Deutsche Bank to get tougher with suppliers over sustainability from July

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Deutsche Bank annual meeting in Frankfurt
Employees of Germany’s largest business bank, Deutsche Bank, gather ahead of the bank’s annual shareholder meeting in Frankfurt, Germany, May 23, 2019. REUTERS/Kai Pfaffenbach/File Photo

FRANKFURT, May 18 (Reuters) - Deutsche Bank (DBKGn.DE) will require its vendors and suppliers around the world to have a sustainability rating from July, according to an internal memo seen by Reuters, a move that is unlikely to fully satisfy environmental activists.

The German bank's chief executive officer, Christian Sewing, will highlight the plan in a speech to shareholders at the lender's annual meeting on Thursday, said a person with knowledge of the matter.

Environmental groups plan to hold protests against the financing of oil companies at the bank's headquarters while the shareholder meeting is taking place.

Financial firms are coming under increasing pressure from campaigners and investors alike to take environmental, social and governance (ESG) issues into account in their business.

Kate Cahoon, a campaigner with activist, called the Deutsche rating initiative "greenwashing".

Last year, Deutsche announced it would require suppliers with contracts of more than 500,000 euros ($525,000) a year to have a sustainability rating.

The bank, which spends 8 billion euros a year on vendors, is now detailing the timing of that move for the first time.

In the memo, Deutsche details eligible rating agencies as EcoVadis, MSCI ESG, and others.

From next year, ratings will have to be "adequately high", which translates to a score of 25 out of 100 points from EcoVadis.

Tilman Massa, an activist with the Association of Ethical Shareholders, said a "rating is a first step, but it can't be the entire story".

Ratings can still conceal environmental destruction and human rights abuses, he said.

In recent years, Deutsche Bank has marketed itself as a bank that companies can turn to as they move to a greener future.

On Sunday evening, activists demanded at Deutsche Bank's headquarters in central Frankfurt that it stops financing a pipeline in Africa that they say will displace thousands of families and disrupt nature reserves.

Deutsche Bank is not financing the pipeline, known as the East African Crude Oil Pipeline (EACOP), a person with knowledge of the matter told Reuters. read more

Cahoon of said Deutsche's sustainability plan was an important step in the right direction and the result of sustained public pressure on the bank, but called on it to stop financing big oil companies.

($1 = 0.9529 euros)

Reporting by Tom Sims and Elke Ahlswede; Editing by Miranda Murray and David Clarke

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Covers German finance with a focus on big banks, insurance companies, regulation and financial crime, previous experience at the Wall Street Journal and New York Times in Europe and Asia.