KfW: Sectoral guidelines for oil and natural gas come into force

• 1.5°C-compatible management in the oil and natural gas sector for the first time
• Effective contribution to the transformation towards greenhouse gas neutrality

KfW Group is expanding the management of its new business by adopting specific sector guidelines in accordance with the Paris Climate Agreement. Following its comprehensive coal phase-out in 2019, it already introduced six Paris-compatible sector guidelines in 2021.

As of this month, KfW is now also managing new financing commitments in the oil and gas sector in accordance with the Paris Climate Agreement, applying far-reaching exclusions, including for the exploration, development and production of crude oil and natural gas. Furthermore, financing is limited in terms of volume and timing (“staggered” exclusions). The extraction and development of oil has not played a role in KfW for the last ten years, and this is now officially anchored in the sector management. This marks the first time that KfW has established management guidelines for the oil and natural gas sector, which are highly relevant for global climate protection.

The sector guidelines are group-wide minimum requirements for the climate compatibility of new commitments. With its sector guidelines, KfW is focusing on greenhouse gas-intensive economic sectors in order to support the global transformation process towards greenhouse gas neutrality in a targeted manner. Since 2021, KfW’s Paris-compatible sector guidelines have included the automotive, iron and steel production, buildings, aviation, power generation and shipping sectors. In 2022, these sector guidelines were made more ambitious by aligning them to the 1.5°C target based on the International Energy Agency’s Net Zero by 2050 scenario. These sector guidelines were then implemented in January of this year.

From this month, the management is complemented by a sector guideline for the oil and natural gas sector, which has also been derived from the “Net Zero by 2050” scenario. The Paris-compatibility of financing commitments in the oil and natural gas sector is ensured by group-wide financing restrictions and exclusions, which have also been added to KfW Group’s exclusion list. Analogous to the sector guidelines for export credit guarantees of the German Federal Government, and provided that compatibility with the 1.5°C target is ensured, there may be narrowly limited exceptions in the gas sector until the end of 2025 for the purposes of national security and geostrategic supply security.

Note: KfW’s sector guidelines and further information on KfW Group’s sustainable finance concept can be found here:
Sustainable Finance | KfW