(Bloomberg) -- Deutsche Bank AG has tied the interest rate on an interbank financing deal with Akbank TAS to goals on gender balance, renewable energy use and avoidance of funding to coal power plants, which it says is a first in the region.
The $300 million repurchase agreement with Turkey's second-largest lender by market value helps bring the German bank's financing for environmental, social or governance goals to more than 5 billion Turkish lira ($582 million) in the first six months of 2020, according to a statement Thursday.
It's the latest sign that the ESG label is increasingly being applied to more exotic corners of finance. But while green bonds allow investors to track the use of proceeds, it will be harder for the market to measure how an ESG repo delivers on the sustainability metrics to which the parties have agreed.
Deutsche Chief Executive Officer Christian Sewing has made clear he wants the bank to ride the rising tide of green finance as a way to win new business. The lender recently held an investor day dedicated entirely to sustainability, and has set itself targets to facilitate 200 billion euros ($260 billion) in sustainable finance and investments by the end of 2023. Deutsche has also linked top executives' pay to those targets.
Deutsche Bank didn't give further details on the key performance indicators or targets behind the Akbank loan pricing structure. The deal is the first time ESG targets have been attached to interbank financing in repo format in Central and Eastern Europe, Middle East and Africa, it said.
Deutsche Bank has won praise from analysts and Moody's Investors Service for its efforts to push sustainability criteria into its mainstream business, as the financial sector comes under increasing pressure to serve broader societal goals. And Akbank is trying to position itself as a leader in sustainable finance in Turkey, with a target of reaching 200 billion lira in qualifying lending by 2030.
The transaction, is “evidence of our ESG structuring ability,” said Orhan Ozalp, head of global emerging markets for Central and Eastern Europe and CEO of Deutsche Bank AS Turkey.
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