A KfW promotional programme aims to provide SMEs with targeted support to help them achieve the German Federal Government’s and EU’s climate targets. The novelty here is that businesses and self-employed professionals can claim funding not just for using climate-friendly technology, but also for manufacturing it. Experts Luise Thomas and Dr Henrike Koschel answer our questions on the climate action campaign for SMEs.
About Henrike Koschel
At KfW Mittelstandsbank Dr Henrike Koschel is responsible for the development and management of products for environmental and energy finance.
KfW has been promoting measures to increase energy efficiency and encourage the use of renewable energy sources in companies for many years now. Why was another promotional programme introduced in March 2020?
LUISE THOMAS: The climate action campaign for SMEs is there, like KfW’s other promotional programmes, to help the economy achieve the German Federal Government’s climate targets. SMEs play a key role in this, which is why the programme is explicitly aimed at them. The funding gives entrepreneurs an additional incentive to invest more in climate-friendly measures. We aren’t restricted to energy efficiency and renewables here, important as they are. We’re also supporting manufacturers, the transport sector and green IT, for example. When choosing the investments that should receive funding, we relied heavily on the EU Taxonomy. One desirable side effect of our programme would be to introduce German SMEs to the EU Taxonomy, as it will play a decisive role in defining climate-friendly, sustainable industry going forward.
“KfW is acting as a trailblazer in the financing of sustainable investments.”
About Luise Thomas
Luise Thomas works together with Henrike Koschel in the product management of KfW Mittelstandsbank.
What is the EU Taxonomy and what does it look to achieve?
HENRIKE KOSCHEL: For the first time, the EU Taxonomy has created an EU-wide framework for ecologically sustainable economic activity. This standardised classification system should offer more transparency and comparability regarding how sustainable finance products and companies are, and steer capital flows towards greater sustainability.
What does this classification system mean for SME financing?
KOSCHEL: It’s really significant because, going forward, certain finance products and companies will only be able to market themselves as ecologically sustainable or “green” if they meet the requirements set out in the EU Taxonomy. In its “TEG Report”, the EU Technical Expert Group on Sustainable Finance developed some initial draft criteria for climate-friendly activities. These criteria will only become binding from late 2021 but they already form the basis for our technical requirements in the climate action campaign. In this regard, KfW is acting as a trailblazer in the financing of sustainable investments.
The EU Taxonomy is a classification system for environmentally sustainable economic activities, developed by a group of experts at the European Commission. Its final report contains guidance for businesses and financiers on measures that can help to reduce CO₂ emissions across Europe to zero by 2050.Find out more
Who will benefit in particular from the new promotional offer?
THOMAS: The promotion is generally aimed at companies with annual turnover of up to EUR 500 million. It should be especially beneficial for manufacturers of climate-friendly technologies. Up until now, there has been no support for the manufacturing of climate-friendly technology — just for using it. With the climate action campaign, we want to change that. Anyone who manufactures climate-friendly technology, including associated products and key components, such as renewable energy installations, insulating material for buildings or low-emission vehicles, can take advantage of our new promotion. Furthermore, applications are welcome from municipal enterprises who, for example, are rolling out ambitious projects in areas like sustainable mobility or management of waste and waste water.
“It should be especially beneficial for manufacturers of climate-friendly technologies.”
What exactly does the promotion entail?
KOSCHEL: The promotion consists of a low-interest loan of up to EUR 25 million and a climate grant. The grant is paid direct to the company. It is currently set at up to six per cent of the loan amount. At present, KfW can adjust the amount in line with market developments in the medium term. The “up to” indicates that state aid legislation may be relevant in determining the actual grant amount.
With the climate action campaign for SMEs, KfW supports investments in measures to reduce and avoid greenhouse gas emissions in an effort to introduce mid-sized companies to the upcoming EU Taxonomy for climate-friendly activities.Find out more
Is there specific evidence that the SMEs need to provide?
KOSCHEL: Yes, there is some, depending on the purpose of the loan. For example, for the manufacture of low-carbon technologies and products, it may be necessary to conduct a carbon footprint assessment and have this certified by an expert. Or, if an energy-intensive company wants to seek support for a project that may take up to five years to meet the relevant requirements. In that case, an expert will have to certify the applicant’s investment plan. Because a lean application process is important to us, there is no need to submit these documents to KfW. They can remain with the company.
Published on KfW Stories: 24 September 2020.