What role does the German Sustainability Code play in the banking industry?
What is the German Sustainability Code?
In 2011, the German Sustainability Code (DNK) was adopted by the German Council for Sustainable Development. The Council is a body that advises the Federal Government on sustainability issues. It is convened by the Federal Chancellor for a three-year term and is composed of representatives from various disciplines. The GSC defines a uniform framework for reports on the sustainable orientation of a company. It can be applied by companies and organisations of all sizes, both nationally and internationally. Since the Code was published in 2011, it has also entered the banking industry. CURENTIS used a random sample to check the extent to which banks submit reports in the German Sustainability Code and how up-to-date they are.
Reporting periods and scope
In the following, 59 banks are considered, all of which have published a report in the sense of the DKN (as of 2021). There are differences in when and how often such a report was published. As the two figures below show, 66% of the banks have produced a report within the last two years. For others, the most recent report dates from earlier years, the oldest from 2015.
The length of the individual reports also varies greatly. The shortest report has 15 pages, while the most comprehensive has 184. On average, a report consisted of 64 pages. This does not necessarily reflect the size of the institutions. The longest report came from a Landesbank, while that of a large private bank came in the middle with 70 pages. Further details can be found in the figure below.
Data basis
Since not all institutions have regularly prepared a report, the reports from the years 2022 and 2021 are considered below. This is to ensure that the data is comparable. For this reason, the year 2019 was not included. In this year, different circumstances prevailed compared to the years under review due to the Covid 19 pandemic. This leaves 39 banks, 10% of which come from the private sector, 20% from the cooperative sector and 69% from the public sector (savings banks, state banks, state development banks).
Current status
The Code includes the following key figures:
| Criterion | Number of banks that have provided an indication |
| Other greenhouse gas emissions | 19 |
| Indirect greenhouse gas emissions | 22 |
| Direct greenhouse gas emissions | 23 |
| Paper consumption | 25 |
| Water consumption | 25 |
| Total energy consumption | 27 |
| Accrued waste | 27 |
As can be seen from the table, not all 39 banks provided information on every point.
The individual indicators show that many banks already act sustainably and strive to eliminate negative environmental impacts. Overall, a relatively homogeneous picture emerges for all of them, with some banks standing out as individual outliers. There seems to be potential here that can be used by the banks concerned.
Furthermore, the values determined are independent of the number of employees. For example, the largest bank by employees has the lowest paper consumption per capita, while the highest value comes from a smaller bank by employees.
As can be seen from the table, 23 banks reported on how high their direct greenhouse gas emissions are. This means that 16 banks were unable or unwilling to state anything about this key variable. Since the ECB, as the highest European supervisory authority, insists that the business of the supervised banks continues to be oriented towards sustainability, such key figures will be more in demand and more critically scrutinised in the future.
Conclusion
Many but not yet all banks apply the German Sustainability Code. The topic is handled differently by the individual institutions. While there are banks that regularly publish a report, for others only older reports are available.
Although the German Sustainability Code aims to create a uniform reporting standard, the respective reports currently differ greatly. This is reflected on the one hand in their scope, and on the other hand in the fact that not all banks have stated something on every criterion.
The topic of sustainability has arrived in the banking industry. The majority of banks are making efforts to reduce their own ecological footprint. Nevertheless, there are banks that have not yet exhausted their potential in this area.
Since the ECB attaches importance to the banks it supervises acting sustainably, reports in the sense of the GSC will become more significant in the future.
About the author: Karl Eugen Reis has been a consultant at CURENTIS AG since 2021 and has extensive project experience in the area of financial services and anti-financial crime. In addition to these activities, he has participated as an assistant in a number of auditing projects, including an Asset Quality Review (AQR) in preparation for the European Central Bank's bank stress test.
About the author: Karl Eugen Reis has been a consultant at CURENTIS AG since 2021 and has extensive project experience in the area of financial services and anti-financial crime. In addition to these activities, he has participated as an assistant in a number of auditing projects, including an Asset Quality Review (AQR) in preparation for the European Central Bank's bank stress test.
