Legal Notice

Introduction / Summary

On March 10, 2021 the Regulation (EU) 2019/2088 of November 27, 2019 on sustainability-related disclosures in the financial services sector (Sustainable Finance Disclosure Regulation, SFDR) entered into force. This regulation aims to support sustainable investment by obliging financial market participants and financial advisors to disclose sustainability-related risks to investors and clients.
Pursuant to Article 3 SFDR, financial market participants shall be obliged to publish information about the integration of sustainability risks within investment decision-making procedures and in investment advice. The approach pursued by Deutsche Oppenheim will be explained in more detail below.

Deutsche Oppenheim Family Office AG applies an overarching approach to the management of sustainability that is set out in a number of group level policies and procedures. The group-wide Sustainability Policy delineates our main sustainability principles as well as the key requirements and responsibilities in connection with sustainability-related enquiries, non-financial sustainability
reporting and ratings, environmental and social due diligence in the context of reputational risk management, and, together with relevant risk frameworks and broader commitments, provides relevant context regarding the Deutsche Oppenheim's view on sustainability topics.

Whilst Deutsche Oppenheim Family Office AG does not currently apply an overarching formal policy regarding the integration of sustainability risks in the investment decision-making and advisory processes, Deutsche Oppenheim Family Office AG still takes sustainability risks into account, as further described in the following sections. In addition, business areas are working towards inclusion of the integration of sustainability risks within relevant policies and guidelines. These will be further enhanced on an ongoing basis as more sustainability related data becomes available over time.

Definition of sustainability risks

The following examples can help to clarify sustainability risks:

• As a result of the occurrence of extreme weather events as a consequence of climate change (known as physical risks), for example, production locations of individual companies or entire regions can be impaired or destroyed, leading to production stoppages, rising costs to restore the production locations and higher insu­rance costs. Furthermore, extreme weather events as a consequence of climate change, such as long periods of low water during droughts, can impair the transport of goods or even make it impossible.
• There are also risks in connection with the changeover to a low-carbon economy (known as transition risks): for example, political measures can lead to fossil fuels becoming more expensive and/or scarcer (examples: fossil-fuel phase-out, CO₂ tax) or to high investment costs as a result of requirements to renovate buildings and plant. New technologies can displace familiar technologies (e.g. electric mobility), and changes in custo­mer preferences and expectations in society can endanger companies’ business models if they do not react in time and take counter measures (by adjusting their business model, for example).
• A substantial increase in physical risks would require a more abrupt changeover in the economy, which in turn would lead to higher transition risks.
• Social risks arise from aspects such as non-compliance with labour law standards (for example, child labour and forced labour) and compliance with occupational health and safety regulations.
• Examples of risks that arise within the scope of corporate management due to inadequate corporate gover­nance and that can lead to high fines include non-compliance with taxpayer honesty and corruption.

Sustainability risks affect the following traditional risks of investments in securities in particular, and if they occur, could have a significantly negative effect on the yields of an investment in securities:

• Sector risk
• Price change risk
• Issuer / Credit risk
• Dividend risk
• Liquidity risk
• Currency risk

Method of including sustainability risks for Financial Markets Participants and Financial Advisor

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Deutsche Oppenheim Family Office AG 5299003G9CMV5CY1FU81

Summary

Deutsche Oppenheim Family Office AG, 5299003G9CMV5CY1FU81 considers principal adverse impacts of its investment decisions on sustainability factors. The present statement is the consolidated statement on principal adverse impacts on sustainability factors of Deutsche Oppenheim Family Office AG (Deutsche Oppenheim).

This statement on principal adverse impacts on sustainability factors covers the reference period from 1 January to 31 December 2023.

This statement is provided under the Sustainable Finance Disclosure Regulation (SFDR) – Regulation (EU) 2019/2088, which defines Financial Market Participants (FMPs) and in scope financial products. Therefore, this disclosure of principal adverse impacts applies to Deutsche Oppenheim to the extent it is an investment firm which provides portfolio management and investment decision making to EU clients. 

Principal Adverse Impacts are defined by the European Commission as “negative, material, or likely to be material effects on sustainability factors that are caused, compounded by, or directly linked to investment decisions and advice performed by the legal entity”. The principal adverse impacts, including their identification, prioritisation, and any action to be taken to manage exposure to them, will be reviewed by Deutsche Oppenheim Family Office AG annually in accordance with the Group Sustainability Council (GSC) of Deutsche Bank AG. Currently, Deutsche Bank AG follows a principle-based approach. As the regulatory requirements and associated data change on an ongoing basis, Deutsche Bank AG is fully committed to integrating a more thorough and exhaustive principal adverse impact framework into its discretionary portfolio management services in alignment with such developments.

Since 10 March 2021, Deutsche Oppenheim makes factors relating to select principal adverse impacts transparent against the investment universe, enabling informed decisions in the selection process for the construction of relevant financial products. The focus will be on making the data available within the processes for selection of underlying products for Deutsche Oppenheim managed portfolios. It is of the utmost importance that Deutsche Oppenheim, given its fiduciary capacity, makes all investment decisions in the best interests of its clients and, in doing so, takes all financial and risk factors into account. Considering these principal adverse impacts is therefore an additional aspect to be reviewed by Deutsche Oppenheim portfolio managers when making investment decisions but will not automatically outweigh other relevant factors. Deutsche Oppenheim works with third-party data providers to help it to obtain the required data and monitor its investable product universe. This enables it to include information on the principal adverse impacts across the applicable universe on a monthly basis.

While Deutsche Oppenheim carries out quantitative reporting in respect of all mandatory principal adverse impacts set out in the SFDR, it considers – in its role as a financial market participant – selected principal adverse impact indicators within its investment process. Indicators are selected on the basis of data availability, alignment with adverse activities on which the Deutsche Bank Group is particularly focused and the ESG Investment Classification Criteria, which set out the standards to be met in the manufacturing of ESG investment products. The investment process must allow for robust asset allocation across different regions, asset classes and sectors, which means that principal adverse impacts are not always applicable, or data is not readily available for all of the securities invested in.

The prioritised principal adverse impacts are as follows:

• Greenhouse gas (GHG) emissions

  • Exposure to fossil fuels

    Industries that derive revenues from the exploration, mining, extraction, distribution or refinement of solid, liquid or gaseous fuels (i.e., coal, oil, natural gas)

  • Carbon emissions

    The carbon dioxide equivalents released by a company, measured by volume and intensity




• Social- and employee matters

  • Compliance with United Nations Global Compact principles

    At a minimum, companies need to fulfil fundamental responsibilities in the areas of human rights, labour, the environment and anti-corruption

  • Exposure to controversial weaponsC

    Countries that have an industry tie to anti-personnel mines, cluster munitions, chemical weapons and biological weapons. An industriy tie includes ownership, manufacture or distribution.

Deutsche Oppenheim will continue to monitor its exposure to adverse sustainability indicators and where applicable may adapt its strategy in accordance with publication of each annual quantitative statement.

As standards regarding the consideration of sustainability criteria are still emerging and reporting frameworks have partly not yet come into force, data is currently not always available from the investee companies, the bank’s issuers or third-party data providers, especially with regard to the adverse impacts on sustainability factors.

Description of the principal adverse impacts on sustainability factors

Deutsche Oppenheim discloses data related to principal adverse impact (PAI) on sustainability factors for products where it acts as a Financial Market Participant and in scope of the SFDR. The following disclosure is an aggregation of all in scope assets of Deutsche Oppenheim. The data is relevant for the reference period 1 January to 31 December 2023.

At this point of time data availability and data quality for principle adverse impact on sustainability factors of the financial investment universe is still evolving. This is due to various factors including but not limited to, alignment and applicability of reporting standards for investee companies and sovereign issuers, evolving methodologies for calculation of sustainability indicators and ongoing efforts in the market and data providers to make data accessible and standardized.  Deutsche Oppenheim considers the data is not yet sufficient to derive well-founded decisions regarding actions to be taken. It is possible that as data availability and quality improve the impact on principal adverse impacts could increase organically and beyond the control of Deutsche Oppenheim.

Additionally, following the targeted consultation of the SFDR regulation in September 2023 there is potential for further changes to the regulation that may invalidate any actions set. Therefore, for its current quantitative reporting Deutsche Oppenheim will continue to disclose and monitor its principal adverse impacts of its investment decisions on sustainability factors but without deriving any planned actions or applying thresholds for the following reference period to avoid or reduce the main negative impacts on sustainability factors.

Deutsche Oppenheim will review its current approach on an annual basis.

The investment universe for which Deutsche Oppenheim acts as a financial market participant includes all assets including investee companies, sovereign issuers, indirect investments (Funds), derivatives, commodities, and cash. In accordance with the evolving guidelines, Deutsche Oppenheim has updated its approach to calculating adverse impacts and, for this reporting period, includes all investments held in the portfolio for the calculation of individual PAIs. This change in methodology means that the figures are not directly comparable year on year. To facilitate this comparison, additional “Memo” values have been included in the table. These corresponding approximate values for 2022 are based on the updated methodology to enable a more consistent year on year comparison. Further information is also included in the explanation column for each adverse impact, where necessary.

For the current reference period, Deutsche Opppenheim includes information on the coverage, which is represented as a percentage share of total investments for which adverse impact data to individual PAIs were available.  The coverage values also reflect the methodology change, with coverage for the year 2022 shown as a percentage of investments applicable to each PAI. However, for 2023, the percentage for coverage is represented as a proportion of all investments. This circumstance results in a generally lower coverage rate for the values of 2023.

The calculation is based on principal adverse impact data for direct investments into investee companies and sovereigns and indirect investment products (Funds) sourced from a third-party data provider assessed against four snapshots of the assets managed during the reference period (31 March / 30 June / 30 September / 31 December).

1) Coverage is included as voluntary additional information. It is based on the percentage of the applicable investment universe for which data was available for the adverse impact indicator.  The investment universe includes all assets including investee companies, sovereign issuers, indirect investments (Funds), derivatives, commodities, and cash.

2) Explanation has been consolidated across all adverse impacts to highlight the general changes in data that need to be considered when considering year on year comparisons

3) For its current quantitative reporting Deutsche Oppenheim Family Office AG will not include planned actions or apply thresholds for the following reference period, due to data limitations and regulatory evolution.

4) Due to significant methodological changes in calculating adverse impacts, additional so-called “Memo” values for the year 2022 have been included to facilitate comparison of previous year's values to the new ones. These Memo values were calculated based on the 2022 holdings but taking into account the calculation method and data foundation used for 2023, and therefore should not be considered an exact representation of the year 2022 but rather as a reference point.

Description of policies to identify and prioritize principal adverse impacts on sustainability factors

Deutsche Bank Group has established a robust governance, helping to manage, measure, and monitor sustainability activities across the bank. This governance structure includes a number of forums devoted entirely to sustainability. The most senior is the Group Sustainability Committee, which was created in 2020. Chaired by the Chief Executive Officer and the Chief Sustainability Office (Vice-Chair), it consists of Management Board members, the heads of Deutsche Bank AG’s business divisions and certain infrastructure functions.

Deutsche Bank Group applies an overarching approach to the management of sustainability, which is set out in various group level policies and procedures.

As the regulatory requirements and data change on an ongoing basis, Deutsche Oppenheim as a subsidiary of Deutsche Bank AG - where it acts as a Financial Market Participant - does not have a single defined policy relating to principal adverse impacts. Where relevant, however, they are covered by existing procedure documents. Deutsche Oppenheim is fully committed to integrating a more thorough and exhaustive principal adverse impact framework into its discretionary portfolio management services in alignment with such developments.

Frameworks for Deutsche Oppenheim where it acts as a Financial Market Participant describe the core processes, responsibilities, governance structures and monitoring environment. These stipulate that portfolio managers are provided with selected principal adverse impact information alongside the investment universe, enabling them to make informed decisions in the selection process for the construction of relevant managed portfolios. The focus is on making the data available within the processes for the selection of underlying products for Deutsche Oppenheim managed portfolios. It is of the utmost importance that Deutsche Oppenheim, given its fiduciary capacity, makes all investment decisions in the best interests of its clients and, in doing so, takes all financial and risk factors into account. Considering these principal adverse impacts is therefore an additional aspect to be reviewed by Deutsche Oppenheim portfolio managers when making investment decisions but will not automatically outweigh other relevant factors.

For financial products that follow an ESG investing approach, Deutsche Bank AG has additionally specified a ESG Classification Criteria Procedure (published 2021) that has to be adhered to Deutsche Oppenheim too. Deutsche Oppenheim in its role as a Financial Market Participant uses third-party data providers to exclude or set threshold limits on exposure to industries or practices that are aligned to select adverse sustainability indicators.  

Deutsche Oppenheim in its role as a Financial Market Participant identifies and prioritizes selected principal adverse impact indicators within its investment process. The selection of indicators is determined via data availability, alignment to adverse activities in focus by Deutsche Bank Group, and the ESG Investment Classification Criteria which sets out standards to be met for portfolio management that considers ESG criteria. The investment process must allow for a robust allocation across different regions, asset classes and sectors, and as such principal adverse impacts are not always applicable or data is not readily available for all securities invested in. Deutsche Oppenheim will continue to monitor its exposure to adverse sustainability indicators and where applicable may adapt its strategy in accordance with the publication of each annual quantitative statement.

Deutsche Oppenheim also regularly performs an assessment to determine the materiality of non-financial topics for the bank and its stakeholders. As part of this assessment, Deutsche Oppenheim assesses actual and potential positive and negative impacts as well as actual and potential risks and opportunities for environmental, social and governance topics in terms of Deutsche Oppenheim business activities, business relations, and products and services.

For the assessment of principal adverse impacts on sustainability factors, Deutsche Oppenheim relies on data provided by by third-party data providers. These previously mentioned providers expose data as reported by investee companies, or investment fund managers. If no data from the investee company or investment fund company is available, the third-party data provider may provide estimated data which can be used.

Deutsche Oppenheim does not guarantee that this information is correct or complete. Furthermore, Deutsche Oppenheim cannot guarantee the correctness of the third-party data provider’s assessment. Deutsche Oppenheim also has no influence on any disruptions to the third-party data provider’s analysis and research preparation.

As the standards and the regulatory framework regarding the consideration of sustainability criteria are still evolving, data on the consideration of principal adverse impacts is not always available and there may still be restrictions on the consideration of the principal adverse impacts.

To minimise these restrictions, Deutsche Bank AG has carefully selected its third-party data provider and maintains close contact with regard to changes in the quality of the data.

Engagement policies

Where Deutsche Oppenheim acts as a financial market participant for financial products within the scope of the Disclosure Regulation, it does not currently engage directly with investee companies and therefore does not influence their business activities or risks.

References to international standards

Deutsche Oppenheim is embedding sustainability into its policies, processes, and products, focusing on four dimensions: Sustainable Finance, Policies and Commitments, People and Operations as well as Thought Leadership and Stakeholder Engagement. Making progress in these dimensions will enable Deutsche Oppenheim to maximize its contribution to the achievement of the Paris Climate Agreement’s targets and the United Nations (UN) Sustainable Development Goals.

To underpin its long-standing commitment to sustainability, Deutsche Oppenheim follows internationally recognized principles for sustainable business and banking conduct and formally endorses universal sustainability frameworks and initiatives such as:

• the 10 principles of the UN Global Compact
• the UN Principles for Responsible Banking and
• the UN Guiding Principles on Business and Human Rights
• Signatory of Finance for Biodiversity Pledge
• Member of Finance for Biodiversity Foundation

By adhering to certain internationally recognized standards, such as the conventions of the United Nations Global Compact Principles, setting a maximum involvement within certain sectors, e.g. thermal coal and/or unconventional oil/gas and by excluding activities in connection to e.g. controversial weapons such as landmines, cluster munitions, biological and chemical weapons,, Deutsche Oppenheim where acting as a Financial Market Participant, indirectly aligns to certain principal adverse impacts.

Within portfolio management services, Deutsche Oppenheim collaborates with third-party data providers for data related to sustainability factors of investee companies for direct as well as indirect investments.

For portfolio management services, Deutsche Oppenheim is invested in developing net-zero aligned forward-looking climate scenarios, which are aligned to the Paris Climate Agreement. However, currently Deutsche Bank AG does not consider climate-scenarios in the investment making decision process.

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Deutsche Oppenheim Family Office AG When providing investment, Deutsche Oppenheim Family Office AG (‘Deutsche Oppenheim’) considers the principal adverse impacts on sustainability factors, which are explained below. The principal adverse impacts on sustainability factors are dealt with in Article 4 of Regulation (EU) 2019/2088 of 27 November 2019 on sustainability-related disclosures in the financial services sector (Sustainable Finance Disclosure Regulation – SFDR). These principal adverse impacts on sustainability factors are specified in more detail in Article 11 of Delegated Regulation (EU) 2022/1288 of 6 April 2022.
In its capacity as an investment and insurance advisor, Deutsche Oppenheim takes the following principal adverse impacts on sustainability factors into account for all finance products managed by EU legal entities within the meaning of the SFDR managed portfolios, alternative investment funds (AIF), insurance-based investment products (IBIP), pension products, pension schemes, undertakings for collective investments in transferable securities (UCITS), pan-European
personal pension products (PEPP):

• Exposure to fossil fuels
  Industries that derive revenues from the exploration,
  mining, extraction, distribution or refinement of solid,
  liquid or gaseous fuels (i.e. coal, oil, natural gas)
• Carbon emissions
  The carbon dioxide equivalents released by a company,
  measured by volume and intensity
• Complinace with United Nations Global Compact
  principles
  At a minimum, companies need to fulfil fundamental
  responsibilities in the areas of human rights, labour, the
  environment and anti-corruption
• Exposure to controversial weapons
  Industries that derive revenues from the manufacture or
  sale of controversial weapons (i.e. anti-personnel mines,
  cluster munitions, chemical, biological, radiological and
  nuclear weapons)

EU managers or manufacturers of managed financial products (financial market participants as defined by the SFDR) that, at the reporting date, meet the criterion of having on average more than 500 employees during the financial year are required to publish a statement on their strategy for considering and addressing the principal adverse impacts. 

As part of our advisory due diligence process, we will review the principal adverse impact statements published by financial market participants and note where their actions and strategies to consider adverse impacts on sustainability factors align with those of Deutsche Oppenheim. If, in the opinion of Deutsche Oppenheim, a statement contains significant departures from the requirements laid down by Deutsche Oppenheim, this may lead to us excluding the relevant manufacturer’s products from Deutsche Oppenheim’s investment advice. Where managers or manufacturers of managed financial products publish indicators of adverse sustainability factors for their financial products from 30 June 2023 onwards, we will incorporate these into our overall qualitative assessment of these financial products. We have not defined any thresholds, rankings or weightings for the indicators in this regard. A key issue for consideration in the assessment processes is whether the indicators for a financial product improve over time. The enhanced due diligence process provides the basis for more clarity and transparency regarding the principal adverse impacts that financial market participants consider in their investment decisions. This enables us to identify products that do not meet our quality requirements and can result in us not recommending those financial products.

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The consideration of sustainability and sustainability risks is an integral part of the performance-based determination of variable compensation at Deutsche Bank Group, both for employees and the Management Board. Where appropriate, we have set sustainability-related targets which include financial and nonfinancial targets such as sustainable financing and investment volumes as well as culture and conduct. Furthermore, we expect all employees of Deutsche Oppenheim Family Office AG to adhere to the sustainability principles stipulated in our code of conduct, which aim to generate sustainable value for our clients, employees, investors and society at a large. The code of conduct is embedded in our governance,
policies, processes, and control systems.

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