Sustainable business practices in line with the SDGs are fundamentally important to DEG’s work. With its commitment and its international network, it acts in partnership with its customers to enable and accelerate transformation and to improve the living standards of people in developing countries for the long term.
As part of its focused impact and climate strategy, which it began to implement in 2022, DEG has identified three key fields of action, which are outlined in its DEG Impact/Climate Commitments.
DEG will
further enhance the positive development impact of its customers on society and the environment;
reduce greenhouse gas emissions in line with the Paris Agreement’s 1.5 ℃ goal in order to make DEG’s portfolio net-zero in 2040;
actively support customers with their transformation in order to build their resilience and achieve greater development impact.
DEG will regularly record and review progress on these tasks, report on them and adapt them where necessary.
More about
DEG Impact/Climate CommitmentProgress on these tasks is reported below.
Impact Commitment
DEG is committed to increasing its customers’ contribution to the economic, social and environmental objectives as indicated by the Sustainable Development Goals (SDGs), thereby continuously improving the positive development impact of our investments.
Status
Since 2017, DEG has been recording development impact with its internationally recognised Development Effectiveness Rating (DERa), development of which was started in 2022 and finalised in 2023. This included the addition of further aspects in the existing five impact dimensions, which will be used accordingly to record the net impact of DEG customers in future. DEG's transformative role is also integrated into the rating. The development impact of DEG's customers will be measured using the new DERa from 2024. The results will be presented in the 2024 Development Report, which will be published in 2025.
The Business Impact Profile was further developed in digital form in 2023 to enable active dialogue with customers about their development impact and identify areas for improvement. This involves visualisation of impact data for customers, including a peer comparison and links to the SDGs.
In 2023, DEG also continued the training programme launched in 2022 to expand knowledge of impact and climate throughout DEG in the form of basic training and deepen understanding of issues such as the circular economy, gender and carbon accounting.
Climate Commitment
DEG is committed to achieving a net-zero portfolio in 2040. Its climate strategy is based on the following hierarchy of targets:
1.
Avoiding greenhouse gas (GHG) emissions
2.
Working with customers to implement climate-related transformation pathways to reduce GHG emissions and increase climate resilience
3.
Neutralising the remaining GHG emissions financed by DEG through direct investment in sink projects
In line with the 1.5 ℃ target of the Paris Agreement, DEG is committed to reducing the GHG emissions attributed to DEG. Since 2022, DEG has been on a science-based transformation pathway reducing the GHG intensity of its investments on portfolio level by an annual average of 4.2%, thereby cutting the portfolio-level GHG intensity of its operating activities as a development bank by two-thirds in 2040.
DEG is neutralising the remaining portfolio GHG emissions attributed to DEG by investing in forestry and other carbon sink projects that are certified by internationally recognised standards and permanently remove the remaining attributed GHG emissions from the atmosphere.
Status
DEG pressed ahead in the reporting period with the implementation and development of the various components of its climate strategy, to ensure that a science-based transformation pathway compatible with the 1.5 ℃ target of the Paris Agreement is in place at portfolio level from 2025. This included compiling customer GHG emissions profiles as precisely as possible based on their environmental and sustainability reports or through joint Business Support Services. The aim is to further increase data quality and obtain a more accurate picture of the GHG emissions financed by DEG and the GHG intensity of our operating activities as a development bank based on real customer GHG data. The majority of portfolio emissions for customers from DEG’s Infrastructure and Energy and Industries and Services customer clusters were calculated based on reported (un-/verified) GHG emissions and/or the physical activity (energy) data of the customer.
DEG’s attributed (financed) GHG emissions declined to 2.3 million t CO2e for 2022 (2021: 3.0 million t CO2e). This reduction is also reflected in the GHG intensity of the DEG portfolio, which decreased to 289 t CO2e per million euros invested (2021: 413 t CO2e per million euros invested) due to a reduction in GHG intensity in all DEG’s customer clusters. The most significant decrease of almost 40% (compared with 2021) was observed in DEG’s costumer cluster of Banking & Capital Markets. The GHG emissions of DEG’s indirect financing activities are still modelled by using the Joint Impact Model (JIM), as our customers from the financial sector are not yet able to report their attributed portfolio GHG emissions based on real data of their clients and financing activities. Ongoing adjustments to the model assumptions and updating of underlying data in the JIM results in more volatile GHG emission model results for the financial sector than in the emissions profiles based on real data. DEG’s many advisory activities support its customers – particularly those with high emissions – in establishing environmental and social systems, to collect GHG emissions data, identify reduction potential and develop their own climate action strategies and transformation pathway to achieve net-zero emissions.
Detailed, science-based data collection and the knowledge thereby gained about DEG portfolio customers and their GHG intensity enables DEG to pilot GHG budget approaches for DEG’s customer clusters Infrastructure and Energy and Industries and Services, with a view to integrating them into DEG’s decision-making management tools from 2025.
DEG started investing in long-term forestry and carbon direct removal projects in 2022 to neutralise its remaining portfolio GHG emissions in 2040.
Commitment to transformation
DEG is committed to working with its customers to ensure a tailored approach to sustainable transformation and climate-sensitive business in line with the SDGs – in its management and internal operations, in its supply chains and in regional contexts. Helping companies navigate their transformation creates added value and, at the same time, ensures the commercial success of DEG and its customers.
Status
DEG focused closely on the concept of transformation in 2023 and gained a deeper understanding of the topic. In terms of its promotional activity for private-sector companies, it defines positive transformation as environmental, social and economic improvement of customers – regardless of their initial situation. The fundamental requirement is always to comply with international environmental and social standards (IFC Performance Standards). Depending on the initial situation, this means that establishing an appropriate environmental and social management system and mitigating potential risks and deficiencies are considered important transformative steps. On this basis, various measures and advisory services are applied to promote customers’ transformations, according to their needs, ranging from gender action plans to the Climate Advisory and Reduction Initiative. The important thing is that the action offers real added value for the customer.
DEG’s subsidiary DEG Impulse significantly expanded its advisory services for DEG customers in 2023 in order to foster this understanding of transformation. DEG Impulse offers project and advisory solutions primarily through the develoPPP and Business Support Services (BSS) programmes. These products and services are closely linked to DEG’s activities and strategic transformation goals. The promotional and advisory services make an important contribution to the transformation of DEG’s customers and to increasing developmental added value.
Bangladesh: Bank measures GHG emissions and local value creation of its customers
DEG’s customer Eastern Bank PLC (“EBL”) is a leading private commercial bank in Bangladesh financing corporate, small and medium-sized local companies, among others, which in turn create jobs and generate local income in the country. In collaboration with DEG and its partner, the Joint Impact Model (JIM) Foundation, EBL has initiated the first-ever carbon accounting for a local bank in Bangladesh.
The “Joint Impact Model” (JIM) enables EBL to measure greenhouse gas (GHG) emissions, indirect jobs, and value added related to the investments that they finance and assess their consequential impacts in economic, social and environmental dimensions.
Measuring key impact indicators will lead to greater comparability, accountability and transparency in Bangladesh's financial sector. As a “first mover”, EBL is setting new standards and helping to increase investment in green finance. EBL can take advantage of opportunities in the area of green financing at an early stage and is not only in a good position with regard to recently introduced regulatory requirements, but also an interesting partner for impact investors. These impacts serve as metrics for evaluating and disclosing the contributions of EBL towards the objectives outlined in the Paris Agreement and the United Nations Sustainable Development Goals.
