Methods Paper: Calculation of the Environmental Impact of KfW’s Clean Transport Projects

Authors: Michel Allekotte, Marie Colson, Felix Spathelf

As awareness of the importance of the transition to a climate-neutral society grows world-wide, the key role of financial institutions in the global response to the climate crisis is in-creasingly recognized. Calculating greenhouse gas (GHG) and air pollutant emissions from the investment activities of financial institutions is an important step that enhances the transparency of the climate impacts of financial decisions and can improve financial institu-tions’ understanding of their climate-related impact. Consequently, this will broaden the way financial institutions assess the impact of their portfolios and could influence future financing decisions.

The Kreditanstalt für Wiederaufbau (KfW) provides impulses for the economy, society, and ecology in Germany and Europe, as well as globally, particularly in the areas of small and medium-sized enterprises, entrepreneurship, environmental protection, housing, infra-structure, educational promotion, project and export financing, and development coopera-tion. The KfW Bank Group, along with its subsidiaries DEG, IPEX, and KfW Capital, plays a leading role among development banks worldwide. A central element of KfW’s financing activities is the fight against climate change through the funding of greenhouse gas reduction measures. To evaluate the impact of these measures, uniform methodologies for calculating emission reductions are being developed across the group for the sectors of energy efficiency, renewable energies, and transport & mobility, which will be further refined in a second step.

The aim of this methodology is to account for relative greenhouse gas and air pollutant emissions in order to quantify the effects of investment activities. The relative emissions are calculated ex-ante (i.e., before the project is realized) from the difference in absolute emis-sions in the following two scenarios:

• With-Project Scenario: Absolute emissions generated by the project

• Without-Project Scenario (Baseline-/BAU Scenario): What would happen without the project? What would the absolute emissions be in this case?

Chapter 2 describes existing methodologies, particularly those from the financial sector, which form the basis for the approach presented in Chapter 3. This includes discussions on the system boundaries, the key metrics for accounting for transport projects, the design of the BAU scenario, and the factor for attributing reductions to KfW. The proposed method-ology was developed in the context of the “Sustainable Mobility” (NaMo) loan program of the IK business area and with the involvement of IPEX Bank, and it is generally applicable to transport projects across the entire KfW Group. Finally, Chapter 4 contains explanations of the detailed procedure and data query, which were developed using the example of the “Sustainable Mobility” program.