Report to Society 2024

Environmental

Products with a sustainability effect

Incentives for targeted investments in sustainability

Transforming means investing: Companies have to adapt or even restructure their production processes, delivery routes and logistics. Conventional credit financing is not always suitable for this, as it usually only considers risks and returns in economic terms. Long-term positive effects of sustainable transformation processes are usually ignored.

This is why there is now a wide range of financing solutions that specifically take sustainable criteria into account and incentivise ESG-compliant investment decisions. The use of suitable instruments for this purpose is also politically intended: the European Union, the European Investment Bank, as well as the Federal Government and the Bundesbank, aim to place greater focus on investments that help manage environmental and climate risks, have positive social effects, and improve corporate governance – thereby also contributing to the overall stability of the financial system.

So-called Green Bonds are now a widely used instrument. The capital generated by them is earmarked for a specific purpose, so it may only be used for sustainable financing, for example for investments in the energy-efficient refurbishment of company buildings or the conversion of vehicle fleets. Green bonds are issued by governments, companies or financial institutions. Municipalities are now also issuing green bonds. Last year, for example, the City of Munich, with the help of BayernLB, became the first German municipality to place a green bond, the proceeds of which are to be channelled into climate and environmentally relevant infrastructure projects.

Motor on the path to sustainable transformation

Has your company already addressed the issue of sustainable financing?
(as a percentage of financial decision-makers surveyed; n = 145)

Source: LBBW, FINANCE/F.A.Z. Business Media | research

A special form is the “green covered bond”, which is specifically secured by real estate and used to refinance environmentally and climate-friendly projects. Some of the more than 40 savings banks with their own covered bond issues have now entered this specialised segment. These include, for example, Sparkasse Pforzheim-Calw, which issued its first green covered bond in 2024, and savings bank Hannover, which is one of the pioneers among the savings banks in this field with its green covered bond issued in 2021. Another good example is Kreissparkasse Köln, which placed a green covered bond with an issue volume of 250 million euros in January 2025. The bond is used to refinance customer loans for the construction or acquisition of energy-efficient and environmentally friendly residential properties. It was a huge success and was oversubscribed several times.

ESG-linked loans are another option for financing sustainable investments. These loans linked to ESG criteria are becoming increasingly popular and have tripled in the last two years, according to an LBBW study. In contrast to green bonds, the loan funds are not earmarked for a specific purpose – instead, the sustainable development of the company as a whole is used as the basis for assessment. If it achieves defined sustainability targets, the financing conditions also improve.

For their commercial customers, the savings banks offer access to various financing options for sustainable investments. This includes both earmarked transformation financing (e.g. the transformation loan, S-transformation leasing or subsidies) and non-earmarked transformation financing, such as S-ESG-linked loans.

One of the strengths of the savings banks is their ability to work with partners in the financial group to develop and offer customised concepts in line with customers’ plans and concerns that also meet complex requirements.