KfW Sustainability Report 2020: Transitioning the group into a sustainable and zero-emissions future

• Overall strategy is in place: ESG risk management will be strengthened, Paris compatibility and SDG contribution of financing activities complement KfW’s strategic objectives
• TranSForm will guide implementation up to 2024

KfW’s latest Sustainability Report entitled ‘2030: a decade of change’ will go online today. “The current report illustrates that we are vigorously pursuing the transition to a sustainable and climate-friendly economy and society. We are positioning ourselves proactively in order to invest in the opportunities of the transformation and secure a successful transition phase”, explained Dr Günther Bräunig, Chief Executive Officer und Chief Sustainability Officer of KfW Group.

In this exceptional pandemic year 2020 the men and women on KfW’s staff very swiftly implemented the support measures which KfW developed in record speed for the economy at home and abroad. “We regard our support as a substantial contribution to the often overlooked economic dimension of sustainability. Besides, the special challenges have triggered an enormous surge in digitalisation for all our employees, the group and the overall economy”, said Bräunig. “This is an important basis for the necessary long-term transformation of the economy in the years ahead.”

The sustainability report shows that all sectors of the group are constantly making improvements in sustainability, whether it be in regard to strategy, banking business and operation or the workforce. Here are some examples of the aspects reported:

KfW Roadmap Sustainable Finance expands the strategy

KfW’s ambitious sustainability management and commitment enabled it to achieve one of its most important strategic objectives in 2020: It defended its position among the top group of international promotional and development banks in the renowned sustainability ratings.

KfW has evolved to become a transformative promotional bank for a greenhouse gas-neutral future, thereby also fulfilling a mandate from the German Federal Government. “After two years of hard work across the group, we adopted the KfW Roadmap Sustainable Finance in December 2020, which put KfW Group on a path in line with the UN Sustainable Development Goals”, explained Bräunig. “Ensuring Paris compatibility enables KfW to achieve a greenhouse gas-neutral portfolio in conformity with the German and EU objectives at the latest by 2050.”
KfW has already begun to implement this under its “TranSForm” project, which will run until 2024. “We will steer new business strategically so that it measurably contributes to the UN Sustainable Development Goals (SDGs) and is consistent with the Paris climate targets. These two sustainability objectives have been newly enshrined in KfW’s strategic objectives”, said Bräunig.

Core elements of the TranSForm project:

• Successively introduce Paris compatible sector guidelines, beginning with emissions-intensive sectors (for example electricity generation and buildings). Here KfW will gradually increase requirements for the climate compatibility of KfW-financed technologies to actively support the transformation of the real economy. Accordingly, technologies that harm the climate will be phased out of the portfolio.
• Establish a GHG accounting system for the entire KfW portfolio that enables KfW to systematically verify to what extent the sector guidelines effectively steer its financings towards the objective of a GHG-neutral portfolio by 2050.
• Systematically strengthen the analysis of ESG risks in risk management across the group and further expand climate risk reporting. This will effectively capture both risks and opportunities and make them transparent to all stakeholders in order to further strengthen their confidence in KfW’s actions.
• Establish an impact management system guided by the SDGs, which will make the contribution of KfW’s core business to the UN objectives measurable. A dedicated team from the Corporate Development Department is already developing uniform group-wide impact indicators for systematic measurement and reporting on the sustainability impact of all KfW financing activities.

Priority areas in sustainable banking business

In 2020 each new KfW financing operation contributed to at least one SDG. Even though the pandemic overshadowed all else, KfW committed EUR 44.4 billion to climate action and environmental protection projects around the world, substantially lifting the target environment quota, which had been raised to 38% at the beginning of the previous business year. Adjusted for coronavirus assistance measures, it actually made up 50% in 2020.
As a bank committed to responsibility, KfW set an important qualitative priority in the area of environmental and social impact assessments in 2020. A further 17 ESIA experts were hired, and 20 new ESIA expert positions are to follow this year, raising their number to a total of 66.
Responsibility also involves transparency: Since early 2020 the summarised ESIA findings have been published on the transparency portal of KfW Development Bank, which was launched in 2019. In addition, all financing projects of KfW Development Bank have been subjected to a climate streaming since 2020. In order to more efficiently meet the challenges of climate action and adaptation to climate change, aspects of climate change are taken into consideration already when a project is designed (as well as in the course of its implementation). Staff receive continuous training in this area.
In ESG risk management, a key element of KfW’s forward-looking sustainability strategy is the expansion of climate reporting in accordance with the TCFD standard. Whereas the first TCFD report (2019) explained the consequences of a 2-degree global warming scenario on the oil and natural gas portfolio, KfW now reports on the impacts of physical climate risks on KfW’s portfolio on the basis of three analyses with a different focus (each based on the worst-case climate scenario of the IPCC). KfW also reports on its first climate stress test for its portfolio, which it based on the scenario of a “disorderly transition”, that is, the assumption of a particularly pronounced increase in transitory risks from 2030.

The first section of the KfW Sustainability Report published today contains data in accordance with the CSR Guideline, the German Commercial Code and the GRI standard, as well as – for the second time – climate reporting according to the TCFD recommendations.
The second section will be published in the form of a magazine on 30 June 2021. It will address the SDGs and group-wide impact management in detail.

Service: Click here to access the

KfW Sustainability Report 2020(PDF, 2 MB, non-accessible)

Press release on SDG mapping of KfW’s financing activities in 2020

Presentation on TranSForm: project charts and graphs(PDF, 2 MB, non-accessible)