Managing sustainability

Significance of ESG aspects for our bank

Aareal Bank Group has been accompanying and supporting the sustainable transformation of the economy and society for years with its systematic approach to sustainability. We want to do our share to help meet international climate protection goals such as those set out in the Paris Agreement on climate change and the United Nations' Sustainable Development Goals (SDGs). This is because, as a financial services provider focusing on the property industry, we are active in a sector that is instrumental to ESG transition.

The property sector accounts for a significant proportion of global energy consumption and resulting greenhouse gas emissions. As a result, this sector has a responsibility to realise potential savings in this area, which are substantial in some cases. ESG criteria play an increasingly important role not only in lending but also on the funding side of our business, in our investment portfolio, and in our digital product portfolio. Above and beyond this, we consider the inclusion of ESG risks as a fundamental necessity for ensuring our long-term business success. At the same time, enhancing transparency with respect to ESG aspects for the properties we finance allows us to manage our business activities in such a way that we can make a contribution to reaching international climate action efforts. In our investment portfolio, we apply these criteria both out of ethical conviction and from a risk perspective, so as to avoid any losses in value as far as possible.

In the Banking & Digital Solutions and Aareon segments, our products and services can raise our clients' environmental awareness and by so doing contribute to using digital solutions to actively and measurably cut energy usage and carbon emissions, reducing negative environmental impacts. For example, they help make processes more efficient and cut the amount of paper used in them, as well as reducing the number of kilometres travelled. We are aware of our corporate responsibility and hence aim to help shape market developments when it comes to implementing ESG aspects. For example, we monitor political developments at national and EU level closely, contributing our expertise in this area through consultation procedures.

Objectives:

• Increase the volume of green loans in the credit portfolio: We are planning to continue expanding our green lending activities in 2024, and aim to extend an additional € 1.5 billion in green loans. For 2026, we are aiming for the total volume of green loans in our portfolio to be in the range of € 6–7 billion, and hence to increase our contribution to a successful transformation.
   
• Increase the volume of green bonds: For 2024, we are planning to continue expanding our green funding activities (an additional € 0.5 billion in long-term green funding).
   
• Create and enhance transparency: We laid the foundations for ensuring carbon transparency in our property financing portfolio in the past financial year. We shall continue to expand this and intend to be able to report the emissions from properties financed by us in accordance with the PCAF Standard (Scope 3) in the course of 2024.
   
• A responsible approach to natural resources and environmental protection are part of our corporate responsibility. At Company level, continuously cutting energy usage and avoiding carbon emissions play an important role in our internal planning and optimisation measures. What is more, we are helping transition to a more energy-efficient and lower-emissions property sector with each energy-efficient building and each energysaving refurbishment project that we finance. Our objective with these measures is to contribute to the responsible management of natural resources and to environmental protection.
   
• Additionally, we shall completely offset the carbon emissions from our own operations for the first time in financial year 2023 by working together with a partner for offsetting projects. This covers all Scope 1 and Scope 2 emissions plus those Scope 3 emissions resulting from our business travel.

A responsible business approach - our strategic benchmark

Aareal Bank Group's sustainability mission statement underpins our corporate sustainability strategy, providing a summary of the corporate responsibility principles that are aligned with our objective of doing business sustainably.

Our sustainability management is driven by the following factors:

1. We take an integrated approach and broaden the areas of activity identified in our strategic programme to include social and ecological issues.
2. We analyze trends holistically, evaluate the resulting opportunities and risks, and align our forward-looking sustainability performance with this.
3. We focus on all relevant stakeholder groups, seek to engage in active dialogue with them in a variety of ways and show how we make use of the insights we have gained.
4. We make sure that business decisions take account of ecological, social and governance factors and communicate our progress and the challenges we are facing transparently and credibly.
5. We set priorities, implement decisions and hence reinforce corporate sustainability values such as reliability, innovative ability, integrity and compliance, our appeal as an employer, and building and maintaining high-trust client relationships.