Level of climate finance transparency

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Paris alignmentReasoning
Some progress KfW provides little overall data on its climate-related lending. KfW Development Bank is transparent and provides project level data, as well as overall data on its lending. It is recommended that all branches adopt the transparency practice of KfW Development Bank. KfW IPEX does not disclose any project-related data.
Climate finance dataOnly reports mitigation and adaptation totals to the International Development Finance Club.
Financial intermediary lendingKfW does not disclose financial intermediary sub-projects on its website
KfW Development BankParis aligned –  KfW Development Bank provides project by project level data and discloses impact assessments. Projects are disclosed according to focus areas such as energy or climate and environment.
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 does not publish an aggregated overview of its lending across the four branches on a project by project basis. The bank has identified climate change and environment as one of four megatrends butdoes not provide a definition of what of its investments isconsidered to contribute to these trends. In its 2020 Sustainability Report, KfW reports the share of green finance (including climate finance) for each branch and aggregated. The share of financial commitments that  relate to climate and the environment differ heavily between the branches. KfW has set itself a quota to reach 38% of annual commitments for the megatrend climate change and environment.

  1. Overall in 2020, the Bank commited 33% (€44bn) to activities related to climate and the environment.
  2. The domestic branch commits 40% for SME and private clients, while committing only 9% for tailored finance and public clients.
  3. KfW IPEX commits 17% for activities that relate to climate and the environment.
  4. KfW Development Bank and DEG commit 41% and 36% respectively for activities related to climate and the environment.

The bank branches are assessed separately.

According to the IDFC Green Finance Mapping 2020, KfW Group committed €28.2 billion for mitigation activities and €2.4 billion for adaptation activities in 2019. Green commitments totalled €32.6 billion.

KfW Domestic Branch

KfW domestic branch does not provide project-by-project level data. However, the majority of its commitments is in form of lending programmes with relatively small disbursement. KfW provides a detailed  disbursement reports that includes data on environmental sustainability and its energy efficiency & renewable energy programme.  However, the domestic branch only reports the aggregated volume of its largest lending programme for climate change and the environment (Energy-efficient construction and refurbishment programmes – €35.3 billion).

Recommendation: In addition to disbursements and given the relatively small amounts of disbursements, KfW should report the aggregated impact (e.g. electricity generation, saved energy, reduced GHG emissions) for programmes with disbursements below €5,000,000. For larger projects (>€5,000,000), KfW should provide project-by-project level data, including expected impact and relationship to the megatrend climate change and the environment.

KfW IPEX Bank

The export finance branch of KfW does not disclose lending on a project by project basis. KfW IPEX does report its aggregate commitments for its business sectors, which includes investment in oil and gas up- and mid-stream investment. However, this is not further broken down into specific sectors (for instance, the share of renewable energy versus the share of fossil fuel-fired power generation.)

KfW Development Bank

KfW Development Bank reports its climate finance volume through the OECD Database Info-reporting, as part of the BMZ’s reporting of climate finance. KfW Development Bank does provide project-by-project data and has a dedicated page to report on impact and environmental and social risks. Information on the environmental and social risk classification of all projects has been published on the transparency portal since mid-2019. This allows for filtering on the regional, country and project focus level.

KfW DEG

KfW DEG does disclose some project-by-project level data but shares fewer systematic information about its impact on climate change and the environment than KfW Development Bank. DEG discloses some of its impact in a separate report, which includes broad-stroke insights into sector-specific portfolios, such as energy. 27% of DEG operations are through financial intermediaries. DEG doesn’t have a framework to assess climate-financial risks associated with intermediary lenders.

KfW’s group wide impact management

As part of its “tranSForm project”, the KfW Group has been gradually establishing a group-wide impact management system since 2020.

The Bank claims that it understands “impact” as the correlations between KfW’s promotional activities and their specific impact on the three dimensions of sustainability (economic, environmental, social). KfW has derived strategic impact categories from it and underpinned them with initial indicators that will be continuously developed and expanded in the coming years. These clearly defined and measurable indicators will eventually result in a KfW-wide ‘impact balance sheet’, the centrepiece of KfW- wide impact management. From the year 2022, the essential impacts of the customer and partner activities financed by KfW are to be regularly reported internally for the whole group. KfW also plans to make impact information public from 2022 onwards.

 

Last Update: January 2022

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