International CEO Forum VIII December 5 to 7, 2011 Thimphu, Bhutan Conference on „Financing for Development in Pursuit of Gross National Happiness“ Environmental Finance Approaches of KfW Uwe Ohls, Director General Europe and Asia

22 Agenda KfW’s international activities 3 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s mission and the principle of sustainability 1

3333 KfW Financing 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 billion ● Commitments 2010: EUR 81.4 billion ● Around 4,530 employees (2010 )

44 KfW Framework 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

5 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

666 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 three key 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  CO 2 emissions, renewable energies, water quality, air quality, biodiversity  Health, education/ graduation rates, gender issues  Political commitment/ participation in elections, integration

77 Agenda KfW’s international activities 3 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s mission and the principle of sustainability 1

8 KfW A 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 Area SME Bank Business Area Private 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

9 KfW Environmental Financing KfW is one of the most important promoters of environmental and climate protection in 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)

10 KfW Environmental Programmes in Germany Renewable Energies Programmes Municipalities (incl. municipal companies and social facilities) SME Private Clients General Environmental Protection Energy Efficiency Renewable Energies Innovative Environmental Protection ERP Environmental and Energy Efficiency Programmes Energy Efficiency Programmes for Buildings BMU Environ- mental Innovations Programme Municipal Infrastructure Programmes KfW Carbon Fund

11 Example: KfW Energy Efficiency Programmes in Germany Effects of promotion: Sustainable reduction of CO 2 -emissions Promotion for SMEs and creation of jobs/ safeguarding employment Definition of energy standards (“KfW-Efficiency House”) based on administrative law Promotion of CO 2 - 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, cooling and air conditioning techniques Energy certificate and calculation methods

12 Example: KfW Renewable Energies Programmes in Germany Effects of promotion: Sustainable reduction of CO 2 -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

13 Agenda KfW’s international activities 3 KfW’s environmental activities in Germany 2 Conclusions 4 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 selection Focus 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.

15 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 CO 2 emissions  Reduced in-house pollution  Reduced health problems esp. for women and children  Reduced time for collection of fuel wood and dung, etc.

16 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

17 KfW Development Bank Selected impacts 2010 KfW Development Bank’s new programmes in 2010 improve ● water supply for 11.0 million people ● the health of some 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

18 Agenda KfW’s international activities 3 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s mission and the principle of sustainability 1

19 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

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

21 Contact Uwe OhlsKfW Bankengruppe Director GeneralPalmengartenstrasse 5–9 Europe and Asia60325 Frankfurt am Main Fon – 2540 Fax – 2944

22 Back-up KfW lives corporate responsibility (CSR) and sustainability CSR “Living and promoting corporate responsibility” Promoting sustainable projects Particular support is given to projects which make a positive contribution to sustainability goals: environmental, climate and resource protection, education and innovation. Investing money sustainably Own 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 operations High standards and goals for environmental protection applied to KfW’s own buildings.