Tracking Climate Finance in the German Building Sector: A Landscape of finance flows for building decarbonisation in 2016

Abstract: Germany’s Energy Concept aims to reduce the building sector’s primary energy demand by 80% compared to 2008 levels, of which 20% are to be achieved by 2020. This requires significant investment in integrated renewables and thermal. Public funds cannot finance such transition alone. Therefore, it is crucial to not only understand current investment levels and potential investment gaps, but also to analyse how public finance can leverage private investment. This thesis tracks public and private climate-specific investment in the German building sector in 2016. Finance flows are tracked from their source, through intermediaries and financial instruments, to the beneficiary measures and the building type. The thesis seeks to answer three questions. First, how is climate finance organised in terms of key funding sources, investors, financial instruments and mitigation activities. Second, what are the main trends in the last five years and how are they aligned to sector targets. The thesis concludes that in 2016, climate-specific investment in the German buildings sector almost reached EUR 30 billion, of which EUR 24 billion went to thermal and electrical efficiency with a 67% share to new buildings. Households invested the most, with close to EUR 19 billion. The development bank KfW plays the key role in facilitating private investment through its concessional loan programmes. The Ministry BAFA provides grants for innovative renewable and energy efficiency measures. Regional banks have proven to play a role in climate finance, yet due to data gaps, their contribution was not quantified. This thesis also finds that common climate finance reporting standards and tracking methodology are needed to enable accurate climate finance tracking and a fair comparison between different publications.