Strategic Public Funding Advisory – A Powerful Lever to Navigate Changing Market Conditions in Corporate Banking

Strategic Alignment: From Corporate Relationship Manager to Transformation Partner

The economic parameters are fundamentally shifting: rising CO₂ prices, volatile energy costs and stricter sustainability requirements across supply chains are forcing the industrial Mittelstand to make substantial investments. These changing conditions require financing advice that goes far beyond a mere interest rate comparison.

The corporate relationship manager (CRM) increasingly acts as a transformation partner. Their task is to identify transformation potential together with the client, critically challenge investment barriers and activate investment willingness through the targeted use of public funding instruments. Expertise in public funding is therefore not an administrative “add-on”, but a strategic lever to make modernization economically viable.

Stimulating Lending and RWA Optimization

A central challenge in today’s market environment is investment restraint driven by high capital costs and global uncertainty. This is where funding advisory services come into play to stimulate lending and strengthen portfolio resilience:

• Activating investments: Advisory on public funding programs that buffer additional investment costs and reduce operating expenses generates loan demand that would often not materialize in standard lending. Guarantees from guarantee banks facilitate credit approval where collateral is limited.

• Steering effect: Structuring investments by combining grants and subsidized loans shifts the customer’s focus toward ecologically beneficial projects. The result is a high-quality, ESG-compliant credit portfolio.

• RWA relief: Liability exemptions reduce risk-weighted assets (RWA). As the liability-exempt portion substitutes to the funding institution, the bank’s capital is preserved—often significantly (50%–80%).

Competitiveness and Risk Reduction for SMEs

SMEs must decarbonize their business models to remain competitive. While large corporations will face tightened disclosure obligations from 2028 onward (EUDR, CSRD, CSDDD) and are already restructuring their supply chains, SMEs are indirectly exposed to substantial pressure. Large clients increasingly demand validated climate data as a prerequisite for supplier onboarding. This pressure is amplified globally through China’s Sustainable Disclosure Standards (CSDS).

A low-carbon operating model thus becomes a central differentiator. Public funding instruments are among the most effective tools due to their intended use:

• Compensating transition burdens: Non-repayable grants and repayment-free grace periods reduce the financial barriers for transitioning to low-carbon production.

• Strengthening resilience: Companies improving energy efficiency and innovation capacity become more crisis-resistant. Funding advisory services therefore help secure future cash flows and the value of credit exposures—reducing default risk.

Regulation as Competitive Advantage (EBA & MaRisk)

Regulatory requirements through the EBA Guidelines on Loan Origination and Monitoring and the 7th amendment of MaRisk have increased significantly. The integration of ESG risks into banking strategy is now mandatory.

• Risk adjustment: Liability-exempt loans and guarantee banks allow institutions to actively manage ESG risks and reduce loss given default (LGD).

• Transparency: A structured funding process generates the data required to document portfolio sustainability — essential for reporting and disclosure requirements.

Strengthening the Bank’s Competitive Position

In an increasingly competitive market for ESG-compliant investments, expertise in public funding within corporate banking becomes a decisive differentiator. Banks that empower their relationship managers gain material advantages:

• Capital efficiency: Risk transfer mechanisms reduce RWA and ease capital requirements, enabling greater lending growth with the same equity base.

• Client retention: Banks that actively help secure grants and ease cost burdens strengthen their role as strategic partners — shielding the house-bank relationship from pure price competition.

Operational Implementation in Practice

To ensure that expertise becomes effective in sales, a pragmatic operational model is essential:

1. Identification: Proactive analysis of factors impacting the client’s business model and mapping to relevant solutions (e.g., energy refurbishment, R&D projects, process digitalization).

2. Securing eligibility: Early assessment of funding criteria (e.g., eligibility, ban on early project commencement).

3. Integrated structuring: Leveraging digital tools within the core banking system (e.g., ESG scoring) and collaboration with funding institutions (KfW, regional banks) to improve advisory and process efficiency.