SDG 13 - Climate action

The burning of fossil fuels is a one-way street that is not sustainable. Experts around the world are searching for alternatives, and investments are being made in new technologies to cover the growing energy requirements with climate-friendly sources. This is where many developing countries are at an advantage; they are not yet fully exploiting the use of the enormous renewable energy resources they have. For example, it is estimated that 40% of global renewable energy resources are located in Africa.

To drive forward the transformation and support an accelerated energy transition, KfW has set up a PtX platform on behalf of the German Government. This is the first of its kind in the world to bundle funding and financing instruments for investors in order to promote plants for the production of green hydrogen outside Europe. Overall, this instrument is expected to mobilise investments worth billions of euros. KfW is also directly involved in financing infrastructure for the use of renewable energies. For example, it is financing projects like the largest solar power plant in Africa to date in Ouarzazate, Morocco, another in Côte d’Ivoire, the first in the West African country, as well as wind farms in Egypt and Bosnia-Herzegovina, and geothermal power plants in Indonesia and Kenya.

But power is not always produced where it is needed, and the supply of energy from renewable sources naturally fluctuates – so sufficient grids and storage capacity are required. In India, for example, KfW has been supporting the construction of “green corridors”, huge power lines that transport sustainable electricity to the country's economic centres, on a gigantic scale, since 2013. Loans totalling EUR 1.4 billion have now been granted for the project.

But the most environmentally friendly energy is the power that is not needed in the first place. The IEA therefore refers to it as "the world's first fuel". So KfW also promotes the 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 Montenegro.

Closely linked to the energy transition and just as necessary is a global transport transition. After all, the transport sector is responsible for around a quarter of global CO₂ emissions. This includes replacing the combustion engine as well as the consistent expansion of public transport. The latter applies in particular to developing countries, where poorer people are especially dependent on public transport. So KfW is promoting environmentally friendly, electricity-based means of mass transport such as subways, commuter trains and metros, for example in Brazil, Tunisia and India, but also non-motorised transport such as in the form of bike paths in South Africa or Peru.

KfW believes that creating sustainable mobility systems that seamlessly coordinate transport methods and integrate them in targeted urban planning is one of the most urgent tasks in the coming years. 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 provide good services in terms of safety, with apps that alert the police in the event of danger.

The growing global population’s increasing demand for food, water, commodities, housing and mobility cannot be met in the current way without destroying existing ecosystems. The solution can therefore only be to reconcile economic development with climate and environmental protection. So KfW is investing in a sustainable development trajectory and promotes, for example, forest conservation, which plays a key role in climate and nature protection, as forests are large natural carbon reservoirs and important habitats for biodiversity. If forests are damaged or cut down, this leads to the release of greenhouse gases and the loss of plant and animal species.

The restoration of forest landscapes (Forest and Landscape Restoration, FLR) is one of the three pillars on which the German government bases its international forest policy, alongside the reduction of CO₂ emissions by avoiding deforestation (Reducing Emissions from Deforestation and Degradation, REDD+) and the promotion of so-called deforestation-free supply chains. KfW finances corresponding projects in all three areas. It supports reforestation programmes such as the ones in Madagascar or Vietnam, as well as deforestation-free supply chains, for example through agroforestry systems, such as cocoa or coffee cultivation, which play an important role in combining forest protection and sustainable use. Ultimately, the sustainable nature of forest utilisation must convince the population, as they are often particularly dependent on the forest as a resource. KfW also promotes compensation programmes as part of REDD+ that provide incentives for forest conservation, for example in Ecuador and Colombia.

It is now undisputed that global warming, the destruction of ecosystems and the danger of pandemics are inextricably linked and must therefore be tackled together. The trend of rapid species extinction must be reversed, also as a means of climate protection. The best way to do this is through well-managed protected areas, if they closely involve the local population. KfW established the Legacy Landscapes Fund (LLF) on behalf of the German government for precisely this purpose. It finances protected areas and their surrounding areas in poor countries. The idea behind the LLF is as simple as it is compelling: if it succeeds in preserving as many species as possible in biodiversity-rich but low-income areas of the world, a good part of the biodiversity that is essential for survival will be secured for the whole world – and thus also for the climate and adaptation. Through the participation of private donors, the LLF can help close the large funding gap in nature and climate protection. The LLF now supports 15 regions in Asia, Africa and Latin America and has a budget of USD 350 million.

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.

It will be necessary to reorganise every area of life – from power production, to transport and agriculture, to building construction – if we are to substantially limit global warming. Large investments will be needed; the Intergovernmental Panel on Climate Change has estimated that around USD 2.4 trillion will be needed in the energy sector alone. In addition to proven instruments, innovative instruments will also be necessary to mobilise these funds. KfW works with these instruments, such as funds for green companies or insurance against consequential losses from extreme weather conditions due to climate change, such as the African Risk Capacity (ARC).

To make the financial world greener, KfW also participates in associations with other financial institutions like the International Development Finance Club (IDFC). This has brought together 26 development banks with a joint vision of a sustainable future and less poverty throughout the world. The IDFC is the largest provider of green financing in the world. By November 2024, its members had collectively spent a total of USD 1.5 trillion on sustainable investment projects since 2015.

In addition, KfW set itself the goal of an even more consistent focus on sustainability. With the group-wide project "tranSForm" in the area of Sustainable Finance, it has initiated trend-setting changes that focus on the contribution of financing to a sustainable and climate-friendly transformation of the economy and society – worldwide. TranSForm forms the core of KfW's sustainable financing agenda. Among other things, KfW is anchoring SDG contributions and Paris compatibility even more strongly in its financings. 2020 also saw the introduction of climate mainstreaming in KfW Development Bank. This means that all climate effects and risks will be analysed at the early design stage of every project so that these can be systematically accounted for in the project design. In this way, the project’s effectiveness in terms of climate protection can be further increased and possible risks can be addressed more effectively. Risk-mitigating measures can thus be even more deeply integrated into the entire FC portfolio.

Despite all efforts to curb or store climate-damaging gases and preserve ecosystems, the Earth’s temperature will continue to rise. The aim here is to improve the resilience of people and infrastructure. So in addition to climate-friendly development and investing in climate protection, adjusting to climate change is also a focus area.

This is why KfW also supports such projects on behalf of the German Federal Government. One focus is on improving the availability of water for drinking purposes and for agricultural production, for example in West Africa. The construction of water reservoirs also helps to better withstand periods of drought. Conversely, flood protection in the form of flood protection bunkers in Bangladesh or coastal protection, for example in Mozambique or Tunisia, is another important area of KfW's work.