The rapidly expanding and evolving market of green and social bonds – impact bonds - presents excellent opportunities to finance new projects and business that enable positive impact on the planet and people. Impact bonds are an important vehicle for companies to raise money for projects with specific environmental and social benefits. By issuing these bonds, the balance sheet of the issuer becomes more sustainable.
KfW Group is the flagship promotional bank of the Federal Republic of Germany. It aims to catalyze Europe’s transition towards a low-carbon economy, and 35% of all its business volume is allocated to projects that support renewable energies (wind, solar, biomass, hydrogen), improve energy efficiency, safeguard biodiversity and prevent and/or reduce environmental pollution. It explicitly excludes projects related to fossil fuels and nuclear power. KfW also supports the real economy, with 40% of new loans in Germany provided specifically to SMEs.
Impact investment rationale
- Energy efficient buildings reduce the need for heating and cooling. Homes and offices that are designed to be energy neutral, and then built, operated, and maintained using environmentally responsible and resource-efficient processes will optimise their positive environmental, social and economic impacts.
- Using a portfolio approach, KfW will allocate up to 80% of the proceeds of the bond issue to disbursements out of two loan programmes, which will finance construction of new energy efficient residential buildings. The improvements must realise efficiency levels of at least 25% better than the country’s current energy savings ordinance for new buildings. The remaining 20% of proceeds will be used to fund new renewable energy plants for electricity generation, combined electricity and heat generation and measures to integrate renewable energy into the energy system. Energy sources are mostly solar panels, on- and offshore wind, hydropower, and biomass.
- KfW is by far the largest issuer of green bonds in Germany in terms of volume and it is among the largest issuers of green bonds on a global scale. It has actively participated in the green bond market since 2014 and added energy efficiency to its green bond loan programme in 2019. The portfolio is backed by the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMU).
KfW Group contributes to the following UN Sustainable Development Goals (SDGs):
Sustainable Mobility and Infrastructure
Mobility and infrastructure cover a broad range of facilities, structures, systems and services that support the day-today operations of human society. The infrastructure sectors of transport, energy and water, telecommunication, waste and sanitation are among the most important elements of infrastructure. Sustainable infrastructure is designed, constructed and operated to optimise the environmental, social and economic impact.
Our Impact Equities and Bond Funds invest in companies that offer solutions for sustainable mobility and infrastructure such as urban mobility, sustainable buildings and electric vehicles.
Watch our webinar Elephant in the room and learn more about the role of fixed income in scaling impact investing.
Explore our Impact Equities and Bonds impact report ‘Making waves where it counts’ to find out more about our role as impact investor. The report presents our 2020 results in a context of numbers and stories and showcases our mission to make money work for positive change.