“We’re sawing at the branch we’re sitting on”

Markus Müller (MM): We know that species extinction and damage to ecosystems can have massive consequences on our lives and also on our prosperity. We need intact ecosystems for clean air and water and we need insects to pollinate our crops. It is estimated that more than half of global GDP, which is about 44 trillion US dollars, largely depends on nature and ecosystem services. We shouldn’t make the mistake, though, to think that the remaining 50 percent do not depend on nature. 

Agriculture and fishing, the construction industry, tourism and mining, for example, are especially dependent on nature – and they’re all areas that have a particularly negative impact on nature.

MM: Basically, yes. The bottom line is that we’re living beyond our means. This is because nature is predominantly a public good, whose systemic importance and long-term value are often not priced into the production of goods and services.

Take trees, for example, if, we regard them primarily as a raw material for products and fail to take into account their value as providers of shade, a place for birds to nest or as oxygen givers, this is basically a market failure. If we keep interfering with nature all the time, it can no longer recover. Destroyed ecosystems are the result.

This also increases the business risk – for us banks, too – for example if companies can no longer service their loans and their earnings decline because they have to pay more money as raw materials become scarce.

World leaders and decision makers are increasingly aware of the situation, as the World Economic Forum's risk assessment shows. A majority sees climate change and biodiversity loss as two of the greatest long-term threats to the economy – ahead of geopolitical crises or upheavals caused by artificial intelligence.   

VB: For the first time, there is actually a global goal for nature, similar to the Paris climate protection goals. This goal states the intention not only to stop the destruction of nature but to reverse the current trend by 2030, in other words by the end of this decade. The international community has agreed to place 30 percent of land and oceans under protection and to make 200 billion US dollars available annually. The fact that 196 nations have agreed on this is a strong signal. Similar to the fight against the climate crisis, the private sector and banks are considered key players when it comes to achieving these goals. However, we have to be careful that our role is not overloaded.

Beyond that, scientific findings on the climate and the environmental crisis are today much more widely discussed in public and damage and disasters are far more obvious. And we are already seeing legislation is following suit.

MM: Personally, I don't really like the term financing gap. It makes it sound like a lot of additional money will need to be spent on new programs. Most people switch off when they hear that – especially in times of overall low economic growth and other equally essential investment needs, be it health, education, infrastructure or digitalization. What it is really about is doing business differently, in a way that doesn’t damage nature, or at least does far less damage than currently.

I can illustrate this with a few figures: the economy uses natural resources worth the equivalent of 125 trillion US dollars annually. These include raw materials such as wood, sand, water, rare earths, fishery products, agricultural products and much more. What we’re doing is helping ourselves to what nature gives us without getting an invoice.

The basic problem is that we don't pay for most of what we get from nature, we don’t pay what it's worth.

Personally, I don't really like the term financing gap. Most people switch off when they hear that – especially in times of overall low economic growth.Markus Müller

VB: There are several starting places for private banks. As a first step, we can ensure that our sustainability goals and sustainable financing that is aimed at reducing global warming also has a positive impact on biodiversity. This is called the climate-nature nexus. We generally have the greatest leverage when we work with clients from the real economy on reducing their biodiversity footprint. 

We have the greatest leverage when we work with clients from the real economy on reducing their biodiversity footprint.
Viktoriya Brand

VB: Yes, of course. If, for example, we support clients in aligning their business model more closely with the circular economy, for example by helping an electric car manufacturer to build a battery recycling plant, this can help the company to use fewer raw materials, the extraction of which is sometimes associated with high environmental pollution.

So it's a matter of looking in our loan book to identify businesses with a high biodiversity footprint and helping them gradually reduce it. To do this properly, however, we need tools that help us assess which sectors have a particularly strong impact on ecosystems and whether business activities take place in biodiversity hotspots, for example.

In the last two to three years especially, different scientific disciplines have collaborated to develop a range of instruments to this end. Basically, though, it is more complex than with the climate issue. This is because biodiversity and ecosystems are very local and at the same time very diverse; there is no one key metric like CO₂.

As a bank, we have been active in some nature conservation areas for some time now. Our deforestation policy was one of the first sustainability policies we made. In essence, it is about the fact that we do not finance any businesses that are responsible for the deforestation of tropical primary forests.

MM: Yes, one focus in terms of direct support is on protecting the oceans. We use our access to high-net-worth clients and investors to channel funds into scientific research and ocean conservation programs. The question is how to protect our oceans and make them more resilient, while ensuring people who live off the sea can continue their livelihoods at the same time.  

One vehicle for this is our Deutsche Bank Ocean Resilience Philanthropy Fund, which we established in 2021. The fund has already supported several ocean projects since then. 

MM: As a big lender we want, and we need to have a holistic and science-based approach to biodiversity finance similar to our approach on climate finance. The topic of biodiversity conservation is complex because we are dealing with very local conditions and ecosystems.

The Nature Advisory Panel supports us here with experts from different disciplines and from different professional contexts, such as the Senckenberg Society for Nature Research, or the UNEP (United Nations Environment Program). They provide us with the latest research results and help us to cut a path through the thicket – in other words, they help us see where measures have the greatest effect and which regions we should keep a special eye on? 

VB: We are currently developing principles and measures to promote nature and biodiversity conservation in our business activities. To do this, we need to strengthen the transfer of knowledge into the bank and anchor the topic in our business areas in the coming years. Our relationship managers need to understand the risks associated with the topic of species extinction and biodiversity loss for our clients, but also the credit and reputational risks that can arise for the bank. 

VB: Legislators and supervisory authorities do have a strong influence. We see it, for example, in countries like France, where there are more requirements for nature conservation from the legislator than in Germany. Basically, European banks are ahead because Europe as a region has the strongest agenda in climate and nature conservation with the European Green Deal, also in the area of nature and species protection. 

Central banks are also focusing more and more on the topic and, of course, Deutsche Bank is looking very closely at what its competitors are doing. We don't just look at the topic from a risk perspective – every major shift or change always provides new business opportunities. 

MM: I think the fact that we as a bank and society in general are talking about it (sometimes more, sometimes less) shows how important it is becoming in people’s minds. Discussion is the social process of finding answers to questions that are vital for humanity. That gives me hope!

VB: We’ve already learned a lot about integrating climate into business processes. Although nature is multi-faceted and complex, yet these findings are valuable. I am always pleasantly surprised at how quickly things are progressing, whether the availability of data or new initiatives and innovative ideas emerging.

We’re no longer talking about “why” but “how” and that’s really encouraging.