Deutsche Bank: “Doing nothing is the biggest risk.”

You participated at the COP26 climate conference in Glasgow. What’s your impression?

The business community is really concerned about climate change and there is a huge alignment of different sectors and stakeholders in society at large. The transition to a carbon-free society is a risk to some, but not doing anything is an even greater risk. The corporates and the financial sector need to be the drivers that make it happen and facilitate the changeover.

How do you view the role of the export credit system in this?

ECAs such as EKN will play a critical role because the transition involves risk. But it also brings a lot of opportunities that require all stakeholders to come together to provide what I called blended finance, to include public support, development aid and other sources as well. In developing countries, ECA-backed projects help secure sustainability in a wider sense, to include social issues like urban development and access to clean water. ECA cover helps the financial sector provide the necessary liquidity to finance the transition by sharing the risk and provide long-term funding.

Do you see a need for a change in the rules that govern export credits, to provide a larger incentive for green investment?

Given that the transition is such a huge task, funding requires more flexibility in terms of tenors and repayment schedules. The rules probably need to be modified to widen the scope for what can be classified as sustainable investment, beyond for example renewable energy projects. Hydrogen-fueled solutions will play a big role in the transition and green hydrogen needs to be made more competitive.

How is the transition affecting your credit portfolio?

Our entire export finance portfolio is undergoing a transition that reflects the large demand for investments in green tech and the ESG share of it is growing much faster than we had anticipated.

We help secure green business by supporting clients and government targets. Not supporting the transition represents a risk to our entire credit portfolio, because all our clients would eventually suffer from a negative climate scenario.

Would DB be prepared to accept lower interest rates on green loans?

I don’t think pricing is the main issue here, but rather the need to secure necessary liquidity for green investments, particularly in developing countries. Having said that, I believe projects in green energy, urban infrastructure and transportation require long tenors, which gives ECAs a prime role since ECA-backed financing can provide long tenors.

To support the transition, ECA schemes will require more flexibility in terms of repayment structure given the varying cashflow of different projects. The down-payment requirement can already, in some countries, be included in the ECA-covered financing, which is good.

How do you view the transition-related business opportunities for Swedish exporters?

Swedish companies have a good reputation and the Swedish corporate landscape offers the right ingredients to be competitive in transition technology. The Team Sweden* approach combines capabilities with financing and local access.

In addition, export finance supports development in emerging markets and Africa is currently the biggest market for DB trade finance.

How important is trade finance to Deutsche Bank?

Deutsche Bank was actually founded on a trade finance footprint to support the German economy when the nation was still young, in 1871. Supporting our exporter and importer clients continues to be at the heart of DB’s business. We deploy significant balance-sheet resources to the business of trade finance.

How do you view the cooperation with EKN?

EKN is one of the most important ECAs to our portfolio. This partly reflects the corporate profile of Swedish business, and the fact that EKN is very attuned to corporate needs and always willing to try new ideas. One good example is the previously mentioned Team Sweden initiative, which has successfully opened up the Swedish supply chain for important infrastructure projects. EKN is very transparent and we very much appreciate the strong relationship we have.

*) Team Sweden is a cooperation between EKN, SEK (The Swedish Export Credit Corporation), Swedfund, Business Sweden and the Ministry for Foreign Affairs.