Deutsche Bank, which sees a significant and rising focus on environment, social and governance (ESG) practice among Indian corporates, has set its sights on becoming the No.1 bank to serve ESG-linked financial needs of India Inc., Kamran Khan, managing director, head of ESG for Asia-Pacific, Deutsche Bank, said in an interaction with Mint.
“India is a very important market for Deutsche Bank in ESG. We are servicing clients across capital markets, loans, and derivative products. There is a significant rising focus in India on ESG considerations and the pace of adoption is quite fast. We did the first green hedge based on a specially designed green hedge framework with a second party opinion, with Continuum Energy,” Khan said. “We want to be the number one ESG bank in India,” he said.
In India, the bank has advised on several ESG-linked transactions such as Shriram Transport Finance’s social bond offering, JSW Infrastructure’s sustainability linked bond, and Greenko’s green bond.
The bank is looking at Asia as a key market, as part of its focus on ESG business.
“The bank has done many ESG transactions in Asia-Pacific in the last year. The year 2021 was phenomenal for Deutsche Bank’s environment, social and governance business in Asia. We are doing a range of sustainable financing, sovereign bonds, multinational bonds, private debt financing, bilateral and syndicated loans. We are doing ESG-linked hedges and derivatives. We also provide pre-initial public offering, pre-merger, or pre-joint venture advice on ESG,” Khan said.
Environment, social and governance is a core pillar of the bank’s strategy and Deutsche is the first bank to set up an ESG Centre of Excellence in Asia, he said.
Banks have a lot of critical lessons to learn in Asia, given the more challenging environment in these markets with regard to implementation of ESG compared to developed economies, and doing significant work in Asia can help financial institutions fine tune their overall ESG practice, Khan said.
“Asia is the most complex region in which to do ESG business. So if we can do it right here, we can do this business everywhere. We believe Asia can in many ways set the pace and benchmark for the rest of the world in ESG-conscious development,” Khan said.
With established market products such as green bonds, companies are now also realising the importance of environment, social and governance practices and the financial benefits of sustainable financing solutions.
“Green bonds are the most established products in the market. We are seeing a greenium (green premium) in the capital markets, where companies have been able to get a pricing advantage of 10-15 basis points (bps) for an investment grade bond and above 20-25 bps in the high yield space,” Khan said.
With its ESG Centre of Excellence, the bank is working on creating new innovative sustainable financing products for corporate clients.
“We are working on new products for corporations and buy side clients such as ESG ETFs and bespoke trades. We are seeing increasing interest in environment, social and governance contingent acquisitions,” Khan said.
Sustainable financing does not have a cookie-cutter approach, and every transaction needs to be structured to suit the client’s needs, he said.
“We excel in structured solutions for clients. Every transaction we do is customized and tailored to suit the client’s business and their needs. We don’t show up to sell a product but to provide solutions. We tell them what they are doing well and the areas where they need to focus and improve,” Khan said.
“While it is relatively easy to measure impact in ESG (E) transactions, the financial services industry is still learning how to effectively measure impact in ESG (S) transactions. The speed with which you pivot towards sustainability on the E side needs to be balanced with the possible resulting impact on lives and livelihoods of common people, the S side. That’s the kind of advice we provide to clients,” he said.
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