Investing sustainably - our approach We are taking Environmental, Social and Governance (ESG) factors into account to determine whether investments and products fulfil sustainability criteria. This includes the provision of financing and investment products, the responsible management of natural resources within our company, as well as good governance and fostering diversity. X-markets offers investors different financial instruments to pursue returns while also taking into account environmental, social and governance considerations. Deutsche Bank has implemented an internal set of criteria for structured securities with sustainability characteristics. As a member of the German Structured Securities Association (Bundesverband für Strukturierte Wertpapiere (BSW)), Deutsche Bank’s approach is in line with the BSW Sustainable Finance Code of Conduct which sets product and transparency standards for structured securities with sustainability characteristics for issuers in the German market and the target market concept developed by the different German banking associations. Deutsche Bank Sustainable Instruments Framework In order to design investment solutions that are aligned with an investor’s sustainability preferences, Deutsche Bank concentrates on three different aspects: issuer, product structure and underlying. Deutsche Bank as issuer Sustainability, which includes Environmental, Social and Governance (ESG) dimensions, has been a central part of Deutsche Bank’s strategy since 2019. It is one of the three thematic pillars that underpin Deutsche Bank’s corporate strategy and support its vision to be the Global Hausbank: the European Champion and first choice for its clients. The bank sees it as its responsibility to support and, where possible, accelerate the historic transformation towards a more sustainable society and economy. The bank has embedded sustainability into its governance and operations as well as in its products and services. Deutsche Bank’s sustainability strategy focuses on four pillars: (i) sustainable finance; (ii) policies and commitments; (iii) people and own operations; and (iv) thought leadership and stakeholder engagement. To underpin Deutsche Bank’s long-standing commitment to sustainability, it follows internationally recognized principles for sustainable business and banking conduct such as the 10 principles of the UN Global Compact (which it has supported since 2000) and the UN Principles for Responsible Banking (which it has supported since 2019). To learn more about Deutsche Bank’s engagement please click here. A list of selected of memberships and commitments, can be found here. Deutsche Bank reports extensively on the aforementioned and additional commitments and progress on sustainability in its annual reports. Deutsche Bank, as a financial institution, is regularly analysed and classified by several recognized rating agencies in relation to its ESG practices. To learn more about Deutsche Bank’s ESG Ratings, please click here. Product structures It is important to note that not every product design contributes to achieving sustainability goals. In particular speculative leveraged products with short duration such as warrants and knock-out products, are not considered suitable for Deutsche Bank issuances of financial instruments which align with investor’s sustainability preferences. Furthermore, Deutsche Bank does not consider reverse structures, i.e. products benefiting from falling prices or a negative price development of the underlying which may undermine sustainability goals, as appropriate for investors with sustainability preferences as well as products with a tenor of less than one year as of issue date. Choice of the underlying As part of its internal approach Deutsche Bank has set out minimum criteria driving the selection of underlyings for products designed to meet an investor’s sustainability preferences. Indices and Fund Underlyings A dedicated ESG strategy is applied by the relevant fund or index. The following minimum criteria apply in combination with the relevant dedicated ESG strategy: Best-in-class strategy: The underlying shall achieve a minimum MSCI ESG rating of A (for high-yield, or emerging markets: MSCI ESG rating of BBB)1. Funds have to be compliant with article 8 or article 9 of the Sustainable Finance Disclosure Regulation (SFDR). If a fund is not in scope of the SFDR, a disclosure on the adoption of investment policies that consider ESG criteria has to be in place, based on what is stated in the fund’s investment strategy on the fund prospectus. Companies which generate any turnover from the following economic activity are not permitted as components of indices/baskets or funds (sectoral exclusions): Controversial Weapons2 Nuclear Weapons2 Coal Mining Tobacco Production Non-conventional Oil & Gas production Furthermore, companies whose turnover exceed 5% in the following areas are also not permitted as components of indices/baskets or funds (sectoral thresholds): Conventional Weapons Civilian Firearms Thermal Coal Power Generation Nuclear Energy Conventional Oil & Gas Production Single Line Underlyings (other than funds or indices): Individual corporate ESG Rating of the single line underlying at product outset: MSCI ESG rating of A (for high-yield, or emerging markets: MSCI ESG rating of BBB). Single line underlyings that are active in the following areas shall be excluded: Controversial Weapons2 Nuclear Weapons2 Coal Mining Tobacco Production Non-conventional Oil & Gas production Single line underlying whose turnover exceeds 5% in the following areas are excluded: Conventional Weapons Civilian Firearms Thermal Coal Power Generation Nuclear Energy Conventional Oil & Gas Production Generally, companies with serious violations of the UN Global Compact or OECD Principles of Corporate Governance are not permitted as underlying for structured securities with sustainability characteristics. For underlyings that are issued by governments (e.g. government bonds), a minimum MSCI ESG rating of A is required. For underlyings that are linked to a certain country (e.g. German inflation denotes a linkage to Germany as a country), the Freedom House Status ‘not free’ is excluded. Freedom House is a US-based nonprofit organisation which focusses on the advocacy of issues relating to democracy, political freedom and human rights. This indicator will identify whether Freedom House has identified a country as “Free”, “Partially Free”, or “Not Free” in its Global Freedom Scores. Commodities are generally excluded as underlyings for products with sustainability preferences. 1 In exceptional cases, when the required minimum eligibility data is not or not yet available or is inconclusive, a reasonable substitute can be considered, in addition to a documented due diligence and approval. A substitute could be Deutsche Bank using respective external data, such as MSCI datapoints for the constituents based on the latest fund or index holdings, to manually evaluate the product based on the MSCI ESG Fund Rating Methodology. 2 Including cluster munitions, anti-personnel mines, chemical, biological, radiological and nuclear weapons. Green bonds/ certificates and Social bonds/certificates Deutsche Bank’s approach for classifying its products in relation to MiFID II sustainability preference distinguishes between Green Bonds and Social Bonds issued in line with Deutsche Bank’s Sustainable Instruments Framework. Deutsche Bank has published a Sustainable Instruments Framework, which forms the basis for Deutsche Bank's Green Bond and Social Bond issuances. This framework is based on the ICMA (The International Capital Market Association) Green Bond Principles and the ICMA Social Bond Principles respectively and details the use of issuance proceeds for financing/refinancing of projects with green or social objectives. Green Bonds or Green Certificates are a sub-set of products that are characterized by the fact that the proceeds from the issuance of securities are used to finance specific activities focussed on projects with green objectives supporting a climate-friendly and low emissions economy such as increasing the use of renewable energy. Proceeds from Social Bonds/Certificates are used for financing or refinancing projects focusing on social objectives such as access to affordable housing and access to essential services (health & social care). The Sustainable Instruments Framework outlines the relevant selection criteria and processes for identification of eligible projects as well as the relevant reporting requirements in relation to Green/Social issuances. The corresponding documentation can be accessed via the following link: Sustainable Instruments Framework(SIF) The independent consulting firm Institutional Shareholder Services ESG (ISS ESG) has reviewed the bank’s Sustainable Instruments Framework and results are documented in a Second Party Opinion (SPO) which confirms that the Framework meets the ICMA Green and Social Bond Principles at the time of its publication. Categorization of products with sustainability characteristics All products that meet the criteria described above are categorized by Deutsche Bank with respect to an investor’s sustainability preferences as follows: a) Products for investors with environmental objectives: This product category is intended for investors who wish to pursue investments that are classified as environmentally sustainable under the European Taxonomy Regulation. Investors invest in these products to finance in part or in full environmentally sustainable economic activities that contribute to achieving the targets set by the 2015 Paris climate agreement. Such products can therefore be suitable for investors who want to contribute towards a sustainable economic system and a climate-neutral world by 2050. b) Products for investors with sustainability objectives: This second category of products may be suitable for investors who have broader sustainability goals and wish to pursue investments that classify as sustainable investments under the European Sustainable Finance Disclosure Regulation (SFDR.). This Regulation covers not only climate protection but also other environmental and social issues, such as waste recycling/prevention, the preservation and protection of biodiversity, and the fight against social injustice. c) Principal Adverse Impacts for investors: These products are relevant for investors, who wish to invest in products that take into account the adverse impacts of investment decisions with a view to reducing any harm in the following areas: Greenhouse Gas Emissions Biodiversity Water Waste Social and Employee Matters Deutsche Bank offers products that meet 2 of the 3 categories described above. Deutsche Bank Social Bonds/Certificates are categorised as suitable for investors with sustainability objectives according to the Sustainable Finance Disclosure Regulation (i.e. category b). The use of proceeds concept and the extent to which the relevant selection criteria for Social projects as outlined in Deutsche Bank’s Sustainable Instruments Framework align to the criteria set out in in the SFDR results in a sustainability ratio of 100% as defined by the SFDR for Deutsche Bank’s Social Bond/Certificate issuances. Deutsche Bank Green Bonds/Certificates have been determined to meet sustainability preferences of investors who want to take principal adverse impacts (as described above) into consideration (i.e. category c). Overview of rules for classification of structured securities with sustainability characteristics Sustainable products Deutsche Bank relies on third party ratings and data providers as part of its Sustainable Instruments Framework. ESG ratings and data providers are not currently subject to any specific regulatory or other regime or oversight. Providers use differing methodologies and data points which may render ratings or data incomparable between agencies. Furthermore, methodologies used by ratings and data providers may be subject to change.