Osnabrück. The German Federal Foundation for the Environment (DBU) has presented its 2021 balance sheet: In a difficult capital market environment, the DBU was able to increase its income from investments to 114.6 million and thus by more than 50 percent compared to the previous year (73.6 million euros). The funding amount increased for the sixth time in a row to 59.8 million euros (2020: 58.3 million euros). The foundation capital increased by 60 million euros to now 2.39 billion euros, the DBU announced today (Monday) in Osnabrück during the digital annual press conference (JPK).
The situation on the capital market is characterized by crises. “Despite all the challenges, we continue to maintain our funding at a stable level and invest between 55 and 60 million euros annually in innovative, model and solution-oriented projects to protect the environment,” says DBU Secretary General Alexander Bonde. “We thus remain a reliable provider of funding, especially for companies from the SME sector.” According to DBU Department Head and Chief of Asset Investment Michael Dittrich, the economy coped well with the aftermath of the Corona pandemic last year. This had supported earnings. “Currently, however, the outlook in the capital markets has dimmed significantly due to supply chain issues and the war in Ukraine, and we are seeing a rapid increase in inflation, which is impacting our performance,” said DBU’s chief financial officer. In 2021, the foundation was able to increase its investment income by more than 50 percent compared to the previous year – from 73.6 (2020) to 114.6 million euros (2021). In addition, 293 projects were supported with a funding amount of 59.8 million euros (2020: 282 projects with 58.3 million euros). Foundation capital increased from 2.33 to 2.39 billion euros.
DBU achieves stable returns with capital investments from wind and solar energy
The DBU has also expanded its commitment to sustainable investments in 2021. Dittrich: “Investments in bonds to finance sustainable projects, so-called green bonds, were increased to 160 million euros last year.” In 2020, they stood at 100 million euros. According to Dittrich, there have been opposing effects in renewable energy generation plants. For example, wind energy yields have fallen short of expectations, while “solar plants have generated significantly higher yields than had been forecast,” Dittrich said. Currently, 100 million euros have been invested in this area (2020: 80 million euros). “Overall, the plants with a mix of wind and solar energy do not deliver particularly high but stable yields, and we plan to further expand these commitments,” the DBU finance chief said. A positive side effect is that “we will have saved around 47,000 tons of carbon dioxide (CO2) with these plants in 2021,” says Dittrich, who was appointed to the German government ‘s new Sustainable Finance Advisory Board in June. The DBU had already firmly anchored the issue of sustainability in its capital investment guidelines since 2005.
High inflation affects the purchasing power of the foundation’s capital
In order to maintain the foundation’s performance, he said, it is important to build up a reserve equal to the rate of inflation in addition to the grant. Last year, with a reserve of 60 million euros and an inflation rate of 3.1 percent, this was almost achieved. Unfortunately, however, the fears expressed last year that inflation would not decline, contrary to the expectations of the European Central Bank, had been confirmed. The opposite is the case. Experts expect inflation to reach six to eight percent in 2022. “That’s where the purchasing power of capital melts like butter in the sun,” Dittrich says. “This will affect all pools of capital, such as foundations, life insurance companies, pension funds and also private savings.” Such high inflation rates could no longer be absorbed by reserves. “Interest rates are just starting to move up from zero,” said DBU’s chief financial officer. “We have built up reserves for such situations, but if inflation continues to remain this high or even rises further, we will not be able to maintain the real, i.e. purchasing power-adjusted, endowment capital in the long term.”
According to Dittrich, the foundation itself invests more than 80 percent of its capital in the capital markets; in addition to interest-bearing securities, the proportion of shares based on market values is around 30 percent. According to him, around nine percent has been invested in real estate and renewable energy generation facilities. In its now more than 30-year history, the DBU had funded more than 10,500 projects with around 1.93 billion euros by the balance sheet date (December 31, 2021).
Note: The DBU-JPK 2022 also available at https://www.dbu.de/@YoutubeYearPK2022