Sustainable business practices in line with the SDGs are fundamentally important to DEG’s work. With its commitment and its international network, it acts in partnership with its customers to enable and accelerate transformation and to improve the living standards of people in developing countries.
As part of its focused impact and climate strategy, which it began to implement in 2022, DEG has identified three key fields of action, which are outlined in its “DEG Impact/Climate Commitment”.
focus even more strongly on its customers’ positive development impact on society and the environment
gradually reduce carbon intensity from 2025 onwards and neutralise emissions attributable to DEG so as to achieve a net-zero portfolio by 2040
at the same time, actively help customers with their own transformation in order to strengthen their resilience and significantly increase their development impact.
DEG will regularly record and review progress on these tasks, report on them and adapt them where necessary.
DEG is committed to increasing its customers’ contribution to the economic, social and environmental objectives (Sustainable Development Goals, SDGs), thereby continuously improving the positive development impact of our investments.
To achieve the impact and climate targets it has set itself, DEG has, among other things, reorganised its Sustainability Department and created new resources in other departments responsible for promotional business. In the Sustainability Department, for example, the topics of environmental and social risk management, impact and climate are addressed jointly and holistically. In addition, three impact and climate specialists help the teams to actively incorporate these topics into their work with customers from the outset.
DEG also invested extensively in the competency of its employees in 2022, developing and implementing a training programme to expand knowledge of impact and climate throughout DEG and deepen it in key areas such as biodiversity, gender and carbon accounting.
Since 2017, DEG has been recording development impact with its internationally recognised Development Effectiveness Rating (DERa), which it began updating in 2022. Further aspects are to be included in the existing five dimensions, and both positive and potentially negative impacts will be recorded in future. The updated DERa will be applied to the portfolio from 2024 onwards and then reported on for the first time in the annual Development Report in mid-2025.
DEG is committed to achieving a net-zero portfolio by 2040. Its climate strategy is based on the following hierarchy of targets:
1. avoiding greenhouse gas emissions
2. working with our customers to implement climate-related transformation pathways to reduce greenhouse gases (GHG) and strengthen climate resilience, and
3. neutralising unavoidable GHG portfolio emissions through direct investment in carbon sequestration projects.
In line with the 1.5 oC target of the Paris Agreement, DEG is committed to reducing the total carbon footprint attributable to DEG in the long term. Since 2022, DEG has been on a scientifically based reduction and transformation pathway to reducing the GHG intensity of its investments, with the goal of reducing GHG intensity by up to two-thirds.
The remaining, unavoidable GHG emissions of our customers that arise from their direct processes and operations (Scope 1) and from indirect energy consumption (Scope 2) will be neutralised in stages from 2025 onwards. From 2040, all remaining GHG emissions attributable to DEG-financed projects that are certified according to internationally recognised standards will be neutralised each year.
In 2022, DEG pressed ahead with the implementation of its climate strategy, which includes a range of components, to ensure compliance with a Paris-compatible reduction pathway from 2025 onwards. At the time the strategy was developed in 2021, the GHG emissions funded by DEG were initially assessed solely via the “Joint Impact Model” (JIM) using balance sheet indicators and estimated at 1.4 million tCO2e for the 2020 financial year. In mid-2022 – partly as a result of certain methodological adjustments – the JIM calculated the DEG-funded GHG emissions at 2.1 million tCO2e for the 2021 financial year.
Although DEG continuously supports the JIM Foundation’s methodological development, it was decided to validate the modelled baseline emissions for 2021 on the basis of available customer data. For this purpose, more than 85% of portfolio customers and portfolio emissions were analysed based on available customer GHG data from the end of 2022 up to March 2023 in order to gradually increase data quality in reporting (PCAF Data Quality Score) and to obtain a more realistic baseline scenario for DEG-financed GHG emissions and GHG intensity from our ordinary business activities as a development bank. This made it possible to increase the data quality for industrial customers and infrastructure projects, in some cases significantly. We continued to use the JIM for our indirect forms of finance, as no real data is available in this area. As a result, DEG-funded GHG emissions for the base year of 2021 increased to 3.0 million tCO2e.
Detailed, science-based data collection and the knowledge thereby gained about DEG portfolio customers and their GHG intensity allows us to pilot CO2 budget approaches for our industrial customers and infrastructure projects and to develop appropriate transformation approaches for high emitters that contribute to climate-friendly, social and sustainable economic development in partner countries. In the medium term, we plan to test internal CO2e pricing in order to assess the climate impact and decarbonisation pathways of our investments in monetary terms as well.
To ensure the neutralisation of unavoidable GHG portfolio emissions with high-quality sink certificates, DEG has already invested in some initial forestry and carbon sequestration projects, for example through the Livelihoods Carbon Fund 3 (LCFIII, see Development Report 2021, page 9). It actively cooperates with various initiatives and stakeholders in this process.
More information about climate commitment:
DEG is committed to working with its customers to ensure a tailored approach to sustainable transformation and climate-resilient business in line with the SDGs – in its management and internal operations, in its supply chains and in regional contexts. Helping companies navigate their transformation creates added value and, at the same time, ensures the commercial success of DEG and its customers.
In 2022, a first important step was taken to support DEG’s customers with even more tailor-made services with the founding of DEG subsidiary DEG Impulse. DEG Impulse manages the promotional programmes BSS (Business Support Services) and develoPPP, and implements the consultancy mandate of the Agency for Business & Economic Development (Agentur für Wirtschaft & Entwicklung – AWE) with the Helpdesk on Business and Human Rights (Helpdesk Wirtschaft und Menschenrechte) jointly with the German GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit) in Berlin. DEG Impulse’s products and services are closely linked to DEG’s strategic transformation goals. These promotional and advisory services make an important contribution to the transformation of DEG’s customers and to increasing the added value of development policy. For example, it is developing new products such as the “Gender Smart Opportunity Assessment”, “Digital Maturity Diagnostic Survey” and “Climate Advisory and Reduction Initiative” (CARI).
More information about transformation:
DEG’s customer Corporación Agricola S.A. (Agri-Corp) has established more sustainable production processes in the rice milling sector, thus cutting costs and saving resources. The rice processing company Agri-Corp was founded in 2000 and is the market leader and a major employer in Nicaragua with several mills and production facilities, including at its main sites in Chinandega and Tipitapa. Four mills process around 185,000 t of rice a year, representing around 60% of its revenue. The company also sells regional food brands as well as salt and eggs from its own farms and from other suppliers.
Agri-Corp buys paddy rice from national producers and international suppliers and processes it into rice of different qualities. The company uses by-products such as broken grains to produce rice flour, which is enriched with nutrients and vitamins and then added to other end products. In addition, the rice bran is used to manufacture cooking oil and brewers rice is sold as a raw material for beer. In all processes, the company relies on modern technologies, energy efficiency and tapping the potential offered by circular production. These measures enhance the company’s competitive position because they help reduce operating costs. At the same time, they facilitate the sustainable use of natural resources in a very energy- and water-intensive industry.