Our Approach to Sustainable Development in Detail

Integration of Sustainability into the Corporate Strategy

Sustainability is at the heart of Vonovia’s identity as a company. We recently added sustainability factors to our successful strategy to reflect this. We are making continuous improvements to our sustainability agenda in order to reflect changes in society, the world of politics, the environment and the economy.

The strategy that Vonovia introduced as part of the IPO in 2013 has reached a high level of maturity, and demonstrated its robustness and flexibility in the year under review. This strategy continues to consist of the four basic approaches of the property management strategy, the financing strategy, the portfolio management strategy and the value-add strategy. It is enhanced and complemented by two supplementary approaches: opportunistic acquisitions and internationalization. Together, they constitute our 4+2 strategy. In recent years, the strategy has allowed us to increase the satisfaction of our tenants, meet new challenges and establish new business models. A detailed description of the 4+2 strategy is available in the 2021 Annual Report.

The 4+2 Pillars of our Strategy

In order to respond properly to megatrends (see Vonovia in the Context of Current Trends and Developments) and meet the changing demands of our various stakeholders, we update our strategy on a continuous basis, with a particular focus on detailing our efforts to meet sustainability targets. This ensures that we have a business model that is fit for the future.

Our sustainability strategy specifically addresses the current sustainability requirements of the Sustainable Development Goals (SDGs) of the United Nations as well as other concrete ESG (Environment, Social and Governance) targets of European and national regulations.

Our strategy remains focused on ensuring the success of the company, while also including the following sustainability-related topics: a voluntary commitment to meeting climate targets and reducing carbon emissions (E), taking social responsibility for our tenants, customers and employees (S) and reliable, transparent and trustworthy governance (G).

Dimensions of Sustainability at Vonovia

To demonstrate the importance of sustainability for our company, we integrated aspects of our sustainability strategy into Vonovia’s management system by introducing the Sustainability Performance Index (SPI) in 2021, in addition to remuneration-related non-financial indicators.

Vonovia’s acquisition of Deutsche Wohnen provides the synergy we need to meet the challenges facing the environment and society in a way that benefits everybody. We are also committed to continuously expanding as a European real estate company which is leading the way in the field of sustainability. The process of integrating Deutsche Wohnen into the Vonovia Group began in 2022 and is due to be complete by the beginning of 2023.

Vonovia’s sustainability strategy commits the company to playing its part in meeting Germany’s climate protection targets, ensuring that its property portfolio is almost entirely carbon neutral by 2045 as well as reliable and transparent governance.

In concrete terms this means for us:

E: With the climate plan developed in 2021, we are committing to the goal of a virtually climate-neutral building portfolio by 2045, while also meeting binding annual interim targets along the way. However, this requires both a more consistent level of refurbishment than in the past and increased, decentralized use of renewable energies for heating and powering neighborhoods. Vonovia has drawn up a development plan for its urban quarters to help it achieve this objective (see Environment and Climate and Sustainable Construction and Development).

S: We assume social responsibility for our tenants, customers and employees. In doing so, we rely on a socially responsible, reliable rent policy and see the expansion of a social infrastructure incorporating innovations and new technologies as an integral part of community development projects. We have a social responsibility to ensure that urban housing is ecological and affordable. We offer our employees an attractive working environment characterized by diversity and personal scope for development (see Homes and Customers, Society and Contribution to Urban Development and Corporate Culture and Employees).

G: We are committed to governance that is reliable, transparent and trustworthy, and based on the best practices of the international Corporate Governance Code. We comply with all applicable laws and internal and external guidelines. This is an integral part of being a reliable and trustworthy partner (see Governance and Responsible Business Practices and Future Fitness and the Capital Market).

We also want to create transparency and reliability through our sustainability reporting. We have therefore had this Sustainability Report externally certified with a limited assurance engagement in accordance with ISAE 3000. We incorporated the recommendations made by the Task Force on Climate-related Financial Disclosures (TCFD) into our reporting. We also prepared a report in accordance with the requirements of the EU Taxonomy for the first time in 2021 (see Auditor’s Report and Non-financial Group Declaration in the 2021 Annual Report).

The Sustainability/Strategy department is responsible for making improvements to the sustainability strategy, monitoring sustainability targets and coordinating sustainability-related activities within the Group. Due to its significance, this department reports directly to the Chief Executive Officer of Vonovia.

We have also implemented a sustainability committee with a managerial function. This broad base ensures that decisions on the implementation of our sustainability strategy are borne by all relevant divisions and all the way through to local implementation levels (see Organizational Establishment in the Company).

Vonovia uses three different approaches to assess the sustainability topics which are of relevance for the company:

1. Outside-in perspective: the relevance and impact of social and environmental changes on the business and on value creation
2. Inside-out perspective: the impact and relevance of the business model and company activities on the environment and society
3. Stakeholder perspective: compares the interests and concerns of stakeholder groups in comparison to the interests and concerns of Vonovia

We performed a materiality analysis in the previous fiscal year on the basis of these perspectives in order to provide a three-dimensional weighted overview of non-financial topics (see Material Topics). This overview will remain relevant in the current year.

We added non-financial performance indicators to our management system in the 2021 fiscal year in the form of the Sustainability Performance Index (SPI). In the process, we have made considerable headway in terms of embedding sustainability in the company’s business processes.

The Non-financial performance indicator SPI comprises six indicators based on the material topics of Vonovia (see Non-financial Perfomance Indicators). These comprise the carbon savings achieved annually in housing stock, the energy efficiency of new buildings, the share of accessible (partial) modernization measures in relation to newly let apartments, the increase in customer and employee satisfaction and diversity in the company’s top management team. The SPI achieved an index value of 109% in the reporting year. For a more detailed description of our sustainable business model, please refer to the chapter entitled Fundamental Information About the Group in the 2021 Annual Report.

Vonovia’s Financial and Non-financial Key Performance Indicators

We have defined specific targets to be achieved by 2025 for each of these indicators. The relevant key figures are recorded quarterly by Controlling and used in our external reporting as well as for communication with the capital market.

Annual targets are also provided for the indicators derived from the SPI. Since the last fiscal year, these have been part of the remuneration system for the Management Board and top management (first level below the Management Board) (see Remuneration Report and Management System).