International CEO Forum VIIIDecember 5 to 7, 2011Thimphu, Bhutan

Conference on „Financing for Development in Pursuit of Gross National Happiness“

Environmental Finance Approaches of KfW

Uwe Ohls, Director General Europe and Asia

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Agenda

KfW’s international activities3

KfW’s environmental activities in Germany2

Conclusions4

KfW’s mission and the principle of sustainability 1

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KfWFinancing with a public mission

● Promotional bank of the Federal Republic of Germany

● Shareholders: 80% Federal Republic,20% federal states

● Balance sheet total at end 2010: EUR 441.8 billion

● Commitments 2010: EUR 81.4 billion

● Around 4,530 employees (2010)

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KfWFramework

Guiding Principle: Sustainability

Promotional mandate: Law concerning KfW

Framework/ Economic system: Social market economy

KfW supports the environmental policy of Germany and the EU

KfW’s decisions follow the Federal Government’s Sustainability Strategy

KfW is a signatory of the UNEP “Statement by Financial Institutions on the Environment and Sustainable Development”

Environmental and Social Principles of KfW Bankengruppe

Mission

KfW is dedicated to the sustainable development of economic, ecological and social living conditions in Germany and abroad

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Gross National Happiness and Sustainability

Sustainability Strategy of the German Federal Government

● These multiple dimensions cannot be measured by GDP. New methods of measuring progress and well-being are required

● Example for efforts in Germany: New Enquete Commission of the German Federal Government on “Growth, Prosperity and Quality of Life”

● Central cornerstone for progress and well-being: Sustainability

Vision:

● Intergenerational equity

● Quality of life

● Social cohesion

● International responsibility

Important areas, e.g.:● Climate and energy, environment ● Sustainable use of raw materials● MDGs/ health, education, food security● Demographic change● Cooperation and participation

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Example “Sustainability Research” KfW Sustainability Indicator

● Objective:

The KfW Sustainability Indicator, published since 2007, provides quantitative information about the progress of sustainable development in Germany.

● Concept of the Indicator:

Consists of 37 basis indicators, which are summarised in threekey areas of sustainability: Economy, Environment, Social Cohesion.

● Via the Sustainability Indicator KfW participates in the ongoing debate: How are economic performance AND social progress properly measured

Examples: Sustainable economic activity (including innovations), employment, public debt

CO2 emissions, renewable energies, water quality, air quality, biodiversity

Health, education/ graduation rates, gender issues Political commitment/ participation in elections, integration

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Agenda

KfW’s international activities3

KfW’s environmental activities in Germany2

Conclusions4

KfW’s mission and the principle of sustainability 1

8

KfWA bank with a wide array of functions

Promotion of developing and

transition countries

International business

Promotion of construction

of new housing and modernisation

as well as education

Promotion of SMEs, business founders,

start-ups

Municipal infrastructure projects and

global loans in Germany/Europe

Domestic promotion

We promote the German economy

International project and

export finance

We ensure internationalisation

We promote development

Promotion of environmental and climate protection: 25.3 bn

Business AreaSME Bank

Business AreaPrivate Client Bank

Business Area Municipal Bank Business Area

Export and Project Finance

Business Area Promotion of

Developing and Transition Countries

Commitments 2010: 64.3 bn EUR Commitments 2010: 5.7 bn EUR

Commitments 2010: 9.3 bn EUR

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KfWEnvironmental Financing

KfW is one of the most important promoters of environmental and climate protectionin Germany

Key contribution towards achieving the Federal Government's climate protection and energy policy targets

Record promotional volume achieved for environmental and climate protection in 2010:around a third of total promotional activities in Germany and abroad

2010: 16.9 million tons of CO2-reduction (preliminary estimation) in Germany and abroad

Main focus: Energy efficiency (EUR 11.5 bn) and renewable energies (11.3 bn)

CommitmentsEnvironmental and Climate Protection

0

5

10

15

20

25

2008 2009 2010

bn

EU

R Domestic Promotion

KfW Development Bank

KfW IPEX Bank

17.6

19.8 25.3

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KfW Environmental Programmes in Germany

RenewableEnergies

Programmes

Municipalities(incl. municipalcompanies andsocial facilities)

SME

PrivateClients

GeneralEnvironmental

Protection

EnergyEfficiency

RenewableEnergies

InnovativeEnvironmental

Protection

ERP Environmental and Energy Efficiency

Programmes

EnergyEfficiency

Programmesfor

Buildings

BMUEnviron-mental

InnovationsProgramme

MunicipalInfrastructureProgrammes

KfW Carbon Fund

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Example:KfW Energy Efficiency Programmes in Germany

Effects of promotion:

• Sustainable reduction of CO2-emissions

• Promotion for SMEs and creation of jobs/ safeguarding employment

• Definition of energy standards (“KfW-Efficiency House”) based on administrative law

Promotion of CO2- reduction in the field of residential building since 1996

Framework:

• The German Buildings Energy Saving Directive (EnEV) which covers:

• Energetic permissible limits for new and the rehabilitation of existing residential and non-residential buildings with regard to building shell and techniques

• Requirements with regard to heating, coolingand air conditioning techniques

• Energy certificate and calculation methods

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Example: KfW Renewable Energies Programmes in Germany

Effects of promotion:• Sustainable reduction of CO2-emissions• Stabilisation of energy supply• Creation of jobs/ safeguarding employment• etc.

Framework:

Electricity generation plants in accordance with the "Law on the New Regulation of Rights of Renewable Energies in the Electricity Sector"

Measures/ Investment Examples• Solar energy• Off-shore wind energy• Biomass/ biogas; combined heat and

power biomass plants• Heat networks• Deep geothermal drilling

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Agenda

KfW’s international activities3

KfW’s environmental activities in Germany2

Conclusions4

KfW’s mission and the principle of sustainability 1

14

Development Goals

Strong focus on Millenium Development Goals (MDGs), including

• the sustainable improvement of the economic and social conditions of the people and the reduction of poverty and

• climate and environmental protection

Framework/ General Principle: Global Sustainable Development

Example: KfW Development Bank

As development bank of the Federal Government KfW funds investments and accompanying advisory services in developing and transition countries.

Project selectionFocus on development impacts and sustainability of the projects/use of indicators

Examples “Climate and Environment”

Projects appraised based on their impact on reduction of GHG emissions,

climate adaptation, sustainable use of resources, biodiversity and forest protection, etc.

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Examples from our project work (1)

Biogas Support Programme Nepal

● Problem Traditional cooking fuels and technologies are inefficient and lead to deforestation

● Approach Cooking energy for rural households via small

biogas plants Plant construction by local companies,

approx. 250,000 biogas plants to date Capacity Building

● Impacts Sustainable, reliable and environmentally friendly

energy supply for some 1,250,000 Nepalese people Reduced deforestation, reduced CO2 emissions Reduced in-house pollution Reduced health problems esp. for women and children Reduced time for collection of fuel wood and dung, etc.

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Examples from our project work (2) Watershed Development Programmes in India

● Approach Catchment based approach to soil and water conservation Partners (since 1992):

NABARD (National Bank for Agriculture and Rural Development) and NGOs Six projects with 230 watersheds in total with around 300,000 hectares in 4 States

(~350,000 villagers) / Contribution of KfW/ the German Government: EUR 70.6 million overall

● Impacts

Support for Self-help groups/ gender Sustainable, reliable and environmentally friendly

energy supply Reduction of erosion and increase of groundwater level Increase of productivity of soil and natural resources Improved provision of potable water Improved employment opportunities in project area Increased income from agriculture Advancement of self-administration of local communities

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KfW Development BankSelected impacts 2010

KfW Development Bank’s new programmes in 2010 improve

● water supply for 11.0 million people

● the health of some 190.0 million people

● electricity supply for 21.0 million people

● access to primary and secondary education for 18.0 million children, teenagers and adults

Area of environment and climate in 2010:

● 58% of KfW Development Bank’s commitments in 2010 contribute to environmental protection, climate and

resource protection● Expected reduction of CO2 emissions in

partner countries: 10.3 million tonnes annually

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Agenda

KfW’s international activities3

KfW’s environmental activities in Germany2

Conclusions4

KfW’s mission and the principle of sustainability 1

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Conclusions (1)

Development banks should continue their mission to support sustainable development of economic, social and business conditions on a global scale.

As the framework in which development banks operate is subject to change, a continuous process of re-defining our roles and products in the light of social and ecological sustainability is essential.

Core challenges of our times:

Finding ways to maintain or improve economic and social living conditions, especially for the disadvantaged among us

Fighting Climate change and managing the growing scarcity of energy and natural resources

2020

Conclusions (2)

● In addition to quantitative economic measures of growth

● measuring the different aspects of prosperity and

● considering the impacts of current activities for future generations

are important to achieve well balanced and sustainable development.

● The ongoing debate on measures of prosperity shows the challenges attached to new approaches

Concept of Gross National Happiness provides relevant hintsand new impulses

Continuous process of reviewing necessary: “How do we want to live today and in the future?”

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Contact

Uwe Ohls KfW Bankengruppe

Director General Palmengartenstrasse 5–9

Europe and Asia 60325 Frankfurt am Main

Fon +49 69 7431 – 2540

Fax +49 69 7431 – 2944uwe.ohls@kfw.de

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Back-upKfW lives corporate responsibility (CSR) and sustainability

CSR “Living and promoting corporate responsibility”

Promoting sustainable projectsParticular support is given to projects which make a positive contribution to sustainability goals: environmental, climate and resource protection, education and innovation.

Investing money sustainablyOwn funds and investments are responsibly invested under sustainability aspects.

Sustainable support of social commitment Taking responsibility as a good corporate citizen through initiatives for culture, environment and the customers. Promotion of voluntary involvement.

Sustainable business operationsHigh standards and goals for environmental protection applied to KfW’s own buildings.