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News from 2023-02-27 / KfW Development Bank
German-Brazilian cooperation intensified
Promotion of energy efficiency and protection of biodiversity
With the change of government in Brazil and the assumption of office by President Lula da Silva at the beginning of the year, German-Brazilian cooperation in the climate and environmental sector has also gained new momentum.
A new guarantee fund to promote energy efficiency in MSMEs, which is being implemented by KfW, was presented during the trip to Brazil by Federal Chancellor Olaf Scholz and Federal Minister for Development and Economic Cooperation Svenja Schulze. In addition, KfW Development Bank's first loan in the green sector was granted to Banco do Brasil to finance the reforestation of degraded land in deforestation hotspots.
Financial cooperation for MSME investments in renewable energies
The innovative Sustainable Financing Mechanism of the Energy Efficiency Guarantee Fund (FG Energia) opens a new phase of cooperation with the Brazilian development bank BNDES. With an FC grant of up to EUR 25 million, BNDES will be supported in the introduction and implementation of a guarantee fund for loans to micro, small and medium-sized enterprises investing in energy efficiency measures. This will enable at least EUR 250 million in private investments in energy efficiency projects by MSMEs in Brazil.
The energy sector in 2021 accounted for about 20% of Brazil's CO2 emissions. Brazil will only be able to achieve its NDC targets (37% reduction in CO2 emissions by 2025 and 43% by 2030 compared to the 2005 baseline) if it continues to significantly expand its renewable energy generation capacity while making greater use of energy efficiency potential.
With the FG Energia project, which was developed in cooperation with BNDES, KfW aims to promote the growth of MSMEs by raising awareness of energy conservation and efficiency. By providing guarantees, MSMEs gain access to loans to invest in energy efficiency measures, as they often lack the financial resources and knowledge to harness the available technologies. Corresponding investments in energy efficiency could thus not only contribute to achieving climate protection goals, but also improve the economic stability of MSMEs thanks to lower input costs for companies, thus generating employment and income. The aim is to enable the transition to low-carbon energy, reduce operating costs, increase competitiveness and create new green jobs.
EUR 80 million for climate and biodiversity protection in Brazil
Brazil is considered the green lung of our planet, but it is also one of the countries with the highest greenhouse gas emissions worldwide. Deforestation and unsustainable agriculture are responsible for a significant share of the emissions.
This is where KfW, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), comes in with a new cooperation with Banco do Brasil. For the first time, it is granting a low-interest loan for climate and biodiversity protection. KfW is financing measures to reforest degraded forest areas in Brazil with over EUR 80 million. Under the Brazilian Ministry of Agriculture's credit line to promote low-carbon agriculture (ABC Programme), credit lines are made available to rural producers for reforestation. The aim of the programme supported by KfW is to reforest 4 million ha productively by 2030.
More than 800 landowning families are to benefit from this, with special consideration given to small landowners. The focus is on the three biomes Amazonas, Cerrado and the Atlantic rainforest. These are hotspots of biodiversity that are particularly threatened. With the reforestation of a total area of 46,000 ha, 90,000 t of CO2 equivalent are to be saved
