Deutsche Bank Transition toward a sustainable and climate-neutral economy Non-Financial Report 2022 Climate risk The management of reputational risk arising from climate-related risks is covered extensively in the following chapter of this report, “Environmental and social due diligence”. Scenario analysis and stress testing The bank participated in the 2022 climate risk stress test of the European Central Bank. In preparation for the exercise, the bank’s stress test methodology workstream developed methodologies for assessing portfolio impacts under the ECB’s set of scenarios. These scenarios included transition risk scenarios for credit (long and short term) and market risk (short term only), and physical risk scenarios, for credit risk only. The three long term scenarios, based on the scenarios of the Network for Greening the Financial System with a time horizon spanning to 2050, were: – An orderly scenario, which assumes an orderly transition with a smooth reduction in CO emissions to achieve the carbon 2 emission goals by 2050 – A disorderly scenario, which assumes a disorderly transition in which CO emissions decrease slowly until 2030, and 2 causing a disorderly transition in the following years to achieve the emission targets by 2050 – A hot house scenario, which assumes a world in which CO emissions are not reduced and the economy is confronted with 2 the materialization of increasing physical risks, resulting in GDP losses Physical risks scenarios tested the impact of droughts and heat for uncollateralized corporate lending, and the impact of floods for lending secured by real estate in Europe. Workstreams are in place to further develop internal climate risk modelling capabilities and integrate into internal stress testing and scenario analysis. In 2022 the bank also developed and ran an internal climate stress test on liquidity. The exercise included different scenarios: – Transition risk scenarios from the Network for Greening the Financial System (Net Zero 2050 Orderly, and delayed transition scenarios), with a 30-year time horizon – Physical risk scenario of extreme flood, with a 6-month time horizon – Reputational Risk scenario, with a 1-year time horizon Risk metrics and targets Financed emissions and exposure to carbon related assets The key metrics used to assess transition risk in the bank’s portfolios are carbon intensity and financed emissions. The bank estimates and monitors financed emissions using the standard from the Partnership for Carbon Accounting Financials and in line with the recommendations of the Task Force on Climate-related Financial Disclosures (see their Guidance on Metrics, Targets, and Transition Plans). The analysis is based on disclosed Scope 1 and 2 emissions of Deutsche Bank’s clients, for which the bank often relies on third-party providers, and on sectoral average emission factors where client data are not available. This emissions data is mapped to the bank’s loan exposure / commitments and clients’ enterprise values to estimate financed emissions and carbon intensity at client and portfolio level. For selected mortgage and commercial real estate portfolios, emissions are estimated using proxies based on Energy Performance Certificate ratings and internal methodologies. Overall corporate industry loan exposure, as well as loan exposure and financed emissions for the sectors which contribute the largest amount to Deutsche Bank’s Scope 1 and 2 financed emissions are disclosed in the tables below. The tables display, in descending order, the top 10 sectors by Financed Emissions calculated on a Total Commitments basis. The differences in sectors shown in the 2021 and 2022 tables are due to changes of the composition of the bank’s corporate lending portfolio. 45