The Impact.Climate.Returns. strategy has given DEG’s financing and advisory services an even sharper focus on promoting high-impact and climate-protecting projects. DEG supports its customers in their transformation as they step up their sustainable business practices and strengthen their resilience in the face of global challenges such as climate change, resource security and employee training, which contributes directly to their business success.
Pillar II of the further developed DERa captures DEG’s role in supporting its customers in their transformation processes.
The second pillar of the DERa – “Customer transformation promoted by DEG” – looks at four elements: structuring of transformation measures as part of the financing process, implementation of international environmental and social standards, transformation support measures, and additional impact/climate commitments, i.e. if customers provide special impact climate services. The DERa documents transformation milestones and objectives that DEG agrees with its customers for these mechanisms and measures progress on implementation.
Structuring
DEG closely examines each partner company and works with it to structure the financing. This often results in the initiation of transformative steps, for example in terms of the use of funds, the publication of audited financial statements to increase transparency or improvements in the corporate governance structure. These in turn put the company in a much better position and secure the impact contributions achieved.
DEG has agreed with almost 42% of the financial institutions that their use of funds will contribute directly to achieving the SDGs. These DEG customers commit to providing lending for micro- and small enterprises and women-led companies or for transactions that contribute to protecting the environment and climate.
By working with DEG and its requirements, around 21% of the companies have significantly improved their corporate governance structures.
Implementing environmental and social standards
DEG’s comprehensive environmental and social assessment as part of the financing process examines the potential effects and risks of the financing. The first step of the environmental and social impact assessment is the screening, which involves categorising all financing based on possible environmental and social impacts and risks. The categorisation determines the content and depth of the assessment as well as the scope of contractual agreements. DEG assesses the risks and the customer’s efforts to mitigate them. Action plans are agreed with the customer in the event of any gaps. Customers in the portfolio report annually on their compliance with the environmental and social standards and, if agreed, on the implementation progress of their environmental and social action plan. Relevant data on compliance with standards and the customer’s environmental and social performance is included in the annual recording of customers’ development impacts via the DERa. DEG’s environmental and social risk management and the underlying standards are continually developed.
The quality of DEG customers’ environmental and social risk management systems (ESMS), which is also directly reflected in the DERa rating, is in line with the previous year’s figures:
85% of the funds in the DEG portfolio had an adequate ESMS, and 86% had clearly defined responsibilities and adequate environmental and social expertise. 75% of the financial institutions had a good or very good environmental and social risk management system in place.
92% of NFS customers (corporates and project finance) already have such management systems, and more than two-thirds of these are good or very good.
Advisory and promotional services
DEG offers additional advisory and promotional services to actively support customers in their transformation.
In particular, the promotional programmes include Business Support Services (BSS) and develoPPP, both provided by the subsidiary DEG Impulse.
The BSS programme helps DEG’s financing customers to meet their business challenges – particularly those associated with sustainability and climate transformation – with targeted advice and by co-funding the costs. Corporate governance, further training of employees and suppliers, risk management and environmental and social risk management are further focal points of BSS.
More about Business Support Services (BSS)With the develoPPP programme run by the German Federal Ministry for Economic Cooperation and Development (BMZ), DEG Impulse promotes private-sector projects in areas where entrepreneurial opportunities and development policy potential coincide. It achieves this through long-term collaboration. As a DEG subsidiary, it particularly supports existing and future financing customers of DEG.
The following development impacts were achieved in 2024:
improved employment conditions for approximately 10,300 people
creation of more than 3,900 new jobs
increase in income of at least 10% for almost 94,700 people
895 million litres of water saved or treated
skills acquisition for more than 45,200 people through training courses
introduction or expansion of environmental and/or social standards in around 2,950 businesses
During the past year, DEG Impulse made new commitments to 45 develoPPP projects amounting to a total project volume (including company contributions) of EUR 30 million. This included nine projects with German companies. As part of a special competition, 12 projects are being implemented in Ukraine. Through this programme, DEG Impulse has provided co-financing of up to EUR 2 million for measures with development impact by companies. The company receives up to 50% of the project costs.
A total of 69 of the develoPPP projects carried out by DEG were concluded in 2024.
More about develoPPPDEG Impulse also oversees the BMZ-funded Helpdesk on Business and Human Rights of the Agency for Business and Economic Development (AWE) on behalf of DEG.
The Helpdesk on Business and Human Rights is a support service of the Federal Government through which DEG Impulse advises companies individually, confidentially and free of charge on human rights and environmental due diligence.
More about Business Support Services (BSS) DEG ImpulseMore about the Helpdesk
on Business and Human RightsImpact/Climate Commitment
Many customers are pursuing their own transformation pathways and impact and climate strategies that reflect their high level of commitment. They are willing to set ambitious targets to achieve them. DEG works with these customers to provide them with support in development and implementation.
develoPPP: tackling South Africa’s energy, climate and water crisis
For more than 15 years, South Africa has been suffering a prolonged energy crisis. With blackouts lasting for up to 12 hours in some regions, the situation continues to hamper the country’s growth potential. At the same time, South Africa’s unique biodiversity is under threat from the impacts of climate change.
To address these challenges, DEG Impulse has now launched a develoPPP project together with two of South Africa’s leading banks: FNB South Africa and RMB (Rand Merchant Bank), both part of FirstRand Bank. DEG Impulse has also been supporting the long-standing DEG customer through its Business Support Services in the area of water security.
FirstRand Bank is investing around EUR 1.9 million of its own funds in the develoPPP project, a figure that is being matched by DEG Impulse with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ).
The project aims to shape South Africa’s transition to a low-carbon, climate-resilient country in a socially responsible way. To this end, it is developing financial instruments that mobilise private capital specifically for investments in energy, climate and biodiversity.
The develoPPP project is helping FNB to offer its business customers better access to renewable energy. Through an advisory service, the aim is to provide sustainable energy solutions that cover customers’ energy needs while contributing to climate resilience. Protecting South Africa’s unique biodiversity is another focus: RMB plans to develop five “environmental impact bonds” as a new asset class for institutional investors. These will be designed to mobilise private capital for biodiversity projects in the region.
FirstRand Bank is also working on water security, again assisted by Business Support Services from DEG Impulse. In a first step, a comprehensive analysis has examined the water-related financial risks in FirstRand’s portfolio. The initial findings show that around 95% of the agricultural lending portfolio could be affected by water scarcity. This information will serve as a basis for targeted measures to reduce risks and develop new financial products, particularly for the agricultural sector.
The second phase, which is currently being planned, will involve the launch of a collective action programme in a water catchment area that is under particular threat. The goal is for companies to work together to strengthen both water security and the financial resilience of agricultural enterprises. Alongside tailored financing solutions (e.g. for efficient irrigation) and training provision for businesses, the project will also provide impetus for water management strategies in various catchment areas. For FirstRand, the project is an opportunity not only to minimise risk, but also to enhance its reputation and expand its business.
