KfW Sustainability Report 2019 focuses on climate change as a risk driver

• For the first time, KfW is reporting separately on its management of climate risks in accordance with the new TCFD standard
• Another novelty is that the report is aligned with the National Action Plan on Business and Human Rights (NAP): measures to ensure the protection of human rights in all business processes

KfW Group has published the first section of its Sustainability Report 2019. It comprises the non-financial report in accordance with the German Commercial Code (HGB) and was prepared in conformity with the standards of the Global Reporting Initiative (GRI) Standards. This first section contains all the data related to sustainability at KfW Group and its strategy, its corporate management and banking business as well as internal bank operation and human resources policy.

First reporting on the management of climate risks
The start of climate risk reporting in accordance with the TCFD is a novelty this year. The Task Force on Climate-related Financial Disclosure was appointed by the Financial Stability Board on behalf of the G20 finance ministers and central banks in 2015/2016. Since June 2017 it has published recommendations designed to help companies better analyse, evaluate and disclose climate change-related (physical and transition) risks – but also opportunities - for their business.

“Even though all our attention is currently focused on the coronavirus, the risks of climate change continue to threaten the stability of our economic and financial systems, and we should not lose sight of that. From my point of view it is therefore crucial for enterprises to actively address the consequences of climate change for their business activities and to be transparent about how they manage material risks. Debt capital and equity investors will take this more into account in their investment decisions in future”, explained Dr Günther Bräunig, Chief Executive Officer of KfW Group.

In the current report KfW primarily sets out its general approach to the management of climate risks. For example, scenario analyses can be used to examine the consequences of climate risks in individual sectors of its portfolio, as demonstrated for the oil and natural gas sector.

KfW is implementing the TCFD recommendations step-by-step since it declared its support for the TCFD recommendations as Europe’s first national promotional bank in October 2018. The management of climate risks and opportunities is also a key priority of the “KfW Roadmap Sustainable Finance”, which was commissioned by KfW’s Executive Board in 2018 and the results of which are to be available in the second half of 2020.

National Action Plan on Business and Human Rights (NAP)
In its current Sustainability Report KfW is also publishing a company report in the meaning of the NAP for the first time. Under the NAP, the German Federal Government expressed its expectation that companies (including finance institutions) will exercise their human rights due diligence and establish structures that ensure the protection of human rights in their business processes by the end of 2020 at the latest. KfW has identified three core elements in the implementation of the NAP: declaration on respect for human rights, risk management and complaints mechanisms. The current report explains the corresponding objectives, measures and processes. For example, it describes the tools used for early identification of human rights risks related to financing projects in order to take appropriate countermeasures. It also reports on the complaints mechanisms existing in individual business areas and how they work, and how complaints received are addressed.

The second section of the Sustainability Report is designed as an online magazine that will be dedicated to the topics of climate change mitigation and adaptation. The third section will deal with KfW Group’s sustainability management in detail. Both are scheduled to go online at the end of June 2020.

Service:

• The KfW Sustainability Report 2019 (first section) can be found here, and will soon be available in English, too: www.kfw.de/Nachhaltigkeitsbericht-2019-DE.pdf
• Information on the TCFD:
  www.fsb-tcfd.org
• Information on the NAP: www.auswaertiges-amt.de/de/aussenpolitik/themen/aussenwirtschaft/wirtschaft-und-menschenrechte