SDG 13 - Climate action

Emissions of climate-damaging gases continue to rise and have reached a new high in recent years, according to the WMO. The increase was primarily due to the continued consumption of fossil fuels, fires and loss of nature – fewer natural CO₂ stores.

As we know, the use of fossil fuels harms the climate and is no longer economically viable in many applications. At the same time, the demand for energy is growing, according to the IEA, by up to 15% by 2030, with the increase mainly due to greater use of electricity. Many areas of life, such as heating or transport, will increasingly work on the basis of electricity in future. The growing use of artificial intelligence will also increase electricity consumption. In addition, many people still have no access to electricity at all. If this additional demand is not to further fuel global warming, it must be met, if possible, by renewable energy sources.

That is why KfW is promoting the expansion of sustainable forms of energy in various partner countries. For example, it has financed Africa’s largest solar power plant to date in the Moroccan town of Ouarzazate and another in Côte d’Ivoire, the first in the West African country. It is also involved in financing wind farms in Egypt and the Balkans, as well as geothermal power plants in Kenya and Indonesia. In addition, KfW has set up a PtX platform that promotes plants for the production of green hydrogen by bundling financing instruments for investors. The platform aims to mobilise billions of dollars in investment in a technology that is promising, forward-looking and indispensable for decarbonising industry.

But producing electricity is not enough. Grids and storage capacity are also central to transporting it to where it is needed, and to offsetting periods of fluctuating production. Only by combining energy production and management can the proportion of zero-emission electricity be brought to the necessary level. In India, for example, KfW has been supporting the construction of "green corridors" since 2013 – overhead power lines that carry sustainable electricity to the country’s economic centres. With KfW support, one of the largest battery storage facilities in southern Africa is being built in Namibia.

But the most environmentally friendly energy is the one that is not needed in the first place. The IEA thus refers to it as “the world´s first fuel”. That is why KfW also promotes more efficient use of energy. For example, it supports the construction of eco-houses for poorer families in Mexico – now home to more than 100,000 people – or the energy-efficient refurbishment of public buildings in the Western Balkans.

Closely linked to the energy transition and just as necessary is a global transport transition. After all, the sector accounts for a good fifth of global CO₂ emissions. This includes sustainable mobility technologies and the consistent development of climate-friendly and environmentally friendly transport systems. So KfW is promoting electricity-based means of mass transport such as subways and metros, for example in Brazil, Morocco and India, and to some extent also as part of the EU’s Global Gateway Initiative, for example in Senegal. Non-motorised transport, i.e. safe bicycle and pedestrian traffic, also plays a role in promoting mobility at KfW, because it offers poor people a cheap and climate-friendly alternative to other means of transport.

KfW considers it an important task in the coming years to create sustainable mobility systems in which different modes of transport are fully coordinated with one another. Digitalisation also offers great opportunities for greater sustainability here. Traffic flows can be better controlled, for example through coordinated traffic light phases, traffic guidance systems, uninterrupted switching between different public transport systems, bike-sharing models or web-based taxi call systems. Digitalisation can also good services in terms of safety, for example through appropriate apps that alert the police in the event of danger.

Climate change and biodiversity loss reinforce each other. They are each part of the problem – but also part of the solution. Deforestation for agricultural purposes not only results in the irretrievable loss of species but also releases vast amounts of greenhouse gases that are harmful to the climate. According to joint calculations by the Intergovernmental Panel on Climate Change and Intergovernmental Panel on Biodiversity, plants and oceans absorb about half of the CO₂ emitted by humans – and do so naturally. So-called nature-based solutions, which include the protection, sustainable management and restoration of ecosystems such as forests, moors and oceans, are therefore an indispensable means of climate protection.

However, the loss of biodiversity continues to increase rapidly. Today, more than half of all ecosystems are already affected or destroyed. Higher temperatures increase this effect even more; as a result, nature can store less CO₂. There is a self-reinforcing effect: biodiversity is being lost, temperatures are rising, even more biodiversity is being lost, temperatures are continuing to rise. This mechanism must be broken: this is best done if as much nature as possible is preserved, and nature becomes an ally in climate protection. The fact that this connection is now also accepted internationally was recently demonstrated at the Climate Change Conference (COP30) in Brazil, which was dubbed the "Forest COP" due to its special focus on the preservation of tropical forests, precisely because of their positive effect on the climate.

For all these reasons, KfW is strongly committed to forest protection. This is achieved through forest and landscape restoration (FLR), but also by reducing CO₂ emissions through avoided deforestation (Reducing Emissions from Deforestation and Degradation, REDD+) and by promoting so-called deforestation-free supply chains. For example, KfW supports the Forest Action Facility (FAF) or compensation programmes under REDD+ that reward the preservation of forests, for example in Ecuador and Colombia.

In addition, KfW promotes well-managed protected areas because they are considered the best way to conserve nature for biodiversity and the climate – provided that they involve the local population. It is precisely for this purpose that KfW founded the Legacy Landscapes Fund (LLF) on behalf of the German Federal Government. In the next few years, it is to promote 30 of the world’s most biodiverse landscapes, and to this end it will be funded by public and private funds.

Another important concern at KfW is global marine conservation. The world’s oceans are not just a significant carbon sink, they also provide a source of food and income for billions of coastal inhabitants. Charitable trusts and initiatives co-founded by KfW like the Blue Action Fund (BAF) or the Clean Oceans Initiative (COI) promote conservation areas, sustainable fishing, environmentally friendly tourism and fighting plastic waste.

With its biodiversity portfolio, KfW is one of the world’s leading donors in this field.

Despite all efforts, the Earth’s temperature will continue to rise. It is therefore important to deal with this reality and improve the resilience of people and infrastructure. In addition to climate-friendly development and financing for climate change mitigation, adaptation to climate change is therefore also in the focus.

This is especially true in countries of the Global South, where the effects of droughts, floods, or heat waves are particularly pronounced, while financial resources, infrastructure, and social protection systems are limited. Many people here live closer to nature, are directly dependent on climate-relevant sectors such as agriculture or fisheries and have few options for cushioning risks. Targeted adaptation strengthens the resilience of communities, protects livelihoods and prevents climate change from reversing development progress or exacerbating poverty. At COP30 in Brazil, the international community therefore decided to at least triple the funding for adaptation measures by 2035.

KfW contributes to this, for example by supporting flood protection projects, such as in Bangladesh, where flood protection measures and so-called blue-green infrastructure increase resilience to flooding in several cities. Or in the Brazilian city of Porto Alegre, where climate-friendly and nature-friendly urban drainage protects the population from the consequences of climate change. Against the backdrop of declining rainfall and persistent droughts, KfW is financing the construction of another wastewater recovery plant in Namibia that will reliably supply the rapidly growing capital with drinking water. In Tunisia, KfW supports not only coastal protection measures to counteract erosion caused by storm surges and sea water surges within the framework of the Integrated Water Resource Management (IWRM) but also projects that channel excess water from the north into dry areas in the south, reduce water losses or increase storage capacities.

As children are particularly affected by extreme weather events, KfW also supports a UNICEF initiative called "Climate Collaboration for Children" (CC4C). The initiative’s goal is to protect children in particularly affected countries in East Africa – for example, in the event of displacement due to natural disasters – by taking measures to adapt to climate-related malnutrition, or to enable them to attend regular classes even in the event of floods or extreme heat.

The more climate change progresses, the more urgent it becomes to take measures to adapt to its effects. Many poorer countries are financially overwhelmed by this task and are dependent on support from donors such as KfW. Supporting them saves lives but also creates stability and security in the countries themselves and here in Germany.

In order to master the upcoming decarbonisation, the issue must play a role everywhere: not only in energy production and transport, but also in agriculture or house construction, for example. That is why KfW Development Bank is pursuing the goal of fully aligning its financing with the Paris Climate Agreement.

In 2020, it therefore introduced climate mainstreaming, whereby climate impacts and risks are analysed at the design phase of all projects and systematically taken into account in the further development of the project. This increases the effectiveness of the projects in terms of climate protection and adaptation and addresses possible risks in the entire portfolio of KfW Development Bank.

Making the financial world greener overall is another way to achieve greater sustainability. KfW is also committed to this and therefore participates in associations with other financial institutions, such as the International Development Finance Club (IDFC). There, 27 development banks have joined forces with a shared vision of a sustainable future. The IDFC is the largest provider of green finance. Since 2015, its members have spent USD 1.7 trillion on sustainable investments.

The objectives of KfW Development Bank are in line with the requirements of KfW Banking Group, which implements a strategic agenda called "KfWplus". This strategy consists of three fields of action: KfW wants to drive forward the sustainable transition towards climate neutrality, strengthen the competitiveness of the German economy and generate overall economic growth. "The three points are interdependent," says KfW CEO Stefan Wintels, and are intended to preserve the livelihoods of future generations while at the same time enabling people to live in peace, freedom and prosperity. In this way, they cover all three dimensions of sustainability and pursue environmental, economic and social goals in equal measure.