Annual Report 2015

∆Annual Report 2015

Taking responsibility KfWKfWKfW Group Group Group key key key figures figures figures

KfWKfW GroupKfW Group businessGroup business business activities activities activities

201520152015 201420142014 201320132013 EUR EUR in billionsEUR in billions in billionsEUREUR in billionsEUR in billions in billionsEUREUR in billionsEUR in billions in billions

KfWKfW GroupKfW Group1) Group1) 1) 79.379.379.3 74.174.174.1 72.572.572.5 DomesticDomesticDomestic promotional promotional promotional business business business 50.550.550.5 47.647.647.6 51.651.651.6 of which:of which:of which: BusinessBusinessBusiness sector sector Mittelstandsbank sector Mittelstandsbank Mittelstandsbank (SME (SME Bank) (SME Bank) Bank) 20.420.420.4 19.919.919.9 22.622.622.6 BusinessBusinessBusiness sector sector Kommunal- sector Kommunal- Kommunal- und undPrivatkundenbank/Kreditinstitute Privatkundenbank/Kreditinstituteund Privatkundenbank/Kreditinstitute (Municipal(Municipal(Municipal and andPrivate Privateand ClientPrivate Client Bank/Credit Client Bank/Credit Bank/Credit Institutions) Institutions) Institutions) 30.130.130.1 27.727.727.7 28.928.928.9 BusinessBusinessBusiness sector sector Capital sector Capital marketsCapital markets markets 1.1 1.1 1.1 1.2 1.2 1.2 0.7 0.7 0.7 InternationalInternationalInternational business business business 27.927.927.9 25.525.525.5 20.520.520.5 of which:of which:of which: BusinessBusinessBusiness sector sector Export sector Export and Export andproject projectand fiproject nance fi nance fi nance 20.220.220.2 16.616.616.6 13.713.713.7 BusinessBusinessBusiness area area KfW areaKfW Development KfWDevelopment Development Bank Bank Bank 6.7 6.7 6.7 7.4 7.4 7.4 5.3 5.3 5.3 DEGDEGDEG 1.1 1.1 1.1 1.5 1.5 1.5 1.5 1.5 1.5

1) Adjustment1) Adjustment1) Adjustment for commitments for commitments for commitments of Export of Export ofand Export projectand project and fi nanceproject fi nance with fi nance withfunding fundingwith from funding from KfW from KfWprogramme programmeKfW programme loans loans (2013: loans (2013: EUR (2013: EUR193 193million,EUR million,193 2014: million, 2014: EUR 2014: EUR153 153million,EUR million,153 million, 2015:2015: EUR2015: EUR229 229million)EUR million)229 million)

The fiThe gures fi Thegures in fitables gures in tables werein tables were calculated werecalculated calculated exactly exactly and exactly addedand added and up. added up. up. FiguresFigures mayFigures maynot addnotmay upadd not to up addtotals to up totals becauseto totals because of because rounding. of rounding. of rounding. Key fi gures of the income statement

2015 2014 EUR in millions EUR in millions

Net interest income (before promotional activity) 2,904 2,768 Net commission income (before promotional activity) 286 313 Administrative expense (before promotional activity) 1,125 1,059 Operating result before valuation (before promotional activity) 2,066 2,023 Risk provisions for lending business –48 –143 Net gains/losses from hedge accounting and other fi nancial instruments at fair value through profi t or loss 478 69 Net gains/losses from securities and investments and from investments accounted for using the equity method 43 4 Operating result a er valuation (before promotional activity) 2,539 1,953 Net other operating income 107 20 Profi t/loss from operating activity (before promotional activity) 2,647 1,973 Promotional activity (expense) 345 364 Taxes on income 130 95 Consolidated profi t 2,171 1,514 Consolidated profi t before IFRS eff ects from hedging 1,900 1,467 Cost/income ratio before promotional activity1) 35.2 % 34.4 %

Key ﬁ gures of the statement of ﬁ nancial position

31 Dec. 2015 31 Dec. 2014 EUR in billions EUR in billions

Total assets 503.0 489.1 Volume of lending 447.0 440.3 Volume of business 587.2 572.5 Equity 25.2 21.6 Equity ratio 5.0 % 4.4 %

Key regulatory ﬁ gures

31 Dec. 2015 31 Dec. 2014 EUR in billions EUR in billions

Risk position 131.8 144.1 Tier 1 capital 24.1 20.3 Regulatory capital 24.2 21.7 Tier 1 capital ratio 18.3 % 14.1 % Total capital ratio 18.4 % 15.1 %

Employees of KfW Group2)

2015 2014

5,807 5,518

1) Administrative expense (before promotional activitiy) in relation to adjusted income. Adjusted income is calculated from Net interest income and Net commission income (in each case before promotional activity). 2) The average number of employees including temporary staﬀ but without members of the Executive Board and trainees ∆Sustainably improving living ˚Responsible Banking conditions. That is what our work is all about.

Climate change, demographic trends and a globalised economy: people across the globe are contemplating how to meet the major challenges of our time.

KfW is one of the world’s leading promotional banks. It has been dedicated to improving environmental, social and economic conditions worldwide since 1948 in accordance with its mandate from the German Federal Government and the federal states. To this end, KfW is active in all areas where promotion serves this mission.

Change begins with responsibility – in Germany, in Europe and around the world. ˚Responsible Banking We promote Germany We supportWe internationalisation We promote development promote We Other notes Other Contents

˚Prospects for globalisation and technical progress Page 6

We promote Germany We support internationalisation We promote development Page 67 Page 87 Page 99

KfW sets things in motion – experience this report interactively in three ways

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4 | KfW Annual Report 2015 Contents Contents

Prospects for globalisation and technical progress 6 Editorial 17 Prospects in crisis countries and new homelands 19 ˚Prospects for globalisation Product and process innovations 34 and technical progress International division of labour and location attractiveness 42 Page 6 International trade and infrastructure 46 Prospects for forward-looking projects – the KfW Awards 53

Letter from the Executive Board 56

We promote Germany 67 At a glance: Domestic promotion in 2015 68 What we off er start-ups and businesses 74 The promotional off ering for private customers 78 The promotional off ering for municipalities 80 Special fi nancing for fi nancing partners and special tasks 81 KfW funding – simple, digital and everywhere 84

We support internationalisation 87 At a glance: Export and project ﬁ nance in 2015 88 KfW IPEX-Bank 92

We promote development 99 At a glance: Promotion of developing and emerging market countries in 2015 100

Business area KfW Development Bank 106 We promote Germany DEG 113

Capital markets 117

The men and women on our staﬀ 127

Financial reporting 133

Corporate governance 139 We supportWe internationalisation Report of the Board of Supervisory Directors 140 We promote Germany We support internationalisation We promote development Corporate Governance Report 143 Page 67 Page 87 Page 99 Executive Board, Directors and Managing Directors of KfW Group 153 Members and tasks of the Board of Supervisory Directors 154

Photographs 156 Imprint 157 We promote development promote We

KfW sets things in motion – experience this report interactively in three ways

01 | App Download the KfW Annual Report 2015 as a convenient app from the App Store or Google Play Store (search for: KfW Annual Report) or scan the QR code.

02 | Videos Download the free Layar app to your smartphone or tablet notes Other (www.layar.com/download), and scan the pages marked with the icon. The video will be loaded and then played.

03 | Online Check out the Annual Report microsite at: www.kfw.de/verantwortung

4 | KfW Annual Report 2015 Contents KfW Annual Report 2015 Contents | 5 ˚How does global thinking become a driving force? We promote international trade. ˚How does global thinking become a driving force? We promote international trade. We promote Germany We supportWe internationalisation We promote development promote We Our goal New prospects for an increased variety of goods, to improve and maintain prosperity around the world.

New sea lock | Amsterdam | Read more on page 46 Other notes Other ˚How do growth markets become environmentally clean? We promote climate protection worldwide. ˚How do growth markets become environmentally clean? We promote climate protection worldwide. We promote Germany We supportWe internationalisation We promote development promote We Our goal New prospects for sustainable transport concepts to meet the growing demand for mobility while conserving resources and the environment.

Traﬃ c management | China and Brazil Read more on page 50 Other notes Other ˚How does solar energy lead to independence? We promote alternative energy concepts. ˚How does solar energy lead to independence? We promote alternative energy concepts. We promote Germany We supportWe internationalisation We promote development promote We Our goal New prospects for green energy to meet the world’s energy needs and provide power where there is none.

Renewable energy | Africa | Read more on page 42 Other notes Other ˚How do you mass produce individuality? We promote innovative production processes. ˚How do you mass produce individuality? We promote innovative production processes. We promote Germany We supportWe internationalisation We promote development promote We Our goal New prospects for innovations to maintain competitiveness, jobs and prosperity in Germany.

Promoting innovation | Germany | Read more on page 34 Other notes Other ˚How do basic services provide a secure foundation? We promote accommodation for refugees. ˚How do basic services provide a secure foundation? We promote accommodation for refugees. We promote Germany We supportWe internationalisation We promote development promote We Our goal New prospects for people seeking refuge in Germany. We need to rise quickly and ﬂ exibly to one of the biggest challenges of recent years.

Refugee crisis | Germany | Read more on page 19 Other notes Other ˚We take responsibility Our goal is to improve people’s living conditions for the long term. In Germany, in Europe and around the world. ˚We take responsibility Our goal is to improve people’s living conditions for the long term. In Germany, in Europe and around the world. Our economy and society are in a state of constant fl ux. It is This year’s annual report focuses on globalisation. KfW fi nances KfW Group’s core function to off er support during these changes investments of German businesses at home and abroad, invests in in a forward-looking, responsible and successful manner. On be- young technology businesses and is participating in the Euro- half of and as a partner to the German federal and state govern- pean investment initiative (“Juncker plan”) to secure Germany’s ments, we have been committed to forward-looking development and Europe’s competitive position in a globalised world and to of our country and to sustainable improvement of living condi- promote technical progress. The demand for such fi nancing was tions worldwide since KfW was founded in 1948. In so doing, we consistently high in 2015.

focus on three megatrends which will be key factors shaping We promote Germany economic and political action in the coming decades: climate and Another reason for dedicating this annual report to globalisation environmental protection, demographic change and globalisation. is that 2015 was also characterised in Germany by the large numbers of people arriving who were fl eeing war and terror. The plight of these people shows that globalisation does not only ˚Using globalisation relate to the transfer of goods and data. Municipalities in partic- as an opportunity. ular are working extremely hard to meet these major challenges for Germany and Europe, by off ering thousands of people a roof over their heads and the fi rst steps towards integration. In the interests of fostering social cohesion in Germany, KfW launched We supportWe internationalisation a special programme to fund refugee accommodation in 2015. We promote development promote We Other notes Other

KfW Annual Report 2015 Taking responsibility | 17 The funds were exhausted very quickly, which shows that municipalities need help too. KfW is also active abroad in tackling the reasons for the refugees’ ﬂ ight at the source and support- What do we need to meet ing the countries in the crisis regions taking them in, so that people do not need to risk their lives to journey to Europe in the ﬁ rst place. the major challenges of the

Globalisation is associated with risks – but as with any development, it also provides opportunities. In addressing the major chal- global waves of refugees? ˚In addressing the major challenges, our promotional activities are aimed at helping create economic and social solutions geared to the future and sustain- lenges, our promotional activities ability, and making globalisation a success story for Germany are aimed at helping create eco- and Europe. KfW abides by this maxim not only as an institution but also in the work and commitment of each individual staﬀ nomic and social solutions geared member. to the future and sustainability. This is how we aim to provide the right impetus for the future and fulﬁ l our mandate as a bank committed to responsibility.

Dr Ulrich Schröder, Chief Executive Oﬃ cer

18 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 19 ˚We take responsibility

The funds were exhausted very quickly, which shows that municipalities need help too. KfW is also active abroad in tackling We are driven by the desire to en- the reasons for the refugees’ ﬂ ight at the source and support- What do we need to meet ing the countries in the crisis regions taking them in, so that people do not need to risk their lives to journey to Europe in the able globalisation and technical pro- ﬁ rst place. the major challenges of the

Globalisation is associated with risks – but as with any develop- gress to reach all people, businesses ment, it also provides opportunities. In addressing the major chal- global waves of refugees? ˚In addressing the major challenges, our promotional activities are aimed at helping create economic and social solutions geared to the future and sustain- and societies worldwide, and thus lenges, our promotional activities ability, and making globalisation a success story for Germany are aimed at helping create eco- and Europe. KfW abides by this maxim not only as an institution but also in the work and commitment of each individual staﬀ offer them sustainable prospects. nomic and social solutions geared member. to the future and sustainability. This is how we aim to provide the right impetus for the future and fulﬁ l our mandate as a bank committed to responsibility. We promote Germany

Dr Ulrich Schröder, Chief Executive Oﬃ cer We supportWe internationalisation We promote development promote We Other notes Other

18 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 19 ˚Prospects in crisis countries and new homelands

˚KfW’s interest-free special support helped to get funds to the municipalities quickly and ﬂ exibly in order to provide more initial accommodation. The next task is to support the integration of refugees and strengthen social cohesion. Dr Ingrid Hengster, member of the KfW Executive Board

KfW Group uses its expertise at home and abroad and works on 3.0 behalf of the Federal Government for refugees ... EUR billion committed by ... in Germany KfW for measures More refugees arrive in Germany every day. It is the municipalities’ job to directly related accommodate them. KfW provides support in the form of special promo- to refugee aid tion for refugee accommodation, which has been topped up three times due to the high demand, to a total of EUR 1.5 billion. Almost 700 municipalities had used these funds by the beginning of 2016.

... in crisis and transit countries Most refugees don’t even come to Europe. That’s why the business area KfW Development Bank and DEG are active abroad in helping partner countries of German development cooperation to tackle the causes of the refugees’ ﬂ ight, to stabilise the regions taking them in and integrating/ reintegrating them.

... with KfW Sti ung The KfW Sti ung (foundation) has launched a national initiative for the economic integration of refugees, “Ankommer. Perspektive Deutschland”. The aim of the project is to identify employment opportunities via an ideas competition, which will then serve as models for further development. More information on KfW’s current commitment for refugees is available at ... and with our staff www.kfw.de/fl uechtlingshilfe KfW staff also help refugees, as volunteers.

KfW Annual Report 2015 Taking responsibility | 21 ˚We take responsibility We are driven by the desire to en- ˚Prospects in crisis countries able globalisation and technical pro- and new homelands gress to reach all people, businesses

˚andKfW’s interest-freesocieties special worldwide, support helped to get and thus funds to the municipalities quickly and ﬂ exibly in order tooffer provide morethem initial accommodation.sustainable The next prospects. task is to support the integration of refugees and strengthen social cohesion. Dr Ingrid Hengster, member of the KfW Executive Board We promote Germany

KfW Group uses its expertise at home and abroad and works on 3.0 behalf of the Federal Government for refugees ... EUR billion committed by ... in Germany KfW for measures More refugees arrive in Germany every day. It is the municipalities’ job to We supportWe internationalisation directly related accommodate them. KfW provides support in the form of special promo- to refugee aid tion for refugee accommodation, which has been topped up three times due to the high demand, to a total of EUR 1.5 billion. Almost 700 municipalities had used these funds by the beginning of 2016.

... in crisis and transit countries Most refugees don’t even come to Europe. That’s why the business area KfW Development Bank and DEG are active abroad in helping partner

countries of German development cooperation to tackle the causes of the development promote We refugees’ ﬂ ight, to stabilise the regions taking them in and integrating/ reintegrating them.

... with KfW Sti ung The KfW Sti ung (foundation) has launched a national initiative for the economic integration of refugees, “Ankommer. Perspektive Deutschland”.

The aim of the project is to identify employment opportunities via an ideas notes Other competition, which will then serve as models for further development. More information on KfW’s current commitment for refugees is available at ... and with our staff www.kfw.de/fl uechtlingshilfe KfW staff also help refugees, as volunteers.

KfW Annual Report 2015 Taking responsibility | 21 ˚Support that renews people’s trust

Adam, 3, Al Abbas, 7, and Hamsa, 10, are afraid They are living in new refugee accommodation when they hear planes in the sky over Siegburg. The near Siegburg railway station until the authorities brothers are Syrian refugees who came to Germany decide whether or not they can stay in Germany. from Aleppo with their mother Noura Al Hamdo and The initial reception centre with 260 camp beds set father Nawaf Alias some fi ve months ago. Nawaf up by the town in a sports hall was soon full. So used to run his own pharmacy in the eastern Al-Shaar Siegburg purchased a vacant building for almost district of the city – until it was bombed. “We spent EUR 2 million to accommodate 150 more refugees. most weekends at my parents’ home in the country- 1. 5 It was also fi tted out with kitchens, showers and side,” he said. “One time we came back to fi nd every- EUR billion washrooms. thing in ruins – the pharmacy and our house too.” Emergency municipal aid He fi nds photos online of the destroyed neighbour- programme for hood, including some of his own shop; only interior refugee accom- walls are le . “Nobody can imagine how terrible it modation help with fi nancing refugee accommodation can is there. I saw so many dead bodies in the streets. now avail themselves of the KfW investment loans KfW loans for refugee accommodation It’s impossible to live there any more.” The family ˚Funds have never been for municipalities at a reduced rate of interest. Funding committed per federal state as of fi rst fl ed on foot to Turkey, and were able to come drawn so quickly. 25 February 2016 in EUR millions to Germany from there thanks to an invitation from KfW also aims to support federal states and munici- a relative. Dr Ingrid Hengster, member of the Executive Board palities in creating aff ordable permanent housing. This is to the benefi t not only of refugees but of all people in Germany that need support. In consulta- 98 tion with the Federal Government, KfW will channel 4 up to EUR 2 billion through the promotional institu- 15 0 58 The town of Siegburg obtained the money via a loan tions of the federal states to create social housing. thousand 15 73 from KfW. KfW provided a total of EUR 1.5 billion New accom- 224 in interest-free loans from September 2015 to Janu - Nawaf Alias and his family would ideally like to go modation for 13 22 ary 2016, to help municipalities accommodate back to Syria. “We feel safe here, but we’re home- people 294 refu gees. They were able to invest these funds in sick,” he said. But he has no hope that the war there 25 building, converting, acquiring and equipping initial will end in the foreseeable future. 7 reception centres. This provided accommodation 64 for some 150,000 people. The funds were topped 98 up three times due to the high demand. New accom- 4 Siegburg is one of around 700 municipalities in modation for 91 Germany to benefi t from KfW’s off ering. And the 407 town of 40,000 people is not just saving interest. 15 0 “We now have a new building in our portfolio,” said thousand mayor Franz Huhn. Municipalities still in need of people

Total volume: EUR 1,498 million

22 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 23 ˚We take responsibility We are driven by the desire to en- ˚Support that renews people’s trust able globalisation and technical progress to reach all people, businesses

Adam, 3, Al Abbas, 7, and Hamsa, 10, are afraid They are living in new refugee accommodation and societies worldwide, and thus when they hear planes in the sky over Siegburg. The near Siegburg railway station until the authorities brothers are Syrian refugees who came to Germany decide whether or not they can stay in Germany. from Aleppo with their mother Noura Al Hamdo and The initial reception centre with 260 camp beds set offer them sustainable prospects. father Nawaf Alias some fi ve months ago. Nawaf up by the town in a sports hall was soon full. So used to run his own pharmacy in the eastern Al-Shaar Siegburg purchased a vacant building for almost district of the city – until it was bombed. “We spent EUR 2 million to accommodate 150 more refugees. most weekends at my parents’ home in the country- 1. 5 It was also fi tted out with kitchens, showers and side,” he said. “One time we came back to fi nd every- EUR billion washrooms. thing in ruins – the pharmacy and our house too.” Emergency municipal aid We promote Germany He fi nds photos online of the destroyed neighbour- programme for hood, including some of his own shop; only interior refugee accom- walls are le . “Nobody can imagine how terrible it modation help with fi nancing refugee accommodation can is there. I saw so many dead bodies in the streets. now avail themselves of the KfW investment loans KfW loans for refugee accommodation It’s impossible to live there any more.” The family ˚Funds have never been for municipalities at a reduced rate of interest. Funding committed per federal state as of fi rst fl ed on foot to Turkey, and were able to come drawn so quickly. 25 February 2016 in EUR millions to Germany from there thanks to an invitation from KfW also aims to support federal states and munici- a relative. Dr Ingrid Hengster, member of the Executive Board palities in creating aff ordable permanent housing. This is to the benefi t not only of refugees but of all We supportWe internationalisation people in Germany that need support. In consulta- 98 tion with the Federal Government, KfW will channel 4 up to EUR 2 billion through the promotional institu- 15 0 58 The town of Siegburg obtained the money via a loan tions of the federal states to create social housing. thousand 15 73 from KfW. KfW provided a total of EUR 1.5 billion New accom- 224 in interest-free loans from September 2015 to Janu - Nawaf Alias and his family would ideally like to go modation for 13 22 ary 2016, to help municipalities accommodate back to Syria. “We feel safe here, but we’re home- people 294 refu gees. They were able to invest these funds in sick,” he said. But he has no hope that the war there 25

building, converting, acquiring and equipping initial will end in the foreseeable future. 7 development promote We reception centres. This provided accommodation 64 for some 150,000 people. The funds were topped 98 up three times due to the high demand. New accom- 4 Siegburg is one of around 700 municipalities in modation for 91 Germany to beneﬁ t from KfW’s oﬀ ering. And the 407 town of 40,000 people is not just saving interest. 15 0 notes Other “We now have a new building in our portfolio,” said thousand mayor Franz Huhn. Municipalities still in need of people

Total volume: EUR 1,498 million

22 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 23 What lessons from the crisis can you Are the refugees accepted by the ˚Prompt help with a apply to your work? local residents? At the beginning, refugee camps were set up in the Most people in the region share the same religious neighbouring host countries, whereas now the refu- and cultural background, which makes integration a sustained effect gees are distributed among towns and villages. lot easier. But the host countries have their own Municipalities are struggling to cope with so many problems, such as very high unemployment in some refugees. Schools are having to teach in shi s, cases. So refugees have not been allowed to work accommodation is scarce and few refugees have yet. The BMZ’s “Cash for Work” initiative is designed access to healthcare. If we want to reduce the infl ux to ease this situation. The idea is that local busi- And what role does KfW play today? of refugees to Europe, we need to do more in the nesses off er apprenticeships – for refugees too – Today at least one third of our commitment in the immediate region. The majority of refugees would and get loans at favourable rates in exchange. region is a response to the crisis. We continue to actually prefer to stay in the region – but without There are also plans to give refugees jobs building fi nance long-term projects that also benefi t refugees, jobs or education for their children and with only schools and establishing a water supply. The ini- such as building schools and creating water supply minimal food distributions from the UN, they see tiative is being fi nanced through German federal systems in Jordan. But we are also able to react at their only chance for survival in fl eeing to Europe. 875 budget funds. EUR 200 million is being made avail- EUR million short notice, and quickly secure a water supply in We are working hard to help the refugees in the able in 2016, which should enable several hundred for crisis a refugee camp. KfW works together with the UN region. We have already assessed and funded two thousand new jobs to be created. This is a good and transit in such cases. UNICEF projects for refugees within the space of idea, because confl ict research indicates that if a countries just seven days – which is extremely fast for devel- crisis has not been resolved within fi ve years, it Has development cooperation changed since opment cooperation. EUR 30 million is going to is likely to become a sustained confl ict of up to the civil war in Syria? Iraq and the same again to Lebanon. 30 years. The civil war in Syria is now in its fi h The Federal Government is expanding support in year. Politicians in Jordan and Lebanon are aware terms of both region and quality. Development co- of this, and their demands are growing. operation with Lebanon has offi cially recommenced for the time being. Turkey is receiving increased support and UN projects are now being fi nanced in Syria, too. For example, Syrian refugees in Turkey KfW department head Babette Stein von have received the fi rst aid from Germany in the form Kamienski talks about KfW’s commitment to of the “winter package”; some EUR 115 million was refugees abroad mobilised quickly at the end of November 2015 for Jordan, Lebanon, Turkey, Iraq – and also for those KfW has been supporting refugees in the suff ering in Syria. The money is primarily being used Middle East for decades now. What form does for education and to protect children. The business this support take, Ms Stein von Kamienski? area KfW Development Bank fi nanced projects re- The fi rst refugees in that region were in Lebanon lating to the Syrian crisis on behalf of the Federal and Jordan following the 1948 Palestine War. The 90 Ministry for Economic Cooperation and Development Palestinian refugees were immediately a key target EUR million (“BMZ”) to the tune of EUR 520 million between group for the development cooperation work that for 36 projects in 2012 and the end of 2015. began with those countries at the time. What were Syria initially refugee camps became small towns with Is KfW independently active in Syria? their own infrastructure, and we provided support, Yes, through the Syria Recovery Trust Fund (“SRTF”), such as for water supply and basic education. which was established in 2013. Germany is the These two small countries have taken in the most second largest donor. We fi nance infrastructure pro- Syrian refugees since 2011; they constitute around jects in opposition-controlled areas, such as rein- half of the population of Lebanon now. stating the electricity supply and producing food.

24 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 25 ˚We take responsibility

WhatWe lessons are from the crisisdriven can you by the desireAre the refugees accepted to by en the - apply to your work? local residents? At the beginning, refugee camps were set up in the Most people in the region share the same religious neighbouringable host globalisation countries, whereas now the refu- and andtechnical cultural background, which makes pro- integration a gees are distributed among towns and villages. lot easier. But the host countries have their own Municipalities are struggling to cope with so many problems, such as very high unemployment in some refugees.gress Schools are to having toreach teach in shi s, all people,cases. So refugees businesses have not been allowed to work accommodation is scarce and few refugees have yet. The BMZ’s “Cash for Work” initiative is designed access to healthcare. If we want to reduce the infl ux to ease this situation. The idea is that local busi- ofand refugees to Europe,societies we need to do more in the worldwide, nesses off ander apprenticeships thus – for refugees too – immediate region. The majority of refugees would and get loans at favourable rates in exchange. actually prefer to stay in the region – but without There are also plans to give refugees jobs building jobsoffer or education for them their children and withsustainable only schools prospects. and establishing a water supply. The ini- minimal food distributions from the UN, they see tiative is being fi nanced through German federal their only chance for survival in fl eeing to Europe. 875 budget funds. EUR 200 million is being made avail- EUR million We are working hard to help the refugees in the able in 2016, which should enable several hundred for crisis region. We have already assessed and funded two thousand new jobs to be created. This is a good and transit UNICEF projects for refugees within the space of idea, because confl ict research indicates that if a countries just seven days – which is extremely fast for devel- crisis has not been resolved within fi ve years, it opment cooperation. EUR 30 million is going to is likely to become a sustained confl ict of up to We promote Germany Iraq and the same again to Lebanon. 30 years. The civil war in Syria is now in its fi h year. Politicians in Jordan and Lebanon are aware of this, and their demands are growing. We supportWe internationalisation We promote development promote We Other notes Other

KfW Annual Report 2015 Taking responsibility | 25 ˚Commitment that makes new arrivals feel welcome

Newcomers want to feel welcome. They generally want to become part of a community and play an active role. That’s why KfW employees support projects and initiatives aimed at Donating school materials enabling refugees to integrate.

Teaching German Spontaneous help

Vincent Schulze KfW Frankfurt

The Brüder-Grimm primary school in Leipzig gained two new classes of Syrian refugee children at very short notice, which was a real challenge for the fundraising group I was Julia Kirsch Shoaib Sheirzei KfW Frankfurt KfW Frankfurt involved with. We needed to get hold of backpacks, pencils I teach German to refugees from Syria, Eritrea and My family fl ed from Afghanistan 25 years ago and and compasses overnight. We Somalia, so that they can manage offi cial paperwork made a new home in Germany, so I felt compelled achieved this largely thanks to and dealings with authorities, visits to the doctor to help other refugees myself. When more and more my colleagues from KfW, who and shopping by themselves. We practise dialogues asylum seekers started arriving in Frankfurt, a donated a lot of supplies. The and use role-plays, or we go to the supermarket network of hundreds of volunteers from a diverse rest of the money for the items together. I’m a member of the “Welcome to Kri el” range of countries formed within a short space of came from membership fees, task force (Willkommen in Kri el) and volunteer with time, and I joined them. We did things like setting raffl es and bazaars. The new about 50 other people. Kri el is a town of 10,000 up refugee accommodation and distributing food pupils are meanwhile already people located between Frankfurt and Wiesbaden. there. We invited refugees to a meal to celebrate showing the fi rst signs of pro- It is important to us that all new refugees arriving the end of Ramadan. As I am from Afghanistan gress. “We have been practis- in our town feel welcome and receive help with myself, I was able to communicate with the Afghan ing with the compasses and the integration. My students are generally motivated refugees – and so became the interpreter. children are getting better and and make fast progress. The fi rst ones are already better,” said a teacher in an starting to make jokes – in German, their new e-mail of thanks. common language.

26 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 27 ˚We take responsibility We are driven by the desire to en- ˚Commitment that makes new able globalisation and technical pro- arrivals feel welcome gress to reach all people, businesses

Newcomers want to feel welcome. They gener- and societies worldwide, and thus ally want to become part of a community and play an active role. That’s why KfW employees offer them sustainable prospects. support projects and initiatives aimed at Donating school materials enabling refugees to integrate. We promote Germany

Teaching German Spontaneous help

Vincent Schulze KfW Frankfurt

The Brüder-Grimm primary school in Leipzig gained two We supportWe internationalisation new classes of Syrian refugee children at very short notice, which was a real challenge for the fundraising group I was Julia Kirsch Shoaib Sheirzei KfW Frankfurt KfW Frankfurt involved with. We needed to get hold of backpacks, pencils I teach German to refugees from Syria, Eritrea and My family ﬂ ed from Afghanistan 25 years ago and and compasses overnight. We Somalia, so that they can manage oﬃ cial paperwork made a new home in Germany, so I felt compelled achieved this largely thanks to and dealings with authorities, visits to the doctor to help other refugees myself. When more and more

my colleagues from KfW, who and shopping by themselves. We practise dialogues asylum seekers started arriving in Frankfurt, a development promote We donated a lot of supplies. The and use role-plays, or we go to the supermarket network of hundreds of volunteers from a diverse rest of the money for the items together. I’m a member of the “Welcome to Kri el” range of countries formed within a short space of came from membership fees, task force (Willkommen in Kri el) and volunteer with time, and I joined them. We did things like setting raﬄ es and bazaars. The new about 50 other people. Kri el is a town of 10,000 up refugee accommodation and distributing food pupils are meanwhile already people located between Frankfurt and Wiesbaden. there. We invited refugees to a meal to celebrate showing the ﬁ rst signs of pro- It is important to us that all new refugees arriving the end of Ramadan. As I am from Afghanistan

gress. “We have been practis- in our town feel welcome and receive help with myself, I was able to communicate with the Afghan notes Other ing with the compasses and the integration. My students are generally motivated refugees – and so became the interpreter. children are getting better and and make fast progress. The ﬁ rst ones are already better,” said a teacher in an starting to make jokes – in German, their new e-mail of thanks. common language.

26 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 27 Making a home – KfW Sti ung supports the Doing their bit – employees support KfW Sti ung projects Milena refugee café Vocabulary books, colouring books, clothing, nappies, toothpaste, frying “Home is where I feel safe and secure” – this is the pans, suitcases, bubble mix and pasta – more than 200 boxes of items were motto of the Milena café for refugee women and collected in several donation drives at KfW. Some of them will go to the girls in the Bockenheim district of Frankfurt. Milena female refugees at the Milena café, and other recipients include socially is a project run by the Frankfurt girls’ club (Mädchen- disadvantaged young people at the Don-Bosco Centre in Berlin. “A lot of büro), which has set standards in the area of support staff asked their friends and relatives and even brought new clothing to for girls from migrant families and diffi cult back- donate,” said Britta Verbeet from KfW Sti ung, who is in charge of organis- grounds in the city for the past 20 years with its “safe ing the donations. “The so toys alone were enough to people a small town, place” concept. The girls voted to name the refugee and brought smiles to a lot of faces later on.” café a er a former member – Milena. The café off ers basic and intensive language and literacy courses, The boxes were provided by KfW’s Central Services, and were stacked in and once a month there is the opportunity to cook and the foundation staff ’s offi ces for quite some time. “We received monetary eat together. The women can also get help in dealing donations too, and a lot of enquiries about volunteering help.” The boxes with authorities, chat and make new friends, and and – in some cases unwieldy – objects were transported to their destina- together get to know their new home city of Frank- tions by KfW’s postal and courier services along with other areas of the furt better. The café receives fi nancial support from company. “The staff ’s commitment at all locations has been relentless,” said KfW Sti ung and Linsenhoff Foundation. KfW em- Verbeet. More donation drives are planned. ployees are also among its volunteers.

28 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 29 ˚We take responsibility We are driven by the desire to en- Making a home – KfW Sti ung supports the Doing their bit – employees support KfW Sti ung projects Milena refugee café able globalisationVocabulary books, andcolouring books, technical clothing, nappies, toothpaste, pro- frying “Home is where I feel safe and secure” – this is the pans, suitcases, bubble mix and pasta – more than 200 boxes of items were motto of the Milena café for refugee women and collected in several donation drives at KfW. Some of them will go to the girls in the Bockenheim district of Frankfurt. Milena gress to reachfemale refugeesall atpeople, the Milena café, and otherbusinesses recipients include socially is a project run by the Frankfurt girls’ club (Mädchen- disadvantaged young people at the Don-Bosco Centre in Berlin. “A lot of büro), which has set standards in the area of support staff asked their friends and relatives and even brought new clothing to for girls from migrant families and diffi cult back- and societiesdo nate,”worldwide, said Britta Verbeet from KfW Sti and ung, who is thusin charge of organis- grounds in the city for the past 20 years with its “safe ing the donations. “The so toys alone were enough to people a small town, place” concept. The girls voted to name the refugee and brought smiles to a lot of faces later on.” café a er a former member – Milena. The café off ers offer them sustainable prospects. basic and intensive language and literacy courses, The boxes were provided by KfW’s Central Services, and were stacked in and once a month there is the opportunity to cook and the foundation staff ’s offi ces for quite some time. “We received monetary eat together. The women can also get help in dealing donations too, and a lot of enquiries about volunteering help.” The boxes with authorities, chat and make new friends, and and – in some cases unwieldy – objects were transported to their destina- together get to know their new home city of Frank- tions by KfW’s postal and courier services along with other areas of the furt better. The café receives fi nancial support from company. “The staff ’s commitment at all locations has been relentless,” said KfW Sti ung and Linsenhoff Foundation. KfW em- Verbeet. More donation drives are planned. We promote Germany ployees are also among its volunteers. We supportWe internationalisation We promote development promote We Other notes Other

28 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 29 We take responsibility for economic and social prospects

KfW Sti ung and the non-proﬁ t Social Impact GmbH give grants for sustainable concepts that oﬀ er refugees economic and social prospects in Germany.

The country needs new ideas

A sewing machine hums by the window, on the other side of 14 projects instead of 12,” said the programme director of the room an ironing board, and colourful rolls of fabric line the KfW Sti ung, Dr Martina Köchling. The projects range from shelves. An idea is becoming reality in a studio in the Born- catering through programmer training courses to part-time heim district of Frankfurt, which could have a ripple eﬀ ect continuing education mentoring programmes of and for throughout the country. Dressmaker Claudia Frick and de- young people. Coaching has also been provided to the grant signer Nicole von Alvensleben are establishing their sewing recipients since November 2015. The three best projects will workshop “Stitch by Stitch”, where refugee seamstresses can each be awarded start-up funds of EUR 20,000 in June 2016. work and share the traditional techniques of their home cul- “The entrepreneurs also have the support of tandem partners tures. The studio plans to produce small batch productions a er the stipend period is over, who will advise them on re- for local start-up fashion labels quickly and eﬃ ciently. alising their business idea for the long term,” said Köchling.

The start-up is one of 14 projects to receive a grant under the Stitch by Stitch has already employed its fi rst seamstress – “Ankommer. Perspektive Deutschland” project, which is spon- a young woman from Syria, who had started studying fash- sored by the KfW Sti ung and non-profi t Social Impact GmbH. ion design back home. She is also learning German through The stipend programme launched in August 2015 under the working so closely together with the company founders, who patronage of Federal Minister for Economic Aff airs and Energy aim in the long term to make their studio a training centre. Sigmar Gabriel supports projects and initiatives that develop They hope to fi nd new talent in Frankfurt’s Milena refugee sustainable concepts to provide work for refugees, and ena- café (see previous page), among other places. ble them to become productive members of German society and economy.

The ideas should be economically viable and transferable; other businesses are invited to adopt the concepts, too. Around 190 start-ups and socio-entrepreneurial initiatives have applied to the programme. “There were so many creative and sustainable ideas that we decided to support

30 | KfW Annual Report 2015 Taking responsibility ˚We take responsibility We are driven by the desire to en- We take responsibility for economic and social prospects able globalisation and technical progress to reach all people, businesses and societies worldwide, and thus

KfW Sti ung and the non-proﬁ t Social offer them sustainable prospects. Impact GmbH give grants for sustainable concepts that oﬀ er refugees economic and social prospects in Germany.

The country needs new ideas We promote Germany A sewing machine hums by the window, on the other side of 14 projects instead of 12,” said the programme director of the room an ironing board, and colourful rolls of fabric line the KfW Sti ung, Dr Martina Köchling. The projects range from shelves. An idea is becoming reality in a studio in the Born- catering through programmer training courses to part-time heim district of Frankfurt, which could have a ripple eﬀ ect continuing education mentoring programmes of and for throughout the country. Dressmaker Claudia Frick and de- young people. Coaching has also been provided to the grant signer Nicole von Alvensleben are establishing their sewing recipients since November 2015. The three best projects will workshop “Stitch by Stitch”, where refugee seamstresses can each be awarded start-up funds of EUR 20,000 in June 2016. work and share the traditional techniques of their home cul- “The entrepreneurs also have the support of tandem partners tures. The studio plans to produce small batch productions a er the stipend period is over, who will advise them on re- We supportWe internationalisation for local start-up fashion labels quickly and eﬃ ciently. alising their business idea for the long term,” said Köchling.

sustainable concepts to provide work for refugees, and ena- café (see previous page), among other places. development promote We ble them to become productive members of German society and economy.

The ideas should be economically viable and transferable; other businesses are invited to adopt the concepts, too. Around 190 start-ups and socio-entrepreneurial initiatives

have applied to the programme. “There were so many notes Other creative and sustainable ideas that we decided to support

30 | KfW Annual Report 2015 Taking responsibility Product and process innovation

˚In which areas does KfW take responsibility for globalisation and technical progress?

32 | KfW Annual Report 2015 Taking responsibility International division of labour and location attractiveness

Product and process innovation We promote Germany

International trade and infrastructure We supportWe internationalisation We promote development promote We ˚In which areas does KfW take responsibility for globalisation and technical progress? Three areas, one common goal: to create prospects KfW promotes new ideas, products and services, and in so doing helps to lay the foundation for an innovative society. Innovations lead to new prospects for achieving and

maintaining prosperity. We support the international division of labour and loca- notes Other tion attractiveness, and in so doing, help to drive economic competitiveness around the world. We also contribute, by way of infrastructure projects, to boost international trade and thus the global economy.

32 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 33 ˚SMEs have an edge thanks to their innovative processes. How do we invigorate our ﬂ agship industry?

Carl Fruth, FIT AG CEO ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

˚Innovative start-up spirit – additive manufacturing in Germany’s Upper Palatinate We promote Germany We supportWe internationalisation

“High tech made in Lupburg” – FIT AG manufac- tures both the skull model and the custom-ﬁ t titanium implant within just a few days using The ruins of Lupburg Castle tower over Fruth established the unlisted company in additive processes. the peaceful valley of the Schwarze Laber 1995 and is active in the areas of rapid

river in the Upper Palatinate region, be- prototyping and additive design and manu- development promote We tween Regensburg and Nuremberg in Ba- facture (“ADM”) via its subsidiaries FIT Pro- ˚SMEs have an edge thanks to varia. But far beneath the castle, objects totyping GmbH and FIT Production GmbH. their innovative processes. How do we are produced through additive manufacturing (also known as 3D printing) and The Bavaria-based group has an excellent invigorate our ﬂ agship industry? distributed to customers around the world. reputation – particularly in the medical FIT AG is the hidden champion of the technology sector. FIT AG specialises in

high-tech industry, and has been receiv- high-quality implants and instruments notes Other ing KfW support for two years now. made of titanium, metal and plastic, produced using additive manufacturing. Find out more: Growing demand in medical technology Demand is also on the rise in automotive download the free Layar app FIT AG, an additive manufacturing group, technology and the aerospace sector. (see page 4) and scan the page. was named for its founder Carl Fruth.

Carl Fruth, FIT AG CEO

KfW Annual Report 2015 Taking responsibility | 35 tors initially have no guarantee of success. This is precisely where promotional bank KfW sees its responsibility.

The technical specialists at FIT are also beneﬁ tting from KfW’s “ERP Innovation Programme”. FIT used EUR 2.6 million from the programme in 2015 to ﬁ nance projects including developing a system to prepare 3D print data and a special laser production facility. The company had already received EUR 3.6 million in promotional funds from KfW in 2014, which it used to develop new machinery control so ware, among other projects.

New jobs in the Upper Palatinate region The SME sector poster child generated ˚Additive manufacturing requires the pro- sales of EUR 17 million in 2015 and duction line as we know it to be digitalised. employed more than 200 people at the company’s headquarters and its sites in We have been working on precisely that for Hamburg, and Santa Clara, California. ten years, which makes our speed, effi ciency Women make up 40 % of the total staff , which is a fantastic rate for an industrial and quality better than our competitors’. manufacturing company. The world’s most powerful plant to focus entirely on Carl Fruth, FIT AG CEO industrial additive serial production com- menced operations in Lupburg at the beginning of 2016 – a “real milestone” Objects produced in additive manufac- Our contribution for founder Carl Fruth. turing are not pressed or cast, but built KfW supports SMEs with products up in layers of material based on a 3D such as the low-interest loans from This brings Fruth that much closer to his data set. In medicine, such data may now the “ERP Innovation Programme”. goal of becoming one of the world’s lead- come from a CT scan, and is turned into These provide long-term funding for ing contractors for additive manufactur- 3D data using proprietary so ware before the development of new products, ing. The region has also profi ted from the being transferred to the machine con- product processes and services. start-up spirit of FIT AG. “The new produc- trols. The machine breaks down the 3D 2015 saw promotion of innovative tion facility will create a lot of new jobs,” model and recreates the object layer by plans from SMEs totalling around said Fruth, who is already one of the larg- layer. These layers may be as little as EUR 620 million under the “ERP In- est employers in the Upper Palatinate. several thousandths of a millimetre thick. novation Programme”. The investment is therefore also a com- This allows exact shapes to be formed, mitment to the region – and to Lupburg. such as implants, which are not only tai- Germany’s future as a centre for technol- lored to the patient, but also meet the ogy depends largely on forgers of creative medical requirements and ISO certifi ca- ideas and innovations like FIT AG. They tions, and are available quickly. Digital show that to make a permanent mark on manufacturing processes with additive the market you have to be fl exible, adapt technologies are in line with Industry 4.0 your products or services to customer re- principles. FIT AG is a pioneer in this quirements and identify trends early on. industry of the future. But innovations need capital – and inves-

36 | KfW Annual Report 2015 Taking responsibility tors initially have no guarantee of success. This is precisely where promotional bank KfW sees its responsibility.

New jobs in the Upper Palatinate region The SME sector poster child generated ˚Additive manufacturing requires the pro- sales of EUR 17 million in 2015 and duction line as we know it to be digitalised. employed more than 200 people at the company’s headquarters and its sites in We have been working on precisely that for Hamburg, and Santa Clara, California. ten years, which makes our speed, effi ciency Women make up 40 % of the total staff , We promote Germany which is a fantastic rate for an industrial and quality better than our competitors’. manufacturing company. The world’s most powerful plant to focus entirely on Carl Fruth, FIT AG CEO industrial additive serial production com- menced operations in Lupburg at the beginning of 2016 – a “real milestone” Objects produced in additive manufac- Our contribution for founder Carl Fruth. turing are not pressed or cast, but built KfW supports SMEs with products up in layers of material based on a 3D such as the low-interest loans from This brings Fruth that much closer to his We supportWe internationalisation data set. In medicine, such data may now the “ERP Innovation Programme”. goal of becoming one of the world’s lead- come from a CT scan, and is turned into These provide long-term funding for ing contractors for additive manufactur- 3D data using proprietary so ware before the development of new products, ing. The region has also profi ted from the being transferred to the machine con- product processes and services. start-up spirit of FIT AG. “The new produc- trols. The machine breaks down the 3D 2015 saw promotion of innovative tion facility will create a lot of new jobs,” model and recreates the object layer by plans from SMEs totalling around said Fruth, who is already one of the larg- layer. These layers may be as little as EUR 620 million under the “ERP In- est employers in the Upper Palatinate. several thousandths of a millimetre thick. novation Programme”. The investment is therefore also a com- ˚Maximum precision of detail sets

This allows exact shapes to be formed, mitment to the region – and to Lupburg. development promote We such as implants, which are not only tai- Germany’s future as a centre for technol- us apart from the crowd. How can we lored to the patient, but also meet the ogy depends largely on forgers of creative make our passion measurable? medical requirements and ISO certiﬁ ca- ideas and innovations like FIT AG. They tions, and are available quickly. Digital show that to make a permanent mark on manufacturing processes with additive the market you have to be ﬂ exible, adapt technologies are in line with Industry 4.0 your products or services to customer re-

principles. FIT AG is a pioneer in this quirements and identify trends early on. notes Other industry of the future. But innovations need capital – and inves-

36 | KfW Annual Report 2015 Taking responsibility ˚Microalgae – a renewable raw material and a perfect fuel for the future. How can we use our expertise for diﬀ erent sectors?

The assembly team at the Degerloch site in Stuttgart

Subitec’s pilot facility in the Weitingen area of Eutingen ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

˚Microalgae are real all-rounders – KfW is investing in a biotech start-up

Biologists have long since maintained that tional photobioreactors, it is both more microalgae are the raw material of the effi cient in monitoring temperature and future. The tiny sea-dwellers – invisible to more accurate in checking the microal- the naked eye – contain valuable proteins, gae’s pH value and gas exchange. Also, ˚Microalgae – a renewable raw plenty of unsaturated fatty acids and are the production capacities can be scaled even richer in oils and vitamins than com- in a rather fl exible way due to the modular material and a perfect fuel for the mon macroalgae. Microalgae are real all- set-up. At night, the algae get additional future. How can we use our exper- rounders. Due to their precious ingredients, air pulsing to avoid sedimentation. they are especially useful in cosmetics, tise for diff erent sectors? pharmaceuticals, but also in the foodstuff s Subitec had the high-tech reactor pa- industry. What is more, microalgae can tented back in 1999 already. Now, the be used to generate cleaner energy, too. technical achievement is already in the third generation – and word of its success Algae have even more benefi ts compared has spread. Indeed, Subitec is presently

The assembly team at the Degerloch site in Stuttgart with conventional land plants, since they preparing to launch the fully automated We promote Germany are fi ve to ten times more productive in FPA technology on the global market. comparison. Around 50 % of atmospheric oxygen is produced by marine algae. Investors are facilitating ambitious growth plans Professor Dr Walter Trösch realised just In summer 2012, the Stuttgart-based what potential the nutrient-rich microal- company received help with its expansion gae have at an early stage. The former plans from KfW within the context of the Head of the Department of Environmental “ERP Start-up Fund”. This support was Biotechnology at the Fraunhofer Institute given in the form of equity capital, rather We supportWe internationalisation for Interfacial Engineering and Biotech- than loans. KfW and eCAPITAL, the Mün- nology (IGB) in Stuttgart has worked with ster-based cleantech investor, as new the marine plants for more than 20 years. investors provided EUR 3.2 million of the Subitec started its operational business EUR 4.5 million capital required for the in 2007 when Managing Partner, Dr Peter expansion. The High-Tech Gründerfonds Ripplinger, was appointed. Nowadays, (HTGF) and Fraunhofer Venture – two Subitec is one of the leading technology long-standing investors – were also in- suppliers in the fi eld of microalgae culti- volved in the fi nancing.

vation. The goal is to utilise almost all the development promote We algal biomass in a materially and ener- When it comes to equity or deposit fi nan- getically meaningful way. cing, a company receives support from new or existing investors. They generally The photobioreactor – already in take a direct stake in the company. The third generation equity fi nancing instrument can be used In the fi rst few years a er it was founded, to establish companies and also for sub-

Subitec worked in close cooperation with sequent capital increases. In principle, the notes Other the Fraunhofer IGB to process a variety of investors acquire an interest in the proﬁ t, algae strains and later went on to de- loss and liquidation proceeds, but also as- velop the so-called ﬂ at-panel airli (FPA) sume the company’s full risk, too. photobioreactor. Compared with conven-

Subitec’s pilot facility in the Weitingen area of Eutingen

KfW Annual Report 2015 Taking responsibility | 39 25 engineers and biologists set to Our contribution to the German Federal Government, work at headquarters Together with the Federal Ministry of KfW is also the biggest investor in This type of fi nancing is a huge opportu- Economic Aff airs and Energy (BMWi), the High-Tech Gründerfonds (HTGF), nity for Subitec. The investors’ funds al- KfW is promoting innovative start-ups which is the largest early-stage in- lowed the company, which is fully focused and technology fi rms such as Subitec vestor in Germany. To help innovative on sustainability, to purchase the new, by strengthening their equity capital. companies in their growth stage, 700 m2 site in the Degerloch area of Stutt- This happens at diff erent company KfW indirectly – through intermediate gart in 2013, to press ahead with inter- development stages. With the “ERP venture capital funds – invests in national projects and to commission the Start-up Fund”, KfW and private lead young companies through the “ERP fi rst production facility for valuable sub- investors are directly involved in a Venture Capital Fund Investments”, stances, which was planned and supplied young company’s foundation phase. a promotional instrument created especially for a European customer, This product also remains available together with the BMWi. in 2015. for follow-up fi nancing in the case of existing portfolio companies. The Subitec has ambitious plans and aims to “ERP Start-up Fund” as a fi nancing continue growing. The company is planning instrument for initial investments was to take on more staff for precisely this pur- replaced in spring 2016 by public co- pose; 25 members of staff are to be hired investment fund “coparion” that to- at the company headquarters in the De- gether with private investors directly gerloch area of Stuttgart alone. This will invests in innovative start-ups and allow the company to continue focusing on young technology fi rms. Coparion is its ecologically sustainable and resource- an independent company with an ex- friendly production operations. perienced management team. Second

40 | KfW Annual Report 2015 Taking responsibility ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

25 engineers and biologists set to Our contribution to the German Federal Government, We take responsibility for securing the supply of raw materials work at headquarters Together with the Federal Ministry of KfW is also the biggest investor in This type of fi nancing is a huge opportu- Economic Aff airs and Energy (BMWi), the High-Tech Gründerfonds (HTGF), nity for Subitec. The investors’ funds al- KfW is promoting innovative start-ups which is the largest early-stage in- lowed the company, which is fully focused and technology fi rms such as Subitec vestor in Germany. To help innovative on sustainability, to purchase the new, by strengthening their equity capital. companies in their growth stage, 700 m2 site in the Degerloch area of Stutt- This happens at diff erent company KfW indirectly – through intermediate gart in 2013, to press ahead with inter- development stages. With the “ERP venture capital funds – invests in national projects and to commission the Start-up Fund”, KfW and private lead young companies through the “ERP fi rst production facility for valuable sub- investors are directly involved in a Venture Capital Fund Investments”, stances, which was planned and supplied young company’s foundation phase. a promotional instrument created especially for a European customer, This product also remains available together with the BMWi. in 2015. for follow-up fi nancing in the case of existing portfolio companies. The Subitec has ambitious plans and aims to “ERP Start-up Fund” as a fi nancing continue growing. The company is planning instrument for initial investments was to take on more staff for precisely this pur- replaced in spring 2016 by public co- pose; 25 members of staff are to be hired investment fund “coparion” that to- at the company headquarters in the De- gether with private investors directly gerloch area of Stuttgart alone. This will invests in innovative start-ups and allow the company to continue focusing on young technology fi rms. Coparion is its ecologically sustainable and resource- an independent company with an ex- friendly production operations. perienced management team. Second We promote Germany High-tech German silicon smelter in Skjálfandi bay, Iceland

The autumn weather in the stark island nation of Iceland, just ting standards in Husavik. The silicon smelter in the Skjál- south of the Arctic Circle, was mild when the country’s prime fandi bay is scheduled to commence production in 2018. minister Sigmundur Davíð Gunnlaugsson cut the ribbon in the Düsseldorf company SMS Siemag AG is the constructor. colours of the German and Icelandic ﬂ ags in the town of Power will be delivered to the PCC BakkiSilicon plant by en- Husavik in September 2015. The ceremony marked the be- ergy provider Landsvirkjun from renewable energy sources. ginning of construction work on the Duisburg PCC SE group’s This will enable PCC, which stands for “Petro Carbo Chem”, most important project of the moment. The chemical, energy to calculate its electricity prices for the next 15 years, We supportWe internationalisation and logistics company is building a state-of-the-art and envi- Preussner commented at the ceremony. “The location, the ronmentally friendly silicon metal production facility in the people, the project – they all go together so well. Iceland north of Iceland, which is designed to produce over 32,000 is ideal for this facility,” he said. tonnes of high-purity silicon per year. “The EUR 265 million project is a step towards securing the future supply of raw It is also ideal for the region surrounding Husavik, which materials for German industry,” said Waldemar Preussner, means “bay of houses”. The PCC silicon plant will create founder and Chairman of the Administrative Board of PCC. 120 new jobs there. Silicon metal is used in the aluminium, electrical and solar

energy sectors. development promote We

This is just one reason why KfW IPEX-Bank is supporting the project. The KfW subsidiary, responsible within the group for granting loans to safeguard the supply of raw materials in Germany and Europe, is contributing around EUR 170 million to the project. It is the ﬁ rst large-volume commercial project

ﬁ nancing of this type in Iceland. The PCC project is also re- notes Other ceiving an untied loan guarantee from the Federal Republic of Germany due to its signiﬁ cance for raw materials policy. Iceland has pledged tax relief. PCC and its partners are set-

40 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 41 ˚Green electricity guarantees access to better living conditions. What’s the best way to ensure that as many people as possible beneﬁ t from our smart idea?

A trainer instructs prospective installation technicians on the roof of the Mobisol Academy. A solar home system can be installed down the line by just one technician. ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

˚Clean energy – new prospects for Africa through sunshine and mobile phones

The Berlin start-up Mobisol will soon be and Rwanda; a year later it was 9,000 able to reach its customers in East Africa and in autumn 2015 as many as 30,000. by air. Solar-powered drones, currently ˚Green electricity guarantees access being tested in a pilot phase, deliver pack- In this way, founder Thomas Gottschalk to better living conditions. What’s the best ages to the remotest of villages much and his team have enabled people in more quickly and cheaply than is possible developing countries to use electronic de- way to ensure that as many people as with four-wheel-drive vehicles in the Afri- vices. Three quarters of the population – possible beneﬁ t from our smart idea? can savannah. Acceptance among the seven million families in Tanzania alone – customers and technical feasibility will be are not connected to the national power assessed at the end of the test period. grid. When travelling in the region, Gott- Find out more: schalk got the idea of using photovoltaics

download the free Layar app High-tech air delivery would be the latest to give people access to modern commu- We promote Germany (see page 4) and scan the page. chapter in an incredible success story. In nications and electrical technology, thereby the space of just ﬁ ve years, Mobisol has connecting them to the Internet and the become an important source of impetus rest of the world. for the East African economy. By the autumn of 2013, the company had sold The vision became reality in a start-up 1,800 solar home systems in Tanzania company in 2010, and only six years later, Drones operated by solar energy will enable Mobi- sol to deliver more quickly to its customers in East Africa. The project is currently in the pilot phase. We supportWe internationalisation We promote development promote We Other notes Other

A trainer instructs prospective installation technicians on the roof of the Mobisol Academy. A solar home system can be installed down the line by just one technician.

KfW Annual Report 2015 Taking responsibility | 43 prises in Tanzania and Rwanda. These provide services such as recharging mobile ˚We are not trying to adapt African markets phones, showing sports events on TV and to European ways, but instead to attune our selling cold drinks. Over 30 % of Mobisol customers use solar power for business off ering to African needs. purposes. Thomas Gottschalk, founder and CEO of Mobisol The company plans to expand into other countries in 2016; it has already tested its business model in Bangladesh, India Mobisol is a model for success. The num- available, from the 80-watt model, which and Kenya. ber of staff has doubled on average every runs primarily small and medium-sized year since the start (currently 400, of electronic devices such as radios, TVs and Our contribution which 300 in East Africa) and revenue phone chargers, to the 200-watt model, KfW subsidiary DEG fi nances sus- has trebled. The impressive development which would be enough to power a fridge tainable projects in developing and was helped by fi nancing and promotional or hi-fi system as well. emerging market countries. It has funds from KfW subsidiary DEG, which already supported Mobisol GmbH has supported the Berlin-Kreuzberg-based Mobisol provides local training for partners through various growth stages since company since the early days. The latest at two of its own “Akademies”. More than it was founded in 2010. It provided DEG fi nancing is intended to provide an 750 technicians, installers and sales staff the company with funds from the additional 150,000 people with access to have been trained to date in one-to-two Federal Ministry for Economic Co- electricity through Mobisol systems. week courses; 400 of them are already operation and Development (BMZ)’s working freelance for Mobisol. Technicians “develoPPP.de” programme for a pilot Payment by text message guarantee repairs within 48 hours. They project in 2012. This enabled Mobisol Mobisol customers lease their solar home receive the assignments via Internet from to fi nance some 2,000 solar home sys- systems, which cost between EUR 500 a database in Germany, which in turn is tems. Two fi nancings followed from and EUR 1,300. They transfer the money updated via a GSM modem every three the “Upscaling” programme, designed by text message using the mobile pay- minutes on the status of every Mobisol to promote innovative business ment system M-Pesa in up to 36 monthly system. The Mobisol technology serves to models. instalments. There are various models support more than 10,000 micro enter- DEG then provided Mobisol with a convertible loan in 2015 to fund expansion plans, and made an investment in the company. This means Mobisol can continue to reap success and enable another 10,000 micro enterprises to generate regular income.

Work is progressing on the world’s largest solar farm in Morocco with KfW’s support. The ﬁ rst of four power plants started operating in February 2016. It has a capacity of 160 megawatts and will generate electricity for 350,000 people. When all four plants are complete near the southern Moroc- can town of Ouarzazate in the next few years, the total output will be 580 megawatts, providing power for some 1.3 million people. This will avoid carbon emissions of at least 800,000 tonnes per year compared to conventional generation methods.

44 | KfW Annual Report 2015 Taking responsibility ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

prises in Tanzania and Rwanda. These We take responsibility for expanding broadband Internet provide services such as recharging mobile ˚We are not trying to adapt African markets phones, showing sports events on TV and to European ways, but instead to attune our selling cold drinks. Over 30 % of Mobisol customers use solar power for business off ering to African needs. purposes. Thomas Gottschalk, founder and CEO of Mobisol The company plans to expand into other countries in 2016; it has already tested its business model in Bangladesh, India Mobisol is a model for success. The num- available, from the 80-watt model, which and Kenya. ber of staff has doubled on average every runs primarily small and medium-sized year since the start (currently 400, of electronic devices such as radios, TVs and Our contribution which 300 in East Africa) and revenue phone chargers, to the 200-watt model, KfW subsidiary DEG fi nances sus- has trebled. The impressive development which would be enough to power a fridge tainable projects in developing and was helped by fi nancing and promotional or hi-fi system as well. emerging market countries. It has funds from KfW subsidiary DEG, which already supported Mobisol GmbH has supported the Berlin-Kreuzberg-based Mobisol provides local training for partners through various growth stages since company since the early days. The latest at two of its own “Akademies”. More than it was founded in 2010. It provided DEG fi nancing is intended to provide an 750 technicians, installers and sales staff the company with funds from the additional 150,000 people with access to have been trained to date in one-to-two Federal Ministry for Economic Co- electricity through Mobisol systems. week courses; 400 of them are already operation and Development (BMZ)’s working freelance for Mobisol. Technicians “develoPPP.de” programme for a pilot

Payment by text message guarantee repairs within 48 hours. They project in 2012. This enabled Mobisol We promote Germany Mobisol customers lease their solar home receive the assignments via Internet from to fi nance some 2,000 solar home sys- Neumünster – a broadband oasis systems, which cost between EUR 500 a database in Germany, which in turn is tems. Two fi nancings followed from and EUR 1,300. They transfer the money updated via a GSM modem every three the “Upscaling” programme, designed Germany is a global economic and technology centre, proud The story is very diff erent in Neumünster, where KfW granted by text message using the mobile pay- minutes on the status of every Mobisol to promote innovative business of its engineers and industry – but it has a lot of catching up the municipal utilities providers a loan of EUR 3 million to ment system M-Pesa in up to 36 monthly system. The Mobisol technology serves to models. to do when it comes to digitalisation. Alexander Dobrindt, accelerate the expansion of the broadband infrastructure. instalments. There are various models support more than 10,000 micro enter- Federal Minister of Transport and Digital Infrastructure, has And it was successful – around 7,000 utilities customers DEG then provided Mobisol with a set the target of providing all households with broadband were connected to the fi bre optic network in 2015 and can convertible loan in 2015 to fund ex- Internet at a speed of 50 Mbps by 2018. But there are still now surf the Internet at a speed of at least 50 Mbps. The pansion plans, and made an invest- broadband black spots on the map – people cannot surf the Neumünster municipal utilities are concentrating on connect- We supportWe internationalisation ment in the company. This means Internet quickly on either a computer or a smart phone in ing the rural surrounding area, and gradually also the urban Mobisol can continue to reap success many rural areas – such as Schleswig-Holstein. districts of the central Schleswig-Holstein town. KfW sup- and enable another 10,000 micro en- ports municipal investors on behalf of the Federal Govern- terprises to generate regular income. Residents in the northern-most federal state have been com- ment, with low-interest loans from the IKU programme plaining about the poor Internet reception for years. Towns (Investment Loans for Municipal and Social Enterprises) to have set up initiatives, approached politicians and searched fi nance infrastructure projects such as expansion of the in vain for telephone providers. But the answer is usually the digital infrastructure. same – it would be too much money for too few customers.

The expensive expansion is not generally worth it for the Neumünster is now something of a broadband oasis, with development promote We Work is progressing on the world’s largest solar providers. Modern cables are diffi cult to lay in the country- a clear advantage from the high-speed Internet. It is not farm in Morocco with KfW’s support. The fi rst of side. And the existing copper cables are not suffi cient to en- only the near 80,000 town residents who benefi t from the four power plants started operating in February sure a usable Internet connection for homes. This aff ected digitalisation, but also the industry based there, the local 2016. It has a capacity of 160 megawatts and will 1,110 villages in Schleswig-Holstein. By the summer of 2014 business agency and the town’s well-known Holstenhallen generate electricity for 350,000 people. When all only 180 of them were connected – and progress is still exhibition centre. four plants are complete near the southern Moroc- slow since. can town of Ouarzazate in the next few years, the Other notes Other total output will be 580 megawatts, providing power for some 1.3 million people. This will avoid carbon emissions of at least 800,000 tonnes per year compared to conventional generation methods.

44 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 45 ˚Goods from all corners of the world need a safe route into port. How can we expand our future prospects? ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

˚XXL sea lock – Amsterdam enlarges its gate to the world We promote Germany We supportWe internationalisation

The Netherlands is among the world’s top export nations. The new sea lock in the North Sea Canal opens up new growth prospects. Room for a new generation of ships construction beginning in 2016. This is The world’s largest lock is due to open a project of large dimensions; at 500 mein IJmuiden, the Netherlands, in 2019. tres long, 70 metres wide and 18 metres It will allow even wider container ships deep, the new lock will be even bigger than ˚Goods from all corners of the world and larger cruise liners to pass through the world’s current largest in Antwerp. need a safe route into port. How can we the North Sea Canal and directly access This new construction is urgently needed, development promote We the Port of Amsterdam around 25 kilo- as the old lock is already outdated in expand our future prospects? metres away. terms of technology, and much too small for the increasingly larger ships. The new The world-famous canal sees 8,000 to lock will oﬀ er plenty of room for the next 9,000 freight and passenger ships pass generation of gigantic bulk freighters, through it and its four locks every year. container ships and cruise liners. Waiting

The largest and most important of these, times will also be reduced, as the lock will notes Other the Noordersluis lock, is to be replaced be usable at all times, regardless of tides. by a new technologically sophisticated Moreover, it will protect the area sur- lock, co-ﬁ nanced by KfW IPEX-Bank, with rounding Amsterdam from ﬂ ooding.

KfW Annual Report 2015 Taking responsibility | 47 ˚Infrastructure is one of the basic founda- passed through the Noordersluis in the tions of society – it is key to ensuring quality past 85 years. of life, mobility and prosperity. The Amsterdam port area is one of the most important logistics hubs in the Christian K. Murach, member of the Management Board of KfW IPEX-Bank world. With freight of 95 million tonnes handled per year, the port is the fourth largest in western Europe. Its central location is a particular reason for this; The new lock will cost in excess of a billion the port of Amsterdam oﬀ ers excellent euros to construct. Around EUR 600 million links to the key European markets, be it will be coming from the Dutch government by boat, train or road. It is the world’s in The Hague, and KfW IPEX-Bank will be largest port for petrol and cocoa – both providing loans of a further EUR 500 mil- of which are transported onwards in lion as part of a syndicate with six other large volumes to Germany. banks. The winners of the international tender were two Dutch construction groups, Good transport networks are vital for the Royal BAM Group and Volker Wessels, worldwide exchange of goods. This is why which were awarded the contract follow- KfW IPEX-Bank, as one of the largest inter- ing a long debate as to whether this major national specialist ﬁ nanciers for infrastruc- project of vital importance to Amsterdam’s ture, lends its support to the expansion economy would actually be realised. and maintenance of road, rail, energy and data networks, airports and seaports – and even locks such as IJmuiden’s, which lays a cornerstone for further growth in Europe.

Our contribution KfW IPEX-Bank is fi nancing the construction of the new lock in cooperation with fi ve international commercial banks and the European Investment Bank (EIB). The seven banks are providing a total of approximately EUR 500 million for the project via a complex PPP (public- private partnership) fi nancing structure. The construction of the lock in IJmuiden is expected to take four Hub for global exchange of goods years, and the loans will be repaid The port operator battled hard for a new over the 26-year operational life of lock for 15 years before the authorities the lock. The project is part of both agreed on the technical and fi nancial the Dutch lock programme and the conditions in the summer of 2015. The Trans-European Networks (TEN), decision was as groundbreaking as the which are supported by the EU. construction of the fi rst locks in IJmuiden 140 years ago. The fi rst two were built in 1876, the third was added in 1896 and the famous Noordersluis lock in 1929. At 400 metres long, 50 wide and 15 deep, it was unique in the world for its time and even exceeded the record holder on the Panama Canal. Around a million ships have

48 | KfW Annual Report 2015 Taking responsibility ˚Infrastructure is one of the basic founda- passed through the Noordersluis in the tions of society – it is key to ensuring quality past 85 years. of life, mobility and prosperity. The Amsterdam port area is one of the most important logistics hubs in the Christian K. Murach, member of the Management Board of KfW IPEX-Bank world. With freight of 95 million tonnes handled per year, the port is the fourth largest in western Europe. Its central location is a particular reason for this; The new lock will cost in excess of a billion the port of Amsterdam oﬀ ers excellent euros to construct. Around EUR 600 million links to the key European markets, be it will be coming from the Dutch government by boat, train or road. It is the world’s in The Hague, and KfW IPEX-Bank will be largest port for petrol and cocoa – both providing loans of a further EUR 500 mil- of which are transported onwards in lion as part of a syndicate with six other large volumes to Germany. banks. The winners of the international tender were two Dutch construction groups, Good transport networks are vital for the Royal BAM Group and Volker Wessels, worldwide exchange of goods. This is why which were awarded the contract follow- KfW IPEX-Bank, as one of the largest inter- ing a long debate as to whether this major national specialist ﬁ nanciers for infrastruc- project of vital importance to Amsterdam’s ture, lends its support to the expansion economy would actually be realised. and maintenance of road, rail, energy and data networks, airports and seaports – and even locks such as IJmuiden’s, which We promote Germany lays a cornerstone for further growth in Europe.

lock for 15 years before the authorities the lock. The project is part of both development promote We agreed on the technical and fi nancial the Dutch lock programme and the conditions in the summer of 2015. The Trans-European Networks (TEN), decision was as groundbreaking as the which are supported by the EU. construction of the fi rst locks in IJmuiden 140 years ago. The fi rst two were built in 1876, the third was added in 1896 and

the famous Noordersluis lock in 1929. notes Other At 400 metres long, 50 wide and 15 deep, it was unique in the world for its time and even exceeded the record holder on the Panama Canal. Around a million ships have

48 | KfW Annual Report 2015 Taking responsibility ˚Modern mobility for cities in China and Brazil

Although China and Brazil are almost develop climate-friendly mobility systems, also in the transport sector they make 17,000 km apart, their megacities experi- on behalf of the Federal Government. the transition to energy-effi cient tech- ence similar problems. They are growing nologies and integrated local public at a lightning rate with ever increasing Brazil is one of the largest economies in transport systems. With KfW on board, populations. the world. KfW Development Bank and several problems can be addressed. In the Brazilian Development Bank (BNDES) particular, the poorer section of Brazilian However, big cities are also growth driv- used the occasion of the German-Brazilian society will be able to use public trans- ers for prosperity in both countries. They government talks in Rio de Janeiro in port in future, giving them more mobility. are home to an expanding middle class, August 2015 to sign a loan agreement Emissions of pollutants and greenhouse whose consumer habits are changing, and in the amount of EUR 265 million. These gases will also be reduced. for whom mobility is increasingly a status funds are intended for local public trans- symbol. Ever more people prefer to travel port investments that have a positive Our contribution by motor scooter or in their own car to effect on climate change, such as urban KfW Development Bank and the BNDES work rather than squeeze onto perpetu- rail systems or energy-effi cient buses. are promoting the climate-effi cient ally overcrowded buses. The growing One of the measures is the new light rail modernisation of urban transport sys- megacities in emerging market countries system without overhead lines in Rio, tems in Brazil with their Brazil pro- in particular do not have effi cient trans- the “VLT Carioca” – the fi rst of its kind in gramme totalling up to USD 1 billion. port infrastructures and are becoming Latin America. KfW is providing the Brazilian bank, overburdened with the rapid rise in popu- the borrower and party responsible lation. There are permanent traffi c jams, “The residents of the majority of Brazil- for the programme, with a low-in- street noise, traffi c accidents and air pol- ian cities have to put up with perpetual terest development loan of the USD lution. Seventy percent of global green- congestion and insuffi cient local public equivalent of EUR 265 million. The house gas emissions come from large transport,” said Stephan Opitz, member BNDES will pass the funds on to pri- cities around the world. of management at KfW Development vate and public investors. KfW Devel- Bank. “In cooperation with the BNDES we opment Bank is participating in the For instance, the smog in Beijing im- are helping the cities to establish modern project on behalf of the Federal Min- pacted life and business for weeks at the transport systems.” The two banks com- istry for Economic Cooperation and end of 2015. Rio de Janeiro’s lack of con- plement each other well, with a 50-year Development (BMZ). trol over its traffi c problems will likely history of German-Brazilian cooperation come to the fore in August 2016 when an for sustainable development. infl ux of visitors descend on the city for the Olympic Games. KfW Development Emerging markets such as Brazil can only Bank is helping both China and Brazil to reach their climate protection targets if

˚We are helping the cities of Brazil to create modern transport systems, and thereby helping to protect the global climate and environment. Stephan Opitz, KfW Development Bank

50 | KfW Annual Report 2015 Taking responsibility ˚Product and process innovation ˚International division of labour and location attractiveness ˚International trade and infrastructure

KfW Development Bank is also doing sim- capacities at certain traffi c intersections, Our contribution ilar work on the other side of the world. allow more cars to remain in the traffi c KfW Development Bank on behalf ˚Modern mobility for cities The 2.4-million city of Huainan in eastern fl ow and minimise bottlenecks. of the BMZ is fi nancing the Intelli- China may be among the smaller cities in gent Transportation System (ITS) the country, but its population and econ- Local public transport is to be given pri- project with a promotional loan of in China and Brazil omy are also growing at top speed. Resi- ority on the streets of Huainan in future – EUR 15 million, to make sustainable dents suff er air pollution and traffi c jams it will be given right of way at crossings improvements to the traffi c situation as a result there too. The proportion of and on busy roads, for instance with ad- in Huainan. This is a pilot project of private car owners will be as high as in ditional bus lanes. Passengers will receive sorts; if it is successful, it is to be Although China and Brazil are almost develop climate-friendly mobility systems, also in the transport sector they make industrialised nations by 2020. real-time information about connections replicated in other Chinese cities. The 17,000 km apart, their megacities experi- on behalf of the Federal Government. the transition to energy-effi cient tech- and an electronic ticket system is to be technology and scientifi c expertise ence similar problems. They are growing nologies and integrated local public KfW Development Bank is investing in a introduced. These measures will serve to for the project is being provided in at a lightning rate with ever increasing Brazil is one of the largest economies in transport systems. With KfW on board, technology-based, intelligent transport greatly improve local public transport and cooperation with the German Aero- populations. the world. KfW Development Bank and several problems can be addressed. In system in Huainan to get the traffi c fl ow make it a real alternative to the car. The space Centre (DLR). the Brazilian Development Bank (BNDES) particular, the poorer section of Brazilian under better control; the aim is to use next step is to improve rail services to re- However, big cities are also growth driv- used the occasion of the German-Brazilian society will be able to use public trans- GPS data, for instance, to both record and move more traffi c from the streets. This ers for prosperity in both countries. They government talks in Rio de Janeiro in port in future, giving them more mobility. navigate traffi c fl ows more effi ciently. The would also reduce the number of deaths are home to an expanding middle class, August 2015 to sign a loan agreement Emissions of pollutants and greenhouse traffi c light and traffi c control system is caused by road traffi c. whose consumer habits are changing, and in the amount of EUR 265 million. These gases will also be reduced. also to be automated, which will improve for whom mobility is increasingly a status funds are intended for local public trans- symbol. Ever more people prefer to travel port investments that have a positive Our contribution by motor scooter or in their own car to effect on climate change, such as urban KfW Development Bank and the BNDES work rather than squeeze onto perpetu- rail systems or energy-effi cient buses. are promoting the climate-effi cient ally overcrowded buses. The growing One of the measures is the new light rail modernisation of urban transport sys- We promote Germany megacities in emerging market countries system without overhead lines in Rio, tems in Brazil with their Brazil pro- in particular do not have effi cient trans- the “VLT Carioca” – the fi rst of its kind in gramme totalling up to USD 1 billion. port infrastructures and are becoming Latin America. KfW is providing the Brazilian bank, overburdened with the rapid rise in popu- the borrower and party responsible lation. There are permanent traffi c jams, “The residents of the majority of Brazil- for the programme, with a low-in- street noise, traffi c accidents and air pol- ian cities have to put up with perpetual terest development loan of the USD lution. Seventy percent of global green- congestion and insuffi cient local public equivalent of EUR 265 million. The house gas emissions come from large transport,” said Stephan Opitz, member BNDES will pass the funds on to pri- cities around the world. of management at KfW Development vate and public investors. KfW Devel- We supportWe internationalisation Bank. “In cooperation with the BNDES we opment Bank is participating in the For instance, the smog in Beijing im- are helping the cities to establish modern project on behalf of the Federal Min- pacted life and business for weeks at the transport systems.” The two banks com- istry for Economic Cooperation and end of 2015. Rio de Janeiro’s lack of con- plement each other well, with a 50-year Development (BMZ). trol over its traffi c problems will likely history of German-Brazilian cooperation come to the fore in August 2016 when an for sustainable development. infl ux of visitors descend on the city for the Olympic Games. KfW Development Emerging markets such as Brazil can only

Bank is helping both China and Brazil to reach their climate protection targets if development promote We

˚We are helping the cities of Brazil to create modern transport systems, and thereby helping

to protect the global climate and environment. notes Other Stephan Opitz, KfW Development Bank

50 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 51 We take responsibility for infrastructure projects

How the port city of Beira, Mozambique, is being protected from the eﬀ ect of climate change

Beira, one of the country’s most important ports, is located restore the natural reservoir capacity, allowing heavy rain directly on the Indian Ocean. But its coastal location also has to be better absorbed. At the same time, the new tidal outlet its disadvantages; large areas of the city centre are only will prevent storm fl oods from reaching the city. The road slightly above sea level, and so suff er from regular fl ooding. along the port connecting the city centre to the industrial The region is also subject to cyclones with heavy rainfall – area is also to be rehabilitated, to restore this key route. a consequence of the progressing global warming which af- fects many developing countries. Beira is the city most at risk from the eff ects of climate change in Mozambique. The frequent fl oods not only rob people of their homes, but also cause diseases such as malaria to break out, as entire neigh- bourhoods are o en under water for weeks at a time.

Active in Mozambique since the 1980s, KfW is supporting the city of Beira on behalf of the BMZ in order to protect the local people from the eﬀ ects of climate change.

Work has been underway since March 2015 on the rehabilitation of the Rio Chiveve river bed and construction of a tidal outlet, ﬁ nanced through BMZ funds in the amount of Phase two of the project will see a park designed and cre- EUR 13 million. As a tidal river, the Chiveve originally func- ated along the banks of the Rio Chiveve. This “green lung” tioned as a natural storm water drain for the city. However, replanted with mangroves in the centre of the city will play the collapse of a bridge blocked the mouth of the river, mean- several important roles: maintaining the Rio Chiveve as a ing that the water cannot drain in the event of heavy rainfall. storm drain system, enhancing the city centre area and providing the city’s residents with an attractive recreational This project aims to restore the natural storm drain eﬀ ect of area, the long-term preservation of which is vital in the age the Rio Chiveve by removing the waste and sludge from the of increasing urbanisation. bed and banks of the river. The rehabilitation of the river will

52 | KfW Annual Report 2015 Taking responsibility We take responsibility for infrastructure projects ˚We take responsibility It’s our job to support forward- looking projects. The KfW Awards allow good ideas to shine.

How the port city of Beira, Mozambique, is being protected from the eﬀ ect of climate change We promote Germany

Beira, one of the country’s most important ports, is located restore the natural reservoir capacity, allowing heavy rain directly on the Indian Ocean. But its coastal location also has to be better absorbed. At the same time, the new tidal outlet its disadvantages; large areas of the city centre are only will prevent storm fl oods from reaching the city. The road slightly above sea level, and so suff er from regular fl ooding. along the port connecting the city centre to the industrial The region is also subject to cyclones with heavy rainfall – area is also to be rehabilitated, to restore this key route. a consequence of the progressing global warming which af- fects many developing countries. Beira is the city most at risk from the eff ects of climate change in Mozambique. The We supportWe internationalisation frequent fl oods not only rob people of their homes, but also cause diseases such as malaria to break out, as entire neigh- bourhoods are o en under water for weeks at a time.

Active in Mozambique since the 1980s, KfW is supporting the city of Beira on behalf of the BMZ in order to protect the local people from the eﬀ ects of climate change.

Work has been underway since March 2015 on the rehabili- development promote We tation of the Rio Chiveve river bed and construction of a tidal outlet, ﬁ nanced through BMZ funds in the amount of Phase two of the project will see a park designed and cre- EUR 13 million. As a tidal river, the Chiveve originally func- ated along the banks of the Rio Chiveve. This “green lung” tioned as a natural storm water drain for the city. However, replanted with mangroves in the centre of the city will play the collapse of a bridge blocked the mouth of the river, mean- several important roles: maintaining the Rio Chiveve as a ing that the water cannot drain in the event of heavy rainfall. storm drain system, enhancing the city centre area and pro-

viding the city’s residents with an attractive recreational notes Other This project aims to restore the natural storm drain eﬀ ect of area, the long-term preservation of which is vital in the age the Rio Chiveve by removing the waste and sludge from the of increasing urbanisation. bed and banks of the river. The rehabilitation of the river will

52 | KfW Annual Report 2015 Taking responsibility ˚Awards for commendable start-ups and building projects

KfW gets up close and personal with development in Germany by honouring particularly deserving projects of private builders and entrepreneurs from a wide range of sectors. These serve as inspiration, and enable forward-looking trends to become everyday practice. KfW’s support not only takes the form of low-interest promotional loans, but also holds up particular commitment as an example and rewards it with prize money.

The “Construction and housing” KfW Award

The aim of the competition is to motivate sustainable private construction and highlight forward-looking trends in Germany. The main focus is on promotion of energy-eﬃ cient construction and refurbishment and accessible and comfortable homes.

More details are available at: www.kfw.de/award

The “Start-up champions” KfW Award

KfW Group has been recognising young companies from all over Germany since 1998 with the “Start-up champions” KfW Award (GründerChampions). Innovative business ideas are selected by a jury of experienced representatives from the worlds of politics and business, from the promotional institutions of the federal states and from chambers of industry and commerce. The businesses are assessed on their level of innovation, their creativity and their social responsibility. The jury also considers how environmentally friendly the business is and whether jobs and traineeships are created or maintained.

In presenting these awards, KfW aims to recognise the successful start- ups, and also draw more public attention to the idea of start-ups as a whole. A er all, in a country as lacking in raw materials as Germany, innovative ideas are more important than ever.

More details are available at: www.kfw.de/award

54 | KfW Annual Report 2015 Taking responsibility ˚Awards for commendable LittleSun GmbH Berlin-based “Start-up champions” award recipient LittleSun GmbH received the special prize for the social background of its business idea in 2015. start-ups and building projects LittleSun is a global project founded in 2012 by artist Olafur Eliasson and engineer Frederik Ottesen. Their objective is to provide clean, aff ordable light to 1.1 billion people around the world who live without a constant electricity supply. KfW gets up close and personal with development in Germany by honouring particularly deserving projects of private builders and entrepreneurs from a wide range Sales of the company’s fi rst product, the Little Sun solar-powered LED of sectors. These serve as inspiration, and enable forward-looking trends to become lamp, already number 350,000 around the world, half of them in regions everyday practice. KfW’s support not only takes the form of low-interest promotional without electricity. They are sold at low, locally aff ordable prices. LittleSun loans, but also holds up particular commitment as an example and rewards it with is developing long-term sales structures for ongoing support in regions prize money. without electricity. It is already active in more than ten African countries.

More details are available at: www.kfw.de/award

The “Construction and housing” KfW Award

The “Construction and housing” KfW Award recognises builders with an eye to the future. As one of the largest promoters of home ownership in Germany, KfW introduced its “Construction and housing” competition in 2003. We promote Germany The aim of the competition is to motivate sustainable private construction and highlight forward-looking trends in Germany. The main focus is on promotion of energy-eﬃ cient construction and refurbishment and accessible and comfortable homes.

More details are available at: www.kfw.de/award We supportWe internationalisation

The “Start-up champions” KfW Award

merce. The businesses are assessed on their level of innovation, their development promote We creativity and their social responsibility. The jury also considers how environmentally friendly the business is and whether jobs and traineeships are created or maintained.

In presenting these awards, KfW aims to recognise the successful start- ups, and also draw more public attention to the idea of start-ups as a

whole. A er all, in a country as lacking in raw materials as Germany, inno- notes Other vative ideas are more important than ever. Find out more: download the free Layar app More details are available at: www.kfw.de/award (see page 4) and scan the page.

54 | KfW Annual Report 2015 Taking responsibility KfW Annual Report 2015 Taking responsibility | 55 ˚Letter from the Executive Board As a modern, professional and customer-oriented promotional bank, we play an important role for the environment, economy and society. We adhere to the principles of sustainability and subsidiarity. We take responsibility as a reliable partner – in Germany, in Europe and around the world. ˚Letter from the Executive Board ˚Dear readers, Germany and Europe are facing major challenges in the form of world- As a modern, professional and wide growth slowdowns, geopolitical crises and infl uxes of refugees around the world, but also new, more ambitious climate protection targets. Financial customer-oriented promotional bank, institutions and promotional banks are also increasingly called upon to off er solutions. we play an important role for the These factors made 2015 an eventful but cial year 2015. The volume of new also very successful promotional year promotional commitments rose by 7 % for KfW. KfW launched many new projects, to a total of EUR 79.3 billion (2014: environment, economy and society. enabling it to support development of in- EUR 74.1 billion). novation, growth and climate protection in Germany, Europe and around the world. Despite the ongoing low interest phase We adhere to the principles of sustain- It also made a key contribution to social and challenging market conditions, cohesion in Germany by assisting the Fed- domestic promotional business devel- eral Government, the federal states and oped positively relative to the previous ability and subsidiarity. We take municipalities to master their most diffi - year, and in 2015 achieved a commit- cult task in decades: accommodating and ment volume of EUR 50.5 billion (2014: integrating thousands of people who have EUR 47.6 billion, +6.0 %). This provided responsibility as a reliable partner – fl ed to Germany in the face of war and impetus for growth to the German eco-

persecution. In so doing, KfW remains true nomy. The increase can be attributed both We promote Germany to its commitment to responsible banking. to rising demand for fi nancing from the in Germany, in Europe and around KfW Group registered very strong de- commercial sector and strong demand the world. mand for its fi nancing products in fi nan- for housing fi nance. We supportWe internationalisation We promote development promote We Other notes Other

KfW Annual Report 2015 Letter from the Executive Board | 57 At EUR 27.9 billion, the volume of inter- Refugee aid national business, represented by the KfW is supporting the German Federal business sector Export and project fi - Government, the federal states and mu- nance (KfW IPEX-Bank), the business area nicipalities in terms of refugee aid. The KfW Development Bank and the subsidi- integration of international and domestic ary DEG, was 9.7 % higher than in the promotional activities is an important prior year (2014: EUR 25.5 billion). In par- factor here. The special “refugee accom- ticular, there was a high level of demand modation” facility launched in early Sep- for fi nancing from KfW IPEX-Bank. tember 2015 enabled KfW to very rapidly KfW Development Bank again recorded a make an important contribution to help- large share of climate and environmental ing German municipalities accommodate fi nance, above all in the fi nancing of envi- refugees. The programme volume was ronmentally-friendly energy generation swi ly increased from EUR 300 million to and supply. EUR 1.0 billion due to consistently high demand, and was fi nally topped up to a KfW also reinforced its role as the world’s total of EUR 1.5 billion on 20 January 2016. leading fi nancier in climate and environ- This amount, which was already fully allo- mental protection projects; the demand cated in January 2016, will provide accom- for climate and environmental protec- modation for up to 150,000 people. tion funding rose by 11 % year-on-year to EUR 29.5 billion (2014: EUR 26.6 bil- Never before in KfW’s history has a fi - lion). KfW remained one of the largest fi - nancing off er taken eff ect as quickly as nance providers for Germany’s energy its “refugee accommodation” extraordi- transition in 2015. nary promotion. No promotional programme has ever been so rapidly implemented and exhausted.

Dr Ulrich Schröder (Chief Executive Oﬃ cer)

58 | KfW Annual Report 2015 Letter from the Executive Board At EUR 27.9 billion, the volume of inter- Refugee aid KfW aims to support the federal states stipend programme in August 2015. “An- national business, represented by the KfW is supporting the German Federal and municipalities in creating aff ordable kommer. Perspektive Deutschland” sup- business sector Export and project fi - Government, the federal states and mu- permanent housing in the next few years. ports projects and initiatives that give nance (KfW IPEX-Bank), the business area nicipalities in terms of refugee aid. The In consultation with the Federal Govern- refugees access to education, training KfW Development Bank and the subsidi- integration of international and domestic ment, KfW will channel up to EUR 2 bil- and jobs, and thus also the chance of be- ary DEG, was 9.7 % higher than in the promotional activities is an important lion through the promotional institutions coming productive members of German prior year (2014: EUR 25.5 billion). In par- factor here. The special “refugee accom- of the federal states to create social society and economy. ticular, there was a high level of demand modation” facility launched in early Sep- housing. for fi nancing from KfW IPEX-Bank. tember 2015 enabled KfW to very rapidly Commitment to Europe KfW Development Bank again recorded a make an important contribution to help- In the international arena, KfW Develop- KfW is well aware of its responsibility to large share of climate and environmental ing German municipalities accommodate ment Bank is currently funding some 70 support the European integration process, fi nance, above all in the fi nancing of envi- refugees. The programme volume was refugee projects in 20 countries with a and is therefore participating in the Euro- ronmentally-friendly energy generation swi ly increased from EUR 300 million to total volume of EUR 1.4 billion. Overall, pean Commission’s investment off ensive, and supply. EUR 1.0 billion due to consistently high new commitments totalling around otherwise known as the Juncker Plan. For demand, and was fi nally topped up to a EUR 570 million are fl owing to 38 projects example, it signed a guarantee agreement KfW also reinforced its role as the world’s total of EUR 1.5 billion on 20 January 2016. in direct support of refugees and the with the European Investment Fund (EIF) leading fi nancier in climate and environ- This amount, which was already fully allo- partner country towns and villages taking in 2015 to fi nance start-ups and young mental protection projects; the demand cated in January 2016, will provide accom- them in. enterprises under the European Fund for for climate and environmental protec- modation for up to 150,000 people. Strategic Investments (EFSI). This enables tion funding rose by 11 % year-on-year The independent non-profi t KfW Sti ung new loans totalling EUR 1.5 billion to be to EUR 29.5 billion (2014: EUR 26.6 bil- Never before in KfW’s history has a fi - (foundation), to which KfW transferred its off ered to young entrepreneurs, start-ups lion). KfW remained one of the largest fi - nancing off er taken eff ect as quickly as social and cultural commitment when it and innovative companies. Plans are un- nance providers for Germany’s energy its “refugee accommodation” extraordi- was set up in 2012, also provided support derway to off er additional fi nancing and transition in 2015. nary promotion. No promotional pro- to refugees. cooperation involving the EFSI. gramme has ever been so rapidly implemented and exhausted. Under the patronage of Federal Minister Within the framework of its capital-market for Economic Aff airs and Energy Sigmar based SME fi nancing activities, KfW is Gabriel and in collaboration with Social also involved in the European securitisa-

Impact gGmbH, KfW Sti ung launched a tion market. We promote Germany We supportWe internationalisation

2015 was a very successful promotional year. With its promotional products,

KfW has been contributing signiﬁ cantly development promote We to modernisation and social cohesion in Germany. Other notes Other

Dr Ulrich Schröder (Chief Executive Oﬃ cer)

58 | KfW Annual Report 2015 Letter from the Executive Board KfW Annual Report 2015 Letter from the Executive Board | 59 Never before in KfW’s history has a fi nancing off er taken eff ect as quickly as its “refugee accommodation” extra ordinary promotion. No promotional programme has ever been so rapidly implemented and exhausted.

Dr Ingrid Hengster

For the fi rst time, KfW worked together positive market response to the substan- with Cassa Depositi e Prestiti (CDP) and tially improved energy effi ciency pro- the EIF to provide fi nancing for European gramme launched in July contributed SMEs by means of an Italian securitisa- signifi cantly to this. At EUR 4.5 billion, tion of lease receivables. This may well the KfW Renewable Energies Programme constitute a model for future closer co- exceeded the fi gure for the previous year operation between European promotional (EUR 4.1 billion). In 2015, KfW thus again institutions, whose expansion has been made an important contribution towards another main focus of KfW’s work during achieving national environmental and the past year. climate targets.

Details on the business sectors’ A very strong result (EUR 3.7 billion) was promotional results achieved for the priority sector of start- The volume of new business in the ups (2014: EUR 2.8 billion). For the ﬁ rst Mittelstandsbank business sector last time, the volume of new business for the year amounted to EUR 20.4 billion (2014: promotion of start-ups was well in excess EUR 19.9 billion). Demand for promotion- of EUR 3 billion. This was driven in par- al loans on the part of companies proved ticular by two factors: the expansion of to be far more robust overall than the the product range implemented in late year before. 2014 and the attractive interest conditions.

With a promotional business volume of Commitments in the fi eld of innovation EUR 9.3 billion (2014: EUR 8.2 billion), the fi nancing came to EUR 0.8 billion (2014: environment priority sector achieved EUR 1.4 billion). Innovation fi nancing is sig- strong growth in 2015. A EUR 3.8 billion nifi cantly strengthened by the new strate- volume of new business in the fi eld of gic approach in equity fi nance. energy effi ciency represents a very good result (2014: EUR 3.2 billion). A distinctly

60 | KfW Annual Report 2015 Letter from the Executive Board In the years to come, KfW will be supply- bustness of the construction sector, due ing up to EUR 400 million to German and to the shortage of housing in the urban European venture capital funds via the new agglomerations, was the reason for this. ERP Venture Capital Funds Investments. In total, this new form of equity fi nance With a commitment volume of EUR 5 billion will enable KfW to leverage as much as (2014: EUR 4.0 billion), infrastructure Never before in KfW’s his- EUR 2.5 billion in private capital for inno- fi nancing also experienced strong growth. vative start-ups over the next few years. Alongside demand that was in any case tory has a fi nancing off er good, the special “refugee accommoda- taken eff ect as quickly as its Commitments in the area of general tion” facility provided particular growth “refugee accommodation” corporate fi nancing declined to stimulus here. EUR 6.6 billion (2014: EUR 7.6 billion). extra ordinary promotion. Decreased demand for the Entrepreneur The previous year’s level was maintained in No promotional programme Loan, which had proved extremely popu- the priority area of education and social lar in 2014, was the decisive factor be- development, with a commitment volume has ever been so rapidly hind this. of EUR 2.6 billion (2014: EUR 2.6 billion). implemented and exhausted. At EUR 4.7 billion, the contract volume New commitments in the Kommunal- und in the general funding of promotional Privatkundenbank/Kreditinstitute busi- institutions of the federal states slightly ness sector amounted to EUR 30.1 billion exceeded that of the previous year (2014: EUR 27.7 billion) – a record fi gure (2014: EUR 4.6 billion). In individual even on a long-term comparison. fi nancing banks a commitment volume of EUR 1.3 billion (2014: EUR 2.2 billion) At EUR 16.5 billion (2014: EUR 14.3 billion), was achieved with the funding of export the housing key priority sector recorded loans and granting of global loans. Dr Ingrid Hengster the strongest growth. The continued ro- We promote Germany

For the fi rst time, KfW worked together positive market response to the substan- with Cassa Depositi e Prestiti (CDP) and tially improved energy effi ciency pro- In 2015 there was high de- the EIF to provide fi nancing for European gramme launched in July contributed SMEs by means of an Italian securitisa- signifi cantly to this. At EUR 4.5 billion, mand for international fi nan- tion of lease receivables. This may well the KfW Renewable Energies Programme cing. KfW launched more constitute a model for future closer co- exceeded the fi gure for the previous year operation between European promotional (EUR 4.1 billion). In 2015, KfW thus again than 700 new projects world- institutions, whose expansion has been made an important contribution towards wide – from eliminating supportWe internationalisation another main focus of KfW’s work during achieving national environmental and the past year. climate targets. causes of fl ight and mitigat- ing misery in the refugee Details on the business sectors’ A very strong result (EUR 3.7 billion) was promotional results achieved for the priority sector of start- camps, through climate pro- The volume of new business in the ups (2014: EUR 2.8 billion). For the fi rst tection measures and the Mittelstandsbank business sector last time, the volume of new business for the year amounted to EUR 20.4 billion (2014: promotion of start-ups was well in excess promotion of the private

EUR 19.9 billion). Demand for promotion- of EUR 3 billion. This was driven in par- development promote We al loans on the part of companies proved ticular by two factors: the expansion of sector in developing and to be far more robust overall than the the product range implemented in late emerging market countries year before. 2014 and the attractive interest conditions. to the fi nancing of German With a promotional business volume of Commitments in the fi eld of innovation and European exports. EUR 9.3 billion (2014: EUR 8.2 billion), the fi nancing came to EUR 0.8 billion (2014:

environment priority sector achieved EUR 1.4 billion). Innovation fi nancing is sig- notes Other strong growth in 2015. A EUR 3.8 billion nifi cantly strengthened by the new strate- volume of new business in the fi eld of gic approach in equity fi nance. energy effi ciency represents a very good Dr Norbert Kloppenburg result (2014: EUR 3.2 billion). A distinctly

60 | KfW Annual Report 2015 Letter from the Executive Board KfW Annual Report 2015 Letter from the Executive Board | 61 The Capital markets business sector ables and Water (EUR 3.2 billion) and adopted new approaches to promotion in Aviation and Rail (EUR 2.8 billion). A major 2015. New commitments in connection portion of KfW IPEX-Bank’s fi nancing with promotional activities on the capital activities in Maritime Industries can be market for SME and environment fi nancing attributed to cruise ships, those in the stood at EUR 1.1 billion. For 2016, KfW Power, Renewables and Water sector de- aims to make EUR 1 billion worth of invest- partment mainly to onshore and off shore ments in securitisation transactions and wind farms and to a number of combined will continue to play an active role in the cycle power plants. The very good new European securitisation market. With the business in the Aviation and Rail depart- green bond portfolio launched in 2015, we ment is principally attributable to several are adding a new capital market instru- larger fi nancing deals for rail projects. This ment to our fi nancing for environmental too underscores KfW IPEX-Bank’s ambi- and climate protection. At the end of 2015, tion to make a signifi cant contribution to the investments for this portfolio stood environmental and climate protection. at EUR 281 million and it is planned to The clear increase year-on-year is the re- increase this to EUR 1 billion over the sult of an accumulation of extraordinary coming years. eff ects, including in particular high-volume individual transactions such as six cruise In the Export and project fi nance busi- ships and bank refi nancings in the mari- ness sector, for which KfW IPEX-Bank is time sector alone. Additionally, the devel- responsible, new business commitments opment of the USD-EUR exchange rate of EUR 20.2 billion were achieved (2014: overstated the commitment volume as EUR 16.6 billion). This was boosted in par- compared to previous years by about ticular by the sector departments Maritime EUR 1 billion. Industries (EUR 3.6 billion), Power, Renew-

The earnings position developed far better than expected in the reporting year. The very good annual result is strengthening KfW’s risk-bearing capacity and enables it to meet the rising capital requirements and to ensure its long-term promotional capacity.

Bernd Loewen

62 | KfW Annual Report 2015 Letter from the Executive Board The Capital markets business sector ables and Water (EUR 3.2 billion) and adopted new approaches to promotion in Aviation and Rail (EUR 2.8 billion). A major 2015. New commitments in connection portion of KfW IPEX-Bank’s fi nancing with promotional activities on the capital activities in Maritime Industries can be market for SME and environment fi nancing attributed to cruise ships, those in the stood at EUR 1.1 billion. For 2016, KfW Power, Renewables and Water sector de- aims to make EUR 1 billion worth of invest- partment mainly to onshore and off shore ments in securitisation transactions and wind farms and to a number of combined KfW is well aware of its responsibility will continue to play an active role in the cycle power plants. The very good new to support the European integration European securitisation market. With the business in the Aviation and Rail depart- green bond portfolio launched in 2015, we ment is principally attributable to several process. With our contribution we are not are adding a new capital market instru- larger fi nancing deals for rail projects. This only strengthening the economic development to our fi nancing for environmental too underscores KfW IPEX-Bank’s ambi- and climate protection. At the end of 2015, tion to make a signifi cant contribution to ment in Europe, but also here in Germany. the investments for this portfolio stood environmental and climate protection. at EUR 281 million and it is planned to The clear increase year-on-year is the re- increase this to EUR 1 billion over the sult of an accumulation of extraordinary coming years. eff ects, including in particular high-volume individual transactions such as six cruise In the Export and project fi nance busi- ships and bank refi nancings in the mari- ness sector, for which KfW IPEX-Bank is time sector alone. Additionally, the devel- responsible, new business commitments opment of the USD-EUR exchange rate of EUR 20.2 billion were achieved (2014: overstated the commitment volume as EUR 16.6 billion). This was boosted in par- compared to previous years by about ticular by the sector departments Maritime EUR 1 billion. Dr Günther Bräunig Industries (EUR 3.6 billion), Power, Renew- We promote Germany

Alongside the increase in new business vol- good risk return proﬁ le and a high degree ume, collaboration in syndicates with part- of relevance to development. The priority ner banks continued to gain in importance. areas here were ﬁ nancings in Africa and other future markets as well as SMEs. KfW Development Bank is maintaining EUR 632 million or 60 % of new commit- its new commitments at a high level. Last ments were made to SMEs, while Africa year, roughly EUR 6.7 billion was provided and other future markets received commit- We supportWe internationalisation The earnings position devel- on behalf of the German Federal Govern- ments totalling EUR 566 million, equiva- ment for development programmes lent to a 53 % share. oped far better than expected throughout the world, the second-highest in the reporting year. The very amount ever aside from the record year To fund its promotional business, KfW 2014 (EUR 7.4 billion). A considerable part in 2015 raised funds amounting to good annual result is strength- of the new commitments (EUR 955 million) EUR 62.6 million on the international ening KfW’s risk-bearing cap- went to the crisis-ridden North Africa/ capital markets in a volatile market Middle East region. Moreover, almost 60 % environment. It issued 175 bonds in 14

acity and enables it to meet of new commitments were issued for currencies, of which 82 % was in the core development promote We projects and programmes in the fi eld of currencies EUR and USD. This was the the rising capital requirements climate and environmental protection. fi rst time the USD accounted for the lion’s and to ensure its long-term share (45 % or EUR 28 billion). KfW also KfW’s subsidiary DEG committed about issued fi ve Green Bonds in EUR, USD, promotional capacity. EUR 1.1 billion (2014: EUR 1.5 billion) AUD, GBP and SEK, in total equivalent to for the fi nancing of investments of private EUR 3.7 billion. In 2016, KfW will be con-

companies in developing and emerging tinuing its established issuing strategy; at notes Other countries in 2015. Given the politically and EUR 70 billion to EUR 75 billion, funding economically challenging trends in impor- needs will be higher than last year. Bernd Loewen tant target markets, DEG’s new business in 2015 was focused on ﬁ nancings with a

62 | KfW Annual Report 2015 Letter from the Executive Board KfW Annual Report 2015 Letter from the Executive Board | 63 Dr Stefan Peiss

The operating result in hedge accounting and other fi nancial instru- fi nancial year 2015 ments at fair value through profi t or loss. The earnings position developed far better than expected in 2015, primarily due to the The promotional activity KfW performed excellent valuation result. The valuation rein the Domestic promotional business at sult benefi ted from various positive non- the expense of its own earnings decreased recurring eff ects, the magnitude of which to EUR 345 million in 2015 (2014: cannot be expected again. This resulted EUR 364 million) due to the low interest in a consolidated profi t of EUR 2.2 billion, environment. exceeding once again the previous year’s excellent profi t of EUR 1.5 billion. Consolidated total assets rose by EUR 13.9 billion to EUR 503 billion in 2015. At EUR 2.1 billion (2014: EUR 2 billion), This was largely due to the development the Operating result before valuation (be- of the US dollar exchange rate, which fore promotional activity) was above both was refl ected in the higher liquidity held the prior-year fi gure and expectations. This (+ EUR 7.9 billion) due to the increase of was primarily the result of the positive cash collateral received in the derivatives development – despite the low interest business as well as in the EUR 3.8 billion environment – of Net interest income (be- rise in Net loans and advances to fore promotional activity), which benefi t- EUR 369.2 billion. Unscheduled loan re- ted from the higher interest margins in payments increased again slightly year- Export and project fi nance and KfW’s con- on-year and amounted to EUR 18 billion. tinued favourable funding opportunities.

This was due in part to only moderate net charges from risk provisions for lending business, and in part to the net gains from

64 | KfW Annual Report 2015 Letter from the Executive Board The excellent risk provisioning result was once again a major contributor to KfW’s annual proﬁ t in 2015. This is very gratifying given the persistent major challenges and increased volatility, particularly in developing and emerging market countries.

Dr Stefan Peiss We promote Germany

The operating result in hedge accounting and other fi nancial instru- Modernisation of KfW Half of all loan approvals in the area of fi nancial year 2015 ments at fair value through profi t or loss. As a bank committed to responsibility, KfW housing are now granted online, within a The earnings position developed far better is a value-oriented organisation. Its actions matter of seconds. KfW’s digitalisation than expected in 2015, primarily due to the The promotional activity KfW performed are based on the principles of sustainability roadmap enables it to systematically pur- excellent valuation result. The valuation rein the Domestic promotional business at in terms of content, and subsidiarity in sue its aim of simplifying, standardising sult benefi ted from various positive non- the expense of its own earnings decreased terms of regulation. KfW’s strength lies in and automating the application and ap- recurring eff ects, the magnitude of which to EUR 345 million in 2015 (2014: providing long-term fi nancing at attractive proval process. All of the bank’s fi nancing cannot be expected again. This resulted EUR 364 million) due to the low interest conditions, serving customers largely partners were connected or on the verge We supportWe internationalisation in a consolidated profi t of EUR 2.2 billion, environment. through fi nancing partners – based on the of being connected to KfW’s promotional exceeding once again the previous year’s established on-lending principle. KfW has platform by the end of 2015. Relevant excellent profi t of EUR 1.5 billion. Consolidated total assets rose by launched a modernisation programme to fi nancial broker platforms and the promo- EUR 13.9 billion to EUR 503 billion in 2015. ensure its long-term promotional activity. tional institutions of the federal states At EUR 2.1 billion (2014: EUR 2 billion), This was largely due to the development will be gradually connected. The corner- the Operating result before valuation (be- of the US dollar exchange rate, which The focus of the modernisation remained stone was also laid for processing com- fore promotional activity) was above both was refl ected in the higher liquidity held on three areas in 2015: mercial products on BDO 2.0 in 2015. the prior-year fi gure and expectations. This (+ EUR 7.9 billion) due to the increase of

was primarily the result of the positive cash collateral received in the derivatives Digitalisation of the development promote We development – despite the low interest business as well as in the EUR 3.8 billion promotional business environment – of Net interest income (be- rise in Net loans and advances to Digitalisation of the promotional business fore promotional activity), which beneﬁ t- EUR 369.2 billion. Unscheduled loan re- is an important step in addressing chan- ted from the higher interest margins in payments increased again slightly year- ges in customers’ banking business require- Export and project ﬁ nance and KfW’s con- on-year and amounted to EUR 18 billion. ments and in ensuring the future viability tinued favourable funding opportunities. of promotional lending as a model of suc-

cess. KfW made signiﬁ cant progress in notes Other This was due in part to only moderate net the digitalisation of its promotional busi- charges from risk provisions for lending ness last year. Expansion of the promotion - business, and in part to the net gains from al platform Bank On-lending Online 2.0 (“BDO 2.0”) was one of the focal points.

64 | KfW Annual Report 2015 Letter from the Executive Board KfW Annual Report 2015 Letter from the Executive Board | 65 Implementation of KfW Group since 1 July 2014, setting out KfW continued to demonstrate in 2015 supervisory requirements the necessary attributes for board mem- the important role it assumes for environ- KfW has made considerable progress in bers, such as the required professional mental protection, business and society implementing supervisory requirements qualifi cations and trustworthiness for the as a modern, effi cient and customer-ori- resolved by the Federal Cabinet in 2013. management board, and the expertise ented promotional bank. It has made sus- The aim is to apply key banking supervi- and trustworthiness for the supervisory tainable promotion its guiding principle sion standards as set out by the German board. The KfW Regulation entered into and helps to ensure that the challenges Banking Act (Kreditwesengesetz) and the full force on 1 January 2016. Additional of our time can be mastered successfully, European Capital Requirements Regula- special banking supervisory requirements while strictly adhering to the subsidiarity tion (CRR) to KfW and to assign super- will be implemented in consultation with principle. KfW takes responsibility as a vision of compliance therewith to the the banking supervisory authorities. reliable partner – in Germany, in Europe Federal Financial Supervisory Authority and around the world. (“BaFin”). KfW welcomes this decision as IT modernisation a further step in professionalising the KfW continues to successfully modernise group, which recognises KfW’s special role its IT system in order to remain prepared as a promotional institution. to meet the variety of promotional business requirements and regulations. The KfW has already voluntarily applied im- main objectives in rolling out the new portant provisions and standards of the SAP fi nancial architecture were achieved KWG, such as the Minimum Requirements in 2015. Implementation of the new IT for Risk Management (Mindestanforderun- strategy is already underway. It was pre- gen an das Risikomanagement – “MaRisk”) sented to the Board of Supervisory Direc- for quite some time. It has also complied tors for the fi rst time in 2015 as part of with the German Solvency Regulation the extended KWG application. This means (Solvabilitätsverordnung – “SolvV”), which that KfW had already implemented the IT facilitated implementation of the new strategy regulatory requirements prior to requirements. The KWG corporate govern- entry into force of the KfW Regulation on ance requirements have applied to 1 January 2016.

Dr Ulrich Schröder (Chief Executive Oﬃ cer)

Dr Günther Bräunig Dr Ingrid Hengster Dr Norbert Kloppenburg Bernd Loewen Dr Stefan Peiss

66 | KfW Annual Report 2015 Letter from the Executive Board Implementation of KfW Group since 1 July 2014, setting out KfW continued to demonstrate in 2015 supervisory requirements the necessary attributes for board mem- the important role it assumes for environ- KfW has made considerable progress in bers, such as the required professional mental protection, business and society implementing supervisory requirements qualifi cations and trustworthiness for the as a modern, effi cient and customer-ori- resolved by the Federal Cabinet in 2013. management board, and the expertise ented promotional bank. It has made sus- ˚We promote Germany The aim is to apply key banking supervi- and trustworthiness for the supervisory tainable promotion its guiding principle sion standards as set out by the German board. The KfW Regulation entered into and helps to ensure that the challenges Banking Act (Kreditwesengesetz) and the full force on 1 January 2016. Additional of our time can be mastered successfully, European Capital Requirements Regula- special banking supervisory requirements while strictly adhering to the subsidiarity We finance investments in the future tion (CRR) to KfW and to assign super- will be implemented in consultation with principle. KfW takes responsibility as a vision of compliance therewith to the the banking supervisory authorities. reliable partner – in Germany, in Europe Federal Financial Supervisory Authority and around the world. by people in Germany; we finance (“BaFin”). KfW welcomes this decision as IT modernisation a further step in professionalising the KfW continues to successfully modernise group, which recognises KfW’s special role its IT system in order to remain prepared as a promotional institution. to meet the variety of promotional busi- start-ups and SMEs so that the ness requirements and regulations. The KfW has already voluntarily applied im- main objectives in rolling out the new portant provisions and standards of the SAP fi nancial architecture were achieved German economy will remain strong, KWG, such as the Minimum Requirements in 2015. Implementation of the new IT for Risk Management (Mindestanforderun- strategy is already underway. It was pre- gen an das Risikomanagement – “MaRisk”) sented to the Board of Supervisory Direc- for quite some time. It has also complied tors for the fi rst time in 2015 as part of and we finance municipal and with the German Solvency Regulation the extended KWG application. This means (Solvabilitätsverordnung – “SolvV”), which that KfW had already implemented the IT facilitated implementation of the new strategy regulatory requirements prior to social infrastructures in order to requirements. The KWG corporate govern- entry into force of the KfW Regulation on ance requirements have applied to 1 January 2016. advance structural change and We promote Germany the common good.

Dr Ulrich Schröder We supportWe internationalisation (Chief Executive Oﬃ cer)

Dr Günther Bräunig Dr Ingrid Hengster Dr Norbert Kloppenburg Bernd Loewen Dr Stefan Peiss We promote development promote We Other notes Other

66 | KfW Annual Report 2015 Letter from the Executive Board ˚At a glance: Domestic promotion in 2015

KfW supported the domestic economy to the tune of EUR 50.5 billion in 2015, thereby exceeding the promotion provided to commercial, private and municipal customers in 2014 by almost 6 %.

All domestic promotional areas contributed to this positive development: SMEs, start-ups, private home builders and refurbishers applied for loans more frequently, their willingness to invest considerably bolstered by the robust economy. KfW made a signiﬁ cant contribution to creating accommodation for refugees in municipalities with its special facility “refugee accommodation”.

68 | KfW Annual Report 2015 We promote Germany | Domestic promotion Special facility “refugee utilised within just days, requiring a top-up primarily refl ected an increased investment accommodation” to EUR 500 million, followed by another propensity among businesses, buoyed by The huge infl ux of people seeking refuge to EUR 1 billion – all KfW’s own funds. stable economic performance and general- in Germany was one of the predominant This amount, too, was exhausted before ly favourable fi nancing conditions. issues of 2015 – for KfW as well. For many the end of the year, with a fi nal top-up municipalities, it was one of the biggest of another EUR 500 million off ered in Start-up funding in particular saw very challenges of recent years. KfW quickly January 2016. Overall in 2015, KfW funded positive year-on-year development, with a developed a simple solution for the munici- accommodation for some 100,000 refu- 35 % increase to EUR 3.7 billion. A recent palities in this extraordinary situation by gees through this special facility. KfW study shows that potential start-up expanding the funding scope for creating entrepreneurs in Germany most frequently refugee accommodation, thereby under- Expanded promotion of SMEs perceive risk and fi nancing as obstacles. scoring its own image as a bank commit- and start-ups Facilitating access to funding is thus one ted to responsibility. As in recent years, promoting SMEs was of the main approaches to promoting once again a KfW focal area in 2015 in start-up activity. KfW again improved its It created a special facility virtually over- terms of promotional volume. At least 40 % off ering to start-ups and young entre- night to fund municipal refugee accom- of domestic promotion in 2015 went to preneurs by extending access to the modation at zero interest for the fi rst SMEs and start-ups. Total promotional busi- “ERP Start-Up Loan – StartGeld”, as of ten years of the loan term. The initial ness volume came in at EUR 20.9 billion, 1 December 2015. Start-up and young EUR 300 million made available was fully similar to the previous year’s fi gure. This companies can now benefi t from the

House within a house supportWe internationalisation

At fi rst glance, the modern home is nowhere to be seen – it’s ingeniously hidden inside an old barn. The clever combination of an old and a new building combines historical structures with innovative, energy-effi cient and accessible living comfort ensured by geothermal heating and solar-powered water heating as well as separate entrances to every fl oor. The space between the old exterior walls and the new ones remains unheated in winter

too, rendering it ideal extra thermal insulation. The young family was able development promote We to turn their unusual idea of modern living in a historical atmosphere into reality with KfW promotion through the “Energy-eﬃ cient Construction” programme. Other notes Other

KfW Annual Report 2015 We promote Germany | Domestic promotion | 69 product for up to ﬁ ve years a er com- structures in line with the market suitable mencing their business activity rather for venture capital in innovative start-ups than being restricted by the previous and young tech companies. The new “copar- three-year limit. ion” fund will be launched in spring 2016.

This is made possible by a guarantee Innovative solutions for greater pledged by the EU’s Competitiveness energy effi ciency of Enterprises and Small and Medium- Development of innovative technical solu- sized Enterprises (“COSME”) programme tions in the energy-sector is also receiving and the European Fund for Strategic a boost through funding of enterprises, Investments (“EFSI”). municipalities and private customers for measures to save energy or utilise renew- Supporting forward-looking able energy sources. The following principle innovations generally applies to promotional pro- Innovative companies o en fi nd funding grammes: the higher the energy effi ciency as much of a challenge as start-ups do. standard a er the measure has been SMEs with new ideas play a special role in implemented, the higher KfW’s fi nancing. the economy, as innovations are essential to long-term growth. Creating a good fund- Enterprises in particular invest specifi cally ing environment for innovators is therefore in energy-saving measures. KfW off ers one of KfW’s central tasks. In addition to such companies special promotional prod- off ering its own products, KfW also fre- ucts that meet several objectives. Demand quently off ers promotional products in for innovative technologies is on the rise cooperation with regional state banks in the energy sector; companies making (Landesbanken). For example, in Septem- such investments increase their competi- ber 2015, it concluded a global loan agree- tiveness, and this ultimately supports the ment based on KfW’s “ERP Innovation Federal Government in reaching its climate Programme” in the amount of EUR 200 mil- goals under the National Action Plan on lion, together with Baden-Württemberg’s Energy Effi ciency (“NAPE”). promotional bank L-Bank. The loan is aimed at promoting new ideas of small A broader and enhanced promotional off er- and medium-sized enterprises in Baden- ing for companies wishing to invest in ener- Württemberg. gy effi ciency was launched on 1 July 2015. Considerable promotional improvements KfW promoted innovative projects with and expansion of the programme to com- around EUR 0.8 billion overall in 2015. To panies of all sizes will realise additional further bolster young companies’ innova- potential, even in large companies. tion potential, the bank realigned equity fi nance that year. The “ERP Venture Capital As buildings consume almost 40 % of all Fund Investments” product has already energy used in Germany, KfW has made been launched in collaboration with the improved energy standards for newly Federal Ministry for Economic Aff airs and constructed and rehabilitated buildings Energy (“BMWi”) to further improve fund- one of its key promotional areas. Under ing for technology start-ups and young the “KfW Energy Effi ciency Programme – innovative companies in Germany, and most Energy-effi cient Construction and Refur- of all to close the gap in follow-on fi nanc- bishment”, businesses now benefi t from ing. KfW plans to invest a maximum of very low interest rates and repayment EUR 400 million in selected private venture bonuses from the Federal Government’s

capital funds over the next few years. The “CO2 Building Rehabilitation Programme” fi rst four fund investments were made funds for investment in energy-effi cient in 2015. The ERP Special Fund (“ERP-SV”) construction and energy-effi cient refur- and KfW also created a new venture capital bishment of commercial non-residential fund at the end of 2015. This fund has buildings. been stocked with EUR 225 million and will invest – always in tandem with a private investor – under pari passu terms with

70 | KfW Annual Report 2015 We promote Germany | Domestic promotion Special design for innovative technology

Sometimes it’s the small things that win people over. For example the concept behind Inkubus UG – building powerful PCs encased in unusually small chassis. The exclusive custom-made computers impress not only with their attractive design but also, in particular, their high quality. The computer casings consist of recycled wooden material or perspex. The energy consumption of such computers is already so low that it is currently half of the limit set by the 2016 Commission Regulation (EU) on energy consumption. KfW gave the young company a helping hand with a loan from the “ERP Start-Up Loan – StartGeld” programme.

Investment in energy-effi cient production in 2015, were key contributors to CO2 districts receiving KfW support have made facilities and processes can be fi nanced reduction. Raising lending ceilings as well a large contribution to climate protection We supportWe internationalisation through the “KfW Energy Effi ciency Pro- as repayment bonuses and investment and the energy transition. gramme – Production Facilities and subsidies provides even greater incen- Processes”. Interest rates are based on the tives for investing in energy effi ciency. Construction boom principle: the greater the increase in effi - A total of EUR 3.6 billion was disbursed Very exacting energy effi ciency standards ciency, the more favourable the loan terms. for energy-effi cient rehabilitation of apply to the construction of new build- almost 240,000 homes. ings, and KfW supports builders in imple- Demand for the new commercial pro- menting them. There was particularly grammes exceeded expectations and is Moreover, a holistic approach can raise high demand in 2015 for fi nancing prod-

proof of the high demand for funding. the effi ciency potential of entire city ucts in new housing construction – which development promote We EUR 1.9 billion was committed for the districts. In the fourth quarter of 2015, received a major boost from the extremely two new parts of the programme alone; signifi cant improvements were also made low interest rate environment. Under total commitment volume for commercial to promotional terms in the “Energy-effi - the “Energy-effi cient Construction” pro- energy effi ciency measures amounted to cient Urban Rehabilitation – City District gramme, promotional loans totalling EUR 3.8 billion. Energy Supply” and “Energy-effi cient almost EUR 7 billion were committed for Urban Rehabilitation – Grants for Inte- over 140,000 homes, advancing not only

Particularly the programmes for energy- grated District Concepts and Refurbish- housing construction itself but also cli- notes Other eﬃ cient rehabilitation of residential ment Managers” programmes. Since the mate and environmental protection in buildings, which were further improved programme launch in 2011, over 800 city the housing sector.

KfW Annual Report 2015 We promote Germany | Domestic promotion | 71 Energetic learning

This school releases energy – among its students as well as on the power grid. The entire school campus dating from the 1950s has been comprehensively expanded and intelligently rehabilitated. Since then the vocational college in Detmold has been an energy- plus school, which means that the building generates more renewable energy than it uses for heating. The comprehensive use of forward-looking construction materials has cut the heating requirement by 93 %. What is more – integrated photovoltaic systems mounted on the roof generate extra energy that is fed into the grid. KfW funded this unusual project with a promotional loan from the “IKK Energy-eﬃ cient Urban Rehabilitation” product. Students and teachers alike now enjoy a welcoming and comfortable educa- tional environment that facilitates modern learning, while the treasurer enjoys the reduced energy costs.

High tech at sea ing share to date, in a fourth off shore applications can be made fully electroni- The energy transition has been a major wind project. “Veja Mate” will be one of cally, which is much more convenient and driving force behind the development of the world’s largest off shore wind farms effi cient and saves considerable time. new technologies. Demand for creative and is considered an important step in the ideas paired with technology know-how is expansion of renewable energy. KfW plans to expand this innovative ap- particularly high in commercial production plication process to commercial products of renewable energy. KfW promotes the Almost full market penetration as well in 2016. expansion and utilisation of renewable for BDO energy via numerous programmes. A par- The way to obtaining a housing-related ticular highlight in 2015 was the conclu- promotional loan became even easier for sion of project fi nancing for the “Veja Mate” an increasing number of private customers wind farm off the German North Sea coast. in 2015. A er an almost seamless online KfW has already funded three wind farms application process was implemented via its “Off shore Wind Energy” programme with a number of pilot partners last year, launched in 2011. A er the programme’s many other fi nancing partners have since terms were adapted to current market also been connected to the On-lending conditions in March 2015, KfW invested Online 2.0 platform (“BDO 2.0”). Now al- around EUR 430 million, its largest fund- most all housing-related promotional loan

72 | KfW Annual Report 2015 We promote Germany | Domestic promotion We supportWe internationalisation

Volume of domestic promotional loans (EUR in billions)1)

33.5 2005 40.5 2006 47.4 2007 43.4 2008

49.2 2009 development promote We 64.3 2010 50.9 2011 50.6 2012 51.6 2013 47.6 2014 50.5 2015 Other notes Other 0 10 20 30 40 50 60 70

1) Without securitisation

KfW Annual Report 2015 We promote Germany | Domestic promotion | 73 What we offer start-ups and businesses

As a partner to the SME sector, KfW of KfW Mittelstandsbank’s total volume. supports start-up entrepreneurs, the As well as general environmental protection, self-employed and SMEs with a broad core elements include fi nancing energy spectrum of fi nancing and advisory effi ciency measures and supporting the services. In addition to start-ups and Federal Government’s expansion plans in general corporate fi nancing, it places the fi eld of renewable energy. particular emphasis on fi nancing investments in climate and environ- Leveraging energy effi ciency mental protection and on promoting potential in the corporate sector innovation. KfW has very successfully off ered SMEs favourable fi nancing for energy effi ciency Promotional business overview measures for many years now through The commitment volume in the business the “KfW Energy Effi ciency Programme”. sector Mittelstandsbank (SME Bank) reached a pleasingly high level of EUR 20.4 billion As businesses’ energy saving potential is again in 2015, following EUR 19.9 billion still far from exhausted, KfW made another in the previous year. This refl ected, among substantial improvement to its promo- other things, an increased investment tional off ering for operational energy- propensity among businesses, buoyed by effi ciency measures in July 2015. stable economic performance and sustained favourable fi nancing conditions. As one of the largest fi nance providers for the energy transition, KfW’s restructuring KfW committed a promotional volume to In the key promotional areas of start-ups of the “KfW Energy Effi ciency Programme” start-ups and general corporate fi nancing and general corporate fi nancing, total supports the Federal Government in similar to that of the previous year, commitment volume stood at a level similar reaching its climate goals under the NAPE. and signifi cantly more to environmental to that reached in 2014, at EUR 10.3 billion. protection funding. In the promotional area of environmental In the “Production Facilities and Processes” protection, total commitments were up con- programme component, investments in siderably year-on-year to EUR 9.3 billion facilities aiming at particularly high energy (2014: EUR 8.2 billion). This positive devel- savings are promoted through low-interest opment was buoyed by the economic up- loans. This follows the principle of “the swing, the low interest environment and higher the energy savings, the higher the the revival of demand for loans. funding”.

Commitments of EUR 0.8 billion to the Uniform standards have now also been innovation fi nancing promotional area in implemented for promotion of buildings 2015, which was a decrease from the on behalf of the Federal Government. previous year, against the general trend, Under the “Energy-effi cient Construction meaning in particular that 2014’s extra- and Refurbishment” component, invest- ordinarily high commitment volume of ments in new construction or rehabilitation EUR 1.4 billion in the “ERP Innovation of energy-effi cient commercial buildings Programme” was not repeated in 2015. can be funded at very favourable interest rates provided by the Federal Government

Commercial climate and from its “CO2 Building Rehabilitation environmental protection Programme” funds. Repayment bonuses Supporting investment in climate and make promotion even more attractive. environmental protection is a particular The amount of promotion is determined focal point of SME promotion. Commit- by the “Eﬃ ciency House” standard ments of EUR 9.3 billion were made in this achieved. area in 2015, which corresponds to 46 %

74 | KfW Annual Report 2015 We promote Germany | Domestic promotion The programme has also been extended Premium” for the heating market and to large companies, enabling signifi cant “Renewable Energy – Storage”. This is energy-saving potential to be further how KfW, as the most important fi nance leveraged. provider on the German market, supports the Federal Government in achieving its The expanded and improved promotional climate and expansion targets in renew- off ering was in great demand from the able energy. outset, and actually exceeded the high expectations. The high demand in ambi- KfW’s “Renewable Energy – Standard” tious promotion standards (premium programme off ers low-interest and long- Energy generation from regenerative standard at 30 % energy savings and term fi nancing for the generation of elec- sources focussed on onshore wind farms newly built KfW Effi ciency House 55) tricity from regenerative energy sources. and photovoltaic systems. shows that the promotional incentives The most frequently fi nanced technologies were appropriately set. are onshore wind farms and photovoltaic power facilities. The commitment volume Overall, commitment volume was further for onshore wind power installations stood expanded in 2015 from the previous year at EUR 3.8 billion in 2015, exceeding the to EUR 3.8 billion; half of this volume prior-year fi gure by EUR 600 million. In was invested in the two new programme addition to numerous new wind farms in components successfully launched on Germany and abroad, KfW also fi nances 1 July 2015. repowering measures, in which older systems are replaced by new, more powerful KfW funds larger corporate projects in ones. The commitment volume for photovol- energy, climate and environmental pro- taic systems at around EUR 478 million tection under the “KfW Syndicated Loan – was down again year-on-year (2014: Energy and Environment”. Financing is EUR 535 million). This trend refl ects the granted as a direct loan at market terms decline in expansion of photovoltaic sys- via banking syndicates. Projects in cli- tems in Germany. mate, environmental and resource protection have also been accepted for fi nancing Larger facilities enabling the use of renew- We supportWe internationalisation since mid-November. The programme was able energy on the heating market are further improved by opening it up to foreign supported by KfW’s “Renewable Energy – projects of German companies and their Premium” programme in the form of subsidiaries located abroad. Loans total- low-interest loans and reduced repayment ling EUR 84 million (including the precursor amounts subsidised by the BMWi. programme Energy Transition Financing The lion’s share of promotional funds Initiative) were committed in 2015. went to small companies in 2015, with the total commitment volume coming

Help along the renewable energy in at EUR 137 million, compared to development promote We expansion corridors EUR 234 million in 2014. As in the pre- KfW’s second major promotional area in ceding years, promotional activity focused climate and environmental protection on heating networks and biomass plants. ﬁ nancing is its support of the Federal Gov- ernment in expanding renewable energy. Small photovoltaic battery storage systems EUR 4.5 billion of support was provided in have been promoted under the KfW

2015 (2014: EUR 4.1 billion) for systems “Renewable Energy – Storage” programme notes Other to generate energy using renewable ener- since 2013. The ﬁ rst phase of the pro- gy sources under the KfW programmes gramme was successfully concluded in “Renewable Energy – Standard” for the 2015. The programme objectives – inte- electricity market, “Renewable Energy – gration of photovoltaic systems into the

KfW Annual Report 2015 We promote Germany | Domestic promotion | 75 power grid, market and technology devel- scale pilot projects aimed at reducing Highest standards for operation and safety opment of stationary battery storage stress on the environment. Investment of battery storage systems in Germany – facilities and reduction in system costs – subsidies totalling EUR 36 million were thanks also to the KfW storage programme. were largely achieved. Each promotional committed in 2015 (2014: EUR 33 million). euro leads to investment of seven euros. Since the programme was launched in Signifi cant expansion of start-up May 2013, KfW has committed a lending and innovation fi nancing volume of EUR 266 million, with support KfW realigned its equity fi nance off ering being provided for around 17,100 storage in 2015. It is improving funding for tech- facilities, almost 8,800 of which in 2015. nology start-ups and young innovative Germany has the highest standards in companies in Germany in collaboration operating and safety of network storage with the BMWi via two new promotional thanks to the KfW storage programme. instruments, thereby helping to resolve the shortage in supply of venture capital KfW has been fi nancing off shore wind (“VC”) through follow-on fi nancing and energy projects in the German North and bolstering Germany’s VC market. Baltic Sea coasts structured as project funding with its “Off shore Wind Energy” Under the “ERP Venture Capital Fund programme since 2011. A er successfully Investments” programme, KfW will invest adapting the programme to current market up to EUR 400 million over the next few conditions, KfW participated in funding years in selected private venture capital the “Veja Mate” off shore wind farm to the funds with an investment focus on start- tune of EUR 430 million in 2015. This up and early-growth phases. project with a total investment volume of around EUR 1.9 billion is the most sizable The programme was very well received by funding since the programme’s launch. market players; KfW invested a total of This wind farm is the fourth thus far to EUR 55 million in four investment funds receive KfW promotion under this pro- in 2015. gramme and will be one of the world’s largest – yet another signifi cant contribu- Moreover, KfW and the ERP-SV launched tion by KfW to implementing the energy a new public fund at the end of the year transition. with market-oriented structures suitable for venture capital, called “coparion”. General environmental funding The new fund has been stocked with contributes to climate and EUR 225 million, making it a major German environmental protection VC investor. The new “coparion” fund will The third component of KfW’s activities in be launched sometime in spring 2016 and the fi eld of climate and environmental replace the “ERP Start Fund” in making General environmental fi nancing focussed on protection is general environmental fund- investments in start-up companies. resource effi ciency improvement, waste ing. The “KfW Environmental Protection avoidance and recycling. Programme” provides low-interest, medium “coparion” will invest directly in innovative to long-term fi nancing for environmental start-ups and young technology companies protection and investment measures that on a pari passu basis of equal fi nancial stop environmental burdens from materi- terms together with lead private investors. alising. The focus in 2015 was on projects aimed at improving resource effi ciency as KfW and ERP-SV will use two new instru- well as waste avoidance and recycling. At ments to leverage private capital of some around EUR 406 million, the commitment EUR 2.5 billion for the German VC market volume was down on the previous year in the next few years. (2014: EUR 579 million). In addition, KfW off ers the “BMUB Environmental Innova- Concluding two new guarantee agreements tion Programme”, fi nanced by the Federal with the European Investment Fund (“EIF”) Ministry for the Environment, Nature also signifi cantly boosted loan fi nancing Conservation, Building and Nuclear Safety of innovations and start-ups. The two (“BMUB”), for particularly worthwhile large- guarantees enable KfW to assume 50 % to

76 | KfW Annual Report 2015 We promote Germany | Domestic promotion 80 % of the credit risks in the “KfW Entre- Under the new guidelines on the Federal prenEUR Loan Plus” and “ERP Start-Up Government’s commercial advisory services, Loan – StartGeld” programmes. This makes the diff erent programmes KfW currently it easier for the on-lending fi nancing off ers and those off ered by the Federal partners to grant loans to innovative Offi ce of Economics and Export Control Demand for low-cost special products of the companies and start-ups. (Bundesamt für Wirtscha und Ausfuhr- energy sector is particularly high. kontrolle – “BAFA”) will be bundled into a The two guarantee agreements are backed standardised off ering. Applications will fi rstly by the InnovFin SME Guarantee then be directed to BAFA. Facility of the “Horizon 2020” programme or the Competitiveness of Enterprises and Small and Medium-sized Enterprises (“COSME”) programme, and secondly, by the European Fund for Strategic Invest- ments (“EFSI”) set up under Europe’s investment off ensive. Commitments totalling EUR 1.5 billion can be secured until the end of 2017. This is an important contribution by KfW to implementing the EFSI – better known as the “Juncker Plan” – in Germany.

Overall, the promotional volume for innovations and start-ups was, at EUR 4.5 billion, a further increase over the previous year (EUR 4.1 billion).

General corporate fi nancing remains the anchor of SME promotion The most popular promotional product in 2015 was once again the “KfW Entre- prenEUR Loan”. At around EUR 6 billion, commitments under this programme were down on the previous year (2014: around EUR 7 billion), refl ecting, among other things, the trend towards high-quality investments – particularly in energy effi - ciency – which is accompanied by a shi We supportWe internationalisation in demand towards KfW’s more inexpen- sive special products. At EUR 378 million in 2015, the commitment volume in the “ERP Regional Promotion Programme”, which KfW has been using for many years to promote investments in structurally weak regions at particularly attractive conditions, remained around the prior-

year level (2014: EUR 392 million). development promote We

KfW also provided grants for provision of advice to start-ups and SMEs in ﬁ nancial diﬃ culties via its “Start-up coaching in Germany”, “Round Table” and “Turnaround Consulting” promotional programmes in

2015. It supported a total of 9,300 consul- notes Other tations with a total of EUR 25 million in 2015.

KfW Annual Report 2015 We promote Germany | Domestic promotion | 77 The promotional offering for private customers

In terms of their numbers, private Improved promotional incentives investors constitute the largest for energy-effi cient housing domestic promotion customer group Promoting housing-related investments by far. KfW’s work has a very broad is aimed not only at creating housing but impact on the housing and education also at advancing climate and environmen- sectors through this group. Its pro- tal protection and supporting the Federal motional products serve to raise the Government in implementing the energy awareness of many people about transition at the same time. Around 40 % environmentally and socially relevant of energy in Germany is consumed in issues such as climate and environ- buildings. There is great potential in this mental protection, demographic area for improving energy effi ciency and change and lifelong learning, while conserving resources. simultaneously supporting their investment in their own future. The KfW Effi ciency House system, which is used in KfW’s promotional approach Promotional volume overview and has now become a uniform national KfW provided a total of more than standard, provides a strong incentive EUR 19.1 billion of support to private to continuously raise standards and con- customers in 2015, thereby exceeding the sequently also advance technological high 2014 commitment volume by 13 %. progress in the area of energy-effi cient Promotional housing programmes made refurbishment and construction. The prin- a key contribution of EUR 16.5 billion to ciple is simple: the more ambitious the the result. Large sections of the population project, the more support is provided. were also supported in education fi nanc- KfW uses federal budget funds to support ing, with a volume of EUR 2.6 billion. investors with the refurbishment or construction of homes for own use or Almost 15 % more funds were committed The commitment volume in housing was rent who exceed the statutory minimum for housing than in 2014. almost 15 % higher than in the previous standards set out in Germany’s Energy year. Commitment fi gures rose in particular Conservation Ordinance (Energieeinspar- for energy-effi cient new construction verordnung – “EnEV”). projects. The construction sector was driven not least by the low interest rate Promotional incentives were further in- environment in 2015, which also raised creased in 2015 and promotional terms the promotional volume. EUR 7 billion in the “Energy-effi cient Refurbishment” was committed for the construction of programme improved by raising the limits 141,500 new energy-effi cient homes on promotional loans and those on repay- under the “Energy-effi cient Construction” ment bonuses. programme. Positive development was also seen in the commitments for energy- The energy-effi cient construction projects effi cient refurbishment of residential and rehabilitation measures initiated buildings. Loans and grants totalling through KfW promotion in 2015 alone EUR 3.6 billion were committed to make contribute to a year-on-year decrease sustainable improvements to energy in annual carbon emissions by around effi ciency in more than 239,000 homes in 675,300 million tonnes – a considerable 2015. There was also great demand for the contribution to the Federal Government’s

KfW Home Ownership Programme, under CO2 reduction and energy eﬃ ciency targets. which KfW committed EUR 5.4 billion in funds, continuing the very high level of recent years.

78 | KfW Annual Report 2015 We promote Germany | Domestic promotion KfW Award Investment in education still Impetus for intelligent effi ciency solutions ranks high o en comes from model projects – reha- KfW has been helping private individuals to bilitation measures that stand out because invest in their own education for some of their blend of particular creativity and years now. It is a strong and reliable partner high-quality technology. The 13th “Con- to borrowers and the Federal Government struction and housing” KfW Award also on the promotional landscape for educa- sought such extraordinary projects in 2015. tional loans. Education is a key factor in KfW recognised projects with particularly safeguarding Germany’s position as a centre smart and innovative solutions under this for technology and science – especially year’s motto “Intelligent building: modern, with a view to demographic change. KfW effi cient, cosy.” A jury comprising renowned supports students in higher education and experts selected ten prize-winners from promotes career advancement opportu- more than 170 applicants, with prize nities with its broad off ering, which also money totalling EUR 30,000. advances scientifi c and technical progress.

Fewer barriers for residents The KfW Student Loan off ers students very and more for intruders fl exible fi nancing opportunities regardless The “KfW Student Loan” off ers students KfW also focuses on demographic change of their parents’ income. The off ering is fl exible fi nancing. in its housing-related support. For six complemented by federal programmes to years now, KfW has promoted age-appro- fi nance degrees, such as the “Education priate conversion of homes. Loans and Loan” and the “BAföG Bank Loan”, which grants are given to support conversion is downstream of the governmental BAföG measures that meet high standards to loan. The federal “AFBG – Master BAföG” improve accessibility, in order to create programme supports further professional adequate and forward-looking housing development. for any stage of life. KfW committed EUR 374 million in loans of this type in Demand has remained high for a number 2015. This was supplemented by grants of years. KfW granted loans totalling from federal funds of EUR 32.7 million. EUR 2.6 billion to 110,000 students in We supportWe internationalisation Overall, this improved accessibility in 2015, with the promotional area main- over 43,900 homes. taining the very high level seen in the previous year. At EUR 1.2 billion, the “KfW By the same token it sometimes makes Student Loan” has the highest commitment sense to create barriers in homes – espe- volume among the education programmes. cially when it comes to keeping intruders The federal programmes for students in- at bay. KfW expanded its promotional creased in 2015 to a total promotional off ering in November 2015 to include business volume of EUR 1.4 billion from

subsidies for crime prevention measures, EUR 1.2 billion the previous year. development promote We such as the installation of burglar-proof front doors, bars and shutters and retro- ﬁ tting of windows. The Federal Government has earmarked an annual EUR 10 million for 2015 to 2017 to fund burglary protection. This enables renters and home

owners to increase their investment in notes Other the security of their apartments and houses as well. The new promotional option has already protected some 4,150 homes through investments in home security.

KfW Annual Report 2015 We promote Germany | Domestic promotion | 79 The promotional offering for municipalities

Municipalities’ many varied duties A large part of the originally planned end, plus a total of 153 grants of include ensuring a high quality of life budget of an initial EUR 300 million and EUR 9.9 million for integrated district and a healthy conditions for local a further EUR 500 million was used up concepts and refurbishment managers. business and work. In 2015, munici- within just days, requiring the facility to This enabled promotion of comprehen - palities and local authorities also be later increased to EUR 1 billion. sive solutions for energy-effi cient urban faced the challenge of accommodat- This amount, too, was fully committed districts. Stimulus was also provided to ing the large infl ux of refugees. KfW by year-end. Overall in issuing some municipalities and their utilities provid- provided these institutions with a 550 loans, KfW supported around 400 mu- ers, as well as to housing companies and special facility to help them cover the nicipalities in providing accommodation private owners for further investments additional investment in accommo- for around 100,000 refugees. in energy effi ciency. dation. It also off ered municipalities and local authorities, as well as social Thanks to the special facility, the commit- The “Energy-effi cient Urban Rehabilitation” and municipal enterprises, a broad ment volume under the basic programme programme, supported with funds of promotional range for their regular for investment in municipal infrastructure, EUR 50 million from the Energy and Climate investments, particularly in climate the “IKK – Investment Loans for Munici- Fund, received an additional boost in the and environmental protection. palities”, reached the extraordinarily high fourth quarter of 2015 from some con- amount of EUR 3.0 billion, EUR 1 billion siderable improvements in promotional Promotional volume overview more than in the previous year. However, terms. The product can now be used for Overall, KfW provided support of EUR 5 bil- 2015 saw very high demand also for the additional promotional targets. An option lion to municipalities as well as municipal second basic programme “IKU – Investment was introduced to extend rehabilitation and social enterprises in 2015. The pro- Loans for Municipal Companies and Social management loans for up to fi ve years, motional volume thus increased consider- Organisations”. The commitment volume and repayment bonuses rendered it even ably over that of the previous year. For one was slightly above the prior-year level more attractive. thing, demand rose for programmes al- and amounted to EUR 1.5 billion. The low ready established for some time. For an- interest rate environment was likely to other, KfW launched the special “Refugee have been a key factor for many appli- accommodation” facility for investments cants in making investment and funding in new buildings, conversions and rehabil- decisions for modernisation of schools itation as well as the purchase of refugee and kindergartens, expansion of local accommodation. public transport systems or energy-effi cient utilities. Swi aid for refugees Handling the tide of refugees has been no Improvements in energy-effi cient easy job for municipalities. The main pri- urban rehabilitation ority was to rapidly create accommoda- A key area in KfW’s funding of municipal tion for so many people without a lot of infrastructure has for some time been red tape. KfW reacted quickly with a special the support provided to investments in loan off ering under “IKK – Investment municipal climate and environmental pro- Loans for Municipalities”, which allowed tection projects. The loans serve for energy- municipalities to fi nance their local refu- effi cient rehabilitation of municipal build- gee accommodation free of interest for ings and energy-effi cient supply of utilities the fi rst ten years thanks to the special to entire urban districts. KfW committed facility stocked with KfW’s own funds. loans totalling EUR 368 million to this

80 | KfW Annual Report 2015 We promote Germany | Domestic promotion Special financing for financing partners and special tasks

In addition to the traditional pro- Individual fi nancing banks Compensatory Fund for Securities gramme loans, KfW also off ers its KfW also maintains close cooperation with Trading Companies fi nancing partners global loans to European promotional banks, concluding KfW administers the Compensatory Fund support their promotional activities, global loan agreements with them in order for Securities Trading Companies (“EdW”) via on-lending banks. The off ers are to strengthen business, environmental under a mandate from the German Federal aimed at partners that focus their protection and infrastructure across Europe. Government. The EdW is a Federal Govern- activities on select common target Particular focal points of this cooperation ment special fund without legal capacity groups and key promotional areas. are promotion of SMEs as well as climate that protects small-scale investors against and environmental protection. The coop- potential loss in securities trading. To date, Global loans to the promotional eration also enables promotional institu- it has processed around 34,100 notices institutions of the federal states tions in other European countries to benefi t of loss under 21 compensation claims and KfW has very successfully cooperated from KfW’s good access to the market. disbursed around EUR 282 million in in- with the promotional institutions of the An example of this in 2015 was a global vestor compensation. federal states (Landesförderinstitute – loan of EUR 100 million to Polish pro- “LFIs”) for years. Cooperation with the motional bank Gospodarstwa Krajowego Humanitarian Aid Foundation LFIs focuses fi rstly on granting programme- (“BGK”). The funds serve to fi nance long- KfW has been conducting the business of related global loans and secondly on term investment loans to Polish SMEs. the Humanitarian Aid Foundation for general funding. The German economy also benefi ts Persons Infected with HIV through Blood indirectly from an improved investment Products on the basis of an agency The programme-related global loans serve climate in Poland. agreement since 1995. For humanitarian to fund the LFIs’ promotional loans in the and social reasons, the foundation pays a SME, housing and infrastructure segments In support of SMEs in Germany, KfW also monthly pension to individuals who have based on the relevant KfW off ers. This off ers global loans for leasing fi nance. been directly or indirectly infected with results in particularly favourable fi nancing Individual fi nancing agreements totalling HIV (human immunodefi ciency virus) or terms for borrowers, as fi nancial support EUR 500 million were concluded via who have contracted AIDS through blood from KfW and the Federal Government is global loans (Europe and leasing). products. In certain circumstances, the bundled with that of the LFIs and federal aff ected person’s dependants may also states. Moreover, the cooperation helps KfW supports German enterprises in receive aid. The foundation is funded create a more transparent promotional global competition with another promo- by the Federal Government, the federal landscape. Business with the LFIs via tional product. On behalf of the BMWi, states, pharmaceutical companies and We supportWe internationalisation programme-based global loans was also it refi nances export loans covered by fed- the German Red Cross. continued at a high level in 2015. The eral guarantees, thereby making an im- total disbursement volume amounted to portant contribution to strengthening the KfW supported around 560 aff ected indi- EUR 6.6 billion. international competitiveness of German viduals from foundation funds in 2015 exporters. The BMWi recently extended with monthly pension payments totalling KfW off ers LFIs general funding as an this product for a further fi ve years. In around EUR 8.7 million. additional cooperation instrument. This export fi nancing, the commitment volume product enables the LFIs to fund state- amounted to EUR 800 million in 2015.

speciﬁ c promotional activities and initia- development promote We tives that fall under KfW’s promotional mandate. The business volume amounted to just under EUR 4.7 billion in 2015, similar to the previous year. Other notes Other

KfW Annual Report 2015 We promote Germany | Domestic promotion | 81 Domestic promotion has been presented housing investment, education and social via the two business areas Mittelstands- development, infrastructure, general bank (SME Bank) and Kommunal- und Pri- funding of the promotional institutions of vatkundenbank/Kreditinstitute (Municipal the federal states/global loans and indi- and Private Client Bank/Credit Institutions) vidual ﬁ nancing banks are accordingly since April 2013. The promotional areas reported together.

Volume of promotional ﬁ nancing of business sector Mittelstandsbank as of 31 December 2015

Programme Promotional business volume Purpose 2015 2014 EUR in EUR in millions millions

Total Mittelstandsbank 20,431 19,924 Start-ups and general corporate fi nancing 10,324 10,334 KfW EntreprenEUR Loan 5,995 6,870 Investments of SMEs Start-ups and young companies, company succession ERP Capital for Start-Ups 133 127 through subordinate loans ERP Start-Up Loan 3,577 2,631 Start-ups and young companies, company succession ERP Regional Promotion Programme 378 392 Investments to improve regional economic structure ERP Participation Programme 43 59 Private equity for small and medium-sized enterprises Other promotional programmes 174 186 Consultancy grants 25 70 Innovation 806 1,371 Research and development measures, ERP Innovation Programme 620 1,329 market launches with debt and subordinated capital Young innovative technology companies ERP Start Fund 33 42 through private equity Special fi nancing R&D 6 – Development costs in aviation KfW EntreprenEUR Loan Plus 48 – SMEs with innovative projects Start-ups and innovative companies in the early growth phase via participation in private venture KfW EntreprenEUR Loan Plus 55 – capital funds Innovative start-ups and young technology “coparion” co-investment fund 45 – companies through private equity Environment 9,301 8,219 KfW Environmental Protection Programme 406 579 Environmental protection measures KfW Energy Effi ciency Programme 3,801 3,171 Energy effi ciency measures KfW Energy Effi ciency Programme (old) 1,887 3,171 KfW Energy Effi ciency Programme – Energy-effi cient Construction and Refurbishment 945 – KfW Energy Effi ciency Programme – Production 968 – KfW Renewable Energy Programme 4,546 4,113 Investment in renewable energy KfW Off shore Wind Energy Programme 428 – Off shore wind farms High-volume investments in renewable energy KfW Syndicated Loan – Energy and Environment 84 140 sources and energy effi ciency measures Projects with demonstrative character in the BMUB Environmental Innovation Programme 36 33 area of environmental protection Demonstration projects in the area of renewable EU NER 300 funding programme – 183 energy sources and the capture and storage of CO2

Diﬀ erences in the totals are due to rounding.

82 | KfW Annual Report 2015 We promote Germany | Domestic promotion Volume of promotional ﬁ nancing of business sector Kommunal- und Privatkundenbank/Kreditinstitute as of 31 December 2015

Programme Promotional business volume Purpose 2015 2014 EUR in EUR in millions millions

Total Kommunal- und Privatkundenbank/ Kreditinstitute (Municipal and Private Client Bank/Credit Institutions) 30,054 27,699 Housing investment 16,468 14,338 Energy-effi cient Construction and Refurbishment 10,554 9,320 Energy-effi cient modernisation and construction Energy-effi cient Refurbishment 3,557 3,697 of residential buildings Energy-effi cient Construction 6,996 5,623 Age-appropriate Conversion – Loans 374 331 Conversion of residential accommodation Age-appropriate Conversion – Grants 33 3 to improve accessibility KfW Home Ownership Programme 5,437 4,684 Acquisition and construction of owner-occupied housing Promotional Funding of LFIs 70 – Education and Social Development 2,643 2,591 AFBG (Master BAföG) 262 291 Continuing professional development BAföG government loans 1,065 773 Education Loan 89 90 BAföG bank loans 27 29 Academic study KfW Student Loan 1,198 1,407 Tuition fee loans 2 2 Infrastructure 4,954 3,983 Investment Loans for Municipalities 3,232 2,296 IKK – Investment Loans for Municipalities 3,004 2,047 IKK – Energy-effi cient Urban Rehabilitation 71 96 IKK – Municipal Energy Supply 0,5 0

IKK – Accessible City 21 22 supportWe internationalisation Investment in the municipal and social infrastructure IKK – Energy-effi cient Construction 136 132 (including refugee aid), special promotional programmes Investment Loans for Municipal for municipal energy supply and urban energy-effi cient and Social Enterprises 1,723 1,686 rehabilitation, with promotional targets that meet the IKU – Investment Loans for Municipal challenges of demographic change and Social Enterprises 1,547 1,486 IKU – Municipal Energy Supply 55 64 IKU – Accessible City 5 5 IKU – Energy-effi cient Construction 68 45 IKU – Energy-effi cient Urban Rehabilitation 48 88 We promote development promote We General Funding of LFIs 4,691 4,626 Global loans to fund the promotional institutions General funding of the promotional institutions of the federal states of the federal states 4,691 4,626 Individual fi nancing banks 1,297 2,161 Refi nancing of export loans covered by Olymp Refi nancing of Export Loans 797 673 federal guarantees Structured products – 100

Global loans – leasing 400 550 Structured products and global loans to promote notes Other Global loans Europe (EU mandate) – 88 SMEs and environmental protection Global loans Europe (other) 100 750

Diﬀ erences in the totals are due to rounding.

KfW Annual Report 2015 We promote Germany | Domestic promotion | 83 KfW funding – simple, digital and everywhere

KfW’s promotional products help age. Additional high-volume fi nancing private individuals, businesses, munici- partners were connected to BDO 2.0 core palities and municipal institutions to functionalities in the housing-related invest in the future. KfW aims to make area over the course of 2015, including it as easy as possible for its custom- Deutsche Bank AG, ING-DiBa and top ers and fi nancing partners to get to institutions in the savings bank sector. know and understand KfW’s products, Opening up the KfW promotional portal which are to be readily accessible and as of 1 October 2015 to those who do not available everywhere. In other words, wish to set up their own BDO solution, KfW aims for promotion that reaches but prefer instead to access KfW’s user- people. To this end, traditional sales friendly online interface was an impor- channels are increasingly becoming tant milestone. Since then, 83 fi nancing digitally enhanced, enabling cus- partners have opted for this new applica- tomers to include KfW promotional tion process, enabling almost full market off erings in their information and penetration. decision-making process anywhere and at any time. In addition, Interhyp AG was the fi rst fi nancial broker platform to be connected to The banking environment has changed BDO, in autumn 2015. Moreover, a pilot in recent years. The low interest-rate partnership was launched to connect the environment, more stringent regulation, promotional institutions of the federal new competitors and, not least, changes states with Landeskreditbank Baden- in the way bank customers deal with in- Württemberg (L-Bank). formation, make decisions and conduct transactions require new sales channels Automation and digitalisation of the for promotional products. In addition to application and approval processes enable the resulting effi ciency and cost pressure connected institutions to give their cus- on banks and savings banks, the increasing tomers a binding response from KfW on digitalisation also aff ects communication the promotional capacity or funding of with customers. KfW is tackling this chal- their project within a matter of seconds. lenge and intends to reduce the burden The processes are fully electronic and on its fi nancing partners as much as pos- consequently more convenient and effi cient sible and support them in off ering and and save considerable time for customers on-lending KfW products. In this manner, and bank advisors alike. KfW is also addressing the growing importance of digital brokers and is expanding Key account management supports its cooperation with this type of provider fi nancing partners increasingly demanded by customers. The fi nancing partners’ diff erent business and service models address individual Full market penetration for BDO needs and requirements. Key account BDO 2.0 makes promotional business Two years ago, KfW launched a pilot project management acts as a direct link to the quicker and more effi cient. with an initial group of bank partners to main fi nancing partners. In addition to replace the traditional submission methods banks, savings banks, insurance companies, with a digital application and approval promotional institutions of the federal process, Bank On-lending Online (“BDO states and associations of banks, these 2.0”). The aim is to make the promotional partners now include fi nancial brokers, business quicker and more effi cient for whose role is becoming increasingly im- both customers and fi nancing partners, to portant, especially in fi nancing housing maintain its attractiveness in the digital construction.

84 | KfW Annual Report 2015 We promote Germany | Domestic promotion KfW receives valuable market feedback This new partner portal gives fi nancing The “KfW Partner Portal” provides fi nancing from regular exchanges with its partners. partners, multipliers and municipalities partners and multipliers with fast and spe- This format was further developed in 2015, the advantage, for example, of optimised cifi c information. yielding a number of diff erent constructive search functions, a simplifi ed publications ideas. A lot of our partners’ momentum order process and an improved overview has already been harnessed, while that of of the latest documents. The portal is others is being assessed. enjoying prolifi c use, with around 88,000 visits a month. Positive collaboration with multipliers Strong demand for personal In addition to fi nancing partners, multi- advice continues pliers such as associations, chambers and Direct customer contact will always be Customers are very satisfi ed with KfW’ s advisors are important contacts for KfW. key. Responses to around 1.1 million tele- advice by telephone. Joint activities were expanded and new phone, e-mail and fax enquiries in 2015 collaboration agreements concluded in are proof of great need for information 2015. These featured events and training on the part of potential and existing cus- sessions on energy-effi cient residential tomers. Almost one in two callers (47 %) and commercial construction and refur- had questions concerning education, 41 % bishment. In particular, the KfW Online requested information on the housing- Academy was expanded and also opened related promotional off ering and 12 % on up to fi nancing partners. support for start-ups and existing enterprises. The results of regular customer The joint initiative of recent years “Better surveys show that customer satisfaction with Architects – Energy-effi cient Buildings” with KfW advice, competency and friend- was continued with the Federal Chamber liness is above average. Systematic opti- of German Architects. Similar event series misation of quality standards for telephone were extended to other associations. and written communication has had a clearly positive impact. More than a thousand individual multipliers were reached via publications, events This is also confi rmed by the experience We supportWe internationalisation and regional conferences in collaboration gained from KfW’s fi rmly established with a number of associations and cham- complaints management system. Overall, bers. Many consultants received informa- complaints received by the bank remain tion material targeted to their needs as very low. The Kundenmonitor Deutschland, part of dialogue marketing, took part in a regular independent survey taken by face-to-face or online training seminars ServiceBarometer AG and a leading indi- and were invited to discussions about cator of customer satisfaction in Germany, KfW promotional programmes. shows that the rate of KfW private customer KfW wants to help its customers

complaints ranks at the lower end com- make decisions. development promote We New KfW Partner Portal pared with other banks and savings banks. Financing partners and multipliers alike can fi nd direct access to information on The Kundenmonitor Deutschland survey also KfW promotional opportunities online. confi rms an overall high level of satisfaction The new “KfW Partner Portal” was set up among KfW customers. Surveys of more in mid-2015 to replace the previous of- than 30,000 customers at diff erent compa-

fering divided into “KfW Advisors’ Forum” nies, including at least 6,600 KfW customers, notes Other and “KfW Partners”. This is a user-friendly show that also in 2015 KfW rated well central contact point speciﬁ cally designed above average for banks and savings banks for target groups to obtain information. in customer satisfaction.

KfW Annual Report 2015 We promote Germany | Domestic promotion | 85 Joint sales and marketing activities “Energy Effi ciency in Enterprises” Providing optimum support to fi nancing product campaign partners in advising their customers on KfW has also been directly addressing KfW products remained one of the mar- potential customers. The aim is to support keting focal areas in 2015. The bank jointly customers’ decision-making process with developed sales and marketing packages relevant and easily comprehensible infor- with the individual partners to their re- mation. The focus is 2015 was the “Energy quirements, using all relevant channels and Effi ciency in Enterprises” campaign, which contact points for addressing customers. included a TV advert, a print campaign and additional measures specifi c to target KfW undertook several regional and nation- groups, besides comprehensive online Financing partners receive support in off ering wide campaigns with its major fi nancing activities. KfW product advice to their customers. partners to directly inform their customers about KfW promotion. To this end, KfW All product marketing campaigns focused expanded its range of measures to include on addressing the relevant target groups at advisory aids such as short explanatory all key contact points in the information- fi lms. Financing partners also received in- gathering and decision-making process, dividually tailored content on KfW’s key whether via traditional or digital media. products for easy integration into their websites. The Savings Banks Finance Group, for instance, is already making great use of this off er.

86 | KfW Annual Report 2015 We promote Germany | Domestic promotion ˚We support internationalisation Advantage and added value: As a financing partner KfW IPEX-Bank supports German and European companies in international competition – to secure growth and employment, to establish essential links for our globalised society and to preserve the means of livelihood and of sustainable living for future We supportWe internationalisation generations. supportWe internationalisation We promote development promote We Other notes Other ˚At a glance: Export and project finance in 2015

KfW IPEX-Bank is responsible for the international Export and project ﬁ nance business sector within KfW Group.

KfW IPEX-Bank has supported mid-sized enterprises and large corporations as a reliable partner for more than 60 years. The specialist bank provides German and other European companies with tailored ﬁ nancing for their international business. This mandate, which is derived from the KfW Law, has relevance for society. This is because the international competitiveness and global orientation of industry in Germany and Europe secure employment, economic strength and prosperity.

88 | KfW Annual Report 2015 We support internationalisation | Export and project ﬁ nance 41.3 square kilometres of renewable energy – the Nordsee One oﬀ shore wind farm

Together with nine other banks, KfW IPEX-Bank is fi nancing the Nordsee One off - shore wind farm, which covers an area of 41.3 square kilometres 40 kilometres to the north of the German island of Juist. Shallow water and high wind speeds provide virtually ideal conditions for an off shore wind farm. A er their commissioning in 2017, the 54 wind turbines made by German manufacturer Senvion are expected to generate over 1,300 gigawatt hours of electrical energy per year – enough to power around 400,000 German households.

The owners of the 332 megawatt project with an investment volume totalling EUR 1.2 billion are Northland Power Inc., Toronto, and RWE Innogy GmbH, Essen. The international banking consortium is providing almost 70 % of the project costs via non-recourse project ﬁ nancing of EUR 840 million. We promote development promote We Other notes Other

KfW Annual Report 2015 We support internationalisation | Export and project ﬁ nance | 89 Fleet modernisation: Together with other banks, KfW IPEX-Bank is ﬁ nancing two new cruise liners for TUI Cruises. The ships, which also set new standards in terms of environmental friendliness, are being built at the Finnish Meyer Turku shipyard.

Cruising out to sea – two new TUI Cruises once again underlines including stations and trains, two new ships for TUI Cruises KfW IPEX-Bank’s structuring skills in underground metro lines totalling 37 kilo- KfW IPEX-Bank is part of a banking con- the fi eld of ship fi nancing. metres in length and 28 stations are also sortium supporting the expansion of being built in Chile’s capital. In order to help German cruise provider TUI Cruises with With its fl eet of currently four cruise liners realise this major project, KfW IPEX-Bank large-scale fi nancing. This investment operating under the name “Mein Schiff ”, is participating in a USD 800 million fi nanc- path includes ordering two more new- TUI Cruises is one of the fastest-growing ing package as part of an international builds from the Finnish Meyer Turku ship- cruise lines in the German market. The banking consortium. yard, which, along with the Meyer Wer fl eet is expected to grow to six ships by shipyard in Papenburg and the Neptun 2017. Both new orders will successively The two new lines will connect a total Wer shipyard in Rostock, is one of the replace the older vessels a er their com- of eleven surrounding communities with world’s leading cruise ship builders. pletion in 2018 and 2019, thus contrib- each other. Five of them are being con- uting to the modernisation of the fl eet and nected to Santiago de Chile’s urban rail- Together with UniCredit and another Euro- also setting new standards in terms of way system for the fi rst time. This will pean commercial bank, KfW IPEX-Bank environmental friendliness. signifi cantly shorten the length of the daily structured the total fi nancing for the new commute to Santiago for approximately ships as book runner and secured the or- Upgrading the metro in one million people. The modernisation der for Meyer Turku shipyard by commit- Santiago de Chile work on the existing lines will also have ting to the total loan amount. Other banks It is an infrastructure project with a total a positive eff ect because it will enable subsequently participated in the fi nanc- volume of around USD 1.3 billion. In addi- energy savings of up to 30 %. ing. Its active involvement on behalf of tion to modernising the existing network

90 | KfW Annual Report 2015 We support internationalisation | Export and project ﬁ nance Airbus A380-800 for Asiana Green light for green cable the water remaining in them. Conversely, Together with ING Capital LLC, The contract is sealed. KfW, represented Germany can import energy from Norwe- KfW IPEX-Bank arranged a USD 227 mil- by KfW IPEX-Bank, and the power grid gian hydropower in the event of high de- lion Coface-covered loan to Asiana Air- operators TenneT and Statnett are to- mand. This makes the interconnector lines, Inc., with a tenor of twelve years. gether launching NordLink. The 516 kilo- with its capacity of 1,400 megawatts a The loan is for the South Korean airline metre-long subsea power cable will con- milestone in the energy transition. to purchase an Airbus A380-800 aircra , nect the electricity markets of Germany parts of which are being manufactured and Norway and enable the exchange of in Hamburg. As part of a complex ﬁ nanc- renewable energy. This will improve sup- ing structure, KfW IPEX-Bank assumed, ply security, stabilise energy prices and

among others, the role of security trustee. boost the integration of the European development promote We electricity market. The four-engine wide-bodied Airbus A380-800 has room for up to 853 passen- Connecting Norwegian hydropower with gers with its two full-length passenger German wind energy oﬀ ers advantages for decks. The largest civil commercial aircra both countries. For example, if Germany in mass production in the history of avia- generates an excess of wind energy, this

tion is a European collective achievement. can be transferred to Norway via Nord- notes Other Final assembly is in Toulouse, with the Link and be used directly by the end users cabin equipment added in Hamburg- there. The reservoirs in Norway will then Finkenwerder. serve as natural storage for wind energy by

KfW Annual Report 2015 We support internationalisation | Export and project ﬁ nance | 91 KfW IPEX-Bank business performance – we support internationalisation

As a specialist fi nancier, KfW IPEX-Bank In its business, KfW IPEX-Bank focuses on is responsible for the business sec- the key industries relevant for the German tor Export and project fi nance within and European export sector. The bank’s KfW Group. The mandate of the legal- clients include mid-sized enterprises and ly independent group company is to large corporations. support the internationalisation of German and other European compa- So that these companies can realise nies. The structuring of medium and their potential in high-technology sectors long-term fi nancing for key industri- of global markets, it must be ensured al sectors of the export economy, for that industry is suffi ciently supplied with economic and social infrastructure commodities. Due to the lack of certain projects and for projects targeting resources in Germany and Europe, climate and environmental protection KfW IPEX-Bank fi nances projects and are at the core of its activities. transactions around the world that facili- tate the import of commodities. Only in KfW IPEX-Bank is an integral part of A solid export industry opens up societal this way can products be manufactured KfW Group. Its task is to support German prospects and ensures economic strength, whose high quality also enables them and European companies in their inter- employment, growth and prosperity. to be traded globally. national business – to secure growth, KfW IPEX-Bank creates a foundation for employment and prosperity. these prospects. Its tailored loans, which Effi cient infrastructure and cross-border are based on over 60 years of experience, networks are basic prerequisites for this help German and other European compa- global exchange of goods and services. nies to stay competitive in the global KfW IPEX-Bank takes account of their marketplace and to expand their export signifi cance by supporting the expansion success. This demands and supports in- of road, rail, energy and data networks, novations and creates future prospects and of airports and seaports with its loans. for our position as an economic centre. Moreover, the bank fi nances investments in means of transport, such as aircra , Inherent to banking in the fi eld of export ships and rail vehicles. It is also involved and project fi nance is its internationality. in the area of expanding social infrastruc- Most projects are so large that one bank ture and provides the debt fi nancing ne- Syndicated fi nancing and bank clubs: alone cannot support them. KfW IPEX-Bank cessary to build and modernise hospitals, KfW IPEX-Bank generally provides large therefore operates in partnership with schools and other administrative build- scale debt fi nancing together with other commercial banks, particularly in ings, frequently structured as public-pri- market partners. large international syndicated fi nancing vate partnerships (PPPs). projects, and in certain areas also increasingly with institutional investors. It con- At the 21st United Nations Climate Change tributes all its structuring experience– for Conference in Paris, the 196 countries the benefi t of German and European ex- represented reached a new global agree- port companies, which thus succeed in ment on climate protection. The stated entering global sales markets in industri- objective is to limit global warming to a alised and emerging market countries. maximum of two degrees Celsius com- KfW IPEX-Bank’s tasks are based on pared to pre-industrial levels by the year KfW’s legal mandate. 2100. New approaches and fresh ideas are needed so that these eff orts will not

92 | KfW Annual Report 2015 We support internationalisation | Export and project fi nance be in vain. Relevant task areas such as Keen competition continued to prevail in Against a background of largely stable energy effi ciency, renewable energy and the market for large-volume export and demand for German and European capital new production and environmental pro- project fi nancing, particularly from banks goods, signifi cant competition prevailed cesses are becoming more of a focus. In from Europe, North America and Asia, in the E&P market. many of these areas, European and in par- albeit increasingly also from banks from ticular German companies are the world’s emerging economies. In addition, institu- leading providers – with KfW IPEX-Bank tional investors, driven by high investment off ering support. Financing energy and pressure in the low interest rate environ- environmental projects is one of its core ment, also advanced into the credit market. tasks. The bank supports its clients by offering them extensive industry knowledge Overall, global demand for capital goods and many years of structuring experience. produced by German and European manu- Each one of its transactions contributes facturers was largely stable. The demand to the implemen tation of the international was also accompanied by high lending community’s objectives. supply and alternative fi nancing opportunities in 2015. Stable demand for export and project fi nance Excellent development The global economy lost momentum in in new business 2015, although the picture was mixed, even KfW IPEX-Bank’s fi nancial statements for Record year: KfW IPEX-Bank granted contradictory, across the diff erent eco- 2015 document the bank’s strongest refi nancing totalling EUR 20.2 billion in 2015. nomic areas. The economy stabilised in sult in its history. In its responsibility for the industrialised nations, driven by the the Export and project fi nance business USA and the euro area. This was facili- sector, KfW provided fi nancing totalling tated by the labour markets, private con- EUR 20.2 billion in 2015. In its original sumption, low energy prices and the credit business it achieved a commit- continuing favourable interest rate envi- ment volume of EUR 17.4 billion (2014: ronment. Development was less positive EUR 15.4 billion). In addition, new com- in other industrialised nations in 2015. mitments to refi nance banks under the CIRR ship fi nancing scheme – agency busi- The group of developing and emerging ness managed on behalf of the German market countries experienced negative Federal Government – were, at around growth for the fi h year in a row in 2015. EUR 2.2 billion, nearly EUR 1 billion Many large emerging markets in particu- higher than in the previous year (2014: lar faced strong headwinds, and geo- EUR 1.3 billion). The equity investment

political tensions continued to aﬀ ect the for realisation of the NordLink subsea development promote We global economic situation in important power cable project in the amount of regions. Not least as a result of this, there EUR 600 million can also be added to was a further decrease in commodity the new commitment volume. prices, particularly in crude oil, during the year. This in turn led to investment reti- This record result impressively demon- cence in the upstream and downstream strates the strength of KfW IPEX-Bank’s

areas. The depreciation of the euro, in business model. However, it also refl ects notes Other contrast, had a positive impact for the benefi cial factors that unleashed their German and European export industries positive eff ect in interplay with each other and their production. in 2015. For example, longer-term planned

KfW Annual Report 2015 We support internationalisation | Export and project fi nance | 93 fi nancings were concluded in the report- sectors, these include basic industries, ing year, documenting the success of sales automotive and mechanical engineering, initiatives begun earlier. In addition, retail, and the pharmaceuticals, speciality business in 2015 was shaped by several chemicals, health and telecommunica- large-scale individual fi nancings – for off - tions sectors. Within transport and infra- shore wind farms and cruise ships, but also, structure, the bank focuses on its sector for example, by the non-recurring eff ect departments Maritime Industries, Rail of the NordLink subsea power cable trans- and Aviation, as well as Transport and action. In conclusion, it can be seen that Social Infrastructure. Particularly in the the bank especially fulfi ls its mandate fi nancing of ships, rail vehicles, aircra , Project, export, investment and acquisition of supporting the German and European energy projects and in basic industries, fi nancing in important key industries – mid- export economy through tailored fi nanc- KfW IPEX-Bank’s structuring know-how sized enterprises and large corporations benefi t ing of international business activities enjoys high standing across the globe. from 60 years of structuring experience. in this area. Its employees’ many years of experience New commitments by with structuring complex transactions and sector department their deep sectoral and market under- As a reliable partner – both for clients standing enable the bank to play a part and for other credit institutions in syndi- in the world’s largest and most renowned cated fi nancing – KfW IPEX-Bank sup- fi nancing projects, mostly in combination ports the eff orts of German and other with other credit institutions, which to- European companies to go international. gether provide large-volume debt fi nan- The specialist bank’s off ering is aimed cing. KfW IPEX-Bank regularly undertakes at mid-sized enterprises and large corpo- diff erent agent roles in the so-called clubs rations in key industries important to and thus additionally contributes to the the German and European economy. In success of its customers’ business. addition to the environmental and energy

New commitments by sector department (EUR in billions) Total: EUR 20.2 billion1)

3.6 3.2 2.8 2.7 2.1 1.7 1.3 0.6

2.2

0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Maritime Industries Power, Renewables and Water Aviation and Rail Industries and Services Financial Institutions, Trade and Commodity Finance Basic Industries Transport and Social Infrastructure (PPP) Equity Portfolio Shipping CIRR bank reﬁ nancing

1) Diﬀ erences in the totals are due to rounding.

94 | KfW Annual Report 2015 We support internationalisation | Export and project fi nance All sector departments of KfW IPEX-Bank tributed to the overall excellent business made a positive contribution to the over- development. all result in 2015. At EUR 3.6 billion, the Maritime Industries sector department Focus on target markets reported the largest new lending volume. for the export industry For example, supplies of components from Products and services from Germany and German and European specialist manu- other European countries are in demand facturers were fi nanced as part of inter- globally. The origin of the goods is already In order to support internationalisation as national ship projects, as were special considered a seal of quality and reliability. well as possible, KfW IPEX-Bank is present in vessels for the off shore industry and fuel- KfW IPEX-Bank contributes to converting the important markets for the German and effi ciency-increasing modernisation in- this reputational advantage into real or- European export economy. It maintains a total vestments by large shipbuilders in the ders, production and added value by sup- of nine representative offi ces and a branch fi eld of retrofi tting. However, it was pri- porting the global marketing of German offi ce in London. marily large-scale fi nancings of cruise goods and services through tailored fi nan- ships that contributed to the strong per- cing. KfW IPEX-Bank supports its clients in formance, with a signifi cantly positive industrialised countries, but also in growth eff ect on the utilisation of German and markets in developing and emerging mar- other European shipyards and their quali- ket countries that are important for both fi ed suppliers. The Power, Renewables their exports and direct investment. The and Water sector department proved an- bank additionally off ers companies medium KfW IPEX-Bank also intentionally serves as other important growth driver. In 2015 and long-term investment and environ- a reliable partner in countries where access in particular through its involvement in fi - mental fi nancing for projects in Germany. to fi nancing is diffi cult. nancing onshore and off shore wind projects and highly effi cient combined cycle KfW IPEX-Bank has more than 60 years of power plants, its new business commit- experience in structuring complex export ments added up to EUR 3.2 billion. At and project fi nancing arrangements. As a EUR 2.8 billion, Aviation and Rail also con- reliable partner both for clients and for

KfW IPEX-Bank abroad

˚Moscow ˚London

˚New York ˚Istanbul

˚Mexico City ˚Abu Dhabi ˚Mumbai

˚Singapore

˚São Paulo ˚Johannesburg development promote We

Branch oﬃ ce Representative oﬃ ce Other notes Other

KfW Annual Report 2015 We support internationalisation | Export and project fi nance | 95 In its global business, the bank voluntarily other banks and institutions with whom it compliance with the World Bank Group’s follows strict international sustainability collaborates to jointly fi nance larger pro- International Finance Corporation Perfor- standards. jects, KfW IPEX-Bank is also intentionally mance Standards (IFC-PS) and Environmen- active in countries where access to fi - tal, Health, and Safety (EHS) Guidelines. nancing is diffi cult. In order to be able to The equator banks maintain a regular dia- support internationalisation as well as logue in which KfW IPEX-Bank also partici- possible, it is present in markets that are pates in order to further enhance these important for the export economy of standards. Germany and other European countries. KfW IPEX-Bank maintains a total of nine The bank’s own sustainability guideline representative offi ces in Abu Dhabi, Istan- for environmentally and socially sound fi - bul, Johannesburg, Mexico City, Moscow, nancing (Sustainability Guideline) goes Mumbai, New York, São Paulo and Singa- even further. In addition to compliance pore, and a branch offi ce in London. In or- with the Equator Principles and the OECD’s der to strengthen its presence in South- ECA Common Approaches, KfW IPEX-Bank east Asia, the representative offi ce in has voluntarily agreed to review all re- Singapore was expanded in line with maining fi nancing products in addition to long-term plans. As part of this, the ca- project and export fi nancings. pacity of the Bangkok representative offi ce was moved to Singapore and the Since summer 2015, KfW IPEX-Bank has offi ce there was closed at the end of Octo- also installed a simplifi ed, publicly accessi- ber 2015. In view of growing import and ble mechanism for submitting complaints investment opportunities in other emerg- on environmental and social matters. For ing markets too, KfW IPEX-Bank plans example, an online form on the website to moderately expand its foreign repre- gives potential complainants direct access sentation. to the bank. Complaints can be submitted by any individuals or organisations expe- Complaint mechanism installed – an online In 2015, 24 % of new loan commitments riencing adverse eff ects as a result of form has given potential complainants direct were in Germany (EUR 4.2 billion), 39 % projects fi nanced by the bank; for example, access to the bank since 2015. in the rest of Europe (EUR 6.7 billion) if they are aff ected by relocation meas- and 37 % in countries outside Europe ures or feel their interests were not suffi - (EUR 6.4 billion). The proportion of new ciently taken into account in the approval business in emerging markets was stable process. In the context of project fi nanc- at approximately 28 %. Even though the ing, KfW IPEX-Bank also has high require- rate of expansion in these regions has ments for its borrowers and asks them to slowed during the reporting year due to set up and maintain a complaint mecha- the persisting geopolitical crises, they nism for the duration of the project and continue to demonstrate their major sig- to document the results. nifi cance as growth drivers for the global economy. They off er German and Euro- Environmental and social impact pean companies new business opportuni- assessment in international business ties, which KfW IPEX-Bank supports as a In order to avoid potential risks for society reliable partner with a long-term approach. and the environment, KfW IPEX-Bank subjects planned fi nancings to an environ- Responsibility mental and social impact assessment. In The international nature of KfW IPEX-Bank’s accordance with its Sustainability Guide- exposure has global environmental, social line, at the start of its credit approval and economic dimensions. With this in process it categorises all projects as A, B mind, the bank aims in particular to fi nance or C based on the degree of their poten- projects and exports that will have a pos- tial environmental and social impact. Any itive impact on the climate and environ- projects that may result in considerable, ment. As early as eight years ago, the bank wide-ranging and to some extent irrevers- joined the Equator Principles Financial In- ible impacts are classifi ed in category A. stitutions (EPFIs). This global association This covers projects with a major, invasive now comprises around 80 equator banks, impact on the ecosystem, such as raw which adhere to a comprehensive volun- materials or dam projects. Category B is tary framework in order to meet environ- for projects which have a more moderate mental and social standards. This includes impact on the environment and society

96 | KfW Annual Report 2015 We support internationalisation | Export and project fi nance and are usually controllable by the use of ships fi nanced by the bank, employing an state-of-the-art technology; this applies assessment method jointly developed with The bank made an important contribution to to many industrial projects. Projects with Germanischer Lloyd. This enables the bank achieving KfW Group’s ambitious climate and no impact, negligible negative impacts or to take the energy effi ciency of a vessel into environmental protection targets in 2015. purely positive environmental and social account as an additional criterion when impacts are classifi ed in category C. making its fi nancing decision and to favour more energy-effi cient ships over tradition- For lending enquiries regarding projects ally built ones. This benefi ts the environ- that need to be assessed in depth, ment and also makes economic sense KfW IPEX-Bank only provides the relevant because the environmental aspects also fi nancing when all internationally accepted increasingly aff ect the likelihood of char- environmental and social standards have tering, and thus also the risk of default. been met, which may only be achieved by the fulfi lment of additional requirements. All of this underscores that KfW IPEX-Bank Countries with established approval and accepts responsibility and is committed to monitoring practices are identifi ed as improving ecological living conditions – “designated countries” in accordance with both in Germany and in the destination the EPFI/Equator Principles Association. countries of exports around the globe. They are assumed to have rules compa- rable with German and European guide- Economic and fi nancial lines. External experts and consultants results for 2015 participate in the environmental and so- 2015 was an extraordinarily successful KfW IPEX-Bank contributed EUR 628 million cial impact assessments to assess project year for KfW IPEX-Bank. The contribution to KfW’s consolidated earnings, again playing risks. They are supported on a project-by- of EUR 628 million to KfW’s consolidated an active role in securing KfW’s long-term project basis by KfW’s experts in technol- earnings confi rms KfW IPEX-Bank’s role promotional capacity. ogy and the natural and social sciences. as one of the main sources of revenue for KfW Group. The business sector again Climate and environmental protection actively contributed to securing KfW’s long- projects in core business term promotional capacity – despite a KfW IPEX-Bank provided fi nancing of challenging economic and market envi- EUR 4.1 billion for projects with a clear ronment. and measurable positive impact on climate and the environment in 2015. This The operating result of the Export and corresponds to around 20.5 % of the total project fi nance business sector, which is commitment volume and thus represents managed by KfW IPEX-Bank, was, at an important contribution by the bank to EUR 690 million, higher than the level of achieving KfW Group’s ambitious climate the already successful previous year. It and environmental protection targets. largely comprised net interest income, which increased signifi cantly over the pre- In 2015 it fi nanced projects in the fi eld vious year, and net commission income, of renewable energy, but also included a er deduction of the only slightly in- highly effi cient conventional energy gen- creased administrative expenses. The risk eration, environmentally friendly means provisions for the lending business also of transport such as rail vehicles, and in- had an extraordinary eff ect on the result – vestments in energy-effi cient and envi- actually a positive one in this case, mean- ronmentally friendly production facilities ing that due to net reversals of provisions,

in the Industries and Services sector de- the overall result from ordinary business development promote We partment. activities totalled EUR 722 million. In general, all recognisable risks were nev er- In Maritime Industries, KfW IPEX-Bank theless taken into account through appro- supports more effi cient and environmen- priate risk provisioning. tally friendly maritime shipping by fi nancing retrofi tting measures. In retrofi ts, Very strong operating income before taxes

modifi cations are undertaken to the ship was also reported for the legally independ- notes Other engine, bow or propeller, for example, to ent KfW IPEX-Bank GmbH, whose accounts improve energy effi ciency. KfW IPEX-Bank are balanced separately. KfW IPEX-Bank continues to attach great importance to GmbH conducts all export and project “eco-shipping”, or the energy effi ciency of fi nance market transactions. The volume

KfW Annual Report 2015 We support internationalisation | Export and project fi nance | 97 Target for 2016: To further strengthen its of lending for the Export and project High liquidity at banks and also institu- position as a reliable specialist fi nancier and fi nance business sector amounted to tional investors who continue to feel high stable partner to key industries important EUR 69.4 billion as of 31 December 2015 investment pressure due to the sustained to the German and European economy. (31 December 2014: EUR 64.3 billion). low interest rate environment continue to create intense competition in 2016. Outlook for 2016: KfW IPEX-Bank actively aims to structure Supporting internationalisation tailored syndicated fi nancing that serves as a reliable banking partner to support the export projects and invest- The global economic basis for ment plans of German and European in- KfW IPEX-Bank’s business will remain dustry in constructive collaboration with positive in 2016 because global economic its market partners. momentum is expected to be somewhat higher than in the previous year. This is In the context of the various frame- based on the forecast that the economy work conditions relevant to the market, in industrialised countries is growing KfW IPEX-Bank is targeting its business slightly more strongly than before – which in 2016 at further strengthening its posi- should apply particularly to the USA, the tion as a reliable specialist fi nancier of, euro area and Germany. Consumers in the and stable partner to, key industries im- euro area are benefi ting from a gradual portant to the German and European improvement in the labour market situa- economy. All in all, the development in tion and the renewed fall in energy prices. the sales markets in industrialised and Fiscal policy is also lending some support emerging market countries continues to for the fi rst time since 2010. Within the off er export opportunities for German group of developing and emerging market and European companies. In 2016, countries, growth diff erences remain con- KfW IPEX-Bank will therefore continue to siderable since many regions are aff ected focus on its role as a supporter of the by political tensions and crises that have German and European economy, which it an adverse eff ect on economic growth. A assists with tailored medium and long- growth rate at the level of the previous term fi nancing of exports and foreign year is expected for the majority of this investments as the economy internation- group of countries – yet it still remains alises. The business sector Export and far from the momentum of earlier years. project fi nance continues to plan on mod- Overall, the demand for exports from erate organic growth for fi nancial year Germany and Europe and consequently 2016. As the success of 2015, which also for appropriate fi nancing is likely to largely resulted from individual factors, remain stable. cannot be automatically carried over to the future, the new commitment volume target for 2016 is EUR 16.2 billion.

98 | KfW Annual Report 2015 We support internationalisation | Export and project ﬁ nance ˚We promote development Our goal is to improve the living conditions of people in developing and emerging market countries and to promote a climate-friendly economy. The business area KfW Development Bank and KfW subsidiary DEG therefore promote climate and environmental protection, the expansion of public infrastructure, and private economic initiatives as drivers of sustainable economic We promote development promote We and social progress. development promote We Other notes Other ˚At a glance: Promotion of developing and emerging market countries in 2015

KfW and DEG work on behalf of the Federal Government to help developing and emerging market countries achieve economic progress, reduce poverty and protect the climate and environment.

Innovation and technical progress play a key role in achieving these development goals. And whether it is using satellite images to monitor irrigation in inaccessible crisis regions, providing medical care for people in remote areas via “telemedicine”, or supplying rural regions with oﬀ -grid solar power, KfW and DEG provide their partner countries with eﬀ ective support in innovating and employing the latest technology.

100 | KfW Annual Report 2015 We promote development | Development fi nance Swi aid for drought for around 500,000 animals, which overall prospects to enable peaceful development victims in Africa served to help some 1.3 million people. in the crisis region. Agriculture and live- A new form of drought insurance helped On behalf of the Federal Ministry for Eco- stock are their main sources of livelihood. a lot of people in Senegal, Niger and Mau- nomic Cooperation and Development Irrigation would drastically increase yields ritania in 2015. For the fi rst time during (“BMZ”), KfW contributed approximately in the dry and barren north of the country, a major drought, these three countries re- USD 50 million in seed capital to ARC to and consequently improve farmers’ income. ceived a payout of some USD 26 million help it get established. A total of more from the African Risk Capacity Insurance than USD 190 million was mobilised for KfW is helping the local people to better Company (ARC), founded with several the new insurance company in 2015 from irrigate their fi elds on the banks of the other African countries. The money was other donors and the premiums paid by Niger and its distributaries near Timbuktu used to buy food, as well as animal feed the insured countries. It is intended to on behalf of the BMZ and in collaboration provide support in times of need for Afri- with Deutsche Gesellscha für Interna- can countries particularly aff ected by tionale Zusammenarbeit (GIZ) and the climate change. Canadian government. This improves the agricultural potential of an area of 18,700 In order for countries to take out an in- hectares. An additional measure under surance policy, their governments must this project is to construct dams around indicate how they plan to use the money natural depressions in order to keep the in the event of a drought. Such contin- water that fi lls them during the fl ood tide. gency plans are assessed by independent experts before a contract is signed. The The progress of the project can be moni- three aforementioned West African coun- tored even in areas o en inaccessible for tries fulfi lled these conditions. Satellite safety reasons, thanks to modern tech- images revealed early on that very little nology. Satellite images show how many rain had fallen in the region and that crops fi elds have been adequately irrigated, would yield a poor harvest; this therefore which is a key condition for eff ective aid constituted a claim. in crisis-stricken Mali.

The money was paid out promptly, so the A plot of land of just a quarter hectare can people received help quickly. The new in- yield enough rice to feed a family for six surance company has thus passed the test. months. This is how the project secured The plan is to expand it to more countries food for half a million people in the re- and also insure against additional risks mote region and created jobs – both im- such as cyclones and fl oods. portant factors on the road to peace in the fragile area. Better prospects for people in crisis regions Promoting social The situation remains precarious in North - entrepreneurship in Asia ern Mali, where the people are still suf- Many developing and emerging market fering from the eff ects of the confl ict that countries in Asia have recently made vast broke out in 2012 – although safety has improvements to their economic situations. improved. The Malian people need better Nevertheless, over 50 % of people there Other notes Other Suffi cient and controlled irrigation of the fi elds will considerably improve yields for Malian farmers – and thus help to secure the food supply as well as peace in a crisis-stricken region.

KfW Annual Report 2015 We promote development | Development fi nance | 101 still have to live on less than USD 2.50 per primarily at disadvantaged areas of the since 2013, has a particular success story day. A lack of basic services, poor access population or create jobs for people pri- to tell. Using modern mobile telephone to education and unstable employment marily in the low-income bracket. The and Internet technology, small-scale farm- conditions are just some of the reasons project is building on the positive experi- ers even in remote areas can order high for this. ence of the Aavishkaar II fund, which quality seeds and aff ordable modern tools was set up in 2011 to promote social entre- via a free call back or a simple click of the This is where the Aavishkaar Frontier Fund preneurs in India – also with KfW’s help. mouse. The products are delivered quickly comes in. It was set up in 2015 to sup- and directly to the farmers, who thus avoid port social entrepreneurship in Asia and The projects promoted range from aff ord- the middleman and benefi t from better stocked with USD 10 million from the able basic medical care in rural areas, quality and clear price advantages. This BMZ via KfW. DEG contributed an addi- through intuitive learning aids for children serves to increase their productivity and tional USD 10 million. The fund invests from poor families, to international mar- signifi cantly improve their livelihood. in very young, innovative companies keting of sustainably produced clothing. which off er products and services aimed The company Ulink Bioenergy, promoted

Improved healthcare in Indonesia

KfW Development Bank is helping to further improve healthcare in Indonesia, on behalf of the Federal Government, through the use of forward- looking medical technology. For example, the Dr Wahidin Sudirohusodo Hospital on Sulawesi, the fourth-largest island of the Indonesian archi- pelago, was extended; new buildings were added, modern medical equipment acquired and labora- tories better outﬁ tted. The hospital’s management was also advised on how to administer the facility more eﬀ ectively and at lower cost. The hospital now provides much better medical services for the region’s around eight million residents. And poor people are also able to use it, because Indonesia has recently introduced a new social health insurance system.

Sulawesi is not the only region to benefi t from modern medical technology; more regional hospitals are to be built and existing ones updated in Aceh, which was badly aff ected by the tsunami of 2004. Rapid data transfer via Internet enables new treatment opportunities such as “telemedicine” there, too. This allows specialist physicians at other locations to be consulted via video during diffi cult medical procedures. They can also view operations and help to analyse blood samples and x-ray images. These innovative methods serve to improve the quality of healthcare considerably, particularly in remote areas.

102 | KfW Annual Report 2015 We promote development | Development ﬁ nance DEG – a reliable partner to German businesses abroad

KfW subsidiary DEG is a reliable partner to German companies making investments abroad. For instance, it supported the SME adhesive manufacturer Jowat SE in relocating its production to another site within Malaysia. The new plant of the company’s subsidiary Jowat Manufacturing Sdn. Bhd. was opened in April 2015. DEG provided a long-term loan of EUR 6.5 million for the new production facilities andthe acquisition of plant and machinery. Jowat has been active in Malaysia for more than a decade. Production capacities at the old site were no longer suﬃ cient given the increased demand in Asia. Founded in 1919 and based in Detmold, North Rhine-Westphalia, the company with more than 1,000 staﬀ produces and markets industrial adhesives.

The new plant is located in the Bandar Enstek industrial park near Kuala Lumpur’s international airport. Jowat constructed facilities to the latest technical standards on a site of 45,000 m2 over a period of around 14 months, using German engineering technology. Other notes Other

KfW Annual Report 2015 We promote development | Development fi nance | 103 DEG – development opportunities Award-winning commitment through technological progress to environmental issues As one of Europe’s largest providers of The Egyptian SEKEM initiative has been development fi nance, DEG has been sup- cultivating and processing organic raw porting private companies that invest in materials for use in teas, food products, developing and emerging market countries textiles and medicines for almost 40 years. for more than 50 years. The private sector It received the “Land for Life Award” from is a key player in creating jobs, income and the United Nations Convention to Combat prospects; the importance of its role as a Desertifi cation (UNCCD) in 2015 for its driver of development in 2015 was under- innovative approach to promoting sustain- scored at the International Conference on able land use and relentless commitment Financing for Development in Addis Ababa to fi ghting soil erosion. DEG has been and through the UN’s Sustainable Devel- fi nancing and advising SEKEM for more opment Goals. than 20 years. The initiative has created some 2,000 jobs since it was founded. Technological progress provides the key impetus to make developing countries Launching sustainability initiatives viable for the future. This includes reliable DEG supports deserving initiatives from and fast Internet access. This is why DEG various sectors as part of its sustainability together with Vantage Capital has invested commitment. For example, it has been in Ghanaian mobile telephony and Internet helping fi nancial institutions in Kenya and provider Surfl ine Communications Ltd. Sri Lanka to develop self-commitments Surfl ine is establishing an LTE network in to environmental and social soundness Ghana that is ten times faster than the principles since 2013. These principles mobile Internet currently used there via were approved by the majority of the most mobile and smart phones. important banks in both countries in the autumn of 2015. Promoting SMEs to create jobs Small and medium-sized enterprises (SMEs) Added value for enterprises are important drivers of economic growth in developing markets and job creation. It is precisely in devel- Private enterprises active in developing oping and emerging market countries that markets o en face particular challenges such companies o en lack access to the and therefore require a lot of advice. fi nancial services they require to develop That’s why DEG off ers its customers Busi- their innovative ability and growth poten- ness Support Services (BSS), with the aim tial. DEG not only provides direct fi nancing of increasing their growth and the devel- to SMEs, but also makes targeted invest- opmental eff ects of their work sustainably, ments, for example in banks that lend to through conceptual and fi nancial support. SME customers in developing countries. It provided a total of EUR 632 million for One example is DEG customer Afriland this purpose in 2015. SME fi nancing went First Bank (AFB) from Cameroon, which to countries such as Chile, Zambia and worked together with DEG to develop a Cambodia. business intelligence solution, or reporting tool, that enables evaluation of data on Helping more German companies business operations. The AFB used this to become active abroad further professionalise its reporting. DEG’s fi nancing and promotional programmes reached more than 110 German DEG also off ers energy and resource effi - businesses in 2015. It provided those ciency checks under BSS, for example, it companies with fi nancing in the amount co-fi nanced a resource effi ciency check for of EUR 138 million for their projects in a banana producer in Ecuador. Banana developing and emerging market coun- stalks on the plantation are now chopped tries, and a further EUR 26 million via into small pieces and turned into compost. promotional programmes. The regional Thanks to this innovative and simple focus of German business was Africa in measure the plantation requires less arti- 2015, with new commitments of around fi cial fertiliser and at the same time EUR 60 million. reduces costs.

104 | KfW Annual Report 2015 We promote development | Development fi nance Ohorongo Cement Ltd., a subsidiary of the German company Schwenk KG, is established as a producer and supplier of cement in Namibia. Sustainable entrepreneurial success for DEG customers confi rmed The renowned consultancy fi rm Steward Redqueen has analysed DEG’s projects in Brazil, Namibia and Vietnam. One of the studies shows how Ohorongo Cement Ltd., the fi rst cement producer in Namibia, established itself as a reliable producer and supplier of high-quality cement in just four years. To get to this position, the company has harnessed primarily local and national workers and resources, and in so doing, has boosted economic devel-

opment in Namibia. DEG has been advis- notes Other ing and ﬁ nancing Ohorongo since 2009.

KfW Annual Report 2015 We promote development | Development ﬁ nance | 105 Business area KfW Development Bank – for better future prospects worldwide

KfW promotes development pro- bank and a specialised development insti- grammes in Africa, Asia, Latin America tution. It promotes and supports pro- and South-eastern Europe on behalf grammes and projects on behalf of the of the Federal Government. It supports Federal Government – from the fi rst con- developing and emerging market coun- ceptual idea, through implementation, tries in improving living conditions to the subsequent assessment of results. and protecting the climate and envi- To this end, KfW also applies the experi- ronment. Business area KfW Develop- ence it has gained in its domestic promo- ment Bank also fi nanced numerous tional business. The projects are estab- projects in various sectors in 2015, lished in such a way that they motivate from protecting rainforests in Latin follow-up investments, providing an incen- America, through food aid for refu- tive for private sector participation and gees in crisis areas, to insurance funds thereby laying the groundwork for broad- to provide protection from the eff ects based transformation processes. of climate change. 2015 – a year of summits crucial to Business area KfW Development Bank development and climate fi nance has maintained its high level of new com- 2015 was a seminal year for KfW, with mitments. The second highest sum ever, the international community adopting key around EUR 6.7 billion (record year 2014: resolutions on development and climate EUR 7.4 billion), was provided on behalf fi nance, as well as development policy of the Federal Government in 2015 for objectives at three important confer- development projects around the world. A ences and the G7 summit under German signifi cant portion of new commitments presidency. (EUR 955 million) went to the crisis-ridden North Africa/Middle East region. The pro- The G7 heads of state and government portion of commitments to the poorest resolved key development policy initia- partner countries also increased, with 44 % tives in June, on issues including access of federal budget funds going to projects to climate risk insurance and the expan- in sub-Saharan Africa (2014: 39 %). sion of renewable energy, but also on se- Almost 60 % of new commitments pro- curing food provision, women’s economic moted projects and programmes relating empowerment, fair working conditions and to climate and environmental protection reinforcing healthcare systems. These (2014: 64 %). resolutions set a precedent for the three UN conferences held in 2015: Bank and development institution – The UN General Assembly adopted a KfW’s role in German Financial Cooperation KfW has supported the Federal Government post-2015 development agenda in New (FC) is that of both an experienced bank and for more than 50 years now in achieving York in September to follow the Millen- a specialised development institution. its goals in development policy and inter- nium Development Goals (MDGs) due to national cooperation. The Federal Govern- expire at the end of 2015. The 2030 ment’s strategic guidelines and policies Agenda for Sustainable Development thus serve as the basis for KfW Develop- combines economic and social development Bank’s scope of activities. ment targets with environmental sustainability targets for the fi rst time. The new KfW’s role in German Financial Coopera- Sustainable Development Goals (SDGs) tion (FC) is that of both an experienced apply equally to industrialised, emerging

106 | KfW Annual Report 2015 We promote development | Development fi nance market and developing countries and agreed to continue climate protection thus form the basis of a new global fi nancing, which is expected to amount development partnership. The need for to at least USD 100 billion p. a. from fi nancing for projects under the SDGs 2020, and benefi t climate-related pro- will increase massively, particularly for jects in developing countries. those relating to infrastructure and climate issues. Development fi nancing from federal KfW supports the Federal Government in budget and own funds meeting its international obligations in com- – The UN’s Financing for Development A signifi cant portion of the funds used bating poverty and protecting the climate Conference had already been held on stems from the Federal Government’s and environment. this matter in Addis Ababa in July 2015. budget. KfW also relies to a great extent The aim was to dra a fi nancing con- on own funds it has raised on the capital cept for implementation of the SDGs market. KfW’s own funds totalled around that would include both public and pri- EUR 4.3 billion in 2015 (2014: EUR 5.4 bil- vate resources at national and interna- lion) and thus a 64 % share of total new tional level. commitments of the business area KfW Development Bank (2014: 73 %). – The UN Climate Change Conference in Paris (COP21) saw a new international The lion’s share of own funds are counted agreement on climate dra ed in Novem- as German Offi cial Development Assistance ber/December 2015, obliging all coun- (ODA). In this way, KfW supports the Fed- tries to keep global warming well below eral Government in meeting its interna- 2 ⁰C through climate protection meas- tional obligations in combating poverty and ures. The industrialised nations also protecting the climate and environment.

The most important FC ﬁ nancing instruments

Grant/standard loan: ﬁ nancing provided exclusively from German Federal Government budget funds. Standard loans – highly subsidised loans with very long terms from federal budget funds – have to be repaid by the borrower; grants do not.

Development loan: combination of federal budget funds and funds that KfW raises on the capital market. Combining funds enables the loan terms and conditions to be adjusted to the economic strength of the borrower country and features of the project.

Promotional loan: loans to partners in developing countries fi nanced solely from KfW’s own funds raised on the capital market. The loans are used for projects that have a development impact, but for which fi nancing via the commercial banking sector is not off ered (for example, due to the longer fi nancing period necessary).

Delegated funds: a form of cooperation in which KfW makes and assumes responsibility for contributions on behalf of other bilateral and multilateral donors. These funds from notes Other other donors are o en pooled with money from German development cooperation to enable larger projects to be realised.

KfW Annual Report 2015 We promote development | Development fi nance | 107 A climate protection breakthrough plant in Upington and the Ingula pumped with KfW as international trailblazer storage scheme in Braamhoek. KfW’s new commitments for climate-related The resolutions of the COP21 set a clear projects in developing countries on behalf of precedent for climate protection and adap- Closer cooperation for forest the Federal Government amounted to some tation around the world. protection with “REDD for Early EUR 3.9 billion in 2015 – a major contribution Movers by KfW” to Germany’s international climate fi nancing. KfW had already shown itself to be a trail- Germany, Norway and the UK agreed at blazer in international climate fi nance prior the COP21 in Paris to further increase to the COP21. KfW’s new commitments their commitment to international forest for climate-related projects in developing conservation. They plan to raise their con- countries on behalf of the Federal Govern- tribution by USD 5 billion by 2020, there- ment amounted to some EUR 3.9 billion by supporting the REDD for Early Movers in 2015, constituting a major contribution (REM) programme implemented by KfW to Germany’s international climate fi nanc- on behalf of the Federal Government, ing. The carbon emission reductions it has which rewards countries pioneering in the achieved through its projects over the past area of Reducing Emissions from Defor- ten years now account for around 10 % estation and Forest Degradation (REDD). of all German greenhouse gas emissions. A few examples of KfW’s commitment to REDD gives fi nancial rewards for proven climate protection: emission reductions, i. e. for reducing deforestation. First KfW project for the While in Paris, KfW signed mandate agree- Green Climate Fund (“GCF”) ments with Norway and the UK, and fi nan- KfW will be implementing one of the fi rst Green KfW will be implementing one of the fi rst cing contracts with Colombia. This means Climate Fund (GCF) projects in Bangladesh. Green Climate Fund (GCF) projects in three donors are coming together for The climate adaptation project will help to Bangladesh. The climate adaptation pro- the fi rst time to implement results-based better protect some 85,000 coastal residents ject has a volume of USD 80 million, of fi nancing in a large tropical rainforest from storms and fl oods. which USD 40 million comprises a grant country via KfW to the tune of over from the GCF; around USD 15 million was USD 100 million. provided by KfW from BMZ budget funds and USD 25 million from the Bangladeshi “eco.business Fund” to promote government. It will help to better protect sustainable enterprises in some 85,000 coastal residents from storms Latin America and fl oods. In three of the country’s poor- On behalf of the BMZ and in collaboration est districts, 45 new cyclone protection with representatives of the EU, NGO shelters are being erected, 20 more re- Conservation International and fund man- habilitated and 80 kilometres of storm- ager Finance in Motion, KfW launched resistant access roads built. KfW was the “eco.business Fund” as part of COP21. accredited as one of the fi rst implement- The fund fi nances Latin American entering entities of the GCF at the beginning prises from the agriculture, fi sheries, of 2015. The fund’s volume is currently forestry and eco-tourism sectors which USD 10.2 billion. employ particularly environmentally friend ly business practices. This makes a Energy transition on the international material contribution to biodiversity con- stage: integrating renewable energy servation, adaptation to climate change into the South African grid and climate protection. The fund volume KfW has granted a promotional loan in the was almost USD 60 million at the end of amount of ZAR 3.94 billion (EUR 300 million) 2015. The EU plans to make a total con- to the South African state energy provider tribution of EUR 16 million. ESKOM. This is to be used to signifi cantly help modernise the South African power LDCs and fragile countries remain grid and, in particular, to connect solar and important partners wind energy plants to the grid. Among The least developed countries (LDCs) other things, the loan will be supporting with average gross national income per the connection of two power plant pro- capita of less than USD 992, according to jects to the grid which KfW has already the UN, are important partners to KfW, agreed to help fi nance – the Kiwano solar along with emerging market countries.

108 | KfW Annual Report 2015 We promote development | Development fi nance These countries receive fi nancial support tens and refugee accommodation. In from the Federal Government via KfW, addition, KfW is fi nancing the reinforce- above all in the form of grants and highly ment of the Ukrainian deposit guar- KfW partners also include the least developed concessionary loans. A signifi cant portion antee scheme with an untied loan of countries (LDCs), with a three-year average of budget funds – EUR 944 million or EUR 200 million on behalf of the Federal gross national income per capita of less than 44 % – was put to use in sub-Saharan Government. A further EUR 300 million USD 992. Africa in 2015. in untied loans is planned, in particular for the rehabilitation of the energy and 2015 was strongly marked by the refugee municipal infrastructure in the east of crisis, with some 60 million people seek- Ukraine, the region most aff ected by ing refuge from war, expulsion and natural the confl ict. disasters – the highest number seen since World War II. Towns in neighbouring coun- – Burundian and Congolese refugees re- tries are particularly aff ected by the mass- ceive aid in Tanzania from the UN’s es of refugees, as their infrastructures World Food Programme (WFP). KfW has are not suitable for such large numbers of supported the work of the WFP with additional people. KfW fi nanced 39 pro- EUR 14 million on behalf of the BMZ. jects providing direct support to refugees These funds enable the WFP to provide and the towns and villages taking them food rations for six months to more than in with a total of around EUR 645 million: 180,000 refugees in transit and refugee camps, including special enriched foods – The confl ict in eastern Ukraine drove for particularly vulnerable groups such at least 2.6 million people to fl ee their as pregnant women, breast-feeding homes, of whom 1.5 million found refuge mothers and children, thereby relieving elsewhere within the country. These or preventing malnutrition. domestic refugees put a lot of pressure on what is already an over-burdened – KfW fi nanced projects in Syria’s neigh- infrastructure in many places. For this bouring countries on behalf of the reason, KfW is supporting the Ukrainian BMZ to the tune of EUR 270 million in Social Investment Fund (USIF) with a 2015 via various UN organisations and total of around EUR 37 million on behalf government partners. These included of the BMZ and with its budget funds, distributing free e-cards for free gro- in its rehabilitation and extensions of cery shopping, and fi nancing container buildings such as hospitals, kindergar- schools and teachers, as well as pro-

Initiatives for climate protection

KfW implements a variety of climate protection initiatives on behalf of the German Federal Government, including the International Climate Initiative (“IKI”) for the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (“BMUB”), and the German Climate Technology Initiative (“DKTI”) for the BMZ and the BMUB. Agreements on development loans of a total of EUR 125 million were signed in India in 2015 as part of the DKTI, to establish “Green Energy Corridors”. These will ﬁ nance transmission lines, including the necessary infrastructure, to feed electricity from renewable energy sources into the public grid in the Indian states of Andhra Pradesh and Himachal Pradesh.

The model “EcoCasa” programme co-fi nanced by KfW on behalf of the Federal Government and the European Commission for energy-effi cient residential construction in Mexico won the revered Ashden Award for innovative climate fi nancing in 2015. This was the second international award for the project designed to build 37,000 eco houses and 600 passive houses for low-income households. Some 12,000 such houses had been completed by the

end of 2015. These use at least one ﬁ h less energy than traditional builds and have set notes Other standards for the industry. Other partners in Latin America are currently assessing whether they could feasibly transfer the programme to their countries.

KfW Annual Report 2015 We promote development | Development fi nance | 109 The German Federal Government invested moting the construction and labour- Debt conversion, cancellation almost EUR 2.2 billion in development projects intensive rehabilitation of power and and restructuring worldwide via KfW in 2015. The BMZ is the water lines, sports facilities and public KfW is mandated to support the respon- primary ministry on whose behalf these pro- roads. This supports both Syrian sible federal ministries in the Paris Club jects are promoted. KfW also operates on refugees and the communities taking and the bilateral implementation of debt behalf of other federal ministries and the EU. them in. restructuring, cancellation and conversion. Debts were cancelled on the basis of ex- On behalf of the BMZ, KfW also supports isting debt conversion agreements with countries plagued by natural disasters. partner countries Egypt, Bosnia and Indo- For instance, it supported the reconstruc- nesia in 2015. These countries had used tion of destroyed infrastructure following their own funds in their local currencies for the devastating earthquake in Nepal with additional development policy measures, special grants of EUR 25 million commit- as agreed, and therefore had debt can- ted for this very purpose. celled by the German Federal Government in the total amount of EUR 37 million. Tailor-made fi nancing KfW adapts its fi nancing instruments to On behalf of the The partner countries benefi t from KfW’s varied conditions, off ering its partners Federal Government … favourable funding opportunities (due to its tailor-made solutions. Only in this manner The German Federal Government invested AAA rating), in some cases interest rates can projects and programmes develop almost EUR 2.2 billion of its budget funds subsidised by federal budget funds and from the maximum impact. in development projects worldwide via KfW partial risk assumption by the Federal in 2015. The BMZ is the primary ministry Government. The type of fi nancing instrument used on whose behalf these projects are pro- depends on the amount of debt, economic moted. KfW also operates on behalf of strength, the country’s development status, other federal ministries, such as the Fed- project partner effi ciency and also the eral Foreign Offi ce, the Federal Ministry type of project. The fi nancing instruments for Economic Aff airs and Energy (“BMWi”), comprise pure grants, loans from budget the Federal Ministry for the Environment, funds, KfW-funded loans with interest Nature Conservation, Building and Nuclear subsidised through federal grants (devel- Safety (“BMUB”) and the Federal Ministry opment loans), KfW-funded loans with of Education and Research (“BMBF”). terms close to the going market rate (promotional loans) and equity investments. ... and Europe A er the ministries of the German Federal Grants from federal budget funds are Government, the EU is the most important primarily awarded to poor and weakly de- public partner and client of KfW Develop- veloped countries. These funds are not ment Bank. The focus remains on cooper- repaid. However, development policy crite- ation in connection with EU blending, ria must be met, which include ownership which is a combination of EU grants and and commitment from the partner coun- loans from development banks aimed at try. Further developed countries may also enabling larger investment projects and receive grants for projects that contribute more effi cient use of public EU develop- directly to combating poverty or preserv- ment funds. Blending enables provision of ing global public goods such as tropical long-term low-interest fi nancing for im- rain forests. portant infrastructure projects in developing and emerging market countries. EU However, more economically advanced development policy continues to be char- countries usually receive loans – particular- acterised by a strong focus on EU-neigh- ly development and promotional loans – bour regions, LDCs and mobilising private that are closer to capital market terms. equity. The issue of refugees also gained The partner countries in these cases ben- immense importance in 2015. efi t from KfW’s favourable funding opportunities (due to its AAA rating), in some Reliable development partnership cases interest rates subsidised by federal Responsibility for the programmes fi - budget funds and from partial risk as- nanced by KfW always lies with an insti- sumption by the Federal Government. tution in a partner country – these are usually ministries, authorities or other

110 | KfW Annual Report 2015 We promote development | Development fi nance governmental agencies. However, KfW particularly in renewable energy. The also works with NGOs, private foundations energy projects to which EUR 1.8 billion and UN organisations. The joint pro jects was committed in 2015 gave at least proposed by partner countries in negotia- 2.5 million more people fi rst-time access tions with the Federal Government must to modern energy supply. This is an im- meet the development policy criteria of portant contribution towards the Federal the Federal Government and of the partner Government’s target of ensuring that a country. KfW evaluates projects on behalf total of 100 million more people have of the Federal Government to determine access to renewable energy by 2030. whether they have developmental bene- Promoting the fi nancial sector, which fi ts. If all criteria are met, KfW experts of- has traditionally been a high priority for fer project partners their know-how and KfW, is a further focal point. New com- years of development experience for the mitments of EUR 1.1 billion to banks, duration of the project. They ensure that funds and microfi nance institutions have A total of around 3.4 million people, mainly both tenders and awards comply with in- enabled some two million loans with a children and young people, are benefi ting from ternationally recognised regulations. If, total volume of EUR 7 billion to be the EUR 352 million committed to education despite careful planning and preparation, granted primarily to small enterprises. projects last year. diffi culties arise during the course of the project, KfW seeks solutions together with – Around EUR 1.6 billion was committed its partners. Continuous dialogue is im- for social infrastructure projects in 2015. portant, particularly in diffi cult times. It On behalf of the Federal Government, enables knowledge transfer and also sup- KfW is helping partner countries to build ports the project partner in establishing schools and healthcare facilities, for additional capacities and skills. example. A total of around 3.4 million people, mainly children and young people, Representative offi ces in 66 countries are benefi ting from the EUR 352 million KfW Development Bank has offi ces in committed to education projects last 66 countries, in addition to the Frankfurt, year. EUR 150 million was committed Berlin and Brussels locations. By having alone to education projects improving continuous local representation, KfW is the situation for refugees in and around better positioned to structure cooperation Syria in 2015. The healthcare projects with its partners and other donors, and promoted in 2015 (EUR 309 million in to closely monitor the promoted projects. total) will reach some 122 million people KfW opened new representative offi ces in the areas of reproductive health and in Togo (Lomé), Moldova (Chişinău) and healthcare infrastructure. Around 35 % Vietnam (Ho Chi Minh City) in 2015. of the commitments for 2015 were aimed at direct improvement of the The water, sanitation and waste management Focal areas of promotion health of mothers and children. The sector is also a high priority. The new projects and the eff ects water, sanitation and waste manage- receiving promotional funds in 2015 in the – KfW is one of the world’s largest fi nance ment sector is also given high priority. amount of EUR 675 million will improve living providers in the area of climate and en- KfW committed a volume of EUR 675 mil- conditions for 10.8 million people. vironmental protection. EUR 3.9 billion lion to new projects alone in this area (almost 60 % of all new commitments by last year in order to improve the living business area KfW Development Bank) conditions of 10.8 million people. went to projects relating to the climate or environment. Of these funds, 63 % – In the peace and security area, commit- served to reduce greenhouse gas emis- ments totalling more than EUR 645 million sions, and 29 % was for adaptation to were made in 2015, fi nancing 39 pro- The projects fi nanced via KfW are proposed climate change. jects off ering direct support to refugees by partner countries in negotiations with the Greenhouse gas emissions in partner and partner country towns and villages Federal Government and must meet the countries are expected to be reduced by that take them in. development policy criteria of the Federal

a total of 11.6 million tonnes of CO2 Government and of the partner country. through the projects funded in 2015. – Overall, the commitments made in

2015 represent a contribution to the notes Other – KfW used a large portion of promotional creation and safeguarding of nearly funds (around EUR 3.5 billion) to ﬁ nance 1.7 million permanent jobs. economic infrastructure last year,

KfW Annual Report 2015 We promote development | Development fi nance | 111 Results assessment ... … and transparency KfW projects are not forgotten a er they Transparency and accountability to KfW’s have been concluded, thanks to KfW’s in- partner countries and worldwide cooper- dependent evaluation department headed ation partners as well as the German by Eva Terberger, Professor at the Uni- public are essential for eff ective interna- versity of Mannheim. A number of years tional collaboration. KfW’s transparency a er completion of the project phase the portal on development fi nance therefore department determines whether the includes detailed information on projects agreed goals were met for the long term, in developing and emerging market coun- and assesses the results. KfW publishes tries, in particular on the source and use all results of this assessment in order to of funds, broken down by region and sector. learn from them itself, and to share the The latest business fi gures for 2015 are experience with other development policy provided here: www.kfw.de/transparency. institutions. The success rate is high: around 80 % of projects fi nanced by KfW are rated as successful.

112 | KfW Annual Report 2015 We promote development | Development ﬁ nance DEG – creating added value for development

DEG – Deutsche Investitions- und Sound knowledge of the economic, social, Entwicklungsgesellscha mbH funds ecological and political conditions in the entrepreneurial initiatives in devel- investment countries, proximity to cus- oping and emerging market countries tomers and permanent local presence are to create sustainable growth and bet- essential to eff ectively fulfi lling the pro- ter living conditions for their people. motional mandate. To ensure this, DEG To this end, it provides private com- maintains 13 local offi ces in Africa, Asia, panies with long-term fi nancings and Latin America and Eastern Europe. It also advises them in planning and imple- shares use of KfW’s more than 70 foreign menting their investment projects. representative offi ces.

Employment and income are essential DEG endeavours to be as transparent as prerequisites for overcoming poverty and possible about its working methods, and providing people with prospects for the uses various types of communication for future. Entrepreneurial initiative is the most this purpose. For example, it has been pub- important driver in achieving this aim, as lishing information on new commitments most jobs are created in the private sector. on its website since the beginning of For this reason, DEG fi nances economi- 2015. And DEG set up a joint complaint cally and developmentally sustainable in- mechanism with Dutch development fi - vestment projects by private companies, nance provider FMO back in 2014, which through loans and guarantees as well as allows individuals and organisations who equity investments and quasi-equity loans. consider themselves compromised by co- It directs its off ering particularly at small fi nanced projects to submit a complaint. and medium-sized enterprises (SMEs). These are then assessed and processed by an independent panel of international As a promotional institution with a devel- experts. Information is also provided opment policy mandate, DEG operates on about this on DEG’s website. the principle of subsidiarity. It provides funding to companies where it is not of- Client-focused DEG fered by the market or not to a suffi cient DEG continuously develops its product The “Client-focused DEG” initiative was degree. As a pioneer investor, DEG con- range, structures and processes, in order implemented successfully in 2015. sciously enters future markets at an early to identify and exploit potential for im- stage, promoting expansion of the private provement. It launched the “Client-focused sector even under diffi cult circumstances – DEG” initiative in 2014 as part of its an- as a driver of development. nual strategy review.

There was also demand for DEG’s advice Further development of the organisational to and professionalisation of companies structure and HR management, and nec- in areas such as corporate governance, essary adjustments to processes, organi- environmental and social management sational rules and IT systems were key and resource eﬃ ciency. areas of activity under the initiative in 2015. Measures included an updated DEG thinks and acts in an entrepreneurial management model. manner. This includes generating risk- appropriate returns to increase equity.

These returns constitute a material basis notes Other for DEG promotion and its expansion.

KfW Annual Report 2015 We promote development | Development fi nance | 113 Focus on promotional quality promotional programmes. The regional Financing committed by DEG in 2015 Growth in developing and emerging market focus of German business was Africa, enabled corporate investments in the countries was lower year-on-year in 2015, with new commitments of around amount of EUR 5.7 billion. at around 4 %. Investment capital for busi- EUR 60 million. nesses frequently remained unavailable again in these countries. This provided Finance was provided to 33 countries scope for DEG to fulfi l its development last year. Broken down by continent, the mandate, off ering larger fi nancing volumes largest portion went to Asia once again in cooperation with other European and (EUR 374 million). At EUR 310 million, com- international development fi nanciers. mitments to Latin America were up by some 14 % on 2014. Of the EUR 284 million DEG agreed new fi nancing in the amount committed to Africa, EUR 235 million of EUR 1.1 billion in 2015 for 75 investment went to the sub-Saharan region. projects, with the focus on high promotional quality. This all happened against KfW committed funding of EUR 75 million the backdrop of diffi cult developments in in total to Europe and the Caucasus. The some key target markets and measures year-on-year decline here was primarily to increase risk-bearing capacity given due to the eff ects of the Ukraine confl ict. that portfolio growth has been boosted EUR 21 million was granted to suprare- by the appreciation of the US dollar. gional projects. SMEs with their particular relevance for development were one focal point, ac- Broken down by industry, the fi nancial sec- counting for 60 % of new commitments, tor received the largest share of commit- and Africa and other future markets ments again in 2015, at EUR 413 million. another, with 53 %. In providing fi nancial means for banks, funds and specialist fi nanciers, DEG is The fi nancing committed in 2015 enabled pursuing the aim of improving local fi nanc- entrepreneurial investments with a total ing opportunities for small and medium- volume of EUR 5.7 billion. DEG’s portfolio sized enterprises above all. rose to around EUR 8 billion distributed among 738 commitments in 81 partner Investments in the manufacturing industry countries. were boosted with around 7 % more commitments from DEG in 2015 (EUR 294 million). Demand for DEG services from SMEs EUR 255 million was provided for infra- DEG supported over 110 German busi- EUR 632 million was committed to SMEs structure projects, with the vast majority nesses through fi nancing and promotional in 2015. EUR 566 million was earmarked going to investments in renewable energy. programmes in 2015. for Africa and other future markets, of The commitment volume for the agricultural which EUR 284 million went to sub-Saharan and food industry totalled EUR 78 million, Africa. for the service sector EUR 25 million.

New commitments for risk capital fi nanc- Promotional programmes ing – equity investments and quasi-equity and consulting loans – amounted to a total of EUR 379 mil- DEG off ers German and European enterpris- lion in 2015. es a variety of promotional programmes for measures with developmental benefi ts. EUR 327 million of new commitments in These combine public fi nancings and com- 2015 was earmarked for projects that pany funds. A total of some EUR 30 million promote climate and environmental pro- from public funds was available in 2015. tection as well as adaptation to climate New commitments were made to 170 change. projects.

DEG’s fi nancing and promotional pro- DEG’s accompanying measures to the grammes reached more than 110 German Business Support Services (BSS) advice businesses in 2015. It provided those programme were further developed in companies with fi nancing in the amount 2015. The programme off ers tailor-made of EUR 138 million for their projects in solutions to DEG customers, for example developing and emerging market coun- to improve a company’s fi nancial viability tries, and a further EUR 26 million via and performance, reduce risk and increase

114 | KfW Annual Report 2015 We promote development | Development fi nance developmental eff ectiveness. The BSS DEG also conducts its own operations in an advisory services are an integral part of environmentally responsible manner. It DEG’s product range. Commitments were focuses in particular on the effi cient use of Business Support Services (BSS) is a compre- made to 73 accompanying measures resources. All carbon emissions resulting hensive advice programme for ompanies. in 2015. from building operations and business trips are neutralised through the purchase The second phase of the programme to and retirement of emission certifi cates, secure the income of African cotton far- in line with KfW’s climate neutral status. mers, the Competitive African Cotton Initiative Phase II (COMPACI II), has been Development quality reaffi rmed underway since 2013. DEG and Deutsche DEG regularly rates the development Gesellscha für Internationale Zusam- quality and eff ectiveness of its projects menarbeit (“GIZ”) were mandated by the with its corporate policy project rating Bill & Melinda Gates Foundation and the tool (“GPR”). An average rating of 2.1 re- Federal Ministry for Economic Cooperation sulted from the assessment of 2015 new and Development (“BMZ”) to implement business, maintaining the high develop- it. The initiative is expected to benefi t ment quality of the previous year. around 650,000 small-scale farmers in twelve African countries. The evaluation of the DEG portfolio performed every two years shows, among The promotional programme Coff ee Part- other things, that businesses co-fi nanced nership for Tanzania (CPT) is also being im- by DEG employ almost a million people. plemented on behalf of the Bill & Melinda Tax payments of an annual EUR 1.5 billion Gates Foundation. It is aimed at 90,000 mean they also contribute to public reve- coff ee farmers. German companies are nues. In addition, they help to improve the materially involved in executing both pro- energy supply by producing an annual grammes. eight terawatt hours (TWh) of power from The development quality of new renewable sources for around nine million commitments remained high in 2015. Binding international environmental people. and social standards DEG’s commitments must be both envi- In addition, around half of the companies ronmentally and socially sound. Certain co-fi nanced by DEG also assume compre- business activities do not qualify for DEG hensive corporate social responsibility. fi nancing from the outset; they are de- They pay above-average wages, off er fi ned in a published exclusion list. pension and health insurance benefi ts, and operate healthcare facilities, kinder- All companies receiving support from DEG gartens and schools. in 2015 were obliged to contractually comply not only with national require- Networks increase customer benefi t ments but also with international envi- DEG values international networks. DEG ronmental and social standards. also cooperates closely with the members of the European Development Finance These include the environmental, social and Institutions (EDFI), an association of devel- human rights Performance Standards of the opment fi nance providers for the private International Finance Corporation (IFC-PS) sector, which it helped to set up. This co- as revised in 2012 in collaboration with operation enables DEG to increase its pres- DEG, and the core labour standards of the ence on the markets, off er its custom ers International Labour Organization (ILO). more fi nancing and share risks. By agreeing environmental and social action plans, DEG was once again able to DEG and twelve other EDFI members have help improve the situation for co-fi nanced been promoting private investments in the companies in projects with potentially African, Caribbean and Pacifi c Group of higher environmental and social risks in States (ACP) along with European Financing

2015. DEG supports the businesses closely Partners (EFP) – the European Investment notes Other for the duration of the project, and en- Bank’s (EIB) co-ﬁ nancing instrument – since sures that action plans are implemented. 2003. Eleven EDFI members, the EIB and Solutions to any issues are worked out Agence Française de Développement (AFD) together. are partners in the Interact Climate Change

KfW Annual Report 2015 We promote development | Development fi nance | 115 Facility (ICCF) to fi nance private-sector Accordingly, DEG is focussing on intensive projects with a positive impact on the market observation and close customer climate. Two projects were fi nanced through support. DEG assumes reduced investment EFP funds in 2015, and fi ve through ICCF activity in the private sector of advanced funds. The two facilities have promoted emerging markets (“BRICS”) in future, private investments in the total amount which may lead to lesser demand for DEG of around EUR 1.5 billion to date. services. DEG off ers primarily equity and mezzanine products in these countries, Moreover, the EDFI partners and the Euro- along with advisory services. pean Commission together founded the Electrifi cation Financing Initiative (ElectriFI) DEG will continue to target emerging in 2015, which supports investments in and frontier market countries capable of rural electrifi cation. tapping international capital markets (Beyond BRICS), as many businesses in DEG also regularly cooperates with other these countries are expanding both re- EDFI partners, multilateral development gionally and sectorally. DEG can off er its banks, in particular the IFC and the EBRD entire fi nance and advice range and gen- (European Bank for Reconstruction and erate major development eff ects in rela- Development), as well as regional fi nanc- tion to employment and infrastructure, ing institutions. for example.

Another good result in 2015 DEG is assuming a key function as pioneer DEG generated a healthy result in fi nancial investor that mobilises additional capital year 2015 under what were at times chal- in Africa and other future markets. It is lenging conditions. Profi t for the year a er therefore in demand there, particularly as increased risk provisioning and before an advisor on introducing international taxes amounted to EUR 101 million. Net standards. retained earnings for 2015 were around EUR 87 million. The predicted development underscores DEG’s complex business environment. It Approach tailored for diff erent plans to further expand its promotional markets and customers business in 2016, particularly in terms of At a global growth rate of an estimated quality. 2.9 %, slightly stronger global economic performance is expected in 2016. This is Long-term achievement of its development partly due to the positive development policy mandate and future-oriented, risk- anticipated in the industrialised countries, adequate portfolio management will remain and partly to the fact that output in key key management factors for DEG in the emerging markets is not expected to future. decline as strongly, and in regions such as Africa is likely to show considerable growth. Overall, therefore, the mixed economic growth around the world of the past few years is set to continue.

116 | KfW Annual Report 2015 We promote development | Development ﬁ nance strategy, we focus oncontinuity, an establishedcapitalmarket with manyyears of experienceand markets. Asapromotionalbank via theglobalmoneyandcapital liquidity oftheentireKfWGroup of ourpromotionalbusinessandthe We ensurethelong-termfunding ˚ important role. Sustain ability playsanincreasingly profession alism anddiversification. Cptl markets Capital

Other notes Professional player in international capital markets

KfW Group bundles its long and short-term funding activ- The business sector Capital markets is active in the growing ities and its liquidity, currency, interest rate and asset market for green bonds, where the proceeds are used to fund management for the entire group in the business sector environmentally benefi cial activities, on both the funding and Capital markets. KfW funds its business activities almost lending side of the bank. “Green Bonds – Made by KfW” off er fully on the international money and capital markets; and KfW’s investors all over the world KfW bonds that are directly is one of the world’s most active and largest bond issuers. connected with its promotional work in climate and environ- The business sector contributes to KfW’s promotional mental protection. As an investor, KfW promotes other green business through investment in commercial securitisation bond issuers’ projects and measures with the green bond port- transactions for capital market-oriented promotion of folio it created in 2015. SMEs and through fi nancing climate and environmental protection projects via the purchase of green bonds. 2015 capital market developments In addition, the sector is responsible for holding arrange- 2015 was a year of major international political and economic ments in the privatisation of Deutsche Telekom and challenges, resulting in extraordinary market developments. Deutsche Post. The European Central Bank (ECB) interest-rate policy and KfW Group’s Capital markets business sector expectations regarding the future course of US Federal Reserve KfW raises resources on the capital markets in the high double policy aff ected capital markets and generated high volatility. digit billion euro range every year to fund its promotional The ECB’s bond-buying programme announced in January 2015 business. It raises billions more via the money markets, i. e. infl uenced yields on outstanding German government and KfW with maturities of less than one year, which serve to ensure bonds. This created uncertainty among investors and market KfW Group’s liquidity. The annual share of KfW Group’s funding participants, which was further exacerbated by other political from the money and capital markets is around 99 %. and economic events such as negotiations on additional bailout measures for Greece, concern about global growth and turmoil In addition to raising funds, the Capital markets business sector on China’s stock markets. is responsible for managing interest rate and currency risks, which are largely hedged through the use of derivatives. KfW is With its broad off ering of bond products, KfW also successfully exposed to very few currency risks in its business, interest rate concluded long-term funding and met investors’ demand in various risks are tolerated to a limited extent, and monitored and man- currencies despite the volatile market and low-interest rate aged at all times. Funds raised that are not initially needed for environment. KfW’s promotional business are temporarily invested for liquidity management purposes.

KfW invests in securities ﬁ rstly to ensure liquidity, and secondly, because the purchase of high quality securitisations of SMEs is part of the promotional business via capital market-based products.

The path of money – from money and capital markets to the ultimate borrower

Investment

Capital markets

Money and Funding Lending businessLending Financing partner Ultimate borrower capital markets

118 | KfW Annual Report 2015 Capital markets Excellent capital market reputation

KfW is a valued business partner on the capital market. Top-notch sustainability ratings for KfW KfW securities are in high demand among institutional The issue of sustainability is becoming increasingly important to investors. KfW’s reputation is based on its responsible investors and issuers alike. KfW pursues a holistic approach in behaviour and on the Federal Republic of Germany’s ex- the Capital markets business sector; as an investor, it manages plicit and direct guarantee, which is refl ected in high its liquidity portfolio with a sustainable approach, in addition, credit quality and forms the basis of an excellent fi nancial KfW bonds off er an attractive investment opportunity for sustain- rating. Excellent sustainability ratings result from KfW’s ability-oriented investors. This has been confi rmed by external, positioning as one of the leading sustainable promotional independent sustainability rating agencies for several years now. banks and highlight the credibility of its “Responsible KfW regularly achieves top ratings compared with international Banking” motto. competitors in the sector; the basis for the ratings are environmental, social and governance factors. First-class credit rating The Federal Republic of Germany has been explicitly liable for As of 31 December 2015, KfW was rated as follows by the inde- the bonds issued by KfW since 1998 in accordance with Article pendent sustainability rating agencies: 1 a of the KfW Law. KfW’s credit rating is thus primarily based on the creditworthiness of the Federal Republic of Germany and – oekom research: KfW received the “prime” rating among refl ects its rating awarded by rating agencies. KfW’s credit fi nancial institutions with the highest ratings; for sustainability, quality is rated by the international rating agencies Moody’s KfW earned a B– rating (on a scale of A+ to D–). Investors Service, Scope Ratings and Standard & Poor’s. KfW – Sustainalytics: KfW was given 83 out of a maximum of 100 solicited European rating agency Scope Ratings for a fi nancial possible points, thus ranking it fi h out of 422 banks worldwide. rating for the fi rst time in fi nancial year 2015. All the agencies – imug: KfW ranked second overall out of 122 national and gave KfW their highest possible ratings with a stable outlook international issuers of bank bonds. as of 31 December 2015. Award-winning capital market presence KfW’s ratings KfW received many awards from the international specialist press in fi nancial year 2015; for example it was declared the World’s As of Moody’s Scope Standard & Safest Bank for the seventh time in a row by Global Finance 31 Dec. 2015 Investors Ratings Poor’s Service magazine and given the title of Best Green Bond Issuer and Best Debt Investor Relations by the information portal cmd. Short-term rating P-1 S-1+ A-1+ Long-term rating Aaa AAA AAA Outlook Stable Stable Stable

Fitch Ratings also gave KfW its best ratings as of 31 Decem- ber 2015 (AAA, F1+, outlook stable), since 1 January 2016 ratings have been on an unsolicited basis.

KfW Annual Report 2015 Capital markets | 119 KfW bonds offer top credit quality and product diversity

KfW regularly issues bonds to fund its promotional busi- The fi rst pillar comprises high-volume, highly liquid benchmark ness in Germany and abroad. Few other promotional banks bonds denominated in euros and US dollars, which are off ered in the world use the global capital markets as intensively worldwide in the global format. It is traditionally KfW’s most as KfW. KfW’s fl exible and proven funding approach en- important funding pillar in terms of volume. The share of the ables it to secure funding at any time and to achieve the 2015 funding volume that benchmark programmes comprised most favourable possible funding conditions to meet its was higher than the previous year at 62 % (2014: 57 %). Ten promotional mandate. KfW has access to various instru- benchmark bonds were off ered in total. Investors were able to ments and currencies for this objective, which are used subscribe throughout the year for euro-denominated benchmark fl exibly in line with market conditions and investor demand. bonds in all major maturities, from ten years at the beginning of the year, through seven and fi ve-year terms to a short-term KfW raised a total volume of EUR 62.6 billion in 14 diff erent bond with a three-year maturity. Investors were in fact off ered currencies and 175 individual transactions in fi nancial year 2015. six KfW benchmark bonds with durations of three, fi ve and ten This result means funding is slightly above the planned range years for US-dollar-denominated securities. of EUR 55 billion to EUR 60 billion, due to strong demand for KfW promotional loans and, as a result, a great need for funding. The choice of suitable issue dates and a systematic focus on KfW expects to see a funding volume of between EUR 70 billion market demand were key contributing factors in the successful and EUR 75 billion in 2016. The tried-and-tested capital market placement and stable secondary market development of the strategy is to be continued so that KfW can respond fl exibly and bonds issued. In the low interest rate environment, coupons from as eff ectively as possible to potential challenges as a result of the euro benchmark bonds in particular were even lower than the market environment, as it did in 2015. in the previous year. Particularly noteworthy is the issue of a benchmark bond in October 2015, which for the fi rst time had a Good capital market access through benchmark bonds negative yield at issue. denominated in euros and US dollars KfW’s funding strategy is based on a three-pillar model comprising benchmark bonds, public transactions and private placements. EUR Benchmark Programme 2015 This positioning means a wide variety of investor groups can be targeted. EUR in Maturity Interest rate billions in % p. a.

KfW EUR Benchmark I/2015 3.0 10 years 0.625 KfW bonds issued KfW EUR Benchmark II/2015 3.5 7 years 0.625 in 2015, total: EUR 62.6 billion KfW EUR Benchmark III/2015 5.0 5 years 0.125 KfW EUR Benchmark IV/2015 5.0 3 years 0.000 4 % EUR 1 % USD 4 % Other 2 % Other USD Programme 2015 2 % JPY 4 % AUD 26 % EUR EUR in Maturity Interest rate 6 % GBP billions in % p. a.

7 % USD KfW USD Benchmark I/2015 3.0 3 years 1.000 KfW USD Benchmark II/2015 5.0 5 years 1.500 7 % EUR KfW USD Benchmark III/2015 3.0 10 years 2.000 36 % USD KfW USD Benchmark IV/2015 4.0 5 years 1.875 KfW USD Benchmark V/2015 6.0 3 years 1.125 Benchmark bonds Public bonds Private placements KfW USD Benchmark VI/2015 4.0 3 years 1.125

Diﬀ erences in the totals are due to rounding.

120 | KfW Annual Report 2015 Capital markets Institutional investors from Europe and in particular Germany requirements. At 63 % in 2015, the share of the total volume of dominated in euro benchmark bond investments, while the bulk funding in foreign currencies was signifi cantly higher year-on- of investors in USD benchmark bonds came from Asia, America year (2014: 55 %). In total, bonds were issued in 14 diff erent and Europe. Around half of KfW benchmark bonds in US dollars currencies (2014: 13). The euro and the US dollar remained were subscribed by central banks; for benchmark bonds in euros, overall the two most important currencies in the funding mix, banks were the largest investor group, with around 50 % of although for the fi rst time, bonds denominated in US dollars the securities subscribed. comprised a greater share of total funding (45 %) than those denominated in euros (37 %). Particularly in the fi rst half of The second pillar of KfW’s funding strategy comprises all public 2015, KfW’s funding strategy enabled it to respond fl exibly to transactions outside the benchmark programmes. These include demand from institutional investors for KfW bonds in the lower-volume bonds in the core currencies euro and US dollar, US dollar market, where it could off er a higher yield than in but also securities issues in other important currencies such as the euro market. Nevertheless, KfW also succeeded in issuing the pound sterling, the Australian dollar and the Canadian dollar. liquid bonds in its domestic currency by acting on the interest At 31 % in 2015, the share of these public KfW bonds in the of international investors at the right time. In addition to the total funding volume was below the fi gure for the previous year two main currencies, euros and US dollars, bonds were primarily (2014: 39 %); 97 securities were issued in total. in demand in Australian dollars, mainly in what is known as the “kangaroo market”, and in pounds sterling and Japanese yen. The third pillar of KfW’s funding comprises privately placed KfW has been a regular, established issuer with a solid market KfW securities. These are tailored to the individual requirements position in these markets for many years. These three currencies of institutional investors in terms of currency, structure and together constituted around 13 % of the funding and are tradi- maturity. KfW was active with these products in many markets tionally an important source of funding for the promotional bank. in 67 individual transactions in 2015. In total, the share of The off ering also included other currencies such as Turkish lira, private placements in the overall funding volume rose from 4 % Brazilian real and New Zealand dollars. Other currencies together in 2014 to 7 %. amounted to 5 % of the total funding volume.

Major signifi cance of the variety of currencies in KfW’s funding strategy KfW can currently issue bonds in 25 diff erent currencies and thus provides a well-diversifi ed off ering for diff erent investor

Funding in 2015/2014 by currency

2015 2014 EUR in % EUR in % billions billions

USD 28.0 45 21.7 38 EUR 23.4 37 25.8 45 GBP 4.6 7 3.0 5 AUD 2.5 4 3.1 5 JPY 1.2 2 1.5 3 Other currencies 3.0 5 2.4 4 American currencies (BRL, CAD) 1.3 2 1.2 2 Oceanic currencies (NZD) 0.8 1 0.5 < 1 European currencies (SEK, NOK, TRY) 0.5 < 1 0.5 < 1 Asian currencies (CNY, INR) 0.4 < 1 0.1 < 1 African currencies (ZAR) 0.01 < 1 0.1 < 1 Total 62.6 100 57.4 100

Diﬀ erences in the totals are due to rounding.

KfW Annual Report 2015 Capital markets | 121 Green bond range expanded and first “Kauri bond”

A er KfW successfully placed “Green Bonds – made by KfW will also support the market segment in 2016 and, depend- KfW” in both euros and US dollars on the capital market ing on the market situation and investor demand, will issue green for the fi rst time in 2014, each with a record volume, the bonds in new currencies and with additional maturities. In addi- product range was expanded in fi nancial year 2015 through tion, KfW plans to introduce the following innovation to the the introduction of new currencies. KfW also expanded its green bond market: when selecting commercial banks in the product range with its fi rst bonds in the New Zealand Kauri mandating process for green bond issues, the sustainability market, and is tapping another investor group. rating of the banks will be considered. This should create an incentive for market participants to also be mindful of position- “Green Bonds – made by KfW” contribute to climate ing themselves sustainably. and environmental protection Sustainability is a key component of KfW’s self-image. As a Green Bond issues in 2015 bank committed to responsibility, it is already one of the world’s largest fi nanciers of climate protection. KfW’s Green Bonds Volume Maturity Interest rate in % p. a. directly link its promotional business to capital market funding. KfW AUD Green Bond AUD 0.6 billion 5 years 2.400 “Green Bonds – made by KfW” enable bond buyers to link their KfW EUR Green Bond EUR 1.5 billion 5 years 0.125 investments to a measurable climate protection eff ect thanks KfW GBP Green Bond GBP 0.5 billion 5 years 1.625 to the direct link of funds raised with KfW’s “Renewable Energy – KfW SEK Green Bond SEK 1.0 billion 5 years 0.586 Standard” programme. A EUR 1 million investment in Green KfW USD Green Bond USD 1.0 billion 5 years 1.875 Bonds (made by KfW) is estimated to be able to save around

800 tonnes of CO2 equivalent per year. Due to the high standards of transparency and impact measurement, KfW’s Green “Kauri bonds” expand investor base for KfW Bonds are in high demand from both long-term and traditionally KfW was present on the local market in New Zealand for the oriented investors. fi rst time in fi nancial year 2015 through the issue of its fi rst “Kauri bond”. The bond has a maturity of fi ve years and investors KfW issued green bonds with a value of EUR 3.7 billion last subscribed a volume of NZD 650 million. “Kauri bonds” are bonds year. In addition to euros and US dollars, new currencies – the issued by foreign issuers on the New Zealand market. Like kan- Australian dollar and the pound sterling – were introduced for garoo bonds in Australia, the name is simply for marketing pur- publicly placed green bonds, which gave new impetus to the poses, intended to be characteristic of the country in question. market. A private placement was also placed in Swedish kronor. “Kauri” is derived from the kauri tree, which is native to New Zealand. Incidentally, the Bank of New Zealand, which was in- KfW’s regular green bond reporting includes the use of funds in volved in the issue of the KfW bond, plants 100 kauri trees for the KfW “Renewable Energy” programme and provides informa- every “Kauri bond” issued through it. The KfW “Kauri bond” thus tion on the volume and use of the of the funds drawn and the contributes to the preservation of the kauri forests in New Zea- regions where they were used. KfW was able to refi nance pro- land. As a result of the local format selected, it was possible to ceeds in the amount of 88 % of funds drawn from the “Renewable specifi cally address New Zealand investors. KfW aims to issue Energy – Standard” programme by issuing green bonds in 2015. more “Kauri bonds” in future and in so doing gradually expand The current report is available on KfW’s website via the following the range to include diff erent maturities. link: https://www.kfw.de/KfW-Group/Investor-Relations/KfW- Green-Bonds/KfW-Green-Bonds-Reporting.

122 | KfW Annual Report 2015 Capital markets Ensuring liquidity

KfW holds fi nancial assets for group-wide management of Short-term funding – commercial paper liquidity through a liquidity portfolio, for which it invests for liquidity management in fi xed income securities. When selecting investments for KfW’s business activities developed very encouragingly in the the liquidity portfolio, KfW considers the issuers’ sustain- money market segment again in 2015. The demand for safe ability assessment based on environmental, social and and short-term investments in KfW commercial paper (CP) governance (ESG) criteria in addition to their credit rating. remained high and led to more intensive use of this funding Moreover, KfW is one of the world’s most active players instrument. in the money market, particularly through its commercial paper programmes, which serve short-term borrowing KfW uses its commercial paper issues, which are important and are important for liquidity management. components of KfW Group’s liquidity management, to raise short-term funds for a term of up to twelve months. Sustainability in the liquidity portfolio The liquidity portfolio serves the aim of keeping KfW in a position KfW provides commercial paper in all major currencies. This to act even when it has no access to the capital market. To this gives investors the opportunity to acquire short-term securities end, KfW invests exclusively in securities with good (i. e. invest- with German sovereign risk that are not denominated in euros. ment grade) credit quality. In addition, bond issuers’ compliance In the short-term market segment, KfW has held its ground with sustainability standards, measured on the basis of the ESG among the world’s largest commercial paper issuers for years criteria, is also taken into account in the investment decision. with its two commercial paper programmes, the Multicurrency Particularly sustainable issuers are favoured. The sustainability Commercial Paper Programme (ECP programme) and the US assessment is based on external sustainability ratings. KfW Commercial Paper Programme (USCP programme). KfW issued regularly communicates the results of its sustainability assess- a total of 1,211 securities in the two CP programmes together ment to the issuers to keep them up to date with the status in 2015 (2014: 1,311). and progress of their sustainability commitment. Furthermore, non-governmental issuers are subject to exclusion criteria The programme volume of the ECP programme designed for based on the World Bank Group debarment list. The liquidity investors around the world was increased from EUR 40 billion portfolio volume totalled EUR 24.4 billion at the end of 2015 to EUR 50 billion in May 2015. The programme is KfW’s most (2014: EUR 23.8 billion). important source of short-term funding. Commercial paper was issued under it in twelve diff erent currencies last year, of which KfW is an active member of the UN’s Principles for the most important were the US dollar, the British pound and Responsible Investment (PRI) initiative the Australian dollar. The issue volume in the ECP programme As one of the fi rst signatories to the United Nations “Principles was, as planned, considerably higher year-on-year in 2015. The for Responsible Investments” (PRI) and faced with issues such outstanding volume amounted to EUR 31.8 billion at the end as dwindling resources and climate change, KfW is committed of 2015 (year-end 2014: EUR 25.2 billion). to the further development of sustainable investment. In addition to managing its own liquidity portfolio as a responsible in- The USCP programme, with a programme volume of USD 10 bil- vestor, KfW has engaged in dialogue with issuers on the issue lion, is specially designed for the US market. KfW uses this of responsibility on the capital market for many years. In 2015, programme to cover a large portion of its need for short-term it received the Institutional Investor Germany Award for the funds in US dollars. The issue volume in this programme was “Best ESG Programme” for its liquidity portfolio’s sustainable also considerably higher than in the previous year. The out- investment approach. standing volume amounted to USD 8.1 billion at the end of 2015 (year-end 2014: USD 7.6 billion).

KfW Annual Report 2015 Capital markets | 123 Promotional business in the capital markets segment

KfW invests in green bonds on the capital market, thereby fi nancing measures for climate and environmental protection. By using qualitative minimum standards for the green securities to be purchased, maintaining dialogue with market participants and participating in initiatives to create standards for green bonds, it also helps to further develop the still young, but growing market segment. Furthermore, KfW promotes fi nancing of commercial enterprises via the capital market. In this capital market- based fi nancing, KfW invests primarily in high-quality securitisations of receivables from SMEs.

Financing climate and environmental projects using green bonds KfW created a green bond portfolio in 2015, and in so doing added a capital market instrument to its loan ﬁ nancing for climate and environmental protection measures through the purchase of green bonds. The Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety has given KfW a promotional mandate to do this. The portfolio is to be expanded to a total volume of EUR 1 billion over the next few years. KfW purchased green bonds amounting to around EUR 280 million over the course of last year. An investment volume of EUR 300 million is planned for 2016.

KfW can invest worldwide in green bonds issued by governments, supranational and semi-governmental institutions, banks and companies, as well as in green covered bonds and asset-backed securities (ABS). With the investments it has made, KfW has promoted measures in promotional fi elds such as renewable energy, resource effi ciency, environmentally friendly transport and water and sanitation management. Upon issue, issuers o en announce investment opportunities in diff erent areas; the ultimate allocation of the funds to individual measures does not take place until a er the green bonds have been issued. The issuers report on the measures fi nanced at a later date, and generally commit to reporting on an annual basis. For this reason, no information can be provided on the promotional fi eld allocation of around half of the volume invested by KfW in 2015.

124 | KfW Annual Report 2015 Capital markets KfW green bond portfolio Promotion of SMEs in Germany and Europe in 2015, total: EUR 280 million via the capital market The securitisation market stabilised at the prior-year level in 2015. As in the previous year, in addition to the ECB’s asset-

22 % backed securities (ABS) purchase programme, the discussion about the future regulatory treatment of securitisations continued to shape market events. The focus was on shaping a future segment for particularly high quality simple, transparent and 49 % 14 % standardised (STS) securitisations. As part of the initiative to create a European Capital Markets Union, the STS regulation impressively underlines the importance now attributed to securi- 12 % tisations in broad areas of politics and at central banks as part >1 % 2 % of the funding of the real economy – and in particular SMEs. 1 % KfW provided SME funding via investments in securitisations of Renewable energy Resource eﬃ ciency Environmentally EUR 838 million in 2015 (2014: EUR 1.2 billion). The funding of friendly transport concepts Biodiversity Waste management European SMEs was supported for the ﬁ rst time with a volume Water and sanitation management Currently unallocated of around EUR 190 million. In addition to promotional activities,

Diff erences in the totals are due to rounding. the focus in the past fi nancial year in the area of capital market- oriented SME funding was on strengthening cooperation with other European promotional institutions. KfW leads a working As a green bond investor, KfW also aims – in addition to its group together with the European Investment Fund (EIF), com- activities as a green bond issuer – to contribute to the further prising other European National Promotional Banks (NPBs). development of the green bond market and the establishment This working group started the EIF-NPB Securitisation Initiative of qualitative standards in this segment. The increasing sensiti- (ENSI), in which processes and minimum criteria were developed sation to climate and environmental protection has caused the for future joint participation of European promotional institu- green bond market to develop dynamically in the past few years. tions in securitisation transactions. By participating in an Italian It has the potential to grow into an important source of funding leasing securitisation, the Italian promotional bank Cassa Depositi for climate and environmental protection measures. Qualitative e Prestiti (CDP), EIF and KfW were able to complete a fi rst minimum standards and suffi cient transparency are important transaction as part of this collaboration at the end of 2015. for the future of this still young market segment. KfW ensures compliance with internal minimum requirements regarding the New issue activity in the European securitisation market is transparency and quality of the securities when making its invest- expected to remain at the level of the previous year in 2016. ment decisions. In addition, it helps to develop guidelines, through KfW will continue its promotion of capital market-based SME initiatives, such as for issuing green bonds and for standardised fi nancing in Germany and Europe. It hopes to be able to give reporting on the environmental benefi t of projects and meas- impetus to a revival of the European securitisation market for ures fi nanced. Because of the use of funds specifi cally for green small and medium-sized enterprises, in particular through projects, KfW considers this capital market instrument also strengthened cooperation with other European promotional ideal for initiating or intensifying strategic dialogue on climate banks as part of ENSI. and environmental protection with market participants in order to mobilise as many of them as possible for this issue. The dialogue on green bonds additionally enables access to the larger issue of sustainability in the capital market which is increasing in importance.

KfW Annual Report 2015 Capital markets | 125 Special capital market-related tasks commissioned by the Federal Government

KfW has assumed an important function in the privatisation of Deutsche Telekom and Deutsche Post.

As part of the privatisation of Deutsche Telekom AG and Deutsche Post AG, and the special transactions mandated by the Federal Government, KfW has been buying shares from the Federal Government, and selling some of them in various capital market transactions, in several stages from 1997 onwards. KfW and the Federal Government have agreed that the privatisation of Deutsche Telekom and Deutsche Post will be continued for the long term. Where the market situation is deemed appropriate, KfW will be exploiting suitable capital market windows for further privatisation measures in close consultation with the Federal Government.

Shareholders in Deutsche Telekom AG were again allowed to choose in 2015 to have the dividend for the past ﬁ nancial year paid out in cash or as shares. A er delivery of new shares from the exercise of subscription rights based on its dividend claims, KfW received around 803.9 million shares in Deutsche Telekom AG at the end of 2015. This corresponded to around 17.5 % of the share capital of Deutsche Telekom AG as of 31 December 2015.

KfW’s holding in Deutsche Post AG during the course of 2015 remained unchanged at 253.9 million shares. This corresponded to 20.9 % of the share capital of Deutsche Post AG as of 31 December 2015.

126 | KfW Annual Report 2015 Capital markets ˚The men and women on our staff In fulfilling our promotional mandate and achieving business success, there is one aspect that is particularly important to us: being a responsible and attractive employer. After all, only a strong workforce can provide the key competitive advantage for future success. KfW as an attractive employer

For the men and women on our staff , fi nancial year 2015 was once again characterised by an intensive volume of business and the implementation of the modernisation projects that had already been initiated, the emphasis being on boosting effi ciency and customer orientation. Since the modernisation measures refl ect our responsibility for KfW’s future, KfW, in its role as an employer, was keen to demonstrate its very responsible attitude towards, and the high value it places on, its employees.

As a result, KfW also forged ahead in 2015 with moves to trans- form its culture and make it ﬁ t for the future. The key aspects of this new culture are reﬂ ected in our Gender Balance Concept and were therefore also incorporated into the new KfW Equal Opportunities Plan.

Personnel As of the end of 2015, KfW Group employed a total of 5,966 people (previous year: 5,727) at KfW, DEG and KfW IPEX-Bank, 4,763 of whom worked at the KfW parent company (previous year: 4,541).

The proportion of KfW employees not covered by collective agreements remained constant at around two-thirds. At the end of the year, 24.8 % of employees worked part-time, a further increase on the previous year (24.2 %).

Women at managerial level totalled 29.4 % at the end of 2015. The proportion of employees with severe disabilities came to 5.36 %. The average age of employees was 42.8, only slightly higher than in recent years. The staﬀ turnover rate – a er adjustments for retirement – of 1.4 % remained very low (previous year: 1.0 %).

Implementation of the HR strategy Already in 2014, KfW’s HR department had readjusted its strategic focus to reﬂ ect KfW’s corporate strategy and mission statement, deﬁ ning key HR policy areas of activity for the period from 2015 to 2018. In the reporting year, KfW’s HR management kept a constant focus on the HR strategy. As the following reports show, a number of key and interim objectives have already been met:

Employer branding/HR marketing KfW is working continuously on its image as an employer. In 2015, for example, it successfully completed a project to develop an employer brand that will form the new face of its entire external communications in the years to come. KfW’s recruitment methods were completely revised in the reporting year. All guidelines and questionnaires were updated on the basis of the latest research results and the roll-out of the new recruitment methods was successfully completed in 2015.

128 | KfW Annual Report 2015 The men and women on our staff KfW also laid the foundation stone for a new, modern image Plan, health management, working hours and inclusion. All of on the technical side of things: moves to implement a new these issues are linked as part of a holistic concept. applicant management system were initiated in 2015 and will be completed in the fi rst quarter of 2016. New Equal Opportunities Plan KfW adopted its new Equal Opportunities Plan in December 2015. We are particularly encouraged by the fact that KfW was assigned It came into force on 1 January 2016 and will apply to the period the highest ranking in the “Young Professionals” target group as from 2016 to 2019. part of a major employer ranking in 2015, bucking the overall trend in the fi nancial services sector by further improving in the A commitment to ensuring equal opportunities for men and “Graduates” category. This is testimony to the growing public women has been a key component of KfW’s personnel policy for awareness of KfW’s appeal as an employer. some time now, and is closely linked to the Gender Balance Concept. As a result, this fourth Equal Opportunities Plan also New job descriptions, grading and allocation of functions focuses on external benchmarking at a high level. The objectives As part of numerous modernisation measures, new structures and measures agreed in close dialogue with the equal opportu- and processes were put in place at KfW. This also meant that nities offi cers are based on successful initiatives and also provide new job descriptions had to be drawn up for all functions. new impetus in line with the German Federal Equal Opportuni- Thanks to systematically generic description and grading across ties Act (Bundesgleichstellungsgesetz – “BgleiG”), which was the whole of KfW, this allowed the number of functions to be amended in 2015. reduced from some 700 to around 250. The descriptions were also regraded in their entirety in fi nancial year 2015. Together Four key objectives based, among other things, on the outcome with the employee representative bodies, a consistent overall of the Gender Balance events of 2013/2014, were set: system of collective wage-agreed and non-collective wage- agreed functions was created, with functions being graded based – The proportion of women in managerial and upper-level on objective criteria. A cross-comparison was used to create professional positions is to increase further by 2019. the greatest possible degree of transparency on the new functions (functional profi le map) for managers in all areas. In order to achieve this, KfW has defi ned targets for female participation, which vary depending on the managerial level in In tandem with these activities, negotiations were conducted question (directors 17 %, heads of department 26 % and team with the employee representative body on the introduction of leaders 35 %). new, permanent provisions for job descriptions and the grading and allocation of functions. A staff agreement was concluded in Over the past few years, KfW has already managed to boost December 2015 which will provide a reliable basis for the years the proportion of women in managerial positions from 26.8 % to come. The new system has resulted fi rst and foremost in the (2011) to 29.4 % (2015). Progress at team leader level, in simplifi cation of the former grading system, while at the same particular, is also to lay the foundation for future success in time ensuring greater transparency, and in the establishment fi lling director and department head positions in the future. of generic job descriptions that are linked to other HR tools (strategic personnel planning, recruitment, individual personnel – KfW is not focusing on formal gender equality alone. It is aiming development, etc.). to truly put equal opportunities into practice in order to make active use of the diff erent skills and personalities of men and The new structure boosts process effi ciency and makes decisions women and to reap the benefi ts this sort of diversity off ers. transparent and easy to understand. This allows KfW to fulfi l key aspects of its mission statement. This remains the aim of the Gender Balance programme, which links the organisational framework and personnel development Implementation of the mission statement with targeted shaping of the corporate culture. Striving for Based on its new mission statement, which was adopted in 2014, diversity and exploiting full potential while ensuring that em- KfW is developing its culture of management and teamwork ployees enjoy a good work-life balance are also key compo- with the aim of achieving sustainable change. KfW’s HR work nents of KfW’s mission statement. covered issues such as leadership, gender balance and work-life balance in the reporting year to forge ahead with this cultural The fact that KfW has been able to inspire managers to act as development in connection with the new Equal Opportunities promoters of the equal opportunities objectives and transparent

KfW Annual Report 2015 The men and women on our staff | 129 communication across the board will help to establish a culture give employees more self-responsibility and to allow more fl exible in which awareness of equal opportunities is part of day-to-day arrangements in terms of working hours and place of work, work at all levels. while taking KfW’s needs into account at the same time. This is consistent with the objectives of the operational health man- – The ability to strike a healthy balance between work and home agement initiative and the programmes to reconcile career and life, a main prerequisite for continued professional develop- family life. ment, and traditionally important to women, is also gaining relevance for men, with provision of long-term care to relatives During the agreed pilot phase, those KfW employees who are an increasing key consideration. This is why KfW is expanding not covered by collective agreements will enjoy “autonomous the range of options available to suit the needs of employees working hours”, designed as a test that could lead to the intro- looking to combine work with long-term care responsibilities, duction of “trust-based working hours” later on. This means while promoting cultural sensitivity as far as this issue is con- that managers will not be able to access the time entries – which cerned. In line with the amended BGleiG, male employees, in remain mandatory for own documentation purposes – of their particular, are to be motivated to make use of work-life balance employees who are not covered by collective agreements. models. KfW already has a whole range of childcare models on off er, as well as tried-and-tested HR tools off ering leaves In order to refl ect KfW’s responsibility for the health of all of its of absence and various part-time working models, also for employees and in the interests of ensuring work-life balance, managers. the staff agreement explicitly states that regular meetings and “jour fi xe” sessions are to be held, where possible, during service As far back as in 2001, KfW was certifi ed as one of the fi rst hours and taking into consideration part-time employees’ work- family-friendly companies in Germany by the Hertie Foundation. ing hours. As a general rule, employees will only be expected to The implementation status of the objectives and measures be available on working days and during service hours. agreed was reviewed again in 2015 as part of the interim report, revealing very good results. The success of the autonomous working hours pilot phase requires managers and employees alike to rethink their attitudes. – Our employees’ professional careers and lives outside of work The project provides KfW with an opportunity to move towards are increasingly characterised by phases such as time out to a modern culture of management and teamwork. look a er family or pursue further education, a return to work, stays abroad and project assignments. Individual needs vary Health management depending on the age and life situations of the employees in In order to live up to the responsibility it has towards its em- question. ployees, KfW has been systematically expanding its operational health management initiative since 2014. It aims to maintain This is why we need a culture and an infrastructure that focus and promote employee motivation, job satisfaction and perfor- on people and enable comprehensive life phase orientation if mance, even in a working world in which KfW employees, just we want to successfully attract, develop and retain qualifi ed like employees of other companies, are coming under greater employees and managers. Based on an extensive analysis, we pressure due to increasing workload, higher momentum and will be developing and implementing a concept for a life phase- complexity and, in some cases, also due to standardisation. oriented personnel policy covering all phases of an individual’s career from recruitment until the point at which they leave KfW. Two focal points were determined, in particular, in 2015: In particular, we will be using the results of workshops held as part of the Gender Balance programme to assess existing 1. In order to analyse psychological stress, a screening proce- development opportunities, such as job rotation, project man- dure developed by the University of Potsdam was introduced. agement careers or part-time management. So far, in around one-third of areas at KfW, observation inter- views have been used to analyse the jobs of a representative The systematic implementation of the Equal Opportunities Plan sample of employees, recording and evaluating possible in the period from 2016 to 2019 is one of KfW’s main personnel stress factors associated with their positions. Most of the policy objectives. positions analysed to date have been classed as non-critical as far as psychological stress is concerned. If individual cases New staff agreement on working hours revealed the likelihood of relevant stress, changes were KfW also expects the entry into force of its new staff agreement made to the work organisation in a timely fashion in order to on working hours, which was concluded in 2015, to make a key reduce these stress factors. The aim is to have analysed all contribution to modernising its corporate culture. The agreement areas within KfW by the end of 2016. will initially apply for a pilot phase of three years and aims to raise awareness of working hours-related issues among manag- 2. Due to the way in which managers shape the overall frame- ers and employees alike, as well as to achieve a systematic work, they have a special responsibility for promoting a health- move from a culture that is based on how many hours someone conscious culture of management and teamwork at KfW. spends in the offi ce to one that focuses on the results that an The seminar entitled “Healthy management in practice” individual achieves. The stated objective of the agreement is to (Praxis Gesundes Führen) was designed in order to help team

130 | KfW Annual Report 2015 The men and women on our staff leaders, in particular, to consider health aspects in their daily and strengthening the project management culture as the “third management work. The idea is to give team leaders specifi c force” alongside specialism and management. suggestions on how to incorporate health-related issues into their day-to-day management work and set an example Ongoing benchmarking in all key areas of action in the fi elds of to their employees in the process. personnel and management development produced the following personnel development project focal points in 2015: The “check-up examination” tool was extended to cover team leaders, to provide these employees themselves with support. 1. Modernisation of the tools used to assess management po- The tool allows individuals to undergo a physical check-up to tential based on the new management skills model which measure their endurance and also includes an optional assess- was developed in 2014. ment of their personal risk of occupational burnout. A consultation session held a er the check-up provides individuals with 2. Revamp of the management feedback (360º feedback) system advice on how to change their lifestyle based on the results of to promote a feedback culture and improvement in manage- the examination. ment and teamwork.

New inclusion agreement 3. Introduction of a project management career path as an at- KfW has employed and supported people with severe disabilities tractive alternative to the classic managerial career. This for many years now. The Executive Board reinforced this com- project is based on an Executive Board assignment from 2014. mitment by signing an inclusion agreement in November 2015, agreeing goals for continued work with the representatives for (1) New procedure for assessing potential employees with severe disabilities and the General Staff Council. A er nine years, the old system for assessing management po- In the interests of inclusion, the aim is to create an environ- tential was revised in 2015. With the broad involvement of ment in which people with severe disabilities are just as natural managers, employees and the various employee representative a part of the KfW community and processes as all other em- bodies, a state-of-the-art procedure was developed in a me- ployees are. A corporate culture based on greater awareness is thodical fashion. The concept incorporated the results of market to also be used to support diversity in the process. comparisons with 18 other organisations, as well as the latest scientifi c fi ndings from the fi eld of potential diagnostics. The new Specifi cally, the main aim of the inclusion agreement is to procedure is based on the management skills model which was make a greater eff ort in creating new, long-term employment developed in 2014 and is split into three phases: the fi rst phase, for severely disabled individuals and to support their profes- “preparation”, allows individuals to refl ect on their own skills in sional development at KfW through targeted advancement and detail. The second phase, “selection”, consists of an interview by balancing out the disadvantages resulting from disability. and an assessment and results in a diff erentiated evaluation of an individual’s potential. The third phase, “further development”, Modern personnel development involves intensive preparation for the individual’s fi rst managerial When qualitative, organic growth was the norm at KfW, it ap- position, either in a line function or within a project. peared suffi cient to use classic personnel development tools (e. g. training sessions) to develop employees’ professional and (2) KfW management feedback personal skills. Since then, the demands placed on personnel The management feedback system developed specifi cally for support and development at KfW have changed signifi cantly. KfW (360º feedback) is based – just like the procedure for as- This is particularly evident if we look at the constant changes in sessing potential – on the new management skills model. For the framework and objectives of KfW’s owners, and in the in- the very fi rst time, it allows feedback to be provided with the creasing level of regulation, which is having a huge impact on help of online systems and, as a result, in a highly effi cient organisational and professional requirements. What is more, at manner. Managers invite individuals from their daily working a modern bank like KfW, the increasingly project-based approach environment to provide anonymous feedback on their manage- to work is resulting in increasing complexity in everyday work- ment behaviour. Managers then use a team workshop to compare ing life. This means that new forms of work and career paths how others see them with how they see themselves, allowing have to be considered. New personnel policy signals and adjust- them to discover new areas of development for themselves. ments to personnel tools are becoming necessary because social trends, such as increasing digitalisation, demographic The new follow-up process provides managers and their teams change and, in some cases, the shi in terms of looking for em- with long-term development support. ployees who are specialists as opposed to “all-rounders”, are calling tried-and-tested structures into question. (3) Introduction of a project management career path Numerous large-scale and specialist department projects are In order to ensure the effi ciency of its employees and manage- currently underway at KfW and are part of day-to-day working ment system in the future, personnel development at KfW is life for many employees. Specifi c project expertise, however, is a currently focusing on four areas for action: gradual and early must when it comes to managing these highly complex project adjustments to professional skills, the development of contem- organisations. In order to establish and further strengthen this porary management tools, identifying and promoting talent project management knowledge and the required skills at KfW,

KfW Annual Report 2015 The men and women on our staff | 131 a dedicated project management career path has been estab- Promoting young talent lished. The career path can be described as equivalent to the As of the end of 2015, 134 young people were undergoing their conventional managerial career path in all respects (selection fi rst vocational training course (previous year: 132), of whom criteria, salary, special benefi ts, etc.). The project management 71 were sandwich degree students (previous year: 76). The num- training off ering has been expanded considerably. These in-house ber of graduate trainees stood at 60 as of 31 December 2015 skills will give KfW a large degree of independence from external (previous year: 34). In the course of the year 122 students com- service providers. pleted internships at KfW (previous year: 104). The total number of interns, sandwich students, and vocational and graduate KfW employees who want to develop further have been able to trainees was 231 as of 31 December 2015 (previous year: 196). embark on this new career path since January 2016. This equated to a training rate of 4.8 % (compared to 4.3 % in 2014). KfW’s appeal as a traineeship provider Greater public awareness of KfW as a whole and target group- Thank you specifi c personnel marketing measures have resulted in a sharp KfW’s employees continued to deal with a high business and increase in the number of up-and-coming young talents apply- promotional volume in 2015. Many of them also worked on the ing to join us. This has allowed us to meet the considerably modernisation and corporate culture projects, contributing increased internal demand for university degree-holders to join considerable additional eff ort. our graduate trainee programmes. We would like to thank all members of staff , as well as the Staff The sandwich degree programmes have been expanded to in- Council members, the equal opportunities offi cer, and repre- clude a BA in Supply Engineering and Environmental Technology sentatives for employees with severe disabilities, and for youth in light of the medium-term succession planning within the and vocational trainees for the good working relationship we Central Services area. enjoyed with them in 2015.

132 | KfW Annual Report 2015 The men and women on our staﬀ ˚Financial reporting The earnings position in 2015 was characterised by a strong operating result combined with an excellent valuation result due to positive one- time effects. Financial reporting

The complete consolidated fi nancial statements including the group management report are contained in our Financial Report, which is available for download from our website. The annual fi nancial statements and the management report of KfW are also available for download. The auditing fi rm KPMG AG Wirtscha sprüfungsgesellscha issued an unqualifi ed opinion on both the consolidated and the individual fi nancial statements as of 15 March 2016.

Basic information on KfW Group KfW Group consists of KfW and six consolidated subsidiaries. As the promotional bank of the Federal Republic of Germany – which owns 80 % of KfW while the German Federal States own 20 % – KfW is one of the world’s leading promotional banks. In addition to KfW, the group’s main operating subsidiaries are (i) KfW IPEX-Bank, which provides project and export ﬁ nancing, and (ii) DEG, which is active in promoting the private sector in developing and emerging market countries.

KfW Group has a set of strategic objectives in place that defi ne KfW’s targeted medium-term positioning. The primary objective of all KfW’s market areas is promotion – the heart of KfW’s business activities – abiding by the principles of subsidiarity and sustainability. KfW addresses the primary objective of promotion largely by focusing its promotional activities on the socially and economically important megatrends of “climate change and the environment”, “globalisation and technical progress”, and “demographic change”. The primary objective is complemented by a set of secondary objectives or strict ancillary conditions that refl ect profi tability and effi ciency as well as risk-bearing capacity aspects.

KfW has a closely interlinked strategy and planning process. The results of the planning process are summarised in the business strategy adopted by the Executive Board as well as the risk strategy derived from it.

General economic environment The global economy lost momentum in 2015, although the picture was mixed across the diﬀ erent economic areas. The economy stabilised in the industrialised nations, driven by the USA, the euro zone and Japan. Development was less positive in other industrialised nations in 2015. Developing and emerging market countries recorded slower growth for the ﬁ h consecutive year in 2015. Many large emerging markets in particular faced strong headwinds, some even entered recession.

Economic recovery gained some momentum in the member states of the European Economic and Monetary Union (EMU). Growth momentum therefore picked up slightly more than KfW had expected a year ago. The geopolitical conﬂ icts were less problematic for the economy than anticipated, and ﬁ nancing

134 | KfW Annual Report 2015 Financial reporting conditions improved considerably over the course of the year recurring eff ects. This resulted in a high consolidated profi t of for business and private households. EUR 2.2 billion, far exceeding both the previous year’s result and forecasts. The focus in the fi nancial markets in 2015 was primarily on the diverging monetary policies of the world’s major central banks. With this result, KfW is improving its capital base in order to Whereas the Bank of Japan maintained its expansionary stance safeguard its promotional capacity in the long term and to en- and the European Central Bank (ECB) shi ed into an even more sure it can meet the regulatory requirements which are higher accommodative gear, rates were raised slightly in the USA for as of the mandatory application of the German Banking Act the fi rst time since 2006. Growing concerns among market par- from 1 January 2016. ticipants were fuelled not only by shi ing assessments of monetary policy, but also in the early summer by developments in Earnings in 2015 were largely characterised by the following Greece and later in the year by muted growth in the emerging developments: markets, particularly China, and the recent drop in crude oil prices. This led to temporary but considerable market turbulence in the Strong operating result late summer. The riskier asset classes bore the main brunt of this, At EUR 2,066 million (2014: EUR 2,023 million), the Operating while safe investments enjoyed consistent high demand. 2015 result before valuation (before promotional activity) was slight- saw an unprecedented development with nominal yields sliding ly above both the prior-year fi gure and expectations. into negative terrain on some bond markets, including in Germany, well into medium-term maturities. This was primarily the result of the positive development – despite the low interest environment – of Net interest income Given the persisting moderate macroeconomic growth rate and (before promotional activity), which benefi tted greatly from the unusually low rate of infl ation, the European Central Bank took increasing margin income in foreign lending business, the US further expansionary monetary policy measures in 2015. This dollar exchange rate development and KfW’s continued favour- environment caused money market rates to fall further in the able funding opportunities. euro zone, all of them landing in negative territory by the end of the year. Yields in the longer maturity segments saw greater The slight decline in Net commission income (before promo- volatility during the year. Yields on ten-year government bonds tional activity) to EUR 286 million (2014: EUR 313 million) was in 2015 were down an average of approximately 70 basis points largely due to the absence of the non-recurring eff ects that year-on-year. Money market rates in the US rose signifi cantly occurred in 2014 in connection with the renegotiation of collat- during the year, due not least to heightened expectations by eral agreements. year-end of a US rate hike, which were confi rmed in December by the US Federal Reserve’s fi rst interest rate increase in nine Administrative expenses (before promotional activity) increased years. Yields on ten-year US government bonds trended slightly to EUR 1,125 million (2014: EUR 1,059 million), however, this upwards with heightened volatility during the year. The diff er- was below expectations. The deciding factors here were both ing monetary policies of the US Federal Reserve and the ECB the extensive investments in modernising KfW and, in particular, had a major impact on the USD/EUR exchange rate, with the measures connected to KfW’s application of the KWG. euro depreciating considerably against the US dollar, to its low for the year of 1.05. Excellent valuation result due to positive non-recurring eff ects Major fi nancial developments for KfW Group Charges arising from risk provisions for lending business to- The excellent earnings position in 2015 benefi tted from a slight talled a very moderate EUR 48 million in 2015. This was well year-on-year increase in the operating result combined with a below the projected standard risk costs and also beneath the major improvement in the valuation result due to various non- low level of the previous year (EUR 143 million). In addition to

KfW Annual Report 2015 Financial reporting | 135 the favourable economic environment, this positive development estate sector, Italy’s asset quality development remains nega- was also due to factors such as high income from recoveries tive (share of non-performing loan portfolio increasing). Among of loans written off (EUR 281 million), which resulted primarily the peripheral countries, the Greek fi nancial sector caused the from exposures in Export and project fi nance. greatest turmoil in 2015. As a result of the drawn-out agreement process between the new Greek government and its international Moreover, the purely IFRS-related eff ects from the valuation creditors, Greek banks were forced to close for several weeks of derivatives used for hedging purposes served to greatly in the summer, following drastic deposit outfl ows, and capital exaggerate the earnings position by EUR 271 million (2014: controls were imposed on citizens. The Swiss National Bank’s EUR 47 million). KfW also generated one-time earnings in the removal of the Swiss franc’s cap against the euro at the begin- amount of EUR 119 million from the disposal of individual ning of 2015 brought about serious upheaval. The massive ap- combinations of hedged items and hedging instruments. preciation of the franc caused the value of CHF-denominated loans outside Switzerland to soar, raising borrower costs and A contribution to earnings of EUR 147 million (2014: creating higher credit risks for banks in some eastern European EUR 122 million) from the equity investment portfolio largely countries, in particular. One such consequence is Poland’s plan resulted from the Promotion of developing and transition coun- to force conversion of foreign currency loans at the expense tries business sector. Performance in the DEG portfolio was of the banks. This could result in considerable burdens on the enhanced by exchange rate eff ects relating to currencies includ- banking sector in 2016, which could be exacerbated by any fur- ing the US dollar. ther measures announced. The above-mentioned deterioration in economic parameters in critical emerging market countries The securities portfolio generated a lower contribution to earn- resulted in lower credit ratings for important banks in these ings in 2015 of EUR 18 million (2014: EUR 57 million), which countries, such as Brazil. Russia’s economy and banking market refl ects the subdued development overall on the fi nancial markets. are suff ering immensely from the recession and the Western sanctions, which is refl ected in increasing loan defaults and risk Other operating income from cancellation of the repayment of a costs, decreasing profi ts and lending, and increased central part of the ERP subordinated loan amounted to EUR 100 million. bank refi nancing.

Promotional activity lower than expected Implementation of the bail-in rules as of 1 January 2016 repre- KfW’s domestic promotional activity, which has a negative impact sents one of the key reforms for European banks. This perma- on KfW Group’s earnings position, decreased to EUR 345 million nently changes the risk profi le for bank bonds and will likely result in 2015 (2014: EUR 364 million), which was below expectations. in slight increases in funding rates. Rating agencies stopped in- This was a result of declining interest rate reductions of cluding the probability of government bail-ins when rating the EUR 304 million (2014: EUR 345 million), particularly due to the creditworthiness of various European banks in 2015. As the ECB lower demand for subsidised promotional loans and the decreased will continue to pursue its expansionary monetary policy in 2016, scope for reductions in the low interest rate environment. consequently maintaining the low-interest rate environment with narrow margins, cost-cutting programmes at banks will contin- Development of net assets and fi nancial position ue to dominate. The focus is particularly on banks with less ef- Consolidated total assets rose by EUR 13.9 billion to fi cient cost-income ratios in Germany, France and Italy, which EUR 503 billion in 2015. This was largely due to the develop- can also be seen in the European Banking Authority (EBA) re- ment of the US dollar exchange rate, which was refl ected in sults from the latest EU-wide transparency exercise at the end the higher liquidity held (+EUR 7.9 billion) due to the increase of 2015. Banks active in ailing banking markets will continue of cash collateral received in the derivatives business as well to focus on reducing bad debts as a means of decreasing loan as the EUR 3.8 billion rise in Net loans and advances to portfolios’ share of non-performing loans, particularly in Cyprus, EUR 369.2 billion. Unscheduled repayments increased again Ireland, Italy, Greece and Portugal. Despite considerable im- slightly year-on-year. provement in European banks’ capital adequacy, the new EBA/ ECB stress test is expected to be a greater measure of each The promotional business is primarily funded through the inter- bank’s resilience. The results are to be published in the third national capital markets. The volume of own issues reported quarter. It is expected that the supervisory authorities will use under Certifi cated liabilities amounted to EUR 415.2 billion the results as a basis for determining individual capital require- (year-end 2014: EUR 404 billion). The EUR 3.6 billion increase ments. Thus regulatory pressure on banks’ capitalisation will in equity to EUR 25.2 billion was due in part to consolidated remain heavy. However, even if capital requirements continue comprehensive income and also in part to a conversion of sub- to exist, the focus of European banks in 2016 will likely remain ordinated liabilities to equity by inclusion in KfW’s capital reserve on generating tier 2 capital and other loss-bearing liabilities in in the amount of EUR 1.25 billion. order to meet future requirements for the leverage ratio, Total Loss-Absorbing Capacity (TLAC) and the minimum requirement Development of the risk situation for eligible liabilities (MREL). The eff ects on the banking mar- Euro area bank performance in 2015 remained mixed. While the kets of political changes in the peripheral countries as well as banking sectors in Ireland and Spain have continued to recover, the tensions between Russia and Ukraine or Turkey are more driven by improved economic parameters and a stabilising real diffi cult to calculate. The spotlight will remain on Austrian and

136 | KfW Annual Report 2015 Financial reporting French banks due to their greater exposure in these regions. risk (CRSA) are determined and reported to the supervisory au- In China, where debts have risen considerably in recent years, thorities as of 1 January 2016. above all in state companies in the construction, real estate, mining and utilities sectors, risk costs for banks’ loan portfolios 2015 was a year of major international political and economic will likely continue to increase. challenges for the funding environment, resulting in extraordinary market developments. The ECB interest-rate policy and expec- The German and European economies were characterised by tations regarding the future course of US Federal Reserve policy stable sideways movement in 2015. The business sector contin- aff ected capital markets and generated high volatility. The ECB’s ues to stagnate; the positive impetus is primarily stemming bond-buying programme announced in January 2015 distorted from private households. A modest improvement is expected for yields on outstanding German government and KfW bonds. This 2016. Companies continue to benefi t from favourable terms due created uncertainty among investors and market participants, to good credit availability and lending structures that are grad- which was further exacerbated by other political and economic ually being eased. The eff ects of the scandal involving exhaust events such as negotiations on additional bailout measures for emissions manipulation on Volkswagen but also on the European Greece, concern about global growth and turmoil on China’s automotive industry as a whole cannot yet be estimated. stock markets.

KfW Group has been aff ected by the aforementioned develop- Outlook ments due to its international promotional mandate. The KfW KfW expects global growth of 2.75 % to 3.75 % for 2016, which portfolio recorded stable performance overall. All recognisable means that global economic momentum will likely be somewhat risks are measured using conservative standards and are taken higher than in 2015. into account in KfW Group’s new business management through Economic recovery is expected to continue in the industrialised systematic implementation of risk guidelines. The regularly countries in 2016, particularly in the largest economies, the performed calculations of risk-bearing capacity show that USA, euro area and Japan. There is considerable variance in the KfW Group can bear the risks assumed in the context of its rates of growth among the group of developing and emerging mandate – even based on conservative stress scenarios. market countries. Major emerging market countries (Brazil, Russia, etc.) and commodity exporters remain in a very diffi cult Risk management within KfW Group chiefl y serves to preserve phase. China’s economic slowdown is expected to gradually the group’s risk-bearing capacity. For the risk-bearing capacity continue, although a hard landing is unlikely. analysis, risk is measured and compared to available fi nancial resources by means of a capital requirement calculation. The low interest-rate environment will remain for the duration of 2016 as well. The US Federal Reserve began its exit from its As of 31 December 2015, KfW had suffi cient economic risk-bear- ultra-easy monetary policy by hiking interest rates for the fi rst ing capacity to satisfy a solvency level of 99.99 %. Risk-bearing time in nine years. However, it will likely proceed very cautiously capacity at a solvency level of 99.99 % for all scenarios is at an in further tightening of monetary reigns. The ECB will maintain adequate level overall. its very expansionary monetary policy for quite some time yet.

KfW Group’s regulatory capital ratios improved signifi cantly in The forecasts for KfW Group’s tier 1 and total capital ratios comparison with 31 December 2014. As of year-end 2015, the prepared in the group’s internal capital adequacy process show total capital ratio taking into account consolidated comprehen- that they are likely to more than meet the expected legally re- sive income was 18.4 % (year-end 2014: 15.1 %), and the tier quired minimum levels in 2016. Stable overall developments 1 capital ratio was 18.3 % (year-end 2014: 14.1 %). The main are anticipated for the group’s economic risk-bearing capacity drivers of the positive development were the healthy annual (99.99 % solvency level) in 2016. Potential changes in economic, profi t, which resulted in a considerable increase in available fi - political, legal and regulatory conditions may have a signifi cant nancial resources, and the dramatic reduction in the capital re- impact on capital ratios and economic risk-bearing capacity. quirement for the separate line item as part of the transition There is thus considerable uncertainty regarding the forecast from blanket coverage to risk-based modelling. The increase in for 2016. the tier 1 capital ratio was greater than the total capital ratio due to the partial conversion of the ERP subordinated loan The planned new business volume of EUR 74.9 billion for 2016 (tier 2 capital) to equity by inclusion in the capital reserve (tier is below the 2015 fi gure, which was infl uenced by non-recurring 1 capital). A moderate increase in the capital requirement for eff ects, particularly in the business sector Export and project counterparty risks as well as the credit valuation adjustment fi nance (EUR 79.3 billion). While a decrease in promotional busi- (CVA) charge had a slightly opposite eff ect on the capital ratios. ness volume is expected in the business sector Export and project fi nance due to the exceptional situation in 2015, the promo- The fi gures stated are internal ratings-based approach (IRBA) tional business volume in the domestic business sector and in values, which result from extensive application of the internal Promotion of developing and transition countries is expected to rating procedures described above. However, KfW is currently remain almost at the level of 2015. To implement KfW Group’s still undergoing the IRBA approval process, for which reason strategic objectives, the plans for the group’s business sectors temporary ratios under the standardised approach for credit contain measures with a strategic focus on promotional quality

KfW Annual Report 2015 Financial reporting | 137 and an orientation of business activities towards the key areas years; however, the negative eff ects due to the ongoing low in- of “climate change and environment”, “globalisation and techni- terest environment are increasingly noticeable. Thus projected cal progress” and “demographic change”. The portion of new interest rate margins from the lending business of around the commitment volume dedicated to climate and environmental same level as in 2015 would be off set by declining results from protection fi nancing is planned to be 34 %, thereby achieving interest rate and liquidity maturity transformation. The expect- the strategic objective requirement of approximately 35 %. This ed Administrative expenses for 2016 exceed the level of 2015. also applies to the SME share of fi nancing; the share of planned This increase is largely due to cost increases from modernisation, fi nancing for small and medium-sized enterprises (SMEs) in growth in the foreign business sectors and personnel cost in- domestic promotional business of 45 % is expected to be at the creases associated with collective agreements. This also raises target level set in the strategic objectives (approximately 45 %). the expected cost-income ratio (CIR) before promotional activity compared with the previous year. The projected standard risk The focus in KfW’s domestic promotional business will remain on costs, which as a long-standing historical average are consider- SME fi nancing and on safeguarding the viability of companies. ably higher for 2016 than the actual risk provisions for lending KfW’s international business areas are staying on course for business in 2015, will have a negative eff ect on earnings. KfW growth in the medium term in order to support the internation- expects its promotional activity to increase again in 2016. alisation of German companies as part of globalisation. The KfW business model is oriented towards the medium to long KfW anticipates a high funding volume over the next two years. term; income from the lending business (interest rate margins KfW expects funding volume via the capital markets to range and net commission income) in particular is very stable. Oppor- between EUR 70 billion and EUR 75 billion in 2016. tunities and risks for consolidated profi t may arise above all for the treasury result from deviating market conditions in conjunc- In the current group earnings projections for 2016, KfW expects tion with KfW’s positioning, as well as for the valuations from Consolidated profi t of slightly under EUR 1 billion (before IFRS risk provisions that deviate from those planned as well as from eff ects from hedging) based on anticipated macroeconomic temporary eff ects on results arising from the valuation of eco- conditions. The expected result is thus at the lower end of the nomically eff ective hedges (IFRS-related eff ects on results). The strategic objectives range. Contributions from Net interest in- latter have no economic basis and therefore are not explicitly come and Net commission income (in each case before promo- included in KfW’s planning. tional activity) are at a high level similar to that of previous

138 | KfW Annual Report 2015 Financial reporting ˚Corporate governance Report of the Board of Supervisory Directors

Meetings of the Board of Supervisory Directors The Board of Supervisory Directors and its committees constant- ly monitored the conduct of KfW’s business activities and the management of its assets. It has taken the necessary decisions on the provision of ﬁ nancing and the conduct of other business in accordance with the conditions set forth in the KfW Law and Bylaws. The Board of Supervisory Directors, the Presidial and Nomination Committee, and the Remuneration Committee each met three times in 2015 for this purpose; the Risk and Credit Committee seven times and the Audit Committee twice.

At the meetings, the Executive Board informed the Board of Sigmar Gabriel, Federal Minister for Economic Aff airs and Energy Supervisory Directors of: – KfW’s 2014 annual and consolidated fi nancial statements, – the business activities and current developments in each of KfW’s business sectors, including KfW IPEX-Bank GmbH and DEG, – the group’s net assets, earnings position and risk situation in general, particularly sensitive areas such as the ship portfolio, as well as any potential impacts of the appreciation of the US dollar and the decline in the oil price, – the status of application of the KWG standards at KfW, as well as the discussions with the banking supervision authorities on implementation of the related requirements, particularly those on compliance with regulatory capital requirements, – the current status of the major project portfolio, particularly concerning the progress in renewing the fi nancial architecture (including the “SAPFin project”), – the development of Administrative expense, with a particular view to the costs associated with implementing major projects and the application of the KWG, – KfW’s European commitment with the contribution to the EU Investment Plan, while continuing its proven cooperation with European promotional banks. – the reorientation of coal-fi red power plant fi nancing in line with the Federal Government’s more restrictive criteria, – the measures and objectives of the new KfW equal opportunities plan applicable from 2016, – KfW’s risk, business and IT strategies for 2016.

In preparation for implementation of KWG requirements on large exposures and loans to managers as of 1 January 2016, the Board of Supervisory Directors approved the amendment to the procedural rules resolved by the Executive Board and adopted pre- cautionary resolutions. The authority to adopt resolutions on loans to managers was transferred to the Risk and Credit Commit- tee with eﬀ ect from 1 January 2016.

In the reports on the activities of the individual business sectors, the primary focus was on the following developments:

140 | KfW Annual Report 2015 Report of the Board of Supervisory Directors – With regard to domestic promotional business, the Executive Each member of the Board of Supervisory Directors informs the Board reported in detail on implementation of the planned Chairman of the Board of Supervisory Directors or the relevant reorientation of equity fi nance to close the venture capital gap committee about potential confl icts of interest before a resolu- in the area of follow-on fi nancing, the commitment in environ- tion is made. Consequently, on some occasions during the report- mental and climate protection, the eff ects of the low interest ing year, members of the Risk and Credit Committee abstained rate environment on promotional activity as well as on the from voting or refrained from participating in resolutions. emergency “refugee accommodation” programme, where KfW funded the creation of accommodation by providing interest- Nine members of the Board of Supervisory Directors attended free loans to municipalities. fewer than half of the board meetings in the reporting year. – With regard to the business sector Promotion of developing Two members attended fewer than half of the meetings of the and transition countries, the Executive Board reported on Presidial and Nomination Committee. The same applies to the key topics of Financial Cooperation, the signifi cant increase in Remuneration Committee. Four members attended fewer than budget funds for development fi nancing primarily utilised in half of the meetings of the Risk and Credit Committee. One the areas of crisis prevention and poverty reduction, KfW’s member of the Audit Committee attended fewer than half of position as the world’s leading provider of bilateral development the meetings. fi nancing in the fi eld of environmental and climate protection, its commitment in the refugee crisis, which includes the fund- KfW organised training events for the members of the Board of ing of supplies to refugees in camps as well as infrastructural Supervisory Directors to gain and maintain expertise in accord- investments in the Middle East and the Horn of Africa, as well ance with the KWG, for the fi rst time in 2015. A total of four as on DEG’s business results. training events and six individual training sessions were held. – As for KfW IPEX-Bank, i. e. the Export and project fi nance business sector, the focus was on its role as a reliable Committees of the Board of Supervisory Directors partner to the German economy in particular. The Executive In exercising its responsibilities prescribed in the Bylaws, the Pre- Board also presented information on the business results sidial and Nomination Committee discussed Executive Board of KfW IPEX-Bank. matters. It was also informed of banking supervision status – The Executive Board gave regular reports on capital market and about KfW Sti ung. The committee approved a donation to development and the funding status of KfW’s business activi- KfW Sti ung. It discussed the status of major projects with the ties. 2015 saw KfW’s Green Bond activities expanded and the Executive Board, and also approved a redistribution of Executive investor base systematically increased through the off ering of Board responsibilities. It conducted an evaluation of KfW bodies, bonds in additional currencies, such as the fi rst-time issue of off ering relevant recommendations to the Board of Supervisory a bond in New Zealand dollars. Directors. – The Board of Supervisory Directors was also informed of KfW Group’s environmental and sustainability commitment. The Risk and Credit Committee reviewed the commitments and equity investments that must be presented to it under the KfW The Board of Supervisory Directors was informed at the meet- Law and KfW Bylaws as well as the scope for funding required ings as well as quarterly, in writing, of the group’s net assets, by KfW for its refi nancing and the related swap transactions earnings position and risk situation, the development of its necessary for hedging, and was informed about the risk situation promotional business, and Internal Auditing’s activity. and the eff ectiveness of the risk management system. It also dealt with KfW’s exposure in certain countries such as Greece, The Executive Board informed the Board of Supervisory Directors the eff ects of the decline in the oil price and the appreciation about the focus areas of the business strategy – particularly in of the US dollar as well as the risk profi le of the business sector the fi elds of climate change and the environment, globalisation, Export and project fi nance. The results of the fi rst Bundesbank innovation and SMEs – including KfW’s activities in Europe. On assessment, the talks with the German Federal Financial Super- the basis of the future development of regulatory capital require- visory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht ments for KfW presented by the Executive Board, the Board of – “BaFin”) and the regulatory capital requirements on KfW were Supervisory Directors discussed how compliance with these re- also reported and discussed in detail. quirements will be ensured in the next few years. The Board of Supervisory Directors approved the planning for 2016, and ac- The Audit Committee addressed the accounting process, the knowledged the multi-year business strategy as well as the risk quarterly reports, the reports by Internal Auditing and Compliance and IT strategies. as well as the annual fi nancial statements of KfW Group 2014.

KfW Annual Report 2015 Report of the Board of Supervisory Directors | 141 It made corresponding recommendations to the Board of Super- down from the Board of Supervisory Directors in 2015. The Board visory Directors for the approval of the annual fi nancial state- of Supervisory Directors would like to thank the members step- ments 2014. It was informed about the effi ciency of the risk ping down for their work. management system, the Internal Control System (ICS) and the internal audit system. In addition, it addressed auditor independ- Anton F. Börner, Frank Bsirske, Klaus-Peter Flosbach, Hubertus ence and certain focal points of the annual audit 2015 and dis- Heil, Holger Schwannecke and Dr Martin Wansleben stepped cussed the initial results of the annual audit 2015 in detail. The down with eff ect from 31 December 2015 and were reappointed Committee approved the audit plan of the Internal Auditing according to schedule with eff ect from 1 January 2016. Dr Uwe department for 2016. It was informed about the progress of the Brandl, Christian Görke, Monika Heinold and Prof. Dr Georg Unland talks with the banking supervision authorities regarding applica- joined the Board of Supervisory Directors a er the reporting tion of KWG provisions at KfW, the Bundesbank’s assessment, period on 1 January 2016. and major projects, particularly the renewal of the fi nancial architecture. With regard to the development of costs and earnings, Annual fi nancial statements the development of administrative costs was discussed as well KPMG AG, which was appointed auditor for the 2015 fi nancial as planning of administrative expenses for the next few years. year, has audited the annual fi nancial statements and the management report of KfW as well as the consolidated fi nancial The Remuneration Committee discussed remuneration issues statements and the group management report of KfW Group, and was informed about the remuneration system for KfW em- all of which were prepared as of 31 December 2015 by the Execu- ployees, among other matters. tive Board, and issued an unqualifi ed auditor’s report thereon. The fi nancial statements and the management report were pre- The committee chairpersons reported to the Board of Super- pared in accordance with the provisions of the German Commer- visory Directors regularly on the work of the committees. cial Code (HGB) and the consolidated fi nancial statements and the group management report were prepared in accordance with Changes on the boards International Financial Reporting Standards (IFRS) as applicable Dr Ulrich Schröder was reappointed to the KfW Executive Board within the European Union. ahead of schedule with eff ect from 1 January 2016, and reappointed as Chief Executive Offi cer. Dr Günther Bräunig was re- At its meeting on 27 April 2016, the Board of Supervisory Direc- appointed to the KfW Executive Board with eff ect from 1 October tors approved the fi nancial statements and the consolidated 2016. Dr Stefan Peiss joined the Executive Board with eff ect fi nancial statements, both of which were prepared by the Execu- from 1 January 2016. Dr Edeltraud Leibrock stepped down from tive Board, as stipulated in Article 9 (2) of the KfW Law follow- the KfW Executive Board upon expiration of her contract as of ing a recommendation by the Audit Committee. 30 September 2015. The Board of Supervisory Directors would like to thank Dr Leibrock for her committed service to KfW. Frankfurt am Main, 27 April 2016

In accordance with Article 7 (1) no. 1 of the KfW Law, in my cap- THE BOARD OF SUPERVISORY DIRECTORS acity as Federal Minister for Economic Aﬀ airs and Energy, I assumed the position of Chairman of the Board of Supervisory Directors for 2016 from my colleague Dr Wolfgang Schäuble, Federal Minister of Finance.

New members of the Board of Supervisory Directors in 2015 Chairman were Kerstin Andreae, Dr Matthias Kollatz-Ahnen and Eckhardt Rehberg. Norbert Barthle, Jens Bullerjahn, Prof. Dr Hans-Günter Henneke, Dr Matthias Kollatz-Ahnen and Erwin Sellering stepped

142 | KfW Annual Report 2015 Report of the Board of Supervisory Directors Corporate Governance Report

As the promotional bank of the Federal Republic of Germany, KfW has committed itself to making responsible and transparent action comprehensible. The Executive Board and the Board of Supervisory Directors of KfW recognise the Public Corporate Governance Code (Public Corporate Governance Kodex – “PCGK”) of the Federal Republic of Germany. A Declaration of Compli- ance with the recommendations of the PCGK was issued for the ﬁ rst time on 6 April 2011. Since then any potential deviations are disclosed and explained on an annual basis.

KfW is a public law institution under the Law Concerning KfW (KfW Law). The Law sets out KfW’s main structural features. For example, KfW does not have a general shareholders’ meeting. The shareholders are represented on the Board of Supervisory Directors of KfW and exercise control and shareholder functions (e. g. approval of the fi nancial statements and adopting resolutions concerning the KfW Bylaws). The number of members, composition and duties of the Board of Supervisory Directors are set out in the KfW Law. The KfW Law also provides that the Board of Supervisory Directors is subject to legal supervision by the Federal Ministry of Finance in consultation with the Federal Ministry for Economic Aff airs and Energy as well as direct control of the Federal Audit Offi ce (Bundesrechnungshof). The KfW Law in conjunction with the Regulation concerning key banking supervision standards under the German Banking Act (Gesetz über das Kreditwesen – “KWG”) to be declared applicable by analogy to KfW and supervision of compliance to these standards to be assigned to the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – “BaFin”) (KfW Regulation), dated 20 September 2013, further stipulates that KfW is subject to supervision by BaFin in collaboration with the Bundesbank.

Declaration of Compliance The Executive Board and Board of Supervisory Directors of KfW hereby declare: “Since the last Declaration of Compliance issued on 14 April 2015, the recommendations of the PCGK, as adopted by the Federal Government on 1 July 2009, were and will be fulﬁ lled to the extent applicable to KfW as a public law institution with the exception of the following recommendations.”

KfW Annual Report 2015 Corporate Governance Report | 143 D&O insurance excess Cooperation between Executive Board and Board KfW has taken out D&O insurance for members of the Executive of Supervisory Directors Board and the Board of Supervisory Directors, which – in dero- The Executive Board and Board of Supervisory Directors work gation of clause 3.3.2 of the PCGK – only contain the option of closely together for the benefi t of KfW. The Executive Board including a policy excess. Exercise of the option is decided on maintains regular contact with the Chairman and Deputy Chair- in consultation with the Chairman of the Board of Supervisory man of the Board of Supervisory Directors and discusses im- Directors and his deputy. portant issues concerning the management of the bank and strategy with them. The Chairman of the Board of Supervisory Delegation to committees Directors informs the Board of Supervisory Directors of serious The KfW Law sets out the size of the Board of Supervisory issues and, if necessary, convenes an extraordinary meeting. Directors at 37 members. To ease the work of the Board of Supervisory Directors, committees more specialised in the During the reporting year, the Executive Board informed the subject matter and fl exible in terms of time are in place, whose Board of Supervisory Directors about all relevant matters re- composition is prescribed by law. In some cases, the commit- garding the bank’s planning, results of operations, risk assess- tees not only prepare the decisions of the Board of Supervisory ment, risk management and fi nancial position. Directors but also – in derogation of clause 5.1.8 of the PCGK – make fi nal decisions. This is done for reasons of practicality Executive Board and effi ciency. The Executive Board is responsible for managing the activities of KfW pursuant to the KfW Law, the KfW Regulation, the KfW – The Presidial and Nomination Committee takes fi nal Bylaws and the procedural rules for the Executive Board. A sched- decisions in the following cases: It adopts measures dealing ule of responsibilities stipulates business responsibilities within with important legal and administrative matters and can the Executive Board. As of 1 August 2014, the Executive Board make urgent decisions in pressing matters. It also draws up requires prior approval of the Presidial and Nomination Commit- job descriptions with candidate profi les for Executive Board tee regarding signifi cant changes to responsibility within the positions and for appointments to the Board of Supervisory Executive Board. Directors. It grants approval for the distribution of responsibilities within the Executive Board and signifi cant changes there- In the reporting year, the Executive Board resolved a temporary to, resolves the compensation system for the Executive Board, redistribution of responsibilities within the Executive Board un- with the decision on the basic structure of the compensation til 31 December 2015, due to Dr Edeltraud Leibrock’s resignation system nonetheless remaining the responsibility of the Board as Executive Board member eff ective 30 September 2015. KfW of Supervisory Directors. In derogation of clause 4.4.3 of the Executive Board member department responsibilities were thus PCGK, the Chairman of the Presidial and Nomination Commit- as follows in the reporting year: tee also accepts information on Executive Board member confl icts of interest, in lieu of the Board of Supervisory Directors. – Dr Ulrich Schröder – Chief Executive Offi cer, Management The Chairman of the Presidial and Nomination Committee Aff airs and Communication, Group Development and Econom- approves secondary employment of Executive Board members ics, Internal Auditing, Compliance and also Sustainability un- instead of the Chairman of the Board of Supervisory Directors, der Environmental Issues; Dr Schröder was also temporarily in derogation of clause 4.4.4 of the PCGK. responsible for Portfolio Credit Service from 1 October 2015 until 31 December 2015; – The Risk and Credit Committee takes fi nal decisions on all – Dr Günther Bräunig – Capital Markets, Human Resources, fi nancing requiring approval pursuant to the KfW Bylaws as Legal Aff airs and Central Services; well as on funding through the issue of bonds or taking out – Dr Norbert Kloppenburg – International Finance (Promotion loans in foreign currencies and via swap transactions. It is of developing and transition countries, business sector Export standard procedure at banks for the fi nal decision in such and project fi nance), including KfW Development Bank, DEG, matters to be taken by a committee. It serves to accelerate and KfW IPEX-Bank; and bundle committee expertise. – Dr Edeltraud Leibrock (until 30 September 2015) – Organisa- tion and Consulting, Transaction Management and Portfolio Loans to board members Credit Service; Pursuant to its bylaws, KfW may not grant individual loans to mem- – Bernd Loewen – Risk Management and Controlling, including bers of the Executive Board or Board of Supervisory Directors. Restructuring, Accounting, Information Technology and since For equal treatment reasons, this does not apply – in derogation 1 October 2015 also Organisation and Consulting; from of clause 3.4 of the PCGK – to utilisation of promotional loans 1 October until 31 December 2015, Mr Loewen also held made available under the KfW programmes. Due to standard- temporary responsibility for Transaction Management; isation of lending and the principle of on-lending through appli- – Dr Ingrid Hengster – Domestic Finance including Mittel- cants’ own banks, there is no danger of confl icts of interests con- standsbank/Management, Kommunal- und Privatkundenbank/ cerning programme loans. The Board of Supervisory Directors Kreditinstitute, New Business Credit Service, Sales and since must, however, be informed of programme loans granted to mem- 1 August 2015 also Competence Centre KfW Digital. bers of the Executive Board and Board of Supervisory Directors.

144 | KfW Annual Report 2015 Corporate Governance Report On 16 December 2015, the Presidial and Nomination Commit- effi ciency in performance of its duties. The committees are tee resolved a redistribution of responsibilities with eff ect from listed below. 1 January 2016, implementing the requirements set out in the regulation on Minimum Requirements for Risk Management (Min- The Presidial and Nomination Committee is responsible for destanforderungen an das Risikomanagement – “MaRisk”), which all legal and administrative matters, as well as the bank’s busi- apply as of 1 January 2016 and stipulate separating Executive ness and corporate policy matters; it also makes urgent decisions Board responsibility for Risk Management and Controlling from in pressing matters. The Presidial and Nomination Committee that for Accounting. For this reason, Dr Stefan Peiss was ap- is also responsible for handling nominations. Moreover, it draws pointed to the KfW Executive Board as Chief Risk Offi cer with ef- up job descriptions with candidate profi les for Executive Board fect from 1 January 2016. In addition to his future responsibility positions and for appointments to the Board of Supervisory for Risk Management and Controlling, Dr Peiss will also assume Directors. It identifi es candidates to fi ll positions on the Executive responsibility for Transaction Management and Portfolio Credit Board and thus ensures with the Executive Board that long-term Service from 1 January 2016. succession planning is in place for it. It can support the government bodies which make the appointments in selecting the in- Executive Board members are obliged to act in the best interests dividuals to be appointed to the Board of Supervisory Directors. of KfW, may not consider personal interests in their decisions, and are subject to a comprehensive non-competition clause dur- The Remuneration Committee deals with remuneration mat- ing their employment with KfW. Executive Board members must ters. It deals in particular with the appropriate structure of the inform their Board colleagues of any confl icts of interests prior compensation system for the KfW Executive Board and employ- to adopting resolutions and disclose them to the Chairman of the ees and advises the Presidial and Nomination Committee on Presidial and Nomination Committee without delay. remuneration of the Executive Board members.

Board of Supervisory Directors The Risk and Credit Committee is responsible for advising The Board of Supervisory Directors supervises and advises the the Board of Supervisory Directors on risk issues, such as, in Executive Board in the management of the bank. particular, the group’s overall risk tolerance and strategy. The Risk and Credit Committee is also in charge of handling credit In accordance with the KfW Law, the Board of Supervisory matters and the approval of KfW’s fundraising and swap trans- Directors consists of 37 members. In accordance with the law, actions. seven Federal Ministers are members of the Board of Supervi- sory Directors. In addition, the German Bundestag and Bundes- The Audit Committee is responsible for accounting and risk rat appoint seven members each. The remaining members of management issues. In particular, it deals with monitoring the the Board of Supervisory Directors are appointed by the Federal accounting process, the eff ectiveness of the internal controlling Government a er consultation with stakeholder groups. The system, the internal audit system and risk management system, Federal Minister of Finance and the Federal Minister for Eco- auditing the annual and consolidated fi nancial statements, the nomic Aff airs and Energy alternate on a yearly basis as Chair- required independence of the auditor, determining the focus are- man of the Board of Supervisory Directors. The Chairman of as of the audit, and monitoring the prompt elimination by the the Board of Supervisory Directors in the reporting year was Executive Board of any defi ciencies found by the auditor. Federal Minister Dr Wolfgang Schäuble. There were three female members on the Board of Supervisory Directors during the re- The chairs of the committees report to the Board of Super- porting year. visory Directors on a regular basis. The Board of Supervisory Directors provides information about No member of the Board of Supervisory Directors may have its work and that of its committees during the reporting year in business or private dealings with KfW or its Executive Board its report. An overview of the members of the Board of Supervi- members which are based on a substantial and more than tem- sory Directors and its committees is available on KfW’s website. porary confl ict of interests. Each member of the Board of Super- visory Directors informs the Chairman of the Board of Super- Shareholders visory Directors or the relevant committee about confl icts of The Federal Government owns 80 % of KfW’s share capital, the interest before a resolution is made. There were occasions dur- German federal states 20 %. In accordance with Article 1a of ing the reporting year, members of the Board of Supervisory the KfW Law, the Federal Republic of Germany is liable for cer- Directors and its committees refrained from participating in tain of KfW’s liabilities. There is no profi t distribution. The KfW resolutions due to confl icts of interest. Law does not require a general shareholders’ meeting; the Board of Supervisory Directors performs the function of a general Nine members of the Board of Supervisory Directors attended shareholders’ meeting. fewer than half of the board meetings in the reporting year. Supervision Committees of the Board of Supervisory Directors In accordance with Article 12 of the KfW Law, KfW is subject to The Board of Supervisory Directors has created four commit- legal supervision by the Federal Ministry of Finance in consulta- tees in accordance with Section 25d KWG in order to increase tion with the Federal Ministry for Economic Aff airs and Energy.

KfW Annual Report 2015 Corporate Governance Report | 145 The supervising authority has the power to take all measures Compliance necessary to ensure that KfW operates its business activities in The success of KfW Group is largely based on the confi dence its accordance with the law, the KfW Bylaws and other rules and shareholders, customers, business partners, employees and the regulations. general public place in its effi ciency and above all in its integrity. This confi dence rests not least on the implementation of and KfW is not considered a credit institution within the meaning compliance with relevant statutory, supervisory and internal regu- of Section 2 (1) no. 2 KWG and is thus generally exempt from lations and other relevant laws and rules. Compliance at KfW the direct application of banking supervision regulations with includes, in particular, measures to comply with data protection the exception of a few individual provisions. It has nonetheless and fi nancial sanctions, for securities compliance, as well as for thus far largely analogously applied the relevant norms of the the prevention of money laundering, terrorism fi nancing and other KWG, particularly MaRisk and the German Solvency Regulation criminal activities and to achieve adequate information security. (Solvabilitätsverordnung – “SolvV”). There are therefore binding rules and procedures that infl uence the day-to-day implementation of values and the corporate cul- However, the KfW Regulation dated 20 September 2013 de- ture, which are continually updated to refl ect the current law as clares central banking supervision regulations henceforth ap- well as market requirements. Compliance’s responsibilities also plicable by analogy to KfW, and subjects KfW to supervision by include coordinating complete fulfi lment of the requirements the German Federal Financial Supervisory Authority (BaFin) in of the KWG (as applicable under the KfW Regulation) as well as collaboration with the Bundesbank regarding KfW’s compliance the central function for compliance in accordance with MaRisk. with these regulations. The KfW Regulation is gradually being Regular training sessions on all compliance issues are held for phased into eff ect by 1 January 2016. BaFin has been entitled KfW’s employees. E-learning programmes are available in addi- since 9 October 2013 to conduct regulatory inspections in collabo- tion to classroom seminars. ration with the Bundesbank. Sections 25c and 25d KWG with their corporate governance requirements became applicable to Accounting and auditing KfW eff ective 1 July 2014. The remaining regulations stipulated As the supervisory authority, the Federal Ministry of Finance in the KfW Regulation will become applicable on 1 January 2016. in consultation with the Federal Audit Offi ce (Bundesrechnungs- hof) appointed KPMG AG Wirtscha sprüfungsgesellscha as The group companies KfW IPEX-Bank and DEG – Deutsche auditor for fi nancial year 2015 on 4 May 2015. The appoint- Investitions- und Entwicklungsgesellscha mbH (DEG) are, on ment was based on the proposal made by KfW’s Board of Super- the other hand, credit institutions within the meaning of the visory Directors on 14 April 2015. The Audit Committee pre- KWG. KfW IPEX-Bank is subject to the provisions of the KWG pared this recommendation. The bank and the auditor agreed in full, while DEG is subject to certain restrictions. that the Chairman of the Audit Committee would be informed without delay of any fi ndings and incidents discovered during Transparency the audit that are signifi cant to the duties of the Board of Super- KfW provides all important information about the bank’s an- visory Directors. It was furthermore agreed that the auditor nual and consolidated fi nancial statements, the quarterly and would inform the Audit Committee Chairman or remark in the semi-annual reports and the fi nancial calendar on its website. auditor’s report if it noticed any facts in performing the audit Investor relations activities and corporate communications also that represent misstatements in the Declaration of Compliance involve regular announcements on the latest company develop- with the PCGK. ments. The annual corporate governance reports of KfW and the group companies KfW IPEX-Bank and DEG including the decla- Effi ciency review of the Board of Supervisory Directors ration of compliance with the PCGK are always available on The Board of Supervisory Directors has regularly reviewed the KfW’s website. effi ciency of its activities. A two-year frequency was set for the effi ciency review; the last was performed in 2013. Since Section Risk management 25d (11) KWG became applicable as of 1 July 2014, the Presidial Risk management and risk control are primary responsibilities and Nomination Committee is required to evaluate both the of overall bank management at KfW. Using the risk strategy, the Board of Supervisory Directors and the Executive Board on an Executive Board defi nes the framework for the bank’s business annual basis. Both evaluations were performed in mid-2015 for activities regarding risk tolerance and risk-bearing capacity. This the fi rst time and are to be repeated every year. ensures that KfW fulfi ls its unique responsibilities with an appropriate risk profi le eff ectively and for the long term. The bank’s overall risk situation is subject to comprehensive analysis in monthly risk reports to the Executive Board. The Board of Super- visory Directors regularly receives detailed information on the bank’s risk situation, at least once a quarter.

146 | KfW Annual Report 2015 Corporate Governance Report Compensation report bei den Kreditinstituten des Bundes). The Federal Public Corporate The compensation report describes the basic structure of the Governance Code is taken into account when drawing up con- remuneration plan for members of the Executive Board and tracts. Each contract is individualised on this basis, accordingly. Board of Supervisory Directors; it also discloses the remuneration of the individual members. Components of compensation The Executive Board members receive ﬁ xed monetary compen- Overview of total compensation of members of the sation paid in equal monthly instalments. One member who Executive Board and Board of Supervisory Directors stepped down on 30 September 2015 received compensation on a pro rata basis in 2015, paid out in equal monthly sums.

2015 2014 Change The compensation of the Chief Executive Offi cer is an excep- EUR in EUR in EUR in tion; based on an agreed set of annual targets, he receives a thousands thousands thousands variable end-of-year bonus in addition to his fi xed salary. The minimum bonus payment for fi nancial year 2015 was set at Members of the Executive Board 3,945.9 4,217.7 –271.8 EUR 179,258. This minimum bonus payment does not apply if Former members of KfW’s net income for a fi nancial year is insuffi cient to ensure the Executive Board allocation to the statutory reserves. The annual targets agreed and their surviving for fi nancial year 2015 comprise promotional, economic and dependants 4,194.2 4,141.1 53.1 regulatory targets with a 60 % quantitative to 40 % qualitative Members of the Board of Super- weighting. A cap on the end-of-year bonus has been agreed. visory Directors 191.7 180.2 11.5 Total 8,331.8 8,539.0 –207.2 The following table shows total compensation, broken down into fi xed and, where applicable, variable components and other forms of compensation, as well as additions to pension Compensation of the Executive Board provisions for the individual members of the Executive Board. The compensation system for KfW’s Executive Board is aimed at appropriately compensating members of the Executive Board Responsibilities for their duties and responsibilities. Executive Board contracts The Presidial and Nomination Committee has discussed the Execu- are drawn up based on the 1992 version of the policy for hiring tive Board compensation system including contract components executive board members at credit institutions of the Federal since the committee structure was modifi ed in accordance with Government (Grundsätze für die Anstellung der Vorstandsmitglieder the applicable Section 25 d of the German Banking Act (Kredit-

Annual compensation of the Executive Board and additions to pension provisions in ﬁ nancial years 2015 and 20141)

Salary Variable Other Total Additions compensation compensation to pension provisions2) 2015 2014 2015 2014 2015 2014 2015 20146) 2015 20146) EUR in thousands EUR in thousands EUR in thousands EUR in thousands EUR in thousands Dr Ulrich Schröder (Chief Executive Oﬃ cer) 740.5 707.3 250.0 269.0 88.4 80.7 1,078.9 1,057.0 707.7 1,454.7 Dr Günther Bräunig4) 552.6 634.7 0.0 0.0 34.9 37.1 587.5 671.8 –190.8 2,155.2 Dr Ingrid Hengster7) 521.4 373.5 0.0 0.0 40.2 26.2 561.6 399.7 142.2 690.6 Dr Norbert Kloppenburg4) 552.6 634.7 0.0 0.0 44.6 43.6 597.2 678.3 –496.0 2,169.6 Dr Edeltraud Leibrock3) 412.7 525.3 0.0 0.0 91.05) 52.7 503.7 578.0 –1,460.4 810.9 Bernd Loewen 582.1 535.2 0.0 0.0 34.9 35.6 617.0 570.8 –209.9 1,189.7 Total 3,361.9 3,410.7 250.0 269.0 334.0 275.9 3,945.9 3,955.6 –1,507.2 8,470.7

1) Amounts in the table are subject to rounding diﬀ erences. 2) The discount rate for pension provisions increased during the year under review from 1.75 % (31 December 2014) to 2.28 % (31 December 2015), resulting in reversals in some cases, as the present value of the obligation has decreased due to the higher discount rate. This also applies to pension provisions for Executive Board members. All provisions for Dr Leibrock were reversed as she stepped down from the Executive Board during the reporting year. 3) Dr Edeltraud Leibrock until 30 September 2015. 4) An anniversary bonus in accordance with KfW’s general company policy of a total of EUR 112 thousand for 2014 is included in the 2014 and 2015 salaries. 5) Includes a one-time payment under a retrospective pension contribution agreement. 6) The totals for ﬁ nancial year 2014 do not include compensation paid to Dr Axel Nawrath, who stepped down on 31 March 2014, and the addition to pension provisions. 7) Dr Ingrid Hengster since 1 April 2014.

KfW Annual Report 2015 Corporate Governance Report | 147 wesengesetz – “KWG”) and adopts and regularly reviews it. The No Executive Board member was granted or promised any ben- Presidial and Nomination Committee is advised on these matters efi ts by a third party during the past fi nancial year with a view by the Remuneration Committee, which in turn considers the to his position as a member of the KfW Executive Board. results of certain analyses of the recently established Risk and Credit Committee regarding the incentive eff ects of the com- Pension benefi ts and other benefi ts in pensation systems. Likewise, a er consulting with the Remu- the case of early retirement neration Committee on the matter, the Board of Supervisory In accordance with Article 1 (3) of the KfW Bylaws, the appoint- Directors decides upon the basic structure of the Executive ment of an Executive Board member should not generally extend Board’s compensation system. beyond reaching the legal age of retirement. The Chief Executive Offi cer is exempt from this provision; he will be above the stat- The Presidial and Nomination Committee discussed compensa- utory retirement age at the end of his period of offi ce which was tion issues on numerous occasions during the reporting year, renewed ahead of schedule in December 2015 until 31 Decem- most recently at its meeting of 16 December 2015. ber 2020. Upon reaching the age of 65 or statutory retirement age and the expiry of their Executive Board contract, Executive Fringe benefi ts Board members are entitled to claim pension payments; they are Other compensation largely comprises fringe benefi ts. Executive also entitled to pension benefi ts if their employment relationship Board members are entitled to a company car with a driver for terminates due to permanent disability. Two members of the business and personal use. Executive Board members reimburse Executive Board who were fi rst appointed to the Board in 2006 KfW for using a company car with a driver for private purposes and 2007 respectively and subsequently reappointed also have in accordance with applicable tax regulations. They are reimbursed the option of retiring at their own request at the age of 63. under tax regulations for the cost of maintaining a secondary These Executive Board members were initially entitled to early residence for business reasons. retirement benefi ts under certain circumstances; however, these were grandfathered and converted into a temporary allowance Executive Board members are insured under a group accident for each when the members were reappointed. insurance policy. Allowances are provided for health and long- term care insurance. Executive Board members are covered by Pension commitments for Executive Board members as well as a directors and offi cers liability insurance policy, which insures their surviving depend ants are based on the 1992 version of the them against the risks of fi nancial loss associated with their Federal Government’s policy for hiring executive board members actions in their capacity as Executive Board members and by a at credit institutions. The PCGK is taken into account when supplemental legal expenses insurance policy. Currently there drawing up the Executive Board contracts. are no deductibles agreed. KfW Executive Board members acting in their management capacity are also protected by a special legal Executive Board member contracts include a severance pay cap expenses group policy for employees covering criminal action. in accordance with the recommendations of the PCGK. In other words, payments to these Executive Board members due to early No compensation is paid to members of the Executive Board termination of the Executive Board function without good cause for assuming executive body functions at group companies. in accordance with Section 626 of the German Civil Code (Bürger- liches Gesetzbuch – “BGB”) should not exceed the equivalent of As with all other executives, Executive Board members may also two years’ salary or compensation including fringe benefi ts for opt to participate in the deferred compensation programme – the remainder of the contract, whichever is lower. a supplemental company pension scheme fi nanced via tax-free salary conversion. Moreover, they are entitled to anniversary The full benefi t entitlement totalled 70 % of the pensionable bonuses in accordance with KfW’s general company policy. salary in the reporting year. The pensionable salary was equivalent to 70 % of the last remuneration (49 % of salary). With Moreover, the fringe benefi ts contain the cost of security the exception of the CEO, the retirement benefi t entitlement systems at Executive Board members’ residences; these ben- amounted to 70 % of the full entitlement for fi rst-time appoint- efi ts are not recognised as other compensation but as Non- ment, with an increase per completed year of service of 2.5 % personnel expenses. to 3 % depending on the contract (from an initial 34.3 % to a maximum of 49 %). The fringe benefi ts are subject to taxation as benefi ts in money’s worth for Executive Board members if they cannot be granted The Executive Board contracts contain additional individual on a tax-free basis or if this is contractually agreed. provisions, in particular concerning vesting of pension benefi ts. The newer contracts also include provisions on retrospective There were no loans by KfW to any members of the Executive pension contributions where pension benefi ts are not yet vested Board in 2015. and the member in question has not been reappointed.

148 | KfW Annual Report 2015 Corporate Governance Report Pension payments to former Executive Board members or their surviving dependants were as follows in 2015 and 2014:

Pension payments to former Executive Board members or their surviving dependants

Head- EUR in Head- EUR in count thou- count thou- 2015 sands 2014 sands 2015 2014

Former members of the Executive Board 19 3,374.5 19 3,260.6 Surviving dependants 10 819.7 11 880.5 Total 29 4,194.2 30 4,141.1

Provisions in the amount of EUR 64,931.5 thousand had been set up at the end of the ﬁ nancial year 2015 for pension obligations to former members of the Executive Board and their surviving dependants (previous year: EUR 69,100.9 thousand).

No loans were granted to former Executive Board members or their surviving dependants in ﬁ nancial year 2015.

Compensation of members of the Board of Supervisory Directors The amount of compensation to members of the Board of Supervisory Directors is determined by the supervisory authority in accordance with Article 7 (10) of the KfW Bylaws. With the last revision in May 2010, compensation to members of the Federal Government who are members of the Board of Super- visory Directors pursuant to Article 7 (1) No. 1 and No. 2 of the KfW Law was set at EUR 0.

In 2015, compensation for other members of the Board of Super- visory Directors pursuant to Article 7 (1) Nos. 3–7 of the KfW Law amounted to EUR 5,100 p. a.; compensation for membership of a Board of Supervisory Directors committee was a standard amount of EUR 600 p. a. for each member. Committee chairs received no special compensation.

Members who join during the year receive their compensation on a pro rata basis.

A daily allowance (EUR 200 per meeting day) is paid and travel expenses and applicable VAT are reimbursed upon request.

The following table provides details on the compensation paid to the Board of Supervisory Directors in ﬁ nancial year 2015; stated amounts are net amounts in thousands of euros. Travel expenses are reimbursed upon submission of receipts and are not taken into account in the table.

KfW Annual Report 2015 Corporate Governance Report | 149 Compensation of members of the Board of Supervisory Directors for the ﬁ nancial year 2015

No. Name Dates of Board of Committee Daily Total membership Supervisory membership1) allowance Directors membership1) EUR in EUR in EUR in EUR in 2015 thousands thousands thousands thousands

1 Dr Wolfgang Schäuble 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 2 Sigmar Gabriel 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 3 Kerstin Andreae 1 Jan.–31 Dec. 5.1 0.6 0.6 6.3 4 Norbert Barthle 31 Jan.–14 Apr. 1.5 0.4 0.2 2.1 5 Jan Bettink 1 Jan.–31 Dec. 5.1 1.2 0.0 6.3 6 Anton F. Börner 1 Jan.–31 Dec. 5.1 0.6 0.2 5.9 7 Hans-Dieter Brenner 1 Jan.–31 Dec. 5.1 0.6 0.8 6.5 8 Frank Bsirske 1 Jan.–31 Dec. 5.1 0.0 0.0 5.1 9 Jens Bullerjahn2) 1 Jan.–31 Dec. 5.1 0.6 0.0 5.7 10 Alexander Dobrindt 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 11 Georg Fahrenschon 1 Jan.–31 Dec. 5.1 2.5 0.0 7.6 12 Robert Feiger 1 Jan.–31 Dec. 5.1 0.6 0.4 6.1 13 Klaus-Peter Flosbach 1 Jan.–31 Dec. 5.1 0.6 0.8 6.5 14 Hubertus Heil 1 Jan.–31 Dec. 5.1 1.8 0.6 7.5 15 Dr Barbara Hendricks 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 16 Prof. Dr Hans-Günter Henneke 1 Jan.–31 Dec. 5.1 0.0 0.6 5.7 17 Reiner Hoﬀ mann 1 Jan.–31 Dec. 5.1 1.2 0.0 6.3 18 Gerhard Hofmann 1 Jan.–31 Dec. 5.1 1.2 0.2 6.5 19 Bartholomäus Kalb 31 Jan.–31 Dec. 5.1 0.6 1.2 6.9 20 Dr Markus Kerber 1 Jan.–31 Dec. 5.1 1.2 0.0 6.3 21 Stefan Körzell 1 Jan.–31 Dec. 5.1 1.2 0.6 6.9 22 Dr Matthias Kollatz-Ahnen2) 6 Feb.–31 Dec. 4.7 0.5 0.0 5.2 23 Dr Gesine Lötzsch 1 Jan.–31 Dec. 5.1 1.2 0.6 6.9 24 Dr Gerd Müller 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 25 Eckhardt Rehberg 23 Apr.–31 Dec. 3.6 0.8 0.2 4.6 26 Joachim Rukwied 1 Jan.–31 Dec. 5.1 0.6 0.8 6.5 27 Dr Nils Schmid2) 1 Jan.–31 Dec. 5.1 0.6 0.2 5.9 28 Christian Schmidt 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 29 Andreas Schmitz 1 Jan.–31 Dec. 5.1 2.5 1.4 9.0 30 Carsten Schneider 1 Jan.–31 Dec. 5.1 1.2 1.0 7.3 31 Peter-Jürgen Schneider2) 1 Jan.–31 Dec. 5.1 0.0 0.4 5.5 32 Holger Schwannecke 1 Jan.–31 Dec. 5.1 1.8 0.0 6.9 33 Erwin Sellering2) 1 Jan.–31 Dec. 5.1 1.2 0.0 6.3 34 Dr Markus Söder2) 1 Jan.–31 Dec. 5.1 1.2 0.0 6.3 35 Dr Frank-Walter Steinmeier 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 36 Dr Norbert Walter-Borjans2) 1 Jan.–31 Dec. 5.1 0.6 0.0 5.7 37 Dr Martin Wansleben 1 Jan.–31 Dec. 5.1 0.6 0.0 5.7 38 Dr Kai H. Warnecke 1 Jan.–31 Dec. 5.1 0.0 0.6 5.7 Total 152.6 27.7 11.4 191.7

1) The amounts had not yet been paid out as of the reporting date 31 December 2015. 2) Amount governed by state law.

150 | KfW Annual Report 2015 Corporate Governance Report Compensation of members of the Board of Supervisory Directors for the ﬁ nancial year 2014

No. Name Dates of Board of Committee Daily Total membership Supervisory membership1) allowance Directors membership1) EUR in EUR in EUR in EUR in 2014 thousands thousands thousands thousands

1 Sigmar Gabriel 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 2 Dr Wolfgang Schäuble 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 3 Norbert Barthle 31 Jan.–31 Dec. 5.1 0.8 0.6 6.5 4 Jan Bettink 1 Jan.–31 Dec. 5.1 1.0 0.0 6.1 5 Anton F. Börner 1 Jan.–31 Dec. 5.1 0.6 0.0 5.7 6 Hans-Dieter Brenner 18 June–31 Dec. 3.0 0.3 0.6 3.9 7 Frank Bsirske 1 Jan.–31 Dec. 5.1 0.0 0.0 5.1 8 Jens Bullerjahn2) 1 Jan.–31 Dec. 5.1 0.6 0.0 5.7 9 Alexander Dobrindt 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 10 Georg Fahrenschon 1 Jan.–31 Dec. 5.1 2.0 0.4 7.5 11 Robert Feiger 8 Jan.–31 Dec. 5.1 0.3 0.8 6.2 12 Klaus-Peter Flosbach 1 Feb.–31 Dec. 4.7 0.5 0.8 6.0 13 Dr Hans-Peter Friedrich 1 Jan.–17 Feb. 0.0 0.0 0.0 0.0 14 Hubertus Heil 1 Jan.–31 Dec. 5.1 1.5 0.6 7.2 15 Dr Barbara Hendricks 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 16 Prof. Dr Hans-Günter Henneke 1 Jan.–31 Dec. 5.1 0.0 0.4 5.5 17 Reiner Hoﬀ mann 18 June–31 Dec. 3.0 0.5 0.0 3.5 18 Gerhard Hofmann 1 Jan.–31 Dec. 5.1 1.0 0.0 6.1 19 Bartholomäus Kalb 31 Jan.–31 Dec. 5.1 0.5 0.8 6.4 20 Dr Markus Kerber3) 1 Jan.–31 Dec. 3.0 0.6 0.0 3.6 21 Stefan Körzell 1 July–31 Dec. 2.6 0.5 0.4 3.5 22 Dr h. c. Jürgen Koppelin 1 Jan.–31 Dec. 5.1 0.5 0.6 6.2 23 Dr Gesine Lötzsch 1 Jan.–31 Dec. 5.1 1.1 0.6 6.8 24 Claus Matecki 1 Jan.–30 June 2.6 0.0 0.2 2.8 25 Dr Michael Meister4) 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 26 Dr Gerd Müller 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 27 Dr Ulrich Nussbaum2) 1 Jan.–10 Dec. 5.1 0.6 0.0 5.7 28 Joachim Rukwied 1 Jan.–31 Dec. 5.1 0.5 0.6 6.2 29 Dr Nils Schmid2) 1 Jan.–31 Dec. 5.1 0.5 0.0 5.6 30 Christian Schmidt 17 Feb.–31 Dec. 0.0 0.0 0.0 0.0 31 Andreas Schmitz 1 Jan.–31 Dec. 5.1 2.0 1.0 8.1 32 Carsten Schneider 31 Jan.–31 Dec. 5.1 1.0 0.8 6.9 33 Peter-Jürgen Schneider2) 1 Jan.–31 Dec. 5.1 0.0 0.6 5.7 34 Holger Schwannecke 1 Jan.–31 Dec. 5.1 1.5 0.6 7.2 35 Erwin Sellering2) 1 Jan.–31 Dec. 5.1 0.8 0.0 5.9 36 Dr Markus Söder2) 1 Jan.–31 Dec. 5.1 0.8 0.0 5.9 37 Michael Sommer 1 Jan.–15 May 2.1 0.3 0.0 2.4 38 Dr Frank-Walter Steinmeier 1 Jan.–31 Dec. 0.0 0.0 0.0 0.0 39 Dr Norbert Walter-Borjans2) 1 Jan.–31 Dec. 5.1 0.5 0.0 5.6 40 Dr Martin Wansleben 1 Jan.–31 Dec. 5.1 0.5 0.0 5.6 41 Dr Kai H. Warnecke 1 Jan.–31 Dec. 5.1 0.0 0.0 5.1 Total 148.5 21.3 10.4 180.2

1) The amounts had not yet been paid out as of the reporting date 31 December 2014. 3) Seat in abeyance until 2 June 2014 (inclusive) 2) Amount governed by state law. 4) No compensation drawn since 16 December 2013.

KfW Annual Report 2015 Corporate Governance Report | 151 There are no pension obligations for members of the Board of Members of the Board of Supervisory Directors are also covered Supervisory Directors. by a directors and oﬃ cers liability insurance policy, which insures them against the risks of ﬁ nancial loss associated with their Members of the Board of Supervisory Directors received no com- actions in their capacity as Supervisory Directors and by a sup- pensation in the reporting year for personal services provided. plemental legal expenses insurance policy. There is currently no excess here either. KfW’s Supervisory Directors acting in their No direct loans were granted by KfW to members of the Board capacity as such are also protected by a special legal expenses of Supervisory Directors in the reporting year. group policy for employees covering criminal action and by a group accident insurance policy.

Frankfurt am Main, 27 April 2016

The Executive Board The Board of Supervisory Directors

Directors Dr Stefan Breuer Dirk Kuhmann Dr Stefan Peiss Dr Frank Czichowski Cherifa Larabi (until 31 December 2015) Andreas Fichelscher Dr Katrin Leonhardt Dr Jürgen Schneider Eberhard Fuchs (interim) Dr Velibor Marjanović (until 31 December 2015) Dr Lutz-Christian Funke Andreas Müller Matthias Schwenk Helmut Gauges Klaus Neumann Roland Siller Werner Genter Werner Oerter (until 31 May 2015) Birgit Spors Dr Volker Gross Stephan Opitz Robert Szwedo (since 1 January 2016) Detlev Kalischer Christiane Orlowski Klaus Weirich Klaus Klüber (until 31 August 2015)

Members of the Management Board of KfW IPEX-Bank GmbH Klaus R. Michalak (CEO) | Christian K. Murach | Markus Scheer | Andreas Ufer KfW IPEX-Bank is responsible for the international export and project ﬁ nance business. Since the beginning of 2008, it has been a legally independent subsidiary of KfW which is subject to the German Banking Act (Kreditwesengesetz – KWG) and banking supervisory regulations.

Managing Directors of DEG – Deutsche Investitions- und Entwicklungsgesellscha mbH Bruno Wenn (Chairman) | Christiane Laibach | Philipp Kreutz DEG was founded in 1962 and has been a wholly-owned subsidiary of KfW Group since 2001. DEG is one of the largest European development fi nance institutions for long-term project and corporate fi nancing. It has been fi nancing and structuring investments by private companies in developing and emerging market countries for more than 50 years.

KfW Annual Report 2015 Executive Board, Directors and Managing Directors of KfW Group | 153 Members and tasks of the Board of Supervisory Directors

The Board of Supervisory Directors supervises the conduct of the bank’s business and the administration of its assets. It approves, among other things, the annual ﬁ nancial statements. The Board of Supervisory Directors consists of 37 members. In the year under review, the Chairman was the Federal Minister of Finance, and the Deputy Chairman was the Federal Minister for Economic Aﬀ airs and Energy.

Sigmar Gabriel Hans-Dieter Brenner Christian Görke Federal Minister for Economic Aff airs Former Chief Executive Offi cer Deputy Minister President and Energy Helaba Landesbank Minister of Finance of the State of Deputy Chairman Hessen-Thüringen Brandenburg (1 January 2015 – 31 December 2015) Representative of industrial credit Member appointed by the Chairman German Bundesrat (since 1 January 2016) Frank Bsirske (since 1 January 2016) Chairman of ver.di – Dr Wolfgang Schäuble United Services Trade Union Hubertus Heil Federal Minister of Finance Representative of the trade unions Member of the German Bundestag Chairman Member appointed by the (1 January 2015 – 31 December 2015) Jens Bullerjahn German Bundestag Deputy Chairman Deputy Minister President (since 1 January 2016) Minister of Finance of the State of Monika Heinold Saxony-Anhalt Minister of Finance of the State of Kerstin Andreae Member appointed by the Schleswig-Holstein Member of the German Bundestag German Bundesrat Member appointed by the Member appointed by the (until 31 December 2015) German Bundesrat German Bundestag (since 1 January 2016) Alexander Dobrindt Norbert Barthle Federal Minister of Transport Dr Barbara Hendricks Member of the German Bundestag and Digital Infrastructure Federal Minister for the Environment, Member appointed by the Nature Conservation, German Bundestag Georg Fahrenschon Building and Nuclear Safety (until 14 April 2015) President of the German Savings Banks Association (DSGV) Prof. Dr Hans-Günter Henneke Jan Bettink Representative of the savings banks Managing Member of the President of the Association of Executive Committee of the German Pfandbrief Banks Robert Feiger Federation of German Districts (DLT) Representative of the mortgage banks Chairman of the Federal Executive Representative of the municipalities Committee of the IG Bauen-Agrar- (until 31 December 2015) Anton F. Börner Umwelt trade union (IG Bau) President of the Federation of Representative of the trade unions Reiner Hoff mann German Wholesale, Foreign Trade Chairman of the German Trade Union and Services (BGA) Klaus-Peter Flosbach Confederation (DGB) Representative of trade Member of the German Bundestag Representative of the trade unions Member appointed by the Dr Uwe Brandl German Bundestag Gerhard Hofmann President of the Member of the Board of Managing Bayerischer Gemeindetag Directors of the National Association Representative of the municipalities of German Cooperative Banks (BVR) (since 1 January 2016) Representative of the cooperative banks

154 | KfW Annual Report 2015 Members and tasks of the Board of Supervisory Directors Bartholomäus Kalb Dr Nils Schmid Dr Markus Söder Member of the German Bundestag Minister of Finance and Economics Bavarian State Minister of Finance, Member appointed by the of the State of Baden-Württemberg Regional Development and German Bundestag Member appointed by the Regional Identity German Bundesrat Member appointed by the Dr Markus Kerber German Bundesrat Director General of the Federation of Christian Schmidt German Industries (BDI) Federal Minister of Food and Agriculture Dr Frank-Walter Steinmeier Representative of industry Federal Minister for Foreign Aﬀ airs Andreas Schmitz Stefan Körzell Member of the Presidency of the Prof. Dr Georg Unland Member of the Executive Board of the Association of German Banks (BdB) Saxon State Minister of Finance German Trade Union Confederation (DGB) Chairman of the Management Board Member appointed by the Representative of the trade unions of HSBC Trinkaus & Burkhardt AG German Bundesrat Representative of the commercial banks (since 1 January 2016) Dr Matthias Kollatz-Ahnen Senator of Finance for Berlin Carsten Schneider Dr Norbert Walter-Borjans Member appointed by the Member of the German Bundestag Minister of Finance of the State of German Bundesrat Member appointed by the North Rhine-Westphalia (6 February 2015 – 31 December 2015) German Bundestag Member appointed by the German Bundesrat Dr Gesine Lötzsch Peter-Jürgen Schneider Member of the German Bundestag Minister of Finance of the State Dr Martin Wansleben Member appointed by the of Lower Saxony Chief Executive of the Association of German Bundestag Member appointed by the German Chambers of German Bundesrat Commerce and Industry (DIHK) Dr Gerd Müller Representative of industry Federal Minister for Economic Holger Schwannecke Cooperation and Development Secretary General of the German Dr Kai H. Warnecke Confederation of Skilled Cra s (ZDH) Managing Director Eckhardt Rehberg Representative of the skilled cra s Haus & Grund Germany Member of the German Bundestag Representative of the housing industry Member appointed by the Erwin Sellering German Bundestag Minister President of the State of (since 23 April 2015) Mecklenburg-West Pomerania Member appointed by the Joachim Rukwied German Bundesrat President of the German Farmers’ (until 31 December 2015) Association (DBV) Representative of agriculture

KfW Annual Report 2015 Members and tasks of the Board of Supervisory Directors | 155 Photographs

KfW Photo Archive/Jens Steingässer | cover (le ), pages 44, 63 (le ) KfW Group/Rüdiger Nehmzow | cover (right), cover inside (both), cover reverse (le ), pages 4 (top), 6–9, 12/13, 34–37, 57, 58 (le ), 63 (right), 64 (le ) KfW Photo Archive/photothek.net | cover reverse (middle), pages 25, 100 (le ) Rijkswaterstaat/– | cover reverse (right), page 47–49 KfW Group/Claus Morgenstern | pages 4 (middle le ), 68/69 Nordsee One GmbH/– | pages 4 (middle 2nd from right), 88 (le ) picture alliance/dpa/dpaweb | pages 4 (middle right), 102 picture alliance/AP Photo | pages 10/11 fotolia/Horst Schmidt | pages 14/15 KfW Group/Susanne Schmidt-Dominé | pages 17, 58 (right), 60 KfW Group/Heinrich Völkel | pages 19–23, 26–29 (big motifs) KfW Group/Frank Blümler | page 24 KfW Group/Alexander Kempf | pages 26 (small), 27 (small right) Sabine Kristan | page 27 (small le ) KfW Sti ung/Jens Steingässer | page 30 Subitec GmbH/– | pages 38 (top), 40 laif/Thomas Ernsting | page 38 (bottom) laif/Tobias Gerber | page 41 (top) PCC SE/– | page 41 (bottom) Mobisol/– | page 42 (both) movik.de/Clemens Wronski | page 43 Getty Images/HeroImages | page 45 Getty Images/Westend61 | page 46 laif/Joao Luiz Bulcao/Polaris | page 51 Thomas Trutschel/photothek.net | page 52 (both) Little Sun/Michael Tsegaye | pages 54/55 KfW Photo Archive/Thorsten Futh | pages 61, 62, 64 Inkubus UG/Sebastian Voß | page 71 pape oder semke Architekturbüro/– | pages 72/73 RWE Innogy GmbH/– | pages 88/89 | the image illustrates the RWE oﬀ shore wind farm North Sea East www.sylent-press.de/– | page 90/91 KfW Photo Archive/Fred Hoogervorst | page 100 (right) Jowat SE/– | page 103 Ohorongo Cement/Image Photography | page 105 Bundesregierung/Bergmann | page 140

156 | KfW Annual Report 2015 Photographs Imprint

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KfW Annual Report 2015 Imprint | 157

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