Sustainable Development Goals

The SDGs are a global consensus on what the world’s most urgent sustainable development priorities are, and how these should be tackled by the year 2030. They were established following the “largest stakeholder consultation in history”. Inputs to their creation were provided by governments, civil society organisations, academia, and the business community. By involving such a wide range of stakeholders, and by calling on the public and private sectors to help achieve the SDGs, the SDGs offer a roadmap for sustainable development and a ‘common language’ for all actors involved in sustainability.

The 17 SDGs are supported by 169 targets. The targets add specificity to the SDGs. For example, targets supporting SDG 3 – Good Health and Well-being range from reducing maternal mortality and ending preventable deaths of new-borns and children, to ending communicable diseases such as AIDS and tuberculosis, halving deaths and injuries from road traffic accidents, and achieving universal health coverage and access to health-care services for all. The diversity of targets helps steer policies. It also implies that performance on an SDG is determined by the balance of a country’s progress on the SDGs’ targets.

All United Nations member states adopted the 2030 Agenda for Sustainable Development, and therefore the SDGs. The SDGs thereby recognise that all countries struggle with realising sustainable development, even though the urgency of specific SDGs is likely to differ across countries. So, no matter how rich or poor a country is, it must work to achieve all SDGs. The SDGs furthermore call on all societal stakeholders, ranging from public institutions and civil society organisations to educational institutes and the business community, to help achieve the SDGs.

The financial sector plays a crucial role in achieving the SDGs. The SDGs face a financing gap that UNCTAD values at USD 2.5 trillion per year. Governmental and civil-society stakeholders therefore urge private finance institutions to help achieve the SDGs. In addition to this financing gap, the financial sector influences global systems of production and consumption through the financing it extends to organisations and individuals that undertake economic activities. By financing specific economic activities, financial institutions drive impacts on the SDGs.

Economic activities are classified by international organisations in order to collect, monitor, and present statistical information. The International Standard Industrial Classification of all Economic Activities (ISIC) is the United Nations’ system for categorising economic activities. The European Union derived its own system of classifications of economic activities, the Statistical Classification of Economic Activities in the European Community (NACE), based on the ISIC system. The ISIC and NACE classification systems describe and codify nearly 1,000 specific economic activities.

An economic activity that is financed may positively interact with the SDGs. This means that the economic activity is expected to contribute to the achievement of an SDG. Such positive interactions may arise when an SDG target calls for an economic activity, and/or when an economic activity is expected to have a positive impact on an SDG target.

First, certain SDG targets explicitly call for specific types of economic activities. For example, targets supporting SDG 6 call for water infrastructure, whereas targets supporting SDG 7 request the efforts of the power generation and distribution sectors. In addition to being explicitly called for, SDG targets may urge an economic activity to help achieve a sustainable development outcome.

Second, economic activities may have positive impacts on SDG targets. Knowing in which way a financing is expected to contribute to the SDGs is important as it helps KfW IPEX-Bank identify which effects it could increase.

To get an independent assessment on where we stand, we partnered initially with Steward Redqueen, a consulting firm specialised in sustainability and impact, to jointly create a methodology for “mapping” our financing to the SDGs as a first step. The SDG mapping that was created identified how our financing of economic activities is expected to positively relate to individual SDGs. It defines the expected positive interactions between nearly 1,000 economic activities and the SDGs’ targets on the basis of the harmonised NACE Code System. We further harmonised our NACE Coded Method with KfW Group. The final SDG mapping uses group-wide overwrites where necessary and is based on the Nace Codes.

The SDG mapping quantifies the proportion of financing that positively relates to the SDGs and their underlying targets. It thereby shows the financial inputs to the SDGs. The SDG mapping does not show the actual impacts on the SDGs. It also does not show whether positive interactions with the SDGs are achieved. For example, it counts the euros of financing dedicated to wind energy, but not the megawatts of energy that are being generated.

Our mission is to “finance the future”. The Sustainable Development Goals (SDGs) stipulate what we, and our stakeholders, want the world to look like in 2030. We therefore see the SDGs as embodying business opportunities that can help us fulfil our mission. Investing in topics such as renewable energies, electric vehicles and sustainable technologies are solid business propositions. Our financing into such themes can drive solutions for the SDGs and simultaneously deliver long-term business returns. Ultimately, our mandate of contributing to the transition towards sustainable economic, social and ecological development, gives us at KfW IPEX-Bank a firm foundation for helping achieve the SDGs.

Banks play a very important role in contributing to the SDGs. On the one hand, the SDGs face a serious finance gap that UNCTAD values at USD 2.5 trillion per year. On the other hand, banks finance economic activities and these have impacts on societies and the environment. Banks can help close the SDGs’ financing gap, and they can channel investments to SDGs that bring the most beneficial contributions to societies. This equally applies to us at KfW IPEX-Bank.

We contribute to the transition towards sustainable societies by financing economic and social infrastructure, promoting industrialisation, helping secure the supply of raw materials, and by supporting the realisation of environmental and climate protection projects around the globe. Our mandate and activities closely link to diverse SDGs, including SDG 7 – Affordable and Clean Energy; SDG 8 – Decent Work and Economic Growth; SDG 9 – Industry, Innovation and Infrastructure; and SDG 13 – Climate Action.

We decide to invest in projects and companies that align with our mandate of supporting the enterprise sector and the export economy. We engage with our clients to ensure that our financing is used effectively. We also acknowledge the trade-offs that our financing may have, and we work on mitigating negative impacts on societies and the environment.

Back in 2000, we established demanding sustainability guidelines that require the projects we finance to be environmentally and socially sustainable. We do not finance projects that result in unacceptable environmental damage or cause unreasonable social impacts. We also abide by external and international standards. This includes the Equator Principles, the IFC Performance Standards, the “safeguard policies” of the World Bank, and sector-specific initiatives like the Extractive Industries Transparency Initiative. These initiatives and principles help us mitigate the negative interactions we have with the SDGs and we continue to ensure that they are effectively applied to our operations.