Weak economy and shift of focus push Germany's corporations to reduce climate investments – KfW

A challenging economic situation for many large corporations has led to shrinking investment budgets and shifting priorities among large corporations in Germany in 2024, significantly reducing the share of investments made into climate and sustainability, said state-owned development bank KfW.

KfW surveyed more than 13,000 companies of all sizes for its “climate barometer” report about their investments in measures that prevent or reduce greenhouse gas emissions. It found that the volume of their domestic climate protection investments fell by 5.5 percent to 80 billion euros (adjusted for inflation: 7.8%). This development was similar to total investment shifts, so the share of overall company investments attributable to climate was almost stable and reached 16.5 percent last year.

There is no "structural slump in climate investments," the bank said. Instead, it pointed out, the reference year 2023 was characterised by unusually high investments in this area that put the 2024 figures into perspective. 

However, KfW said there was a stark difference that depended on the size of the businesses. While small and medium-sized companies actually increased the share of climate investments, large corporations with an annual turnover exceeding 500 million euros reduced their share from 18 percent in 2023 to 15.8 percent last year. Bigger companies were generally more exposed to international competition, weak global demand, and comparatively high costs in Germany, explained KfW.

“In addition, there are signs that the issue of climate protection has shifted somewhat out of focus among large companies,” it said. More and more companies say that their priorities have shifted, which had caused them to invest less in climate. KfW said one main reason could be linked to public opinion: the share of companies that said their customers demanded climate protection of them shrank from 48 percent in 2023 to 46 percent in 2024 and only 34 percent this year.

A recent survey among senior business executives commissioned by Siemens found that the phasing out of fossil fuels and decarbonisation of heavy industry slipped down the policy priority ranking, while a resilient energy supply and renewables expansion was still a main priority.