Our Approach to Sustainable Development in Detail

Integration of Sustainability into the Corporate Strategy

Sustainable conduct is at the heart of Vonovia’s identity as a company. 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 Vonovia introduced at the time of its IPO has reached a high degree of maturity and has proven its viability and flexibility. Customer satisfaction has improved significantly, and new demands and new business models have been successfully established. This strategy still consists of the four basic approaches: the property management strategy, the financing strategy, the portfolio management strategy and the Value-add strategy. The two additional approaches of opportunistic acquisitions and internationalization are intended to support and round off the four basic approaches in the long term.

A detailed explanation of the 4+2 strategy is available in the Strategy chapter of the 2022 Annual Report.

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 of the business model, we refine our strategy on a continuous basis. We intend to emphasize the sustainability-related aspects of our successful strategy in particular to ensure that both the strategy and the sustainable business model are fit for the future.

The 4+2 Pillars of Our Strategy

Our sustainability strategy specifically addresses the requirements of the Sustainable Development Goals (SDGs), the UN Global Compact principles, and since 2023 also the requirements of the UN Guiding Principles on Business and Human Rights, as well as other concrete ESG (Environment, Social and Governance) targets of European and national regulations.

The strategy, which will continue to have a commercially successful business model at its core in the future as well, explicitly addresses the following sustainability issues:

• Contribution to climate protection and reducing CO₂ in both the housing stock and new construction (E)
• Taking on social responsibility for our tenants, customers and employees (S)
• Reliable, transparent and trust-based corporate governance (G)

The integration of Deutsche Wohnen’s systems and processes into Vonovia’s structures was one of the key tasks on the management agenda in 2022. This process was consistent with Deutsche Wohnen’s decision to work with Vonovia to achieve harmonization effects and economies of scale. This helps us to better overcome the environmental and social challenges for the benefit of all. We are also committed to continuously expanding as a European real estate company that is leading the way in the field of sustainability.

Aspects of Sustainability at Vonovia

Aspects of Sustainability at Vonovia

Vonovia’s sustainability strategy commits the company to playing its part in meeting Germany’s climate protection targets, to aiming for the target of a virtually carbon-neutral property portfolio by 2045 and reliable and transparent governance.

This specifically means that:

E: With the climate plan, we are committing to the goal of a virtually climate-neutral housing stock by 2045, while also meeting binding annual interim targets along the way. To ensure that the implementation is successful, we require both a higher level of refurbishment than in the past and increased, decentralized use of renewable energies for heating and powering neighborhoods. The urban quarter is the main implementation level for climate protection targets and carbon reduction in the housing portfolio. The use of renewable energies and sustainable materials plays an important role in new construction and conversion (see Environment and Climate).

S: We assume social responsibility for our tenants, customers and employees. 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 environmentally friendly 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 stand behind our reliable, transparent and trust-based corporate governance. It is based on German Corporate Governance Code best practice. We comply with all applicable laws and internal and external guidelines. This is an integral part of being a reliable and trustworthy partner (see Sustainable Governance and Responsible Business Practices).

We also want to communicate transparency and reliability through our sustainability reporting. We have therefore had the Key Figures contained in this Sustainability Report externally certified with a limited assurance engagement in accordance with ISAE 3000 (see Independent Assurance Report). We expanded the content of the report to include physical climate risks in the reporting year in line with the recommendations made by the Task Force on Climate-related Financial Disclosures (TCFD) (see Implementation of the TCFD Recommendations). Vonovia is also reporting on the proportion of climate-related taxonomy-aligned and non-taxonomy-aligned revenue, capital expenditure and operating expenses in 2022 for the first time in accordance with Article 8 of the EU Taxonomy Regulation and the Sustainable Finance Framework. Relevant information on this can be found in our Non-financial Group Declaration in the EU Taxonomy Regulation chapter.

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

Vonovia systematically manages the main sustainability topics for the company on the basis of two dimensions:

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

As part of this process, the perspectives of the stakeholder groups that are relevant for us are taken into consideration in our assessment of the material topics. The materiality matrix, which is built up from the two dimensions, was compared against those of Deutsche Wohnen following the merger in 2021 and Deutsche Wohnen’s sustainability topics were assigned to Vonovia’s sustainability topics. In the 2022 reporting year, we once again performed a critical review of all topics against the backdrop of integration and consolidated reporting, as well as new regulations. The materiality matrix, which is based on this review, shows ten material topics and 14 other important sustainability topics in five action areas (see Material Topics).

Managing Sustainability

To demonstrate the importance of sustainability for our company, we integrated sustainability targets into Vonovia’s management and remuneration system with the introduction of the sustainability performance index (SPI) back in 2021. The SPI comprises six indicators based on the material topics of Vonovia (see Non-financial Performance 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 (excluding Deutsche Wohnen) achieved an index value of 103% in the reporting year. For a more detailed description of our sustainable business model, please refer to the chapter in the 2022 Annual Report entitled Fundamental Information About the Group.

Vonovia’s Financial and Non-financial Key Performance
Indicators

We have defined specific annual targets to be achieved by 2026 for each of these indicators. The targets include Deutsche Wohnen from 2023. The relevant key figures are recorded quarterly by Controlling and used in our external reporting and for communication with the capital market.

Annual targets are provided for the indicators derived from the SPI. Since the 2021 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).