SDG Classification Methodology

To be able to specifically measure its business activity, DZ BANK developed an assessment methodology based on the individual SDGs back in 2020, known as the SDG classification. Therefore, the SDG classification also forms the basis for selecting suitable sustainable assets that underlie DZ BANK's products with sustainability aspects.

Using the SDG classification, DZ BANK's business activities, such as lending to companies, are evaluated in terms of their impacts on the 17 SDGs. A system of sector- and subsector-specific indicators has been developed, enabling a classification of business activities along the evaluation categories of negative, neutral, and positive impact contributions across the ESG spectrum based on an in-house impact model. The classification directly relates to the specific economic activities financed by DZ BANK for a customer or the specific economic activity a customer performs with the provided liquidity. To create a standardized and comparable basis, a customer's economic activities are categorized based on the Statistical Classification of Economic Activities in the European Community (Nomenclature statistique des Activités économiques dans la Communauté Européenne – "NACE codes"). The NACE codes are the classification of economic sectors within the European Union and were developed in 1970 to uniformly capture and compare statistical data across various economic sectors throughout Europe.

Given this, the SDG classification distinguishes between purpose-bound financing (e.g., project financing) and non-purpose-bound financing (e.g., open fund allocation).

In the case of purpose-bound financing, the directly financed economic activity is assessed. Other economic activities of this customer are irrelevant within the scope of purpose-bound financing.

In the case of non-purpose-bound financing, all economic activities of a customer are evaluated individually (known as activity splitting). In the overall assessment, the individual results of the evaluation of all respective economic activities are compiled and jointly considered. The weighting among them is determined by the customer's revenue share from the respective economic activities, so that the classification result of the customer finally reflects the impact of the overall activities on the SDGs.

Within the framework of SDG classification, there is a sector-specific focus on the typically relevant SDG impacts of the respective sector, mostly related to the respective product or service offering and the necessary processes. Furthermore, SDG classification results are largely based on publicly accessible information, which can occasionally lead to slight inaccuracies in qualification in individual cases.