Climate change is one of the biggest challenges of our time. It has far-reaching economic and social impacts that are already visible around the world today. It affects all economies, but the developing countries are much more at risk than industrialised and emerging economies that bear the main responsibility for climate change. With the Paris Agreement 2015, the United Nations have set a target to limit the increase in global warming well beyond 2°C. KfW Development Bank is working towards achieving this goal by promoting mitigation and adaptation projects. 5.1 billion EUR (58 %) of our 2018 commitments totalling 8.7 billion EUR pertained to climate and environmental protection.
Development in poorer countries is being hindered by the ongoing climate change. A whole range of coordinated measures is required to counter the changes to our climate. Thus, emissions of greenhouse gases like carbon dioxide or methane, which are primarily produced in agriculture, must be avoided where possible to protect the environment.
However, it must also be clarified whether droughts, melting glaciers or other impacts of climate change could pose a threat to the given development project itself or its effectiveness, and which counter measures can be taken. Last but not least, initiatives that support people in coping with the consequences of climate change must be carried through, such as promoting effective irrigation methods in agriculture to survive periods of drought. A proactive approach is required to protect the environment and natural resources.
Respecting the agreements reached by the international community at the global climate summit in Rio de Janeiro in 1992, KfW Development Bank therefore links many development projects with programmes designed to protect the climate and the environment as well as facilitate adaptation to climate change.
Its activities are also aligned with the relevant international agreements of recent years: the 2015 Paris Agreement to limit climate change and Agenda 2030, also from 2015. Sustainability Development Goal (SDG) number 13 is particularly relevant here.
The increase in the average global temperature is causing the rise of sea levels, which in itself poses a threat to 60 million people living in the vicinity of river deltas. Hurricanes and incidents of desertification and devastation are growing in number, too. Melting glaciers could have catastrophic effects on the water supply of people in Asia and Latin America.
The main reason for the climate change is the high concentration of greenhouse gases in the atmosphere, first and foremost carbon dioxide. The main perpetrators in the past were the industrialised nations, which made intensive use of fossil fuels and contributed the most to the enrichment of carbon dioxide. This now makes them responsible for supporting emerging and developing countries with their legitimate efforts related to energy, growth and prosperity. Their experience is needed to create a sustainable economy, without which it is impossible to prevent further progress in global warming.
In recent years KfW Development Bank has invested more than half of its new commitments in environmental and climate-related projects, the majority in the field of energy. This helps to create new and effective technologies in the partner countries such as solar and hydropower plants as well as geothermal and biogas plants.
It is not enough to address the causes of climate change by reducing greenhouse gas emissions. The impacts of climate change are already clearly evident in many of our partner countries. Rising sea levels threaten many people, with an estimated 60 million in river deltas alone. Cyclones, erosion and desertification are becoming more common. Melting glaciers affect the water supply of people in Asia and South America, with some catastrophic effects. According to estimates, between 75 and 250 million people in Africa are affected by increasing water shortages due to decreasing rain fall. The lives of many people in these areas also depend heavily on agriculture, which is experiencing smaller or non-existent yields due to extreme climate conditions. This is why KfW Development Bank, on behalf of the German Federal Government, also finances projects that focus on climate change adaptation, benefiting many millions of people worldwide every year. To minimise the negative impacts of climate change in development cooperation partner countries, KfW Development Bank takes care to make sure that its investment measures are not adversely affected by climate phenomena such as increasingly heavy rain fall. To this end, the design of roads and other infrastructure will be adapted where necessary. It also supports projects aimed at explicitly reducing the negative impacts of climate change on people and ecosystems. One focus is improving the availability of water – for both human consumption and agricultural production. Afforestation measures promote the infiltration and replenishment of groundwater reservoirs, while scarce water is used more efficiently by preventing water loss in water supply systems and introducing improved irrigation technologies. Building water reservoirs helps to better endure periods of drought. Another important area of activity is flood protection, both on the coast and on rivers. This is accomplished not only with conventional infrastructure but increasingly with nature-based solutions, such as mangrove projects to protect against tropical cyclones or disaster early warning systems to help prevent the worst outcomes.
To cushion the economic impacts of climate change, KfW worked with other stakeholders to develop climate insurance. The benefits from such insurance can protect people from ruin.
KfW uses proven instruments of international development cooperation for climate financing: climate-related projects in developing and emerging countries are funded over long periods with a mix of grants, participations and low-interest loans. In addition, and specifically for environmental and climate protection, there is also a variety of special programmes and funds available that offer greater financial leeway and support particularly innovative or broad approaches to reach small and medium-sized businesses as well as private households. These include, for example, the special funding products of the Federal Ministry for Economic Cooperation and Development (BMZ) for environmental and climate financing, which also promote specific technological approaches, the International Climate Initiative (ICI) of the Federal Ministry for the Environment (BMU) or the NAMA (Nationally Appropriate Mitigation Actions), and projects launched by developing countries themselves aimed particularly at climate protection.
Forest resources contribute directly to the livelihoods of 1.6 billion people worldwide. Forests are also a source of animal and plant life: they harbour 80% of the world’s biodiversity. Many of the resources that forest ecosystems provide, such as food, water, clean air and erosion control, are essential for humans.
Standing forests are amongst the largest repositories of carbon. If these forests are degraded or cut down entirely, greenhouse gases are emitted. Given global forest loss, deforestation is among the largest factors for global warming, accounting for 11% of the world’s emissions.
REDD+ is a programme to keep forests standing in developing countries. This collaborative programme was agreed upon within the context of the United Nations Framework Convention on Climate Change (UNFCCC). REDD stands for “reducing emissions from deforestation and forest degradation” and the “+” refers to activities targeted towards conservation, restoration and sustainable management of forests. The main idea is to incentivise tropical countries to address the drivers of forest loss and to reward those that have managed to reduce emissions from deforestation.
“REDD Early Movers (REM)” is one of the most advanced REDD+ programmes, among a series of bilateral and multilateral initiatives that support and implement REDD+ globally. More information on the REM Programme can be found .
Amazon Fund for forest protection and climate change mitigation: as part of its national strategy to combat deforestation in the Amazon region, the Brazilian government established the Amazon Fund in 2008. Today it is considered the world's first outcome-based national funding mechanism for REDD+. After Norway, Germany is the most important donor to the Amazon Fund, which is managed by the Brazilian development bank BNDES. The German financial contribution is provided by KfW on behalf of the Federal Ministry for Economic Cooperation and Development. To date, this has amounted to EUR 55 million. An ex post evaluation of the first phase of the project can be found here.