“Cities are key players in lowering carbon emissions”

That’s absolutely right. Cities are one of the main contributors to global carbon emissions. That means that they are key players in lowering carbon emissions. First, they have purchasing power, for example when they construct or renovate buildings or procure new public transport. This is when cities can opt to buy sustainable materials and products. Second, cities can impose powerful policies and make the transition to net zero an integral part of urban planning.

In the UK housing-sector for example, homes produce more carbon emissions every year than all of the country’s cars. That is mainly due to gas heating and poor insulation. So Cities can influence planning requirements, support home solar panel schemes, promote energy efficient insulation and combine affordable housing policies with good energy standards. They can use energy-saving street lighting, create green areas and expand the infrastructure for electric vehicle (EV) charging.

There are many ways in which financial markets can help. Sustainable bonds or loans are a good example. With green and sustainable funding, the issuer – it might be a city, municipality or a state – will use the proceeds to finance projects that help to combat climate change. Having access to different financial markets can be a powerful transformation tool for cities and different regions.

Take the United States, for example, they have a huge securitisation market and a very sophisticated capital market, including a broad municipal market in which Deutsche Bank is active. The broader securitisation markets allows more granular climate loans such as residential solar and EVs to obtain adequate financing. This, in turn, drives the development of climate friendly investments. By comparison, Europe is primarily a bank-funded market.

We have seen a surge in emerging market countries developing green taxonomies. The city of Johannesburg was one of the first municipalities in 2014 to list a green bond on the local stock exchange. A more recent example is Chile’s first sustainability-linked sovereign bond. Last year Belize used a debt for nature swap. In such a swap, investors buy the debt of a developing country at favourable condition. In return, the country guarantees to engage in nature conservation projects.

The demand for financing this transition is huge, but very often government policies do not support investment flows. So facilitating policies, such as residential renewable permitting, defined milestones for the exit out of diesel vehicles, or incentives for renovations, need to align with the growing capital and investment flows directed to support green investment.

The way we do business is changing fundamentally right now. We have set ourselves ambitious volume targets for sustainable financing and part of that includes supporting our clients as they finance the transition. Our due diligence with regard to climate and ESG matters is also more involved than it was, let’s say, 12 months ago.

I have certainly never seen the kind of shift we are seeing right now. The financial crisis also had some huge implications, primarily for the financial markets, though. The current development is changing the whole economy along with our clients’ entire value chains. Helping them to manage this transition is a challenging and exciting task.

The interview was conducted by Georg Berger.

… is fascinated by new technology that could speed up our journey to net zero. Huge changes are necessary and he wonders how all of it will be financed.