies down in "more administrative work than we can advise our clients".

"It's unfortunately happening already again in the banking industry and in each and every industry our clients are in," he said. "These are things which are actually hindering Europe to make the next steps. We need to have reasonable regulations."

Sewing has made higher revenue from selling sustainability-linked products a key plank of Deutsche Bank's growth promise for the next several years. Income from sales that have an ESG aspect is expected to almost double to 1.5 billion euros (S$2.1 billion) by the end of 2024. 

In recent months, those efforts have been dealt a setback by regulatory scrutiny of sustainability claims made by its investment arm DWS group, which led to CEO Asoka Woehrmann stepping down in early June. BLOOMBERG

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