Sustainable Finance

Corporate Responsibility has a long tradition at cooperative banks. Accordingly, at DZ BANK, as central institution of the cooperative network, sustainability is anchored in our DNA. Sustainable Finance is therefore an essential part of our core business. With our Sustainable Financing products, we take into account environmental, social and ethical criteria and thus specifically promote the sustainable development of our society and the responsible use of limited resources.

Accordingly, we at DZ BANK have a team within our Capital Markets division that is dedicated to Sustainable Finance. For many years, the bank's DCM team has been actively contributing to the further development of the market for Sustainable Finance as a reliable partner for issuers. This was done, among other things through innovations such as ESGlocate (an innovative allocation tool for issuers of Sustainable Bonds), the KPI Library (a tool for the rapid identification of possible KPIs for Target-Linked structures) or FrameNow (an automated construction kit that supports and accelerates the creation of Sustainable Finance Frameworks).

Our ESG experts provide issuers with holistic support in the context of a Sustainable Finance Transaction, i.e. in structuring, placement and reporting. In addition to our activities in the primary market, we also develop and shape the topic of Sustainable Finance in numerous national (e.g. Forum Nachhaltige Geldanlagen (FNG), Green and Sustainable Finance Cluster Germany (GSFCG), Sustainable Finance Advisory Board of the German Federal Government) and international (Climate Bonds Initiative, ICMA Green Bond Principles, UN PRB) initiatives and working groups.

In 2025, sustainable finance faced a great deal of headwinds. The main reasons were, among other things, the backlash for sustainable finance in the US, ongoing geopolitical and economic uncertainty around the world, the question of how to reconcile sustainable transformation and competitiveness in Europe, and a regulatory environment that remains too complex and difficult to understand. This had a noticeable impact on the global sustainable bond market, which had enjoyed almost uninterrupted success until then, causing it to take a little breather.

While much of the criticism of sustainable finance is exaggerated, some of it is certainly true. Is this a cause for concern? Or even the sword of Damocles? The good news is, after the storm, the all-clear can be given. Rather than being at a crossroads, sustainable finance is reaching a turning point. Currently, it is undergoing a necessary evolution that we should view less as doom and gloom and more as an opportunity. These opportunities will gradually become apparent in the sustainable bond market.

There are three main reasons for this. Firstly, the traditional ESG view neglects the economic dimension of sustainability. Therefore, a more effective approach would be 'EESG'. When making decisions in the capital market, it is essential to consider the interdependent interactions between the four dimensions of sustainability: Economic, Environmental, Social and Governance. Secondly, the traditional ESG approach was often backward-looking and reflective of the status quo. However, as in traditional financial analysis, it is important to consider the future. Sustainability in capital markets is neither a snapshot nor a rigid construct. Hence, there is an increasing focus on identifying tomorrow's sustainability champions. This becomes particularly clear when we consider sustainable transformation. This is accompanied by the credo 'Transform rather than divest', which is gaining popularity among an increasing number of investors.

Thirdly, in some regions of the world, the term 'ESG' has disappeared or will do so in the future. But that's no reason to bury our heads in the sand. One thing is clear: ESG as we knew in the past is 'dead', but sustainable finance is here to stay. It is no longer a niche, but a transformative force and will emerge from the trough of disillusionment and reinvent itself on a healthy plateau of productivity.

Sustainable Finance 2.0: shaping the architecture for further growth in the sustainable bond market

Sustainable finance is maturing and evolving, as are discussions in the sustainable bond market. Enormous funding is required to address the global sustainability agenda. In fact, the funding gap has even widened in recent years. 2025 was the third warmest year on record. Without protecting nature, there is no way to tackle climate change. Hence, there will be no net-zero without nature-positive. Furthermore, building an efficient adaptation economy is a critical component of the long-term global response to climate change. Global progress towards the Sustainable Development Goals is also alarmingly off track.

Thinking in extremes will not get us anywhere. The journey is often the reward (not a radical change). Black-and-white thinking is unhelpful. Transition is key. We must be open to technologies (both established and new) and willing to discuss new (sometimes controversial) topics. Sustainability cannot be reduced to a simple 'yes/no' analysis; it is an ongoing process. Competitiveness and sustainability are not mutually exclusive. Sustainable transformation is a major opportunity for the real economy. And it is not irreversible. The leading corporates of tomorrow will be the ones who successfully leverage sustainability as a competitive advantage. And that also applies to financing and funding.

However, the concerns of the business community must be addressed, and bespoke solutions must be established. This is particularly important for small and medium-sized enterprises (SMEs), which form the backbone of most economies. There is no one-size-fits-all solution. Sustainability always has a cultural component that we must consider. Transition does not happen overnight. Less or simplified regulation does not necessarily mean less ambition. If regulation is applied, it should promote market growth rather than hinder it.

The Sustainable Finance market is characterised by innovations, both in structural and technical terms. With our innovation projects "ESGlocate" and "KPI Library", we at DZ BANK contribute to the further development and standardisation of the market and offer our customers innovative solutions for specific challenges within the issuance process. In doing so, we set new standards in the market with our ideas for solutions for both structuring (KPI Library) and placement (ESGlocate).

More and more issuers are using the option of a sustainability-focused allocation process as they are interested in putting a sustainable exclamation mark at the end of the value chain of a Sustainable Bond transaction. ESGlocate is an innovative, data-based ESG scoring tool used by investors in the context of Sustainable Bond transactions.

DZ BANK has recognised the dynamics in the Sustainable Finance Market and launched the DZ BANK KPI Library, an innovative project for issuers of so-called Target-Linked structures. Based on the economic sectors in which the issuer is active, the KPI Library provides a list of possible key performance indicators (KPIs) that could underlie such a transaction. The guidelines of the ICMA Sustainability-Linked Bond Principles, the Sustainable Development Goals of the United Nations and the EU Taxonomy, among others, serve as orientation.