International CEO Forum VIII December 5 to 7, 2011 Thimphu, Bhutan

1. International CEO Forum VIIIDecember 5 to 7, 2011Thimphu, Bhutan Conference on „Financing for Development in Pursuit of Gross National Happiness“ Environmental Finance Approaches of KfW Uwe Ohls, Director General Europe and Asia

2. Agenda KfW’s mission and the principle of sustainability 1 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s international activities 3 2

3. KfWFinancing with a public mission • Promotional bank of the Federal Republic of Germany • Shareholders: 80% Federal Republic,20% federal states • Balance sheet total at end 2010: EUR 441.8 billion • Commitments 2010: EUR 81.4 billion • Around 4,530 employees (2010) 3 3 3

4. KfWFramework Guiding Principle: Sustainability Mission KfW is dedicated to the sustainable development of economic, ecological and social living conditions in Germany and abroad • Promotional mandate: Law concerning KfW • Framework/ Economic system: Social market economy • KfW supports the environmental policy of Germany and the EU • KfW’s decisions follow the Federal Government’s Sustainability Strategy • KfW is a signatory of the UNEP “Statement by Financial Institutions on the Environment and Sustainable Development” • Environmental and Social Principles of KfW Bankengruppe 4

5. Gross National Happiness and Sustainability Sustainability Strategy of the German Federal Government • These multiple dimensions cannot be measured by GDP. New methods of measuring progress and well-being are required • Example for efforts in Germany: New Enquete Commission of the German Federal Government on “Growth, Prosperity and Quality of Life” • Central cornerstone for progress and well-being: Sustainability Vision: • Intergenerational equity • Quality of life • Social cohesion • International responsibility Important areas, e.g.: • Climate and energy, environment • Sustainable use of raw materials • MDGs/ health, education, food security • Demographic change • Cooperation and participation

6. Example “Sustainability Research” KfW Sustainability Indicator Objective: The KfW Sustainability Indicator, published since 2007, provides quantitative information about the progress of sustainable development in Germany. Concept of the Indicator: Consists of 37 basis indicators, which are summarised in threekey areas of sustainability: Economy, Environment, Social Cohesion. Via the Sustainability Indicator KfW participates in the ongoing debate: How are economic performance AND social progress properly measured Examples: • Sustainable economic activity (including innovations), employment, public debt • CO2 emissions, renewable energies, water quality, air quality, biodiversity • Health, education/ graduation rates, gender issues • Political commitment/ participation in elections, integration 6 6

7. Agenda KfW’s mission and the principle of sustainability 1 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s international activities 3 7

8. KfWA bank with a wide array of functions Domestic promotion International business We ensure internationalisation We promote development We promote the German economy Promotion of SMEs, business founders, start-ups Promotion of construction of new housing and modernisation as well as education Municipal infrastructure projects and global loans in Germany/Europe Business AreaSME Bank International project and export finance Promotion of developing and transition countries Business AreaPrivate Client Bank Business Area Municipal Bank Business Area Promotion of Developing and Transition Countries Business AreaExport and Project Finance Commitments 2010: 64.3 bn EUR Commitments 2010: 9.3 bn EUR Commitments 2010: 5.7 bn EUR Promotion of environmental and climate protection: 25.3 bn

9. KfWEnvironmental Financing 25.3 19.8 17.6 • KfW is one of the most important promoters of environmental and climate protection • in Germany • Key contribution towards achieving the Federal Government's climate protection and energy policy targets • Record promotional volume achieved for environmental and climate protection in 2010:around a third of total promotional activities in Germany and abroad • 2010: 16.9 million tons of CO2-reduction (preliminary estimation) in Germany and abroad • Main focus: Energy efficiency (EUR 11.5 bn) and renewable energies (11.3 bn)

10. KfW Environmental Programmes in Germany General Environmental Protection Energy Efficiency Renewable Energies Innovative EnvironmentalProtection SME ERP Environmental and Energy Efficiency Programmes Renewable Energies Programmes BMUEnviron- mental Innovations Programme Municipalities (incl. municipal companies and social facilities) Municipal Infrastructure Programmes Energy Efficiency Programmes for Buildings PrivateClients KfW Carbon Fund

11. Example:KfW Energy Efficiency Programmes in Germany Promotion of CO2- reduction in the field of residential building since 1996 • Framework: • The German Buildings Energy Saving Directive (EnEV) which covers: • Energetic permissible limits for new and the rehabilitation of existing residential and non-residential buildings with regard to building shell and techniques • Requirements with regard to heating, coolingand air conditioning techniques • Energy certificate and calculation methods • Effects of promotion: • Sustainable reduction of CO2-emissions • Promotion for SMEs and creation of jobs/ safeguarding employment • Definition of energy standards (“KfW-Efficiency House”) based on administrative law

12. Example: KfW Renewable Energies Programmes in Germany Framework: Electricity generation plants in accordance with the "Law on the New Regulation of Rights of Renewable Energies in the Electricity Sector" • Measures/ Investment Examples • Solar energy • Off-shore wind energy • Biomass/ biogas; combined heat and power biomass plants • Heat networks • Deep geothermal drilling • Effects of promotion: • Sustainable reduction of CO2-emissions • Stabilisation of energy supply • Creation of jobs/ safeguarding employment • etc.

13. Agenda KfW’s mission and the principle of sustainability 1 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s international activities 3 13

14. Example: KfW Development Bank As development bank of the Federal Government KfW funds investments and accompanying advisory services in developing and transition countries. Framework/ General Principle: Global Sustainable Development Development Goals Strong focus on Millenium Development Goals (MDGs), including • the sustainable improvement of the economic and social conditions of the people and the reduction of poverty and • climate and environmental protection Project selection Focus on development impacts and sustainability of the projects/use of indicators Examples “Climate and Environment” Projects appraised based on their impact on reduction of GHG emissions, climate adaptation,sustainable use of resources, biodiversity and forest protection, etc.

15. Examples from our project work (1)Biogas Support Programme Nepal • Problem • Traditional cooking fuels and technologies are inefficient and lead to deforestation • Approach • Cooking energy for rural households via small biogas plants • Plant construction by local companies, approx. 250,000 biogas plants to date • Capacity Building • Impacts • Sustainable, reliable and environmentally friendly energy supply for some 1,250,000 Nepalese people • Reduced deforestation, reduced CO2 emissions • Reduced in-house pollution • Reduced health problems esp. for women and children • Reduced time for collection of fuel wood and dung, etc.

16. Examples from our project work (2) Watershed Development Programmes in India • Approach • Catchment based approach to soil and water conservation • Partners (since 1992): NABARD (National Bank for Agriculture and Rural Development) and NGOs • Six projects with 230 watersheds in total with around 300,000 hectares in 4 States (~350,000 villagers) / Contribution of KfW/ the German Government: EUR 70.6 million overall • Impacts • Support for Self-help groups/ gender • Sustainable, reliable and environmentally friendly energy supply • Reduction of erosion and increase of groundwater level • Increase of productivity of soil and natural resources • Improved provision of potable water • Improved employment opportunities in project area • Increased income from agriculture • Advancement of self-administration of local communities

17. KfW Development BankSelected impacts 2010 water supply for 11.0 million people the health of some 190.0 million people electricity supply for 21.0 million people access to primary and secondary education for 18.0 million children, teenagers and adults KfW Development Bank’s new programmes in 2010 improve Area of environment and climate in 2010: • 58% of KfW Development Bank’s commitments in 2010 contribute to environmental protection, climate and resource protection • Expected reduction of CO2 emissions in partner countries: 10.3 million tonnes annually

18. Agenda KfW’s mission and the principle of sustainability 1 KfW’s environmental activities in Germany 2 Conclusions 4 KfW’s international activities 3 18

19. Conclusions (1) • Core challenges of our times: • Finding ways to maintain or improve economic and social living conditions, especially for the disadvantaged among us • Fighting Climate change and managing the growingscarcity of energy and natural resources Development banks should continue their mission to support sustainable development of economic, social and business conditions on a global scale. As the framework in which development banks operate is subject to change, a continuous process of re-defining our roles and products in the light of social and ecological sustainability is essential. 19

20. Conclusions (2) • In addition to quantitative economic measures of growth • measuring the different aspects of prosperity and • considering the impacts of current activities for future generations • are important to achieve well balanced and sustainable development. • The ongoing debate on measures of prosperity shows the challenges attached to new approaches Concept of Gross National Happiness provides relevant hints and new impulses Continuous process of reviewing necessary: “How do we want to live today and in the future?” 20

21. Contact Uwe Ohls KfW Bankengruppe Director General Palmengartenstrasse 5–9 Europe and Asia 60325 Frankfurt am Main Fon +49 69 7431 – 2540 Fax +49 69 7431 – 2944 uwe.ohls@kfw.de 21 21 21

22. Back-upKfW livescorporate responsibility (CSR) and sustainability CSR “Living and promoting corporate responsibility” Promoting sustainable projectsParticular support is given to projects which make a positive contribution to sustainability goals: environmental, climate and resource protection, education and innovation. Investing money sustainablyOwn funds and investments are responsibly invested under sustainability aspects. Sustainable support of social commitmentTaking responsibility as a good corporate citizen through initiatives for culture, environment and the customers. Promotion of voluntary involvement. Sustainable business operations High standards and goals for environmental protection applied to KfW’s own buildings. 22