Climate protection requires social change
In this interview, Melanie Kehr, Member of the Executive Board of KfW Group (responsible for IT, Transaction Management, and Central Services), talks about the importance of sustainable finance in climate protection.
Mrs. Kehr, KfW is the world’s largest development bank. What can the institution do to contribute to climate protection?
MELANIE KEHR: In recent years, we have put a lot of work into the development of a holistic sustainable finance approach. Climate protection plays a key role in this endeavor. For example, we now organize our new business in line with the Paris climate targets – a very challenging undertaking! We also view ourselves as pioneers, blazing a trail for the financial sector, setting standards, and supporting change. KfW is ideally positioned for this role owing to the multiplier effect it has as a national development bank with significant capital market activities and international financing for emerging and developing countries as well as export and project finance.
How can we achieve change?
The commitment of our owners was decisive for us. At the end of 2020, the German federal government gave KfW the go-ahead to develop into a transformative development bank for a sustainable and carbon neutral future in line with the mission of the Climate Action Program 2030. This has given a boost to our efforts to transform the bank and to establish sustainability as a central operational element in our strategy. This means that KfW, while pursuing climate goals, also supports the transformation of the economy and of society. In 2020, for example, our focus was on combating the pandemic and its consequences. Values such as prosperity and the preservation of the economy are just as much a priority for us as climate protection.
What precisely does KfW do?KfW’s sustainability strategy is based on three main elements. First of all, the 17 sustainable development goals (SDG) of the United Nations are decisive for us. In 2020, we were able to show for 100% of our financing operations which SDG targets they contribute to. Additionally, we are presently working on a precise means of measuring the effects. In this way, we are also creating a reliable framework for our owners – the German federal government and the federal states – on which to base political decisions. We also want to make the risks transparent by clearly demonstrating the impact of climate risks on revenue, assets, and liquidity. And last but not least, it is crucial for us that our funding commitments are in line with the Paris targets. This is not always easy.
Of course we often have to deal with conflicting goals. In addition to SDG Goal 13 “Climate action”, we also pursue other goals such as SDG Goal 8 “Decent work and economic growth”. However, we have an advantage in this respect over other commercial banks. For example: as long as we meet the capital requirements of the supervisory authorities, KfW is not primarily concerned with maximizing its own profits.
Could you give us an example?
To achieve the Paris climate targets, we have developed sector guidelines that define minimum requirements for the climate-friendliness of KfW-financed technologies, e.g. for the steel industry and shipping. They clearly show what mix of transitional and future technologies is required in order to achieve the successful transformation towards carbon neutrality. KfW aims to raise the level of ambition step by step and to tighten requirements gradually.
So it’s not enough to stop financing fossil fuels?
No, definitely not. Surely it would be easier to stop lending to greenhouse gas-intensive industries. But we want to support the economy by providing attractive financing conditions, and thus achieve the transformation to climate-neutral business models. The good news is: we already have future technologies that can make this possible. Now we need to tackle their implementation. We at KfW are highly motivated.
You are optimistic about the future.
We now have many opportunities, and I am convinced that a new federal government will want to take advantage of them. In any case, it is high time for us to accelerate change.