Deutsche Bank Transition toward a sustainable and climate-neutral economy Non-Financial Report 2022 Climate risk Integration into risk type frameworks and processes Credit risk Climate risk drivers are integrated across the different stages of the transaction lifecycle (including transaction approval / client onboarding, risk classification and credit ratings, portfolio analysis and monitoring, collateral valuation). Deutsche Bank's Environmental and Social Policy Framework outlines specific restrictions, due diligence and escalation requirements for sectors with inherently elevated potential for negative environmental impacts. In addition, new transactions or limit extensions with a significant impact on the bank’s financed emissions and / or net zero targets are reviewed by a dedicated Net-Zero Forum consisting of senior representatives from the Business, Risk and the Chief Sustainability Office. This review includes an assessment of client sustainability disclosures, transition strategies, decarbonization targets and governance. New transactions must fit within Deutsche Bank’s internal sectoral risk appetite aligned to net zero targets. The bank uses an internal climate risk taxonomy to identify sectors which are most impacted by climate transition risks. Sectors classified as high risk are subject to enhanced due diligence requirements in the credit rating process and transaction approvals. As part of the bank’s industry risk management framework, the Enterprise Risk Management team assesses sectoral risks and assigns each sector short- and long-term risk ratings. The long-term risk ratings include an assessment of a sector’s inherent vulnerability to climate risks and are an important input for setting sectoral risk appetite. Long-term risk ratings are incorporated into the bank’s internal counterparty rating model which the bank uses to guide client risk appetite. As part of the internal credit rating process climate and other ESG risks must be assessed and, where deemed material, documented. This may lead to adjustments of the relevant rating parameter (i.e., “special risks”). With regards to the valuation of collateral, the bank’s Global Collateral Policy sets its ESG standards based on respective minimum requirements of the Capital Requirement Regulation for initial valuation, monitoring and review over the life of the loan. Deutsche Bank’s underwriting standards require real estate collateral to be insured by the client. Such insurance often provides a protection against natural hazards. In some countries supplemental insurance against natural hazard is provided by the government. The bank’s German retail mortgage loan portfolio accounts for more than 80% of real estate collateral. The bank has estimated the amount of residential loans exposed to acute physical events, such as drought, earthquake, lightning, heavy rain, flooding, and according to where the collateral is located. The analysis was carried out through the Nomenclature of Territorial Units (NUTS) level 3 for purposes of aggregation. NUTS level 3 in Germany are Kreise (districts) and kreisfreie Städte (urban districts), of which there are 401 in total. At year end 2022, the bank had book value exposure of € 20.5 billion in 100-year flood zones. Compared to 2021 the volume increased by € 1.0 billion in line with the overall portfolio growth of the German mortgages. In Germany, the bank owns additional insurance against natural hazards, which provides further safeguard against physical risks. Acute physical risks to clients’ assets and collateral are also considered in the assessment of Commercial Real Estate credit risk exposures. Physical risks to real estate collateral are addressed primarily through the requirements outlined in the bank’s Credit Policies and Process Guides, which prescribe financed properties to be adequately and appropriately insured. The assessment of insurance requirements considers the potential impact of natural disasters, such as storms, floods, and earthquakes. Similar requirements are also in place for other physical collateral, including large movable assets (such as airplanes and ships) and smaller assets (such as cars and machines). The assessment is documented by means of the Capital Requirements Regulation’s compliance checklists. Insurance coverage on loan collateral is monitored on a regular basis, including by means of onsite inspections. Additional disclosures around exposures to physical risks are included in the bank’s Pillar 3 Reporting 2022. Market risk As part of the Market Risk Identification process individual business lines are asked to consider forward-looking and/or idiosyncratic material risks including climate and other ESG risks, which must be included in the Market Risk identification documentation. Climate-related risks are currently managed within the existing market risk framework and treated as a price trigger, in the same way as market events such as central bank announcements or earnings announcements. Market risk monitors and reports “brown” exposure (as per Deutsche Bank’s climate risk taxonomy) and financed emissions in its traded credit portfolio. The report provides granular views required for business management of exposures. 43