GlobalCapital: We’ve just had the annual World Bank IMF meetings in Washington, DC. What were your three big takeaways from those meetings?
Stefan Wintels, KfW: Indeed, I came back early last week. I have attended these meetings since 2002 and I have to say that, for the first time, after six days of intense conversation, there was not the consensus building you normally observe at these kinds of meetings.
But I have three main takeaways upon reflection. The first is that there is no consensus because the world is increasingly very complex. We, of course, observe fragmentations in markets’ and governments’ agendas.
Point number two: we lack global growth and therefore there is a call for action, also by the IMF, to strengthen national agendas, to enhance resilience.
But on the other side, the US economy is quite resilient, despite all the trade discussions held. I was impressed by the focus of the US administration on growth and on investments in artificial intelligence.
And thirdly, as you would expect, given that many banks around the world were at these meetings, there was a debate about deregulation in the US on the one side and on the other side, the need to have a level playing field in global banking.
So, from my perspective, three interesting key takeaways. It’s always worth attending and being part of the debate.
It’s interesting you mentioned growth. One of the big topics that we were talking about with people in Washington was the sclerotic state of growth in the eurozone. What is KfW doing to help both the eurozone and German economies?
So, first of all, I would say, indeed, we lack growth in the eurozone. For next year, our growth projections are around 1.1% for the eurozone. This is clearly well below what we need in order to fund our competitiveness and our growth agenda. But Germany is projected at 1.5%, so we are currently at the more optimistic range of the forecasts.
The second point I would like to make is that we clearly have a government in Germany committed to reform, modernise and make a lot of investments in infrastructure.
And then the third point comes back to KfW. We have a history of supporting the government, regardless of which colour it is, whether in the sixties, where we supported the internationalisation agenda, or in the nineties with reunification.
Now it’s competitiveness. We, as KfW, want to support the government’s agenda in competitiveness, I definitely see three things that are necessary. From a bank’s perspective, we need to have a set of instruments for our core in Germany, which is the Mittelstand.
Secondly, we definitely need venture [capital] because innovation will play a crucial role in this competitiveness agenda.
But also, thirdly, our international businesses are very well suited on the project finance side — KfW IPEX-Bank — but also on the development bank side, to align much more with the German economic agenda and our foreign agenda.
So therefore, there’s a lot to do for us in this chapter of our history to support the German government, the German economy and the people in our country and in Europe.
That German government agenda — the government has recently made huge infrastructure and defence spending plans. What will KfW’s role be in funding that or helping to fund it? Also, how will KfW be affected in the bond market when there’s so much extra debt being raised across the SSA bond market?
I will answer your second question upfront. We will announce our funding plans in December, and therefore, I leave this to our treasury and to the board which will decide upon the funding plan.
Overall government spending, despite having debt relief, will grow over time, so additional government spending is roughly €50bn-plus next year, , in infrastructure and on defence.
We have a set of instruments and programs to support the infrastructure side, whether it’s companies or municipals, where we do have a big funding programme, or on the other side, the defence industry, where we are really open for business.
I think the defence industry should be treated as any other industry, and our programmes already include the defence industries , and have done for more than three years. There was never real exclusion. In addition, we have skipped away the dual use category, so we can finance munitions but, of course, no controversial munitions, and nothing which is not in accordance with international standards. Therefore, it will be interesting to see which business opportunities lie ahead of us in 2026.
The demand is increasing from my perspective, from what I hear, but the most important thing is that we scale our defence industry on the one side, and on the other side, we also drive the innovation agenda in this sector, whether we like it or not, unfortunately.
Where is Germany in its green transition, and how is KfW contributing to that?
I think the good news is that this government has clearly committed itself to the 2045 net zero goal — so it’s even five years ahead of the Paris set of goals. This government has also emphasised, as I said in the beginning, the competitiveness agenda.
Therefore, from my point of view — and we published a joint study with Deloitte today of almost 30 pages on the economic benefits of climate action and how decarbonisation can enhance competitiveness and growth — I think it is important that we think about these things together and that we do not say they are a contradiction.
No, these are two sides of the same medal, and therefore the programs which we have in place should be and are available to green tech in the broadest sense. In addition, in venture capital, today green tech is already more than 20% of our portfolio, and Germany overall has a global leading market position for exports —13% is Germany. We are number two behind China.
We are leading on patents, and again, as often in Germany and Europe, it’s important that all the good innovation which comes out of Germany and Europe is translated into sustainable and competitive business models. That, I think, is the key issue for us as well — that we reflect upon what we offer and understand the ecosystem and then have targeted programmes and solutions also for this important sector.
As you know, we have just had the important COP 30 in Brazil, and it will be important that the world is aligning with these Paris goals, 10 years after Paris, because the biggest issue which we still have, and which makes often policy decisions very difficult, is that we do not have a global level playing field. Think about CO2 pricing — it would be a major breakthrough if the world could at least agree further on minimum standards and on the pricing or market mechanism.
KfW is also contributing our intellectual capital, so to speak, not [just] with our balance sheet, to progress this important agenda because, from my perspective, it’s the biggest challenge facing this planet.
KfW was a pioneer in the green bond market and is still a leading proponent in it. To your previous point, it is also prominent in the digitalisation of the bond market, which is possibly its next big development. How has it positioned itself in this evolving market, particularly regarding distributed ledger technology and tokenisation, and what role does it play in fostering innovation?
I’m glad you asked the question, and I’ll tell you a secret. I’m very proud of what KfW has achieved because I remember when I started about four years ago, I had a discussion with our group treasurer, given the relevance we have in the global fixed income market as one of the largest issuers, about how we need to drive this agenda. We need to be a pioneer in this segment.
Four years later, I’m proud to say that we are a leading issuer of digital bonds, that we drive the intellectual and learning journey together with the German and European regulators, which is important, and that we use all the opportunities we have to create a sense of urgency to create a competitive market in Europe vis-a-vis other regions.
For me, it’s great to see that regulators, whether it’s the European Securities and Markets Authority, the European Commission or the ECB, have clearly understood they should have a better understanding that this is a priority for us in Germany and in Europe.
Therefore we also recently joined, as you may have followed, the Regulated Layer One initiative, a joint European blockchain initiative supported by major financial institutions. The idea is that we create one distributed ledger network for digital assets to enable payments and other transactions.
This is important that we progress and establish leading infrastructure in Europe . If the ECB also progresses with the wholesale digital euro, I think we are very close to making Europe a leader, not a follower in this regard, and that should be our objective.
