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Side Note 5. DEG – Entrepreneurial Development Cooperation
DEG, a development finance institution and subsidiary of KfW, invests in projects that
contribute to sustainable development in all sectors of developing and emerging country
economies, from agriculture to infrastructure and manufacturing to services. DEG
also invests in the financial sector in order to facilitate reliable access to capital locally.
To date and with around €12 billion in financing, DEG has worked together with more
than 1,700 companies and contributes to facilitating entrepreneurial investments.
DEG systematically applies the IFC Performance Standards (IFC PS) to all of its
investments for environmental and social due diligence. All projects are screened
against this international standard, gaps are identified, and roadmaps are defined and
negotiated between DEG and its clients on how to reach compliance over time. Water
and water-related ecosystem services are considered critical from the environmental
and social perspective, in particular as they represent key indicators for climate
change impacts. As the IFC PS do not provide a tool for assessing company- and
basin-related water risks in itself, WWF together with DEG developed such a tool.
DEG’s Sustainability Department has applied this to its due diligence process for and
with selected clients in high-risk sectors and regions since 2012. It gives added value
and information to the environmental and social due diligence process and helps
define and prioritise an action plan’s measures.
Examples of mitigation measures addressing company-related water risks are water
treatment facility installations in Bangladesh’s textile industry or Vietnam’s leather
industry, covered directly through DEG’s investment or through accompanying
measures supported with funds either from DEG or Germany’s Ministry of Economic
Cooperation and Development (BMZ). Basin-related risks are more challenging to
address as they require the active engagement of local and national governments
as well as other relevant stakeholders. One exemplary approach was with a client
in Panama – DEG helped launch a hydropower basin initiative on the Chiriquí Viejo
River to assess cumulative impacts and risks of the existing and new hydropower
projects along the river.
THE IMPORTED RISK Germany’s Water Risks in Times of Globalisation | 57