Appeal on the Capital Market
As a real estate company with a long-term focus, we aim to strike a balance between commercial activity on the one hand, and social responsibility and ecological objectives on the other. We are committed to the principles of the social market economy and profitability. The only way for us to be sustainable is if we are also commercially successful. We believe that our long-term success is dependent on having access to a broad mix of financing instruments so that we can choose the right product at the right time. This will allow us to attract different capital market participants like investors, banks and insurance companies while also guaranteeing our access to the capital market.
Due to the increasing importance of ESG factors for the capital market, Vonovia used 2021 to enhance the company’s strategic and operational governance in line with ESG criteria. This included integrating sustainability concerns into our corporate strategy. We have established and implemented structures and processes to this end (see Our Approach to Sustainable Development in Detail). One key element of our approach is the Sustainability Performance Index (SPI) (see Non-financial Performance Indicators in 2021 Annual Report). This has been one of the Vonovia Group’s main non-financial performance indicators since 2021. Another key to ensuring sustainable governance is integrating sustainability risks into our risk management strategy (see Managing Opportunities and Risks). We are also issuing new financing instruments to appeal to sustainability-conscious investors.
You can find more information in the Strategy section of the 2021 Annual Report.
Communication with our stakeholders on the capital market is handled by the Investor Relations (IR) department in consultation with the Management Board. Transparency is the guiding principle here. It is important to us to provide relevant information on our company and our economic development, but also on the sustainable direction of Vonovia, thereby providing an accurate picture of Vonovia. This also strengthens trust in the Vonovia brand. At the same time, IR acts in an inward-facing way so that the topics communicated to us by capital market actors come to the attention of the right people within the company.
We have also established structures which enable us to process sustainability ratings systematically. By providing clear and transparent information about our activities, we can satisfy our stakeholders’ demand for transparency while also meeting our legal obligations. We incorporate the latest trends and developments such as the EU Taxonomy, the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) (see Environment and Climate) and the United Nations Sustainable Development Goals (SDGs) (see Material Topics) into our reporting, while also making sure that we are guided by their requirements. In this context, the application of the GRI standards and the regulations of the EU Taxonomy and possible further European standards have priority for us as a European company. Due to the importance of English-speaking investors for us, we are also creating a mapping of the indicators for the content published in this report for the Real Estate reporting framework of the Sustainability Accounting Standards Board (SASB). We have also made our report on the EPRA Best Practice Recommendations on Sustainability Reporting available on our Website.
Our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for our activities in the capital market. The Sustainability/Strategy department coordinates the company’s participation in ESG ratings with the involvement of the operational departments. Communication with the capital market and our investors is handled by the IR department, which reports to our CEO, as does the Sustainability/Strategy department. Decisions regarding ESG ratings are made in the sustainability committee, which receives regular information on developments in this area. Finance & Treasury is responsible for implementing our financing instruments and reports to the CFO.
Objectives and Measures
We want to make sure that the information we provide to our stakeholders is transparent and reliable. Our aim is to provide investors with all of the information they need to get an accurate impression of our company. We want to generate attractive risk-adjusted rates of return for our investors and achieve sustainable revenue and value increases. Our overarching objective is to build trust in Vonovia.
Our participation and good performance in a variety of ESG rating systems is clear evidence of our commitment to sustainability. Our aim is to be represented in all relevant international ESG indices and obtain good to very good ratings in comparison to our peers. Our IR department surveys key investors every two years to identify the ESG rating systems that are most relevant to them. We use these surveys to check whether we are represented in the ratings that are most important for us and our stakeholders on a regular basis. The Sustainability Committee discusses which ESG ratings Vonovia should focus on based on this decision. We systematically use the results of ESG rating systems to enhance our sustainability efforts and make improvements in specific areas.
As such, we were able to maintain our membership of the prestigious Dow Jones Sustainability Index Europe and ISS-ESG Prime Status in the year under review. In the ESG Risk Rating of Sustainalytics, Vonovia was (as of December 9, 2021) one of the top 25 companies within the set evaluated, which included some 15,000 companies worldwide, as well as one of the top three performers in the real estate sector (out of 1,054 companies). We intend to keep our performance at a high level while making continuous improvements in the ESG rating systems that we are included in.
The results of selected rating systems from 2021 are available on our IR-website and provided in the ESG Ratings and Indices section of this Sustainability Report. In 2022, we did not take part in GRESB due to the changes to the methodology used by the rating system and the significant changes that will be made in future.
Our IR department use a variety of formats to stay in regular contact with capital market players. The Capital Markets Day is an event that we use to showcase our company. Despite having to cancel the event in 2021 due to the coronavirus pandemic, we continue to use investor conferences, roadshows and one-to-one conversations to stay in contact with shareholders and potential investors. We are also making increasing use of visual formats. Our Annual General Meeting, for instance, was for the second time held virtually in April 2021.
We believe it is important to have access to a broad mix of financing instruments so that we can choose the right product at the right time, like bonds, promissory notes, secured real estate loans, commercial paper, working capital facilities and loans from development banks like the German government-owned development bank Kreditanstalt für Wiederaufbau (KfW) and the European Investment Bank (EIB). We also have access to innovative sources of finance like blockchain-based promissory notes, which we issued for the first time in 2021. This puts us in a position to attract different capital market participants like investors, banks and insurance companies. This diversification helps us to spread out our risk and handle periods where individual sources of financing are not available due to rapid developments in the capital market, as occurred with the coronavirus pandemic.
One of the steps that we took during the year under review to expand the mix of financing instruments at our disposal was to issue a green bond certified by the Climate Bond Initiative with a volume of € 600 million. The fact that this bond was thoroughly oversubscribed demonstrates that there is healthy demand for investments of this nature. In 2022, we will revise our Sustainable Finance Framework – which was published in February 2022 – in light of the EU Taxonomy, and add social components in order to be able to issue Social/Sustainability Bonds. Based on the new framework, green and social bonds were successfully placed for the first time in March 2022 in the amount of € 2.6 billion (see project box “Vonovia Social Bonds – Unique in the Real Estate Sector“; Investor Relations). Through the success of this additional financing option, we feel strengthened in the continued development of our sustainable projects, especially in terms of the goal of a virtually climate-neutral building portfolio.
Vonovia established a Green Finance Committee in 2020 to coordinate and refine this and other sustainable financing activities. It includes representatives from several different departments and is chaired by the Head of Finance & Treasury. With the update to the framework, the Green Finance Committee was renamed the Sustainable Finance Committee.