Sustainability in lending business

For Deka Group, ESG aspects stand on an equal footing with economic aspects in lending decisions in the sense of a holistic and risk-optimised portfolio management and are therefore fully examined before the financing decision. Currently, the credit business of the DekaBank comprises trade and capital market operations, real estate financing, as well as transport and infrastructure finance. An integral part of the credit process is formed by the specifications of the business strategy in relation to the “sustainable corporate governance”.

Lending principles

The credit risk strategy forms the foundation for lending business. On the basis of the business objectives and crash barrier supporting the business strategy, the framework of conduct for all financing activities. DekaBank excludes the following types of financing in principle:

  • Transactions which could have a lasting negative effect on public trust in, or the public reputation of, DekaBank by public reporting (among other things on the basis of socio-cultural, ethical aspects) on the financing itself, abusiness partner, the business practice or the country (location or risk country).
  • Lending transactions of a speculative nature or very unusual type of risk (such as highly-leveraged transactions)
  • Financing connected to the arms trade (financing of arms shipments or of weapon manufacturers or trading companies)
  • Financing in relation to activities that pose a significant threat to the environment, e.g. Uranium mining, nuclear / coal power plant financing and financing in connection with mountain top removal mining (OECD environmental guidelines contain clues)
  • Project financing that does not meet the requirements of the Equator Principles (EP). The EP include social and environmentally-friendly standards and reference guidelines drawn up by the International Finance Corporation (IFC) as well as the industry-specific environmental health and safety guidelines (EHS)
  • Financing of speculation on basic foodstuffs
  • Transactions with a country or lender in a country that is included on the negative list of central governments
  • Venture capital financing
  • Financing companies in the pornography sector or similar sectors (sex industry)
  • Financing in direct relation with the manufacture and sale of tobacco
  • Financing of companies that operate controversial forms of gambling (betting offices, game halls etc.)
  • Financing of companies that breach internationally recognised principles on human rights and labour rights (ILO Declaration on Fundamental Principles and Rights at Work) or
  • Financing of enterprises without evidence of experience or in new markets

Furthermore, DekaBank does not enter into financing transactions if it suspects that in doing so it may be supporting companies that use forced, compulsory or child labour. If a suspicion of an increased risk of sustainability is visible, the experts in DekaBank sustainability management are brought into the credit preparatory process. Their vote is included in the credit decision process. The experts examine whether a business partner, the business practice or the country (location or risk country) matches the internal values and objectives on the basis of social, environmental or ethical aspects. In addition, the question of to whether a business relationship or the financing could adversely affect public confidence in the Deka Group or its reputation is also considered.

Real estate financing

In commercial real estate financing, the Deka Group is focused on financing in transparent markets with existing market liquidity and secure legal environments, which, due to their size, transparency and liquidity, are of central importance for the whole of the business field. In the countries where this is possible, the ability of the loan to serve as collateral is sought in principle. In addition to classic investors and project developers, customers also include Real Estate Investment Trusts (REITs), real estate companies, pension funds and German open real estate funds. At the end of the reporting year, there was real estate financing in Germany, France, Great Britain, Italy, Ireland, Japan, Canada and the USA. The gross credit volume, including financing for open real estate funds and local construction projects, amounted to around 7.1 billion euros. Economic efficiency and environmental and social compatibility are the mandatory selection criteria for the real estate credit transaction. These are explicitly analysed for each new transaction and brought into the due diligence process. Any sustainability certificates are also taken into account. Alongside energy efficient operation, sustainable real estate generally has better rentability and higher value stability. This is reflected in the safety position of the lender.

Transport and infrastructure financing

The gross lending volume in the area of transport and infrastructure financing was 6.8 billion euros at the reporting date. Of this, 63 per cent was transport financing and 37 per cent was infrastructure financing. The share of loans for the financing of alternative energy production (wind and solar) amounted to 0.36 billion euros, around 15 per cent of the gross lending volume of infrastructure financing. As a mandated lead arranger, for example, DekaBank structured a financing package for the construction and operation of the Norwegian onshore wind parks Tellenes in south-west Norway in cooperation with Rabobank.