Responding to the UN Sustainable Development Goals

In 2015, the United Nations (UN) agreed on 17 Sustainable Development Goals (SDGs) as part of the 2030 Agenda for Sustainable Development. “Blended finance” through public–private partnership funds will provide opportunities to attract private investment in the SDG areas through catalytic public sector investments such as first-loss capital or guarantees.

Our Sustainable Investments team in Asset Management’s Alternative and Real Asset Division pursues an approach which is fully aligned with the SDG agenda. Sustainable Investment vehicles achieve a “triple bottom line”—in other words, market-based financial returns together with positive environmental and social outcomes. In 2015, we managed five open-ended “blended” public–private investment funds. They include the Africa Agriculture and Trade Investment Fund, the European Energy Efficiency Fund, the European Fund for Southeast Europe, the Green for Growth Fund, and the SANAD fund. Together, these funds hold a combined volume of more than €1.6 billion, each fund addressing a specific set of SDGs (see table below).

With yields at historic lows, investors are increasing their investment allocations towards fixed-income products. One outcome of this is that allocations to alternative investments have been rising. At the same time, investors are becoming more aware of ESG considerations and are increasingly integrating ESG aspects into their investment practices. This is illustrated by the ongoing strong growth of assets managed in accordance with the UN’s Principles for Responsible Investment (PRI). These assets had grown to US$59 trillion by April 2015, a 29% increase on the previous year. Furthermore, a recent investor survey by JP Morgan of 146 impact investors worldwide reported plans to increase sustainable investment commitments by 16% in 2015, from US$10.6 billion in 2014 to US$12.2 billion.

Challenges to the sustainable investment sector include identifying bankable transactions, especially in emerging markets, with appropriate risk–return profiles for public and private investors and a minimum track record. To identify such investment opportunities, the Sustainable Investments team at Deutsche Asset Management works with an extensive network of external partners, including providers of technical assistance, project developers, like-minded investment funds, risk insurers, as well as corporate off-takers including, for example, consumer goods companies and input providers. The team also leverages internal expertise, including our Global Transaction Banking network, to identify suitable partner financial institutions for investment. It also looks to our own corporate and investment banking network, to identify bankable direct investments.

Case study

Green Climate Fund

The Green Climate Fund (GCF) was established by the UN Framework Convention on Climate Change’s Conference of the Parties as the central global investment vehicle to combat climate change and its effects. It aims to bring together public and private funds promote and finance a shift towards a low-emission global economy and climate-resilient development “pathways.” Further information: Green Climate Fund

We became the first commercial bank globally to become accredited to act as implementing entity for the fund, alongside public institutions such as the World Bank, European Bank for Reconstruction and Development, and Inter-American Development Bank. Total pledges made to the fund amounted to US$10.2 billion as of November 2015.

As an accredited entity, Deutsche Bank has the right to submit funding proposals to the GCF for investment and will thus act as intermediary to enable, mobilize, and manage private-sector investments at transformative scale for climate change adaptation and mitigation. Our experience and track record in energy efficiency and renewable energy project finance, green bonds, and climate funds is proving critical in this context. We are currently helping the fund to prepare its first funding proposal around energy access and climate change mitigation in Africa.

Tracking outcomes

To measure the impact of our sustainable investment funds, we use a framework of social and environmental guidelines and performance indicators. These include the International Finance Corporation Performance Standards and the European Investment Bank’s Statement on Environmental and Social Principles and Standards.

To further ensure sustainable impact, we partner with the UN International Labor Organization (ILO), the UN Environment Program (UNEP), and the Common Fund for Commodities (CFC) in this effort as well as with research organizations.