Environmental and Social Appraisal and Sustainability Guidelines

The KfW Group exclusion list applies to all new financing and promotional projects. KfW has also introduced sector guidelines for selected emission-intensive sectors in order to develop new business in line with the temperature target of the Paris Agreement and to systematically boost the Group-wide contribution to transformation. In addition, the projects to be financed are subject to an Environmental and Social Appraisal.

To fulfil KfW Group's promotional mandate and to simultaneously minimise any potential negative effects on or risks to people and the environment, all planned projects in developing countries and emerging economies, as well as all export and project financing, are subject to an Environmental and Social Appraisal; this concerns projects of KfW Development Bank, DEG and KfW IPEX-Bank. In the same way, projects of the KfW Raw Materials Fund are subject to an Environmental and Social Appraisal. This Environmental and Social Appraisal is conducted by applying internationally established standards such as the World Bank’s Environmental and Social Standards (ESS), the Equator Principles, the International Finance Corporation’s Performance Standards (IFC PS), as defined in the specific sustainability guidelines (see below).

The Environmental and Social Appraisal begins with a screening for possible environmental and social risks and impacts of the projects. The result is an environmental and social risk category, that determines scope and depth of the appraisal. For projects with high and substantial environmental and social risks, an independent Environmental and Social Due Diligence (ESDD) may be required, depending on the KfW business sector. If the ESDD shows that either national or international environmental and social standards are not yet complied with, we determine measures to rectify this. We contractually agree on the implementation of these measures, their review and regular reporting with the relevant partners. Environmental and social specialists are involved for the screening, appraisal stage and the environmental and social monitoring processes for evaluating and managing the environmental and social project risks and impacts. Projects that are likely to have unacceptable environmental or social risks and impacts that cannot be avoided or mitigated by suitable measures are not eligible for financing.

In addition, the KfW business sectors “SME Bank & Private Clients” and “Customised Finance & Public Clients” established a graduated appraisal procedure for all promotional projects with regard to environmental and social risks, depending on the investment country and risk content of the financed projects. This is based on procedures that are customary at international level.

KfW Capital’s approach includes both the review of the fund management and the investment processes established there in accordance with defined ESG criteria and regular monitoring by means of ESG data at the level of the funds and the corresponding portfolio companies.

Detailed information on the procedure for Environmental and Social Appraisals in the different business sectors can be found in the respective Sustainability Guidelines or in the KfW Group’s sustainability report:

• KfW Development Bank: Appraisal and handling of environmental, social and climate aspects
• Sustainability Guideline of KfW IPEX-Bank
• DEG environmental and social sustainability guidelines
• Sustainability Guideline of the KfW Raw Materials Fund(PDF, 168 KB, accessible)
• KfW Capital: Sustainability Policy
• Sustainability Report of KfW Group