Institutional leadership and information sharing

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Paris alignmentReasoning
Paris aligned By definition of its sheer size, KfW is a highly influential market shaper and innovator in sustainable finance. KfW is represented and participating in most national and international initiatives for sustainable finance. 
Disclaimer: KfW Group is comprised of four institutions: KfW Development Bank, KfW IPEX Bank (International project and export finance bank), DEG (private sector finance in developing and emerging markets) and a branch for domestic lending and support. Unless specified otherwise, the provided information concern the entire KfW Group.

Explanation

KfW Group is the third largest bank of Germany and thus a major player in the German financial system. Outside of China, KfW is amongst the three largest development banks together with the European Investment Bank and the World Bank.

While KfW is a member of a variety of associations and initiatives, it has not been on the forefront of institutional leadership. Innovative approaches, such as the Blue Action Fund or the Eco.business Fund are usually commissioned by BMZ or BMU.

KfW representatives sit on supervisory boards of various organisations including DEG and KfW IPEX-Bank, as well as the German Energy agency and BEA, two organisations in which it holds shares.

KfW has been participating in many sustainable finance policy processes, such as the high-level expert group for the EU Taxonomy and as a member of the German sustainable finance council. KfW has been in particular influential on setting standards, such as for energy efficiency.

However, iven its size and capacity, KfW is sometime reluctant to weigh into the role of development banks in the transition toward climate-neutral, resilient economies, both domestically and abroad. As an example, despite close cooperation with the Agence Francaise de Developpement (AFD), KfW has abstained from leading on the formation of the Finance in Common summit. Similarly, KfW has refused to sign a statement to end international public support for fossil fuels at COP26, despite Germany joining the initiative.

Recommendation: KfW should expand its role as a standards setter and leader on impact management, as well as an innovator in sustainable and development finance for other peers. This implies that the progress KfW is making under the tranSform project and in other leading areas should come with a spillover effect for peer development banks.

 

Last Update: November 2022