Commerzbank focus report on sustainability
Sustainable finance: What’s in a name?
The COVID-19 pandemic has done little to demote sustainability from the headlines. In fact, quite the opposite is true: in handling the social and public health crisis caused by the pandemic, governments have also prioritised sustainability concerns as part of the economic recovery. And, in turn, financial institutions have a key role to play in directing capital to sustainable projects and ventures. In its Sustainability focus report, Commerzbank shows how it is supporting corporates through their transformation towards sustainability.
Increasingly, corporates are responding to socioeconomic developments, as well as to customer demand, by making their products, production processes and supply chains more sustainable. But precisely which activities and projects warrant the “sustainable” label? Is it only climate-friendly initiatives – or much more? And which sustainable financial products are currently available?
Clearly, the political debate is dominated by the greatest challenge: the signficant reduction of greenhouse gas emissions. Only recently, the European Commission tightened the CO2 savings targets. But the responsibilities of banks extend further than sustainable finance to include environmental, social and governance (ESG) factors in investment and financing decisions.
A comprehensive overview
Against this backdrop, the Commerzbank focus report provides a comprehensive overview of the various aspects of sustainability. It provides detailed information on the German government's sustainability goals and analyses economic and technical strategies to achieve the sustainability goals pursued.
The report also explores how sustainable concepts and climate protection measures are being elaborated and implemented in two key sectors – the automotive and retail industries. Complementing the discussion is the story of the Otto Group, one of the world's largest online retailers, which made sustainability one of its corporate goals as early as 1986. The report also highlights the ways in which the financial services sector can play its part – importantly, including the contributions that Commerzbank can make.
Commerzbank’s supporting role
For Commerzbank, sustainability is an integral part of its corporate strategy. Thanks to its market and sectoral expertise and its wide range of sustainable financing products, the bank supports the transformation processes that its clients are currently undergoing. Available products include:
Commerzbank can offer the entire spectrum of green, social and sustainable bonds.
Commerzbank is an active arranger of sustainable and sustainability-linked loans and Schuldscheine in Germany and Europe.
Renewable Energies Project
Commerzbank has been active in financing renewable energy for three decades and established its own dedicated competence centre in Hamburg in 2003, which today is one of the biggest financiers of renewable energy in Europe.
Trading in CO2 emission rights
ACommerzbank ranks among the leading banks on the European emission rights market.
Sustainable bonds and loans: Their use is decisive
The main difference between sustainable and conventional bonds is the use of funds for a specific purpose. The market leaders among sustainable bonds are green bonds, the funds of which are used exclusively to finance new or existing environmental projects that are eligible for support.
The proceeds from social bonds flow not into environmental or climate protection projects, but into social projects – for instance those that promote access to health care, education and affordable housing or those that improve the supply of food. Bonds that provide capital both green and social projects are commonly referred to as sustainable bonds.
Financial incentives for sustainable performance
On the credit side, too, sustainability initiatives can be supported by the financing itself. For example, with sustainable loans and Schuldscheine. Both instruments are only available for the full or partial financing or refinancing of new or existing eligible green projects.
Furthermore, the sustainability-linked loan instrument is becoming increasingly established in the syndicated loans market. Such loans can be used for general corporate purposes without any requirements – however, the terms of the loan (including pricing) will depend on the company's sustainability development. In this way, these loans create financial incentives to achieve pre-defined sustainability goals.