KfW Research: Enterprises in Germany are ramping up their investments in climate solutions

• In 2023, businesses stepped up their efforts to improve their own climate footprint to EUR 85 billion
• Positive development is driven primarily by large enterprises, while SMEs are finding it hard
• Achieving net zero in Germany faces an investment gap of at least EUR 35 billion per year
• KfW CEO Stefan Wintels: “Climate action is high up on KfW’s agenda”

Businesses in Germany collectively expanded their commitment to climate solutions last year. The aggregate volume of climate investments by companies based in Germany rose by 12.1% to EUR 85 billion. Adjusted for inflation, that was an increase of 5.3%. But that positive trend was driven mainly by large enterprises. Last year, they invested EUR 50 billion in climate solutions, EUR 11 billion more than in the previous year – a price-adjusted increase of 19%. By contrast, the SME sector as a whole invested EUR 35 billion, after a EUR 36 billion in the previous year, which was 10% less on a price-adjusted basis.

These are the findings of the KfW Climate Barometer, which will be published for the third time this year. It provides what is thus far the only representative database for the investment behaviour of German businesses – from micro-businesses to large enterprises – on the road to climate neutrality. This year, 9662 enterprises took part in the survey between mid-February and mid-June. Climate-positive investments are defined as investments in measures aimed at avoiding or mitigating greenhouse gas emissions from the relevant business.

The number of businesses that undertook investments aimed at improving their own climate footprint dropped sharply in 2023 to around 340,000 of the approx. 3.8 million enterprises in Germany, 150,000 fewer than in 2022. That means the proportion of businesses implementing climate investments was down to a mere 9%. In 2022 it was still 13%, and in 2021 as high as 23%. This decline was driven by small and medium-sized enterprises, which dominate the business landscape in Germany in terms of numbers. SMEs that invested in climate solutions, however, significantly stepped up their efforts. The average sum invested by SMEs in climate action rose by 38% to EUR 146,000.

“Climate action remains high up on KfW’s agenda. Since 2017, we have committed some EUR 320 billion for climate and environmental finance, and in 2024 it will be around EUR 30 billion”,

said Stefan Wintels, CEO of KfW.

“We must now ramp up our efforts to combat the accelerating pace of climate change. The difficult economic situation is putting many enterprises under pressure and reducing their scope for investing in climate solutions. We need reliable frameworks in Germany and more support schemes in order to accompany SMEs in particular on the way to net zero.”

What is keeping enterprises from investing in climate action? According to the KfW Climate Barometer, there are a number of structural barriers alongside economic factors. The most important one reported by enterprises is uncertainty regarding the cost-effectiveness of climate investments (47%), followed by the lack of financial resources (37%) and lengthy planning and approval procedures (36%).

Enterprises that invested in climate solutions in 2023 focused mainly on climate-friendly mobility – electric vehicles and charging infrastructure. This was followed by measures aimed at the generation or storage of electricity and heat from renewables and improvements to the energy efficiency of existing buildings.

A comparison of current investment activity with the investment volume required for Germany to achieve its goal of climate neutrality shows that enterprises of all size classes must significantly step up their efforts. On average, the private sector needs to invest around EUR 120 billion each year – plus price increases over time – to achieve net zero by 2045. That means there is currently an investment shortfall of at least EUR 35 billion across the business sector, in addition to further investment requirements to close the gaps of previous years.

Even so, there is hope, since one fourth of all enterprises currently plan to increase their climate investments in the coming three years, meaning that the topic is likely to gain importance again.

The Climate Barometer by KfW Research can be found at www.kfw.de/klimabarometer

The dataset:

The business survey for the KfW Climate Barometer was conducted by GfK GmbH on behalf of KfW Group. A total of 9,556 small and medium-sized enterprises and 106 large enterprises took part in the survey, which was conducted between 12 February and 21 June 2024.

KfW supports SMEs with a number of promotional programmes on behalf of the Federal Government. More information is available at Support for Enterprises | KfW

KfW is one of the major financiers of climate action worldwide. Further information is available at KfW_COP_2024(PDF, 69 KB, accessible)