• KfW completes its debut pilot voluntary carbon market transaction as a proof of concept (PoC)
• This pilot provides practical experience across due diligence, legal documentation, transaction execution and settlement
• KfW and its partners will use the lessons learned to explore how European carbon markets can be further strengthened

Carbon credits are a climate finance instrument and a complementary component of climate policy aimed at supporting climate mitigation activities. The development of the voluntary carbon markets in Europe is therefore to be welcomed, provided it is underpinned by clear standards, transparency, and robust processes.

Against this backdrop, KfW has decided to gain initial practical experience in the purchase, sale and operational settlement of voluntary carbon credits in the market. The proof of concept allowed KfW to better assess and develop the use of relevant execution and process models from operational, regulatory, legal documentation, and accounting perspectives.

Within the scope of its regulatory requirements, KfW has started its learning journey by conducting a proof of concept together with Deutsche Bank AG, Carbonfuture and Finance in Motion. The initiative has the objective to leverage this experience from this pilot transaction to further develop and contribute to market standards, processes, and infrastructure with a view to develop European carbon markets.

“We want to understand how carbon credit purchase, sale and settlement works in practice in the voluntary market, where improvements are needed and how KfW can contribute and engage. Our proof of concept under real-world conditions is intended to provide a basis for this. We would like to thank our partners Deutsche Bank AG, Carbonfuture and Finance in Motion with whom we were able to carry out the entire pilot,” commented Tim Armbruster, KfW Group Treasurer.

“Deutsche Bank AG is pleased to support this pilot under KfW’s leadership. We look forward to building on this collaboration and working with KfW to support the continued development of credible and robust carbon markets in Germany and across Europe”, commented Esra Turk, Global Head of Sustainable Finance, Investment Bank, DB AG.

The proof of concept represents a practical step in KfW’s engagement with the voluntary carbon market and provides a basis for continued collaboration with its partners to support its further development.