Climate Change Data

Environmental Metrics

ESG Focus Areas

• Sustainable core business
• Systematic Group-wide approach to sustainability
• Contribution to added value
• Transparency regarding contributions to sustainability

Environmental Achievements

• Reduced paper consumption to 47 tonnes in 2015 (from 49 tonnes in 2014)
• Increased recyclable waste to 51%
• Main locations in Wiesbaden and Mainz using green power since 2014, saving approximately 3,800 tonnes of CO2 emissions per year

Social Achievements

• Employee-initiated staff turnover was a mere 2.8% in 2015
• Awarded as an “Attractive Employer in the Rhineland-Palatinate” in recognition of its innovative and sustainable human resources policy
• Conducted client satisfaction surveys (Germany: ~1400 clients, International: >2800 enterprises)

Governance Achievements

• Expressly supports the objectives of the German Corporate Governance Code
• Implemented procedural guidelines for preventing financial crime
• Implemented anti-corruption guidelines

Climate Goals & Targets

Environmental Challenges

• Continued low interest rate environment
• Changes in investor behaviour
• Persistent uncertainty and volatility on capital markets
• Intense competition
• Technological change and shifting client needs
• Tightening regulatory requirements

Mitigation Strategies

• Appropriate, ongoing risk management and risk control
• Sound, sustainable lending policy
• Closeness to the market and clients
• Forward-looking refinancing policy
• Healthy balance sheet structure
• Active portfolio management
• Diversification strategy

Supply Chain Management

Responsible Procurement

• Favouring local suppliers
• Requiring compliance with statutory minimum standards
• Using contract templates obligating compliance with regulations and standards

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G4 (In Accordance – Core option), GRI’s Financial Services Sector Supplement

Certifications: DIN/ISO 9001 (Aareon), DQS data protection seal of approval (Aareon), ISO/IEC 27001 (Aareon)

Third-party Assurance: PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft (limited assurance on selected data)

Sustainable Products & Innovation

• Aareon Smart World
• BK 01 eConnect

Awards & Recognition

• TOP employer (CRF Institute)
• Corporate Health Award (Handelsblatt Verlagsgruppe)
• Aareal Award of Excellence in Real Estate Research

Environmental Metrics

ESG Focus Areas

• Environmental Matters
• Employee Matters
• Social Matters
• Respect for Human Rights
• Compliance

Environmental Achievements

• Achieved carbon-neutral operations at two head offices by 2023 (aim)
• Verified ESG information for 40% of the global credit finance portfolio
• Extended roughly €430 million as green loans since the Green Finance Framework – Lending was published in June 2021
• Generated green issuing proceeds of almost €1 billion from the first senior preferred green bond and drawdowns under the green commercial paper programme

Social Achievements

• Maintained high level of mobile working during the pandemic
• Assisted employees with childcare needs
• Offered free masks, coronavirus tests, and Covid-19 vaccinations
• Implemented protective measures on premises
• Equipped home office workstations
• Provided ergonomics advice for staff working from home

Governance Achievements

• Revised Code of Conduct in 2021 to include new supervisory requirements from the EBA Consultation Paper
• Implemented an ESG risk manual and corresponding ESG risk governance practices
• Expanded risk management framework to include ESG risk factors

Climate Goals & Targets

Environmental Challenges

• Indirect environmental impacts from financing activities
• Lack of uniform methodology for calculating and ensuring comparability of financed carbon emissions
• Covid-19 pandemic impacting workforce and operations
• Changes in the world of work accelerated by the pandemic
• Potential human rights violations along the supply chain

Mitigation Strategies

• Systematically aligning activities with sustainability requirements
• Participating in the development and implementation of a uniform standard for calculating carbon emissions (PCAF)
• Adapting systems to store data on energy efficiency, green building certificates, and energy-efficient renovation projects
• Implementing a Green Finance Framework
• Developing ESG KPIs for sustainability performance and funding portfolios
• Implementing a Code of Conduct for Suppliers and Business Partners
• Regularly reviewing new regulatory requirements for relevance and action

Supply Chain Management

Responsible Procurement

• Code of Conduct for Suppliers and Business Partners

Climate-Related Risks & Opportunities

Opportunities

• Green lending
• Development of energy-efficient products and services

Reporting Standards

Frameworks Used: GRI, TCFD, UN Global Compact

Third-party Assurance: KPMG AG Wirtschaftsprüfungsgesellschaft (limited assurance)

Sustainable Products & Innovation

• Green lending
• Aareal Meter
• Connected Payments
• Aareal Exchange & Payment Platform
• AiBATROS®
• PrediMa

Awards & Recognition

• Top Employer (CRF Institute)
• Great Place to Work® (Aareon)

Environmental Metrics

ESG Focus Areas

• Environmental matters
• Employee matters
• Social matters
• Respect for human rights
• Compliance (including anti-corruption and bribery)

Environmental Achievements

• Increased the proportion of green properties in the CREF portfolio from approximately 17% to 21%
• Issued roughly €1 billion in new green loans, increasing the total green loan volume by €1.8 billion to €2.2 billion
• Generated roughly €2.3 billion in green issuing proceeds from green bonds and commercial paper
• Achieved 100% green electricity sourcing at its Wiesbaden and Mainz head offices.
• Developed a methodology for harmonising and prioritizing data sets used to calculate financed carbon emissions.

Social Achievements

• Launched USP Programme to facilitate onboarding for new staff.
• Introduced “Aareal Digital Night” for digital transformation training.
• Published internal Diversity Guidelines.
• Aareon launched a group-wide “Mental Well-being” programme.
• Aareon awarded “Great Place to Work®” certification.

Governance Achievements

• Comprehensive revision of the Group-wide Code of Conduct.
• Implemented an end-to-end NFR framework to standardize assessment criteria and methods.
• Incorporated ESG criteria into the investment criteria used for securities portfolios.
• ESG targets included in Management Board remuneration (minimum 15% weighting in 2022, increased to 25% in 2023).

Climate Goals & Targets

Environmental Challenges

• Data gathering and disclosure challenges related to financed emissions from commercial property.
• The war in Ukraine, the easing of the Covid-19 pandemic, and the energy crisis posed challenges for employee health and well-being.
• Room for interpretation in the EU Taxonomy Regulation.
• Heightened risk of cyberattacks.

Mitigation Strategies

• Participation in the development and use of a uniform standard for financed emissions (PCAF).
• Continued mobile working options, support for employees facing childcare challenges, and provision of information and resources related to the pandemic and energy crisis.
• Conservative approach to calculating Taxonomy ratios due to interpretative uncertainties.
• Implementation of a wide range of security solutions and regular reviews and enhancements to prevent cyberattacks.

Supply Chain Management

Responsible Procurement

• Code of Conduct for Suppliers

Climate-Related Risks & Opportunities

Opportunities

• Green lending and green funding
• Development of energy-efficient products and services

Reporting Standards

Frameworks Used: GRI Standards, TCFD recommendations, UN Global Compact

Certifications: ISO/IEC 27001 (Aareon)

Third-party Assurance: KPMG AG Wirtschaftsprüfungsgesellschaft

Sustainable Products & Innovation

• Green loans
• Green bonds
• Aareal Meter
• AiBATROS®
• Momentum platform

Awards & Recognition

• Top Employer (CRF Institute)
• Great Place to Work® (Aareon)

Environmental Metrics

ESG Focus Areas

• Environmental matters
• Employee matters
• Social matters
• Respect for human rights
• Anti-corruption and bribery matters

Environmental Achievements

• Completely offset carbon emissions from own operations (Scope 1 and 2, plus business travel Scope 3) in 2023.
• Increased proportion of green properties (as defined in Aareal Bank AG’s Green Finance Framework – Lending) in the CREF portfolio from approximately 21% to 28%.
• Issued approximately €3.0 billion in new green loans, bringing the total volume to €4.8 billion.
• Total energy usage and resulting carbon emissions declined by roughly 7%.

Social Achievements

• Aareal Bank AG named as a “top employer” in 2023 by the CRF Institute.
• Established a holiday club for employees' children.
• Held numerous employee events, including a centennial celebration and participation in the STADTRADELN cycling challenge.
• Aareon launched a group-wide mental well-being program.

Governance Achievements

• Established a publicly accessible grievance procedure as required by the LkSG.
• Revised Group-wide Code of Conduct.
• Implemented a Group-wide Anti-Financial Crime (AFC) Framework Directive.

Climate Goals & Targets

Environmental Challenges

• Physical climate-related risk and transition risk impacting credit, liquidity, property, and reputational risk.
• Mid- to long-term risks of climate transition risk related to technology, regulatory breaches, and governance factors (fraud, sustainability management, data protection).
• Client behavior as an overarching risk factor.

Mitigation Strategies

• Implemented an ESG risk management function and systematically integrated ESG aspects into risk strategy and processes.
• Included ESG aspects in the risk management framework.
• Continuously refined systems for monitoring and managing ESG risks.
• Developed suitable risk indicators and limits for climate and environmental risks.
• Used scenario analyses and stress tests to measure climate risks.

Supply Chain Management

Responsible Procurement

• Code of Conduct for Suppliers

Climate-Related Risks & Opportunities

Physical Risks

• Floods, storms, droughts

Transition Risks

• Regulatory changes, market shifts, technology changes, investor behavior

Opportunities

• Green lending and funding, energy-efficient buildings

Reporting Standards

Frameworks Used: GRI Standards, TCFD recommendations

Certifications: ISAE 3000 (Revised) (limited assurance review by KPMG AG)

Third-party Assurance: KPMG AG Wirtschaftsprüfungsgesellschaft

UN Sustainable Development Goals

• Paris Agreement on climate change
• United Nations’ Sustainable Development Goals (SDGs)

Supporting sustainable transformation of economy and society.

Sustainable Products & Innovation

• Green lending and funding products, Aareal Meter, AiBATROS®, Momentum energy monitoring system.

Awards & Recognition

• Top Employer (CRF Institute)