Transformation financing for corporate clients: Opportunities for banks and businesses

The gap between sustainability strategy and implementation

Sustainability is now firmly embedded in strategy across both the real economy and the financial sector. Yet why do companies often fail to invest in transformation projects despite having set climate targets? And why is the implementation gap widening even amongst credit institutions when it comes to achieving their sustainability ambitions?

The sustainable transformation of the German economy is stalling in the face of a weak economy, international competitive pressure and geopolitical uncertainties. Tariff restrictions, blockades of key trade routes and the loss of Russian energy imports highlight the vulnerability of German supply chains and are influencing corporate investment decisions.¹

Alongside waning regulatory pressure, these developments are contributing to sustainability losing priority within companies. The latest Sustainability Transformation Monitor 2026 shows that companies are currently deprioritising sustainability,² and that investments in sustainable transformation are being postponed.

As a result, there is also a lack of financing opportunities where banks could support their corporate clients. Combined with a lack of sustainability expertise on the part of clients and the fact that transformation advisory services are still not sufficiently integrated into the sales strategies of banks’ corporate banking divisions, this is widening the implementation gap in the decarbonisation of loan portfolios.

In practice, sustainability therefore often remains a risk and reporting issue for banks, rather than being systematically incorporated into their lending activities. Although banks have already established sustainability assessment systems such as the ESG score, their influence on lending terms has so far often remained limited.³ Similarly, the results of these assessments are still too rarely used to identify specific financing opportunities, such as investments in electric vehicle fleets, charging infrastructure, building refurbishments or energy-efficient production facilities.

Yet environmentally and economically sound projects do not fail because of the technology, but rather due to a lack of planning capacity, confusing funding schemes or a lack of expertise. To overcome these hurdles, it is worth looking at a best-practice example of a successful energy transition.

Transformation financing as the key to energy sustainability

Particularly in economically challenging times, such investments must be financially viable. Energy transition projects are especially attractive when, in addition to protecting the environment, they simultaneously secure the energy supply and reduce operating costs in the long term.

The example of a medium-sized manufacturing company illustrates what such an energy transition looks like in practice. Instead of allowing the heat from cooling water to go to waste, as was previously the case, and heating the production halls at great expense using natural gas, the company has integrated its processes. A large heat pump utilises the waste heat from machine cooling as an energy source and converts it into space and process heat. The system is powered by electricity generated by the company’s own photovoltaic system on the roof of the production hall.

From the perspective of financial institutions, this offers the following advantages:

• Predictable cash flows and risk minimisation: Natural gas consumption can be reduced by up to 80 per cent. This protects the company from fluctuating energy prices and rising CO₂ costs, and strengthens its operating margin and debt-servicing capacity in the long term.
• High subsidy rate as an equity substitute: Through programmes such as the federal subsidy scheme for energy and resource efficiency, repayment grants of 30–50 per cent can often be secured for such projects. This reduces the default risk and simplifies the financing structure.
• Rapid payback: Thanks to the combination of (repayment) grants and reduced ongoing operating costs, such investments usually pay for themselves within four to six years.

Four strategic benefits of transformation financing for banks

Actively supporting the energy transition creates direct benefits for corporate banking:

1. Customer loyalty: Corporate clients increasingly expect concrete support with their transition. Banks that actively support their corporate clients strengthen customer loyalty and position themselves as strategic partners beyond traditional lending.⁴
2. Lending business: The transformation of corporate clients creates new financing opportunities, as the installation of solar panels, charging infrastructure, battery storage systems, energy-efficient production facilities, building refurbishments or the electrification of vehicle fleets generates additional investment needs and thus new lending business.
3. Stability: A more energy-resilient – and therefore economically more robust – business model strengthens corporate clients’ future viability and ability to service their debt. The resulting lower probability of default protects the bank’s loan portfolio and reduces the need for risk provisions.
4. Emissions reduction: Transition finance is one of the most effective levers for reducing financed emissions. The vast majority of greenhouse gas emissions from credit institutions do not arise from their own business operations, but from their lending and investment portfolios.

Conclusion

Transition finance creates added value for businesses, credit institutions and environmental protection in equal measure. This requires greater capacity-building in strategic grant advisory services.⁵

It is equally crucial to highlight successful practical examples and to embed transformation consultancy more firmly within sales management and performance measurement systems. Only in this way can new ESG-compliant financing opportunities be systematically created to bridge the gap between sustainability strategy and implementation.