Nature based solutions

Disclaimer: KfW Group is comprised of four institutions: KfW Development Bank, KfW IPEX Bank (Export credit agency), 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

Nature based solutions

The domestic arm of KfW offers the “environmental programme”, which provides finance for  environmental protection measures by commercial enterprises. The programme brochure states that, wherever possible, nature-based solutions and green infrastructure are particularly recommended. The measures are further detailed here. Supported measures include greening of streets and parking spots around commercial property, increase of natural, green spaces, as well as nature-based water management and protection of soil.

In a report, KfW Development Bank states that “NbS approaches will be increasingly applied in the Bank’s projects. These include ecosystem restoration (e.g. FLR), ecosystem-based adaptation and mitigation (e.g. REDD+), ecosystem-based management approaches (e.g. integrated coastal zone management) and ecosystem protection.” However, the report does neither outline concrete targets nor a strategy to integrate Nature based solutions systematically into the bank’s operations.

Biodiversity

In a report on its biodiversity investment, KfW Development Bank has outlined its current commitments and involvement.

The development branch supports 600 nature reserves in more than 60 countries spanning an area of 1.6m square km. The volume of ongoing projects in 2019 was just under €1.3 billion. The focus areas of those activities are in Africa and Latin America.

Several model funds have been created by branch – on behalf of the German Federal Government – that have raised nature conservation to a new level, both conceptually and financially: for example, the “Caucasus Nature Fund” for nature conservation in the Caucasus or the “Blue Action Fund (BAF)” to promote marine conservation worldwide.

KfW Development Bank has initiated the eco.business fund, a vehicle that enables companies and cooperatives in Latin America to finance investments that contribute to preserving biodiversity or to the sustainable use of natural resources (prevent deforestation).

Together with other actors, KfW Development Bank is currently designing the “Legacy Landscapes Fund”. Its aim is to contribute to the solid financing and conservation of the most important nature conservation areas in partner countries by 2030. To this end, KfW is establishing a foundation on behalf of the BMZ, in which numerous other donors, including philanthropic ones, are participating. The fund was introduced to a broader public at COP26 in Glasgow and has so far started with seven pilot sites of which two have already been officially approved.

Agriculture

KfW Group does only address some unsustainable agriculture practices in its exclusion list (such as for palm oil) and only partially promotes lending in the sector. KfW DEG is supporting private enterprises in developing and emerging economies in agriculture. While the investments are subject to an environmental and social risk assessment, it is unclear whether DEG actively promotes sustainable forms of agribusiness. 

KfW IPEX does not offer specific investment for agribusinesses. However, the branch provides short-term liquidity finance for commodity trading, to hedge associated risk. KfW IPEX does not provide any specific details on the support, but explicitly references coffee and cocoa farming in its introduction text.  KfW IPEX does assess environmental and social risks associated with agribusinesses..

KfW Development Bank has identified  two priorities for support of rural development. Specifically, the branch supports a higher efficiency in production methods while keeping environmental impact at a minimum. At the same time, KfW Development Bank fights malnutrition and hunger in developing countries. The branch also explicitly references adaptation as part of its support, but does not further specify how this is integrated into the rural support.

KfW Development Bank as co-designed the eco.business fund  which aims to invest in biodiversity and climate-friendly production methods in forest, agriculture and fishing businesses in Latin America. The fund is due to expand into African markets. A similar initiative is the Caribbean Biodiversity Fund, co-led by World Bank.

Forests

KfW banned investments in commercial logging operations for use in primary tropical moist forests and investments which could be associated with the destruction or significant impairment of areas particularly worthy of protection (without adequate compensation in accordance with international standards).

KfW implements the REDD Early Movers Programme (REM) on behalf of the BMZ. The aim is to reward pioneers in forest and climate protection for their achievements in forest conservation. Until 2020 €160 million have been paid out for avoided deforestation.