SUSTAINABILITY STRATEGY TRUSTFUL …€¦ · SUSTAINABILITY STRATEGY TRUSTFUL COMMUNICATION, ... the introduction of a Group-wide database structure, ... Sustainability Report 2015

DG HYP | Sustainability Report 2015

Letter from the Management Board | Our Company | Sustainability Strategy | Sustainable Banking Business | Employees

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SUSTAINABILITY STRATEGY TRUSTFUL COMMUNICATION,

APPRECIATIVE INTERACTION

Expo Real trade fair, Munich

“DG HYP meets immoebs“ – an event hosted by DG HYP Property visit with DG HYP‘s Advisory Council“DG HYP meets IMMOEBS“ – an event hosted by DG HYP

15DG HYP | Sustainability Report 2015

Ecological Responsibility | Social Commitment | Sustainability Programme | GRI Content Index

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Our Approach to Sustainability As the commercial real estate bank in the Volksbanken Raiff eisenbanken cooperative financial network, we look back on a corporate history spanning more than 90 years. Uniting business and social responsibility has always been an integral part of our corporate culture. To us, sustainabil-ity means that we must satisfy the needs of today’s genera-tions, and offer them fair opportunities for development – without compromising the chances of future generations or threatening our natural livelihood. We thus agree with the Brundtland Commission Report, published in 1987.

To us, sustainable development is a constant learning proc-ess, one which helps reveal potential for improvement in various businesses, as well as directions as to how we can better overcome current and future challenges and seize new chances in new ways. This not only includes a risk-aware banking business, but also efficiently using and conserving natural resources and a forward-looking HR approach to demographic change. GRI G4-18, G4-19

Along the road to sustainability, we need benchmarks. That is why, in 2013 we committed ourselves to the ten interna-tionally acknowledged principles stipulated by the Global Compact of the United Nations, and in 2014 we imple-mented a Group-wide Code of Conduct. We define respon-sible corporate governance to include not only adherence to legal requirements, but also to values and principles.

3 Values and Principles: p. 9 3 Responsible Corporate Governance: p. 20 et seq.

DG HYP is confident that by acting sustainably, we will gain a competitive edge in the medium term. For a Pfandbrief issuer that specialises in commercial real estate, the effects felt in direct competition in the market should be less pro-nounced. Open communications, attractive working condi-tions and a fair, appreciative approach to all stakeholders help us to create and maintain relationships that are built on trust, to avoid risk-taking and to use opportunities when they arise. Regular communication with our stakeholders and transparent reporting are key elements of our sustain-ability strategy. GRI G4-26

3 Materiality: p. 19 et seq.

Sustainability ManagementThe responsibility for the issue of sustainability lies with the Chairman of the Management Board of DG HYP. This reflects the strategic significance we place on sustainability, and ensures top management attention concerning imple-mentation.

The Sales Management and Investor Relations department is in charge of coordinating all activities related to sustainabili-ty; the head of this department reports internal and external developments to the Management Board. This department is the first point of contact for all other departments when questions concerning sustainability and/or the implementa-tion of sustainability programme measures arise. It monitors all sustainable actions, and makes suggestions regarding the advancement of the sustainability programme together with the affected divisions. Furthermore, it serves as first point of contact for internal and external stakeholders and is responsible for reporting.

Sustainability is a cross-divisional responsibility. To en-sure that it is addressed across all management levels and divisions, various departments formally assumed responsi-bility for sustainability-related topics and implementation of measures in their division. This approach has proven a success in anchoring sustainability all over the bank. With this allocation of responsibilities, we want to raise aware-ness in all divisions for our understanding of successful busi-ness operations: we believe that success is not defined by economic metrics only, but also by a conscious take on the ecological and social consequences of our daily activities.

DG HYP also applies economic, environmental and social criteria when choosing its suppliers, based on Group-wide sustainability standards for suppliers established in 2012. We give preference to local suppliers and service providers, meaning they are located close to one of our offices.

3 http://dghyp.de/suppliers3 Human Rights: p. 233 Environmental Protection Along the Supply Chain: p. 51


Sustainability Programme Our Sustainability Officer develops a sustainability pro-gramme for DG HYP in cooperation with the relevant de-partments. The sustainability programme describes the goals that we have set for ourselves in individual areas, and how we want to achieve them. Current and planned meas-ures to continuously improve our sustainability performance are linked to a schedule. Achievement and implementation status of these goals – and the corresponding measures – are reviewed in internal audits. This system ensures that the sustainability programme is being put into practice consist-ently and in a targeted manner.

The segmentation of the central areas of activity, together with the allocation of objectives and measures of our sus-tainability programme were adjusted during 2015, accord-ing to the principle of materiality, adding two new areas: “Sustainability Strategy and Corporate Governance” as well as “Sustainable Banking Business”. This structure – with two areas instead of one “Economic Responsibility” dimen-sion – is a better reflection of the issue’s complexity: when

addressing sustainability, we touch upon cross-divisional questions regarding strategy and management, while still focusing on our core business as a real estate bank. The three remaining areas “Employees”, “Ecological Responsi-bility” and “Social Commitment” correspond with the clas-sical dimensions every company needs to deal with when looking at its economic, environmental and social responsi-bility. GRI G4-19, G4-22

3 Our Sustainability Programme: p. 56 et seq.

Stakeholder DialogueTrust is fundamental for the feasibility and success of co-operative projects, and an important factor in stakeholder communications. It shows in the strength of the dialogue we foster with our stakeholders, which include clients, business partners, employees, analysts and investors, but also associ-ations, political decision-makers, media and academia. We also regularly communicate with non-governmental organi-sations, whose queries and issues we address.GRI G4-24,G4-25

DZ BANK GROUP’S CORPORATE RESPONSIBILITY COMMITTEE (CRC)

With a view to integrating sustainability to an even greater extent in the business processes, DG HYP is playing an active role in DZ BANK Group’s sustainability market initiative. This initiative aims to bundle sustainability-related activities, take advantage of market opportunities, avoid risks and foster the active exchange of knowledge and experience between the members of the Group. For this purpose, a permanent Corporate Responsibility Committee (CRC) was formed in 2014, of which DG HYP is a member. The results of this collaboration are, for example, the introduction of a Group-wide database structure, common supply standards and a coordinated environmental and climate strategy.



Anchoring sustain-ability in business strategy

Transparent reporting

Regular stakeholder communications

Adherence to legal requirements, and to values and principles

Sound business model, with a conservative risk strategy

Long-term relationships with business partners

Powerful funding options through

> the Volksbanken Raiffeisenbanken cooperative fi nancial network

> issuance of Mortgage Pfandbriefe

SUSTAINABLEBANKING

EMPLOYEES

Performance-based remuneration

Work/family balance

Occupational health management

Extensive CPD offers

Empowering the next generation

ECOLOGICAL RESPONSIBILITY

Reducing the use of energy and resources

Reducing CO2 emissions

Enhancing employees’ ecological awareness

SOCIAL COMMITMENT

Support for social projects and non-profi t organisations

Promoting issues and organisations with real estate topics

Support for research institutes dealing with the cooperative sector

Supporting employees’ voluntary engagement

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SUSTAINABILITY STRATEGY AND

CORPORATE GOVERNANCE

Being in dialogue enables us to better respond to the vari-ous stakeholders’ concerns and requests and provides us with an initial understanding as to how the opportunities and risks associated with our business activities are per-ceived in the outside world. The importance of building lasting relationships with our stakeholders is therefore also a strategic one; it lays the groundwork for the continuing development of our sustainability programme. GRI G4-26

3 Stakeholder Focus and Materiality: p. 19 et seq.3 Client Dialogue and Complaints Management: p. 28

Employee Dialogue We foster a culture of dialogue, openness and mutual re-spect in our bank, and our employees play an active part in decision-making processes. In addition to extensive per-sonal communication, we use our intranet to keep employ-ees constantly informed about what is going on in the bank and its divisions.

To further intensify the dialogue with our employees, we regularly conduct online employee surveys to assess the bank’s development from the perspective of its employees. The most recent survey, held in 2014, provided a represent-ative overview of the sentiment among the employees with a participation ratio of 81 per cent. A good way of meas-uring employee satisfaction is the Organizational Commit-ment Index (OCI) indicating an employee’s attachment to their company. DG HYP achieved a good result, with a score of 78. However, the survey also pointed out potential for improvement, which we have been addressing systemati-cally ever since. GRI G4-24, G4-26

3 More on the employee survey: p. 33

Employees also have a powerful voice in the materiality analysis, whose results influence our sustainability reporting and the further development of our sustainability pro-gramme.

3 Stakeholder Focus and Materiality: p. 19 et seq.



Cooperative Bank Dialogue The cooperative banks are amongst our most important stakeholders. To support the dialogue with them, we have instituted an Advisory Council comprising representatives of the cooperative banks, in addition to personal meetings and visits with our sales staff. The Advisory Council supports DG HYP’s Management Board as part of an intensive ex-change of ideas. We also organise various events designed to encourage a sense of togetherness. GRI G4-24, G4-25, G4-26

We discuss professional topics openly, and involve the Managing Directors of the cooperative banks in discussions with our real estate clients. Through our IMMO PARTNER dialogue, we created another nationwide concept that pro-motes more intensive collaboration with the cooperative banks. We also organise regional real estate conferences, to expand our network and client contacts. With regular re-ports on real estate markets, particularly regional ones, and our IMMO KOMPAKT publication, we increase transparency on our business activities to support cooperative banks in their daily work on the markets they are active in.

Capital Markets and Rating Agencies DialogueWe strive for transparency in all communication with part-ners in the capital markets. We cultivate investor relations intensively, with both larger-scale events and one-on-one briefings. In addition to the annual and interim reports, we publish market-relevant information. Our Debt Issuance Programme (DIP) offers standardised documentation for the issuance of medium- and long-term bonds on the capital market. This is published with the Luxembourg Stock Ex-change, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – "BaFin"), and the German Federal Gazette (Bundesanzeiger). It is available on DG HYP's website, amongst other places. We are also in constant and extensive dialogue with rating agencies and analysts for financial and sustainability ratings. GRI G4-24, G4-25, G4-26

Dialogue with Society and PoliticsDG HYP communicates with social and political decision-makers mainly via associations it holds a membership with. These include the National Association of German Coopera-tive Banks (Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V. – “BVR”), the Association of German Pfandbrief Banks (Verband Deutscher Pfandbriefbanken e.V. – “vdp”), the German Property Federation (Zentraler Immobilien Ausschuss e.V. – “ZIA”) and the German Inves-tor Relations Association (Deutscher Investor Relations Ver-band e.V. – “DIRK”). We support efforts towards a more stable financial system as well as the interests of Pfandbrief issuers and the economic and non-economic interests of the real estate sector. GRI G4-24, G4-26 We are also an active member of the Association for Environmental Management and Sustainability in Financial Institutions (Umweltmanagement und Nachhaltigkeit in Finanzinstituten e.V. – “VfU”), a network of environmen-tal and sustainability managers at leading financial services providers, and engaged intensively in its forum for sustain-able lending in the year under review. The VfU provides its members with a platform to exchange subject-matter knowledge and information, and to maintain an interesting dialogue with experts and representatives of non-govern-mental organisations. We also take part in a round table with the United Nations Environment Programme Finance Initiative (“UNEP FI”), where recent developments and progress made in the realms of sustainable finances and sustainability management are discussed.

We consider ourselves an independent, politically neutral institution, and ceased to support political parties in 2005.



Stakeholder Focus and MaterialityOur reporting on sustainability is designed to meet our stakeholders’ information requirements on the one hand, and to reflect the sustainability issues that are of major im-portance to us as a bank on the other. This is what the Global Reporting Initiative (GRI) – the standard our reporting is based on – defines as the principle of materiality. While in the past we regularly requested feedback from our stake-holders to help us identify “relevant” or “material” topics, in 2015 we also conducted a systematic materiality analysis to determine which sustainability-related aspects are con-sidered important by DG HYP and various stakeholders. The analysis was designed as an online survey, in which we and DZ BANK Group invited external and internal stakeholders to participate. GRI G4-18, G4-23

When selecting the stakeholders to participate in the survey, we took various aspects, such as diversity and relevance for our bank, into account: GRI G4-25

• Our most important stakeholders are cooperative banks as clients and owners, corporate and private clients of Group entities, as well as our bank’s and DZ BANK Group’s employees.

• Suppliers and service providers, as well as associations and investors, are of high economic relevance.

• Criticism voiced by non-governmental organisations,

rating agencies, policy makers or academia, was also taken into consideration. GRI G4-24

The 2015 survey spanned five areas with subordinated as-pects and was based on an analysis of sustainability trends we are currently witnessing in our society. With a response rate of 46 per cent, it yielded valuable indications as to what we should report and work on. GRI G4-18

DG HYP’S ASSOCIATION MEMBERSHIPS

• Federal Association of German Credit Unions and Rural Banking Cooperatives (BVR)

• Cooperative Association Weser-Ems

• Cooperative Association, Frankfurt/Main

• Cooperative Association Rhineland-Westphalia

• Cooperative Association Baden-Württemberg

• Cooperative Association Bavaria

• German Cooperative and Raiffeisen Confederation (DGRV)

• Association of German Pfandbrief Banks (vdp)

• Association of German Pfandbrief Banks (vdp)

• Urban Land Institute (ULI Europe)

• Association for Environmental Management and Sustainability in Banks (VfU)

• German Investor Relations Association (DIRK)



The results on Group-level were then evaluated by each entity, the external stakeholders’ responses compared to internal perceptions, and displayed in a materiality matrix (see chart). The matrix shows that both surveyed groups attribute “Sustainable Corporate Governance” and “Sus-tainable Products and Services” the highest level of rele-vance. Within these areas, they ranked “Cooperative Prin-ciples and Values” and “Corporate Strategy and Success” highest. The results confirm the need for sustainability to be approached as a strategic cross-divisional responsibility, and to be systematically integrated into the core business. For DG HYP, this means that the principle of sustainability, which is already enshrined in the cooperative model, needs to be worked out more clearly. GRI G4-27

For the future, we will conduct such materiality analyses on a regular basis, as they provide us with valuable information on the scope we should aim for in our sustainability report-ing. They help us review our strategy and, where necessary, rework our sustainability programme. GRI G4-26

Responsible Corporate GovernanceGood corporate governance and sustainable economic management require compliance with legal and regulatory regulations, the responsible management of risks, protec-tion of the bank’s reputation, and the implementation of transparent business processes. Our Corporate Governance policy provides a framework that spans all legal concerns and operational principles.

Relevance for external stakeholders

3,5 4,0 4,5 5,0 5,5 Relevance for DZ BANK Group

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Corporate governance

Employee responsibility

Ecological responsibility

Products and services

Social commitment

MATERIALITY MATRIxGRI G4-19, G4-20, G4-21



Corporate Governance At DG HYP, we apply a model of dual leadership. Two Managing Directors lead the company according to existing statutory provisions, ensuring compliance within DG HYP. The Supervisory Board and its committees monitor and ad-vise the Management Board.

DG HYP’s internal regulations – for example the Articles of Association and Internal Rules of Procedure – comply with legal requirements. The Supervisory Board consists of 18 members. In accordance with the German Act to Simplify the Election of Employee Representatives to the Supervisory Board (Drittelbeteiligungsgesetz), it comprises twelve mem-bers elected at the Annual General Meeting and six mem-bers elected by employees. 22 per cent of Supervisory Board members are female, an 11 per cent rise on 2014.

The Management Board informs the Supervisory Board about relevant plans and developments at an early stage, with special attention paid to conveying the risk situation.

3 Target quota for women on the Supervisory Board, the Management Board and the upper management: p. 36

Risk ManagementAs an integral part of DG HYP’s strategic and operative management of the bank as a whole, our risk manage-ment is closely integrated into the risk management and risk control systems of DZ BANK Group. Assuming risks in a targeted and controlled manner, observing target returns, is an element of our enterprise management. The activi-ties driven by DG HYP’s business model require the ability to identify, measure, assess, manage, monitor and com-municate risks. In addition, maintaining an adequate level of equity backing for risk exposure is a prerequisite for our business. As a guiding principle for all of its business ac-tivities, DG HYP assumes risk only to the extent required to achieve the objectives of its business policy and where the risks seem controllable.

To implement this principle, DG HYP’s Management Board has defined risk strategies for material risks which are in line with Group guidelines, and which are based on the bank’s business strategy. Each of these sub-risk strategies comprises the business activities exposed to risk, the risk management objectives (including provisions concerning risk acceptance and avoidance), and the measures designed

to achieve these objectives. The business and risk strategy, as well as the sub-risk strategies, were discussed with the Supervisory Board.

The regulatory organisational requirements and the allo-cation of risk management responsibilities are set out, in particular, in the Minimum Requirements for Risk Manage-ment (Mindestanforderungen an das Risikomanagement – “MaRisk”). DG HYP meets these requirements. We have also implemented risk management and risk control systems that fulfil the needs arising in the market and competitive environment. This forms the basis that ensures the proper operation and efficiency of the risk management process.

3 For more information, please see Report on Expected Developments, Opportunities and Risks in our 2015 Annual Report, p. 51 et seq.

Remuneration Oversight Committee and Remuneration Officer After DG HYP was classified as a material institution pursu-ant to the German Regulation on Remuneration in Finan-cial Institutions (Institutsvergütungsverordnung – “Instituts-VergV”) in 2013, the Supervisory Board established a Remuneration Oversight Committee in early 2014. The Committee supports the Supervisory Board in monitor-ing whether remuneration systems for the bank’s staff are appropriate, and in assessing the impact of remuneration systems on the management of risk, capital and liquidity. This applies, in particular, to the Management Board as well as to employees whose activities have a material impact on the bank’s overall risk profile, and to the heads of Risk Controlling and Compliance. Furthermore, the Remunera-tion Oversight Committee prepares the Supervisory Board’s resolutions concerning the remuneration for Managing Directors.

The Management Board also appointed a Remuneration Officer and a deputy, in compliance with the InstitutsVergV. The Remuneration Officer reports to the Management Board. He/she functions as supervisor, advisor and reporter for the Remuneration Oversight Committee. The Remuner-ation Officer prepares an annual remuneration oversight re-port on the appropriateness of the bank’s remuneration sys-tems. In accordance with legal and regulatory requirements, we publish information on our remuneration systems on our website. The general standards of these systems, including



employer/works council agreements (Betriebsvereinbarun-gen), are transparent and accessible to all employees in the central handbook for our organisation.

3 Performance-Based Remuneration: p. 38 3 Information on remuneration systems: http://dghyp.de/remuneration (available in German only)

Transparent Financial Reporting DG HYP meets applicable reporting standards to ensure dis-closures are comprehensive and transparent in the Annual Report and Interim Reports. The financial statements are prepared by the Management Board and examined by both external auditors and the Supervisory Board. The financial statements are confirmed by the Supervisory Board.

3 2015 Annual Report, p. 68 et seq.

Compliance Sustainable economic management requires compliance with all applicable legal requirements, regulations and self-commitments as well as internal guidelines. As a financial services provider, the trust and safety of our stakeholders are of enormous importance to us. Countering corruption and bribery, and preventing money laundering and fraud, are therefore amongst the core principles of our business activity. Our Compliance Office advises and supports our business units in implementing and fulfilling legal require-ments and ensures a constant exchange of information.

It is organisationally aligned with the central office for money laundering, fraud prevention and data protection management, and has a direct organisational, substantive and disciplinary connection to the Management Board, to preserve its independence. The Compliance Office evaluates and monitors compliance with regulations and ensures the proper conduct of our employees. It identifies violations, and sanctions them accordingly, and is active in preventing money laundering, terrorism financing and fraud. Further-more, it cooperates closely with Risk Controlling’s opera-tional risk group to identify, assess and manage risks. With uniform instruments for the identification of operational

risks and processing feedback from risk analyses, DG HYP ensures that the risk of losses is minimised and eliminated at an early stage.

In the year under review, no complaints regarding anti-competitive conduct, cartelisation or monopolisation were registered.

Prevention of Money Laundering, Terrorism Financing and Fraud DG HYP’s anti-money laundering policies are designed to prevent the circulation of illegally obtained funds. To ac-complish this, suitable principles and procedures have been developed in line with statutory provisions that are moni-tored internally on an ongoing basis. The same applies for the financing of terrorism. Internal training raises employee awareness of these issues.

Fraud prevention is another part of DG HYP’s proper busi-ness organisation. The bank evaluates all potentially action-able, internal and external practices which could endanger its assets, and sets measures to prevent any wrongdoing.

Every two years, we train our employees on meeting ap-plicable laws and regulations, as well as combating money laundering and fraud. The effectiveness of the aforemen-tioned prevention measures are evaluated on an annual basis as part of the risk analysis.

While suspicious activity reports were filed, they did not re-sult in incidents relevant under criminal law in 2015.

Whistleblowing SystemTo prevent white-collar crime and deter unauthorised in-fluence from being exercised on our employees, DG HYP has instituted a whistleblowing system. As part of this sys-tem, employees can relay information about non-compliant practices, serious violations or other failings to an internal Compliance Officer – confidentially, and without their name being disclosed. The Officer then investigates the incident and takes necessary measures. The Officer may also involve an emergency committee.



Human RightsAdhering to and honouring human rights is a prerequisite for DG HYP’s day-to-day business. As our business activities are focused on commercial real estate finance in Germany, human rights abuses such as child and forced labour are not an issue. Further topics such as equal treatment, anti-discrimination or data protection are addressed in internal regulations, prevailing principles and the Group’s Code of Conduct.

DG HYP has pledged to ensure that human rights are ad-hered to along its supply chain. In 2012, the Group elabo-rated sustainability standards that require suppliers to meet certain social and environmental requirements. These re-quirements are based, amongst others, on the principles stipulated by the Global Compact of the United Nations, the Code of Conduct published by the German Associa-tion Supply Chain Management, Purchasing and Logistics (Bundesverband Materialwirtschaft, Einkauf und Logistik e.V. – “BME”), as well as on the relevant conventions of the International Labour Organisation (ILO). Suppliers with a total business volume of €100,000 or more commit them-selves to meeting the sustainability requirements through a self-declaration.

Data Protection DG HYP guarantees that personal data is protected, and only used for specific purposes. In addition, we implement technical and organisational security measures. These are constantly improved in step with technological advance-ments, and monitored by an internally appointed Data Pro-tection Officer. In performing his data protection duties, this person is free from external influence or other instructions and reports directly to the Management Board. The Data Protection Officer is responsible for new employee induc-tion, conducting training, and providing updates concern-ing developments in data protection law. All employees are bound to confidentiality, pursuant to section 5 of the German Federal Data Protection Act (Bundesdatenschutz-gesetz), and are familiar with the provisions of the Data Protection Act and data protection requirements. For train-ing and regular refreshers in data protection, our employees

can turn to both the intranet and the DG HYP process por-tal’s data protection learning programme.

There were no relevant infringements of data protection regulations during 2015.

3 Protection of Client Data: p. 28

German General Equal Treatment Act Our employees, especially our executive staff, receive regu-lar training on the German General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz). New employees receive this training at the very start of their career with DG HYP. In the year under review, no violations or com-plaints regarding non-compliance with the German General Equal Treatment Act were registered.

3 Equal Opportunities: p. 35 et seq.

Our Code of Conduct To hold us accountable beyond legal requirements and market standards, we developed our own set of internal rules and values, upon which our Guiding Principles and Management Guidelines are based, and which are also reflected in our Code of Conduct developed jointly with DZ BANK Group.

Our Code of Conduct is a risk prevention, leadership and communication tool, and documents our understanding of ethical and responsible conduct. The Code of Conduct serves as a framework of minimum standards that are then further specified through internal instructions, guidelines and the central handbook for our organisation. Apart from basic rules to counter corruption and bribery, money laun-dering, financing of terrorism and white-collar crime, our Code of Conduct provides guidelines on sustainability and responsibility vis-à-vis our clients, business partners and em-ployees. It serves as a compass for our daily conduct, and has been communicated to all employees, via our intranet as well as by other means.

3 http://dghyp.de/codeofconduct


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SUSTAINABILITY STRATEGY TRUSTFUL …€¦ · SUSTAINABILITY STRATEGY TRUSTFUL COMMUNICATION, ... the introduction of a Group-wide database structure, ... Sustainability Report 2015