Federal Government and KfW launch Germany Fund

19.12.2025

Source: E & M powernews

The German government's Deutschlandfonds is intended to mobilize private investment - with guarantees and funds of around 30 billion euros.

The German government and the Kreditanstalt für Wiederaufbau (KfW) launched the Deutschlandfonds on December 18. With this new instrument, the federal government aims to facilitate private and municipal investments in key future-oriented fields, according to a statement from the Federal Ministry of Economics.

The federal government is providing public funds and guarantees amounting to around 30 billion euros for this purpose. In total, additional investments of around 130 billion euros are to be triggered, according to Federal Finance Minister Lars Klingbeil (SPD).

The state-owned bank KfW is coordinating the fund and acting as a point of contact for national and international investors. According to the German government, the Deutschlandfonds aims to strengthen the competitiveness and future viability of Germany as a business location. The fund is an umbrella structure under which various financing instruments are bundled. These are intended to specifically address industry and SMEs, start-ups and young growth companies as well as energy supply companies.

Stimulating energy investments

The key areas of investment include industry and SMEs, venture capital and energy infrastructure. Funding will be provided for new production facilities, future technologies, the expansion of renewable energies, electricity and heating grids as well as projects for the extraction of raw materials. Investments in deep tech, artificial intelligence, biotechnology and security-related technologies are also planned.

Federal Economics Minister Katherina Reiche (CDU) referred to the high level of investment required to modernize the country. It is crucial to mobilize private capital where innovation is created and supply chains become more resilient.

The fund consists of several components. In energy infrastructure, the borrowing of electricity distribution and heating network operators is to be secured in order to enable their increasing investments. In addition, the so-called exploration risk for drilling in the geothermal energy sector will be covered. According to the German government, this is intended to strengthen municipal and private energy supply companies in particular.

In the area of industry and SMEs, large transformation investments are to be secured, for example in electricity generation, in the hydrogen sector or in the automotive and supplier industry. In addition, KfW provides equity and loans through a raw materials fund to finance projects for the extraction of critical raw materials.

KfW will also act as a co-investor in the start-ups and scale-ups module in future. A total of one billion euros will be available for this purpose by the end of 2030, with a maximum of 50 million euros per investment. A further EUR 300 million is earmarked for investments in credit funds. From 2026, the Future Fund is also to be increased and made permanent in order to strengthen venture capital financing.

Gradual launch planned

The German fund will be launched gradually. According to the German government, the hedging instrument for transformation industries, a loan program for geothermal energy projects and a new financing instrument for start-ups and scale-ups will begin in December 2025.

Further modules are to follow from 2026, including instruments for modernizing energy infrastructure and new private credit funds. A module for residential construction is also being prepared to promote private investment in affordable and sustainable housing.

Positive reactions have come from the Association of Local Utilities (VKU). Its Managing Director Ingbert Liebing described the Germany Fund as an important step towards enabling the high level of investment required for the energy transition.

The VKU particularly welcomed the launch of the geothermal energy development loan, which is intended to support municipalities in the heating transition. At the same time, Liebing called for further programs to be developed quickly in order to strengthen the equity of municipal utilities in particular.

The Startup Association also welcomes the fund, but sees a need for further action. Chairwoman Verena Pausder explained that the focus on the growth phase is correct, but that additional efforts are needed in view of the large financing gaps. Among other things, the association advocates greater mobilization of institutional investors and points to international differences in per capita investments in start-ups.

Further information on the Germany Fund is available on the Internet.

Author: Susanne Harmsen