Sustainability Disclosures – Deutsche Bank Luxembourg S.A.

 

Introduction

 

SFDR[1] came into effect on March 10, 2021. SFDR imposes new transparency obligations (Website disclosures, Pre-Contractual disclosures) & periodic reporting requirements on investment management firms at both a product and entity/manager level. This section relates to the “Website Disclosure” regulatory obligations arising out of SFDR Articles 3-10. More information can be found on the below links.

 

Definitions

 

For the purposes of this Regulation, the following definitions apply:

(1)   ‘financial market participant’ means:

(a)   an insurance undertaking which makes available an insurance-based investment product (IBIP); 

(b)   an investment firm which provides portfolio management;
(c)    an institution for occupational retirement provision (IORP);
(d)   a manufacturer of a pension product;
(e)   an alternative investment fund manager (AIFM);
(f)    a pan-European personal pension product (PEPP) provider;
(g)   a manager of a qualifying venture capital fund registered in accordance with Article 14 of Regulation (EU) No 345/2013;
(h)   a manager of a qualifying social entrepreneurship fund registered in accordance with Article 15 of Regulation (EU) No 346/2013;
(i)     a management company of an undertaking for collective investment in transferable securities (UCITS management company); or
(j)     a credit institution which provides portfolio management;

 

(2)   ‘insurance undertaking’ means an insurance undertaking authorised in accordance with Article 18 of Directive 2009/138/EC; 

 

(3)   ‘insurance-based investment product’ or ‘IBIP’ means: 

(a)   an insurance-based investment product as defined in point (2) of Article 4 of Regulation (EU) No 1286/2014 of the European Parliament and of the Council (19); or 
(b)   an insurance product which is made available to a professional investor and which offers a maturity or surrender value that is wholly or partially exposed, directly or indirectly, to market fluctuations; 

(4)   ‘alternative investment fund manager’ or ‘AIFM’ means an AIFM as defined in point (b) of Article 4(1) of Directive 2011/61/EU;
 

(5)   ‘investment firm’ means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU;


(6)   ‘portfolio management’ means portfolio management as defined in in point (8) of Article 4(1) of Directive 2014/65/EU;


(7)   ‘institution for occupational retirement provision’ or ‘IORP’ means an institution for occupational retirement provision authorised or registered in accordance with Article 9 of Directive (EU) 2016/2341 except an institution in respect of which a Member State has chosen to apply Article 5 of that Directive or an institution that operates pension schemes which together have less than 15 members in total;


(8)   ‘pension product’ means:

        (a)   a pension product as referred to in point (e) of Article 2(2) of Regulation (EU) No 1286/2014; or

        (b)   an individual pension product as referred to in point (g) of Article 2(2) of Regulation (EU) No 1286/2014;

 

(9)   ‘pan-European Personal Pension Product’ or ‘PEPP’ means a product as referred to in point (2) of Article 2 of Regulation (EU) 2019/1238;

 

(10)   ‘UCITS management company’ means:

        (a)   a management company as defined in point (b) of Article 2(1) of Directive 2009/65/EC; or

        (b)   an investment company authorised in accordance with Directive 2009/65/EC which has not
designated a management company authorised under that Directive for its management;

 

(11)   ‘financial adviser’ means:

        (a)   an insurance intermediary which provides insurance advice with regard to IBIPs;

        (b)   an insurance undertaking which provides insurance advice with regard to IBIPs;

        (c)    a credit institution which provides investment advice;

        (d)   an investment firm which provides investment advice;

        (e)   an AIFM which provides investment advice in accordance with point (b)(i) of Article 6(4) of Directive 2011/61/EU; or

        (f)    a UCITS management company which provides investment advice in accordance with point (b)(i) of Article 6(3) of Directive 2009/65/EC;

 

(12)   ‘financial product’ means:

        (a)   a portfolio managed in accordance with point (6) of this Article;

        (b)   an alternative investment fund (AIF);

        (c)   an IBIP;

        (d)   a pension product;

        (e)   a pension scheme;

        (f)   a UCITS; or

        (g)   a PEPP;

 

(13)   ‘alternative investment funds’ or ‘AIFs’ means AIFs as defined in point (a) of Article 4(1) of Directive 2011/61/EU;

 

(14)   ‘pension scheme’ means a pension scheme as defined in point (2) of Article 6 of Directive (EU) 2016/2341;

 

(15)   ‘undertaking for collective investment in transferable securities’ or ‘UCITS’ means an undertaking authorised in accordance with Article 5 of Directive 2009/65/EC;

 

(16)   ‘investment advice’ means investment advice as defined in point (4) of Article 4(1) of Directive 2014/65/EU;

 

(17)   ‘sustainable investment’ means an investment in an economic activity that contributes to an environmental objective, as measured, for example, by key resource efficiency indicators on the use of energy, renewable energy, raw materials, water and land, on the production of waste, and greenhouse gas emissions, or on its impact on biodiversity and the circular economy, or an investment in an economic activity that contributes to a social objective, in particular an investment that contributes to tackling inequality or that fosters social cohesion, social integration and labour relations, or an investment in human capital or economically or socially disadvantaged communities, provided that such investments do not significantly harm any of those objectives and that the investee companies follow good governance practices, in particular with respect to sound management structures, employee relations, remuneration of staff and tax compliance;

 

(18)   ‘professional investor’ means a client who meets the criteria laid down in Annex II to Directive 2014/65/EU;

 

(19)   ‘retail investor’ means an investor who is not a professional investor;

 

(20)   ‘insurance intermediary’ means an insurance intermediary as defined in point (3) of Article 2(1) of Directive (EU) 2016/97;

 

(21) ‘insurance advice’ means advice as defined in point (15) of Article 2(1) of Directive (EU) 2016/97;

 

(22) ‘sustainability risk’ means an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the investment;

 

(23) ‘European long-term investment fund’ or ‘ELTIF’ means a fund authorised in accordance with Article 6 of Regulation (EU) 2015/760;

 

(24) ‘sustainability factors’ mean environmental, social and employee matters, respect for human rights, anti-corruption and anti‐bribery matters.

 

 

 

1.1 Sustainability Risk Policy

Article 3: Transparency of sustainability risk policies for financial market participants and financial advisors for Deutsche Bank Luxembourg S.A., March 2021

Introduction / Summary

On March 10, 2021 the Regulation (EU) 2019/2088 of November 27, 2019 on sustainability-related disclosures in the financial sector (Disclosure Regulation) has entered into force. This regulation aims to support sustainable investments by requiring Financial Market Participants (FMPs) and Financial Advisers (FAs) to disclose information regarding sustainability risks to investors and clients.

 

Article 3 of this regulation requires information to be shared with regards to the integration of sustainability risks within investment decision-making processes and investment advice. The approach taken by Deutsche Bank Luxembourg S.A. is further detailed below.

 

Deutsche Bank AG applies an overarching approach to the management of sustainability that is set out in a number of group level policies and procedures, which also apply to Deutsche Bank Luxembourg S.A. as member of Deutsche Bank Group. The group-wide Sustainability Policy delineates our main sustainability principles as well as the key requirements and responsibilities in connection with sustainability-related enquiries, non-financial sustainability reporting and ratings, environmental and social due diligence in the context of reputational risk management, and, together with relevant risk frameworks and broader commitments, provides relevant context regarding the Bank’s view on sustainability topics.

 

Whilst Deutsche Bank AG does not currently apply an overarching formal policy regarding the integration of sustainability risks in the investment decision‐making and advisory processes, Deutsche Bank AG still takes sustainability risks into account, as further described in following sections. In addition, business areas are working towards inclusion of the integration of sustainability risks within relevant policies and guidelines. These will be further enhanced on an ongoing basis as more sustainability related data becomes available over time.

Definition of sustainability risks

Sustainability risks (“ESG risks”) are designated as incidents or conditions in the areas of the Environment, Social or Corporate Governance, whose occurrence could have actual or potential significantly negative effects on the value of the investment. These risks can occur both separately and cumulatively; they can affect individual com­panies or also entire sectors/branches or regions and can have very different characteristics.

 

The following examples can help to clarify sustainability risks:

 

As a result of the occurrence of extreme weather events as a consequence of climate change (known as physical risks), for example, production locations of individual companies or entire regions can be impaired or destroyed, leading to production stoppages, rising costs to restore the production locations and higher insu­rance costs. Furthermore, extreme weather events as a consequence of climate change, such as long periods of low water during droughts, can impair the transport of goods or even make it impossible.

 

There are also risks in connection with the changeover to a low-carbon economy (known as transition risks): for example, political measures can lead to fossil fuels becoming more expensive and/or scarcer (examples: fossil-fuel phase-out, CO2 tax) or to high investment costs as a result of requirements to renovate buildings and plant. New technologies can displace familiar technologies (e.g. electric mobility), and changes in custo­mer preferences and expectations in society can endanger companies’ business models if they do not react in time and take counter measures (by adjusting their business model, for example).

 

A substantial increase in physical risks would require a more abrupt changeover in the economy, which in turn would lead to higher transition risks.

 

Social risks arise from aspects such as non-compliance with labour law standards (for example, child labour and forced labour) and compliance with occupational health and safety regulations.

 

Examples of risks that arise within the scope of corporate management due to inadequate corporate gover­nance and that can lead to high fines include non-compliance with taxpayer honesty and corruption.

 

Sustainability risks affect the following traditional risks of investments in securities in particular, and if they occur, could have a significantly negative effect on the yields of an investment in securities:

 

·       Sector risk

·       Price change risk

·       Issuer/Credit risk

·       Dividend risk

·       Liquidity risk

·       Currency risk

Method of including sustainability risks for Financial Markets Participants and Financial Advisors:

In order to evaluate sustainability risks, Deutsche Bank AG uses information such as that from external service providers that have specialised in the qualitative evaluation of ESG factors.

 

Because sustainability risks can have different effects on individual companies, sectors, investment regions, currencies and investment classes (for example, equities or bonds), when recommending financial instruments in the Bank follows the approach of diversifying investments as broadly as possible in order to reduce the effects of the occurrence of sustainability risks on the client´s portfolio. The Bank generally recommends distribution across a variety of investment classes in order to establish an individual client opportunity/risk pro­file. In addition, investment advice pursues a policy of a broad spread of investment classes in a variety of bran­ches/sectors, investment regions and currencies.

 

In addition to diversification, for Financial Market Participants, sustainability risks are taken into account at various points in the investment process when making investment decisions within the framework of financial portfolio management. Sustainability risks are taken into account during the macro-economic consideration and development of market opinion, when allocating assets to individual investment strategies and when selecting individual financial instruments.

 

1.2 Adverse sustainability impacts statement

1.2.1 Financial Market Participant

 

1.2.2 Financial Advisor

 

1.3 Remuneration Policy

Sustainability and Remuneration

The consideration of Sustainability and Sustainability Risks is an integral part of the performance-based determination of variable compensation at DB group, both for employees and the Management Board.

 

Where appropriate, we have set sustainability related targets which include financial and non-financial targets such as sustainable financing and investment volumes as well as culture and conduct.

 

Furthermore, we expect all employees of Deutsche Bank to adhere to the sustainability principles stipulated in our code of conduct, which aim to generate sustainable value for our clients, employees, investors and society at a large. The code of conduct is embedded in our governance, policies, processes, and control systems.

 

1.4 Sustainability-related product disclosure section

 

The information contained in this section is provided in accordance to Art. 10 of the REGULATION (EU) 2019/2088 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of November 27, 2019 on sustainability-related disclosures in the financial services sector (the Disclosure Regulation).

1.4.1 Products promoting environmental or social characteristics

Financial Portfolio Management considers environmental and social characteristics:

 

Deutsche Bank acts in the capacity of a Financial Market Participant, and offers financial products in scope of the Disclosure Regulation. The following provides an overview of products offered that promote environmental and social characteristics (Article 8).

Disclosure on the inclusion of environmental or social characteristics in pre-contractual information
 

Pre-contractual disclosure for financial products referred to in Article 8(1) of Disclosure Regulation

Disclosure on the inclusion of environmental or social characteristics in periodic reports
 

Periodic disclosure for the financial products referred to in Article 8 of the Disclosure Regulation 

 

Disclosure on the inclusion of environmental or social characteristics in pre-contractual information
 

Pre-contractual disclosure for financial products referred to in Article 8(1) of Disclosure Regulation

 

Disclosure on the inclusion of environmental or social characteristics in periodic reports
 

Periodic disclosure for the financial products referred to in Article 8 of the Disclosure Regulation 

 

Disclosure on the inclusion of environmental or social characteristics in pre-contractual information
 

Pre-contractual disclosure for financial products referred to in Article 8(1) of Disclosure Regulation
 

Disclosure on the inclusion of environmental or social characteristics in periodic reports
 

Periodic disclosure for the financial products referred to in Article 8 of the Disclosure Regulation 

 

Disclosure on the inclusion of environmental or social characteristics in pre-contractual information
 

Pre-contractual disclosure for financial products referred to in Article 8(1) of Disclosure Regulation

 

Disclosure on the inclusion of environmental or social characteristics in periodic reports


Periodic disclosure for the financial products referred to in Article 8 of the Disclosure Regulation 

1.4.2 Products with sustainable investment objective

Deutsche Bank Luxembourg S.A. acts in the capacity of a Financial Market Participant, and offers financial products in scope of the Disclosure Regulation. Currently Deutsche Bank Luxembourg S.A. does not offer any products which have a sustainable investment objective (Article 9). The following provides an overview of products offered that have a sustainable investment objective (Article 9). 

 

·       No products currently in scope

References

1.
https://eur-lex.europa.eu/eli/reg/2019/2088/oj


The content and materials on this website may be considered Marketing Material. The market price of an investment can fall as well as rise and you might not get back the amount originally invested.  The products, services, information and/or materials contained within these web pages may not be available for residents of certain jurisdictions. Please consider the sales restrictions relating to the products or services in question for further information. Deutsche Bank does not give tax or legal advice; prospective investors should seek advice from their own tax advisers and/or lawyers before entering into any investment.