Environmental Issues

Environmental issues include the following material topics for Vonovia: “Reducing CO₂ in the real estate portfolio /energy-efficient modernization,” “Renewable energies and energy mix,” “Sustainable new construction and refurbishment” (see materiality matrix). The Group guidelines, concepts and processes of Vonovia are decisive in terms of describing the concepts and their implementation. As part of the pending integration of the company Deutsche Wohnen acquired by us, these guidelines, concepts and processes will also be transfered to the acquired business activities. Unless stated otherwise, the concepts presented for the reporting year apply to the Vonovia Group excluding Deutsche Wohnen.

We regard the mitigation of global warming and the protection of natural resources for life on earth as the most important challenge facing society as a whole in our time. Therefore, environmental and climate protection is accorded paramount importance within our sustainability strategy. Vonovia supports targets set at international level, such as the Paris Agreement and the European Union Green Deal, as well as those set at national level, such as the goal set by the German Federal Government this year to achieve climate neutrality by 2045.

As the housing industry market leader in Europe, we aim to be a central driving force behind climate protection. With our own real estate portfolio of 565,334 residential units (including Deutsche Wohnen) and our extensive development activities, we possess significant levers for environmental and climate protection. In this regard, we place CO₂ emissions at the forefront; these arise through the provision of our buildings with heating and hot water (so-called Scope 1 and 2 emissions), with the majority of our portfolio located in Germany. However, we are also paying increasing attention to CO₂ emissions from the upstream value chain and other environmental aspects.

Vonovia Climate Path: Portfolio Decarbonization Strategy

In the reporting year, we further developed our climate strategy and redefined our goal. In light of the new Federal Climate Change Act and the sector targets contained therein, we have set the target of achieving a virtually climate-neutral building portfolio by 2045, with a CO₂ intensity of less than 5 kg of CO₂ equivalents per m² of rental area. By 2030, we aim to achieve a CO₂ intensity of less than 25 kg CO₂e/m². These targets were once again developed through interdisciplinary consultation between various functional departments with the support of science (Fraunhofer ISE) and go further than the recognized 1.5° target pathway of the Carbon Risk Real Estate Monitor (CRREM) for multi-family homes in Germany (as of 07/2021). The Vonovia climate targets are contingent not only on a comprehensive improvement of the building portfolio’s energy efficiency through energy efficiency modernization, and an increased share of renewable energies in our neighborhoods but also on a profound transformation of the energy sector. As such, the provision of sufficient volumes of carbon-free district heating and electricity by the energy sector, coupled with a more rapid phase-out of coal, as described in the Coalition Agreement, are fundamental prerequisites for a climate-neutral buildings sector.

With respect to the attainment of our climate target and the targets of the housing sector as a whole, we continue to regard the right subsidy instruments and the removal of legal hurdles as decisive. After all, we believe that for climate-neutral housing to be a success and also remain affordable, there is a need not only for commitments and investments but also for ambitious and long-term partnerships and, in particular, changes in the overall political conditions. As part of the complete implementation of the business combination with Deutsche Wohnen, we will also incorporate the additional building stocks within our climate strategy and objectives.

The development of our climate path is part of our systematic response to the impact of climate change on our business development. In developing this course further, we not only consider the risks – such as those relating to our future business operations due to rising prices for the generation of CO₂ emissions and those relating to our buildings due to the impacts of climate change – but also the opportunities, such as those associated with climate-resilient and exceptionally competitive neighborhoods. The recommendations made by the Task Force on Climate-related Financial Disclosures (TCFD) constitute important guidance in this regard.

The following three material topics contribute to Vonovia’s overarching climate strategy:

Reducing CO₂ in the real estate portfolio/energy-efficient modernization

Energy-efficient refurbishments are a key element of our climate path. Following the initial definition of the target in 2020, concrete implementation work continued in the reporting year. A specially developed tool makes it possible to break down the Group target at the level of regions and neighborhoods – and identify nuanced solutions. In this respect, both environmental/social and economic targets are factored in. Here, the focus is on the urban quarter as a solution level, including for the energy revolution in particular. Many integrated solutions for energy provision with renewable energies and CO₂ optimization can only be implemented in a technically feasible and economically viable way within larger neighborhoods. The innovation clause of the German Buildings Energy Act (GEG), for example, is only applicable to neighborhoods. The energy-efficient modernization measures focus on heat insulation for facades, basement ceilings and attics, the replacement of windows and the installation of new heating boilers. Here, we are increasingly moving the focus away from individual measures, but rather gearing our programs more closely toward the holistic efficiency house notion within the meaning of Federal subsidies for energy-efficient buildings (BEG). In terms of heating modernization, we focus on the use of hybrid solutions and heat pumps. By the end of 2022, we also aim to have replaced all existing oil heating systems in existing buildings.

When carrying out energy efficiency building refurbishments, we need to consider both the strain on the tenants/residents concerned and the rising costs. Vonovia is committed to using numerous (academically supported) cooperation projects and integrated approaches to find innovative and cost-efficient, effective solutions for energy efficiency and a climate-neutral housing stock.

One example of this sort of approach is the Energiesprong initiative, a serial refurbishment concept that stands for minimal refurbishment times, high residential comfort and an innovative financing model on account of standardization and prefabrication. The aim is to conduct refurbishments to bring buildings to net zero, meaning that they generate as much energy in a year as they consume. The Energiesprong principle is currently being piloted in Bochum and is earmarked for further implementation within the portfolio. Vonovia is also taking part in projects to optimize the operational management of heating systems and the interaction between, for example, system technology, user behavior and structural measures, so as to deliver further ideas for measures that can be implemented at a reasonable cost.

The Portfolio Management department, which reports to the Chief Rental Officer (CRO), is responsible for coordinating the energy-efficient modernization activities. The urban quarters to be modernized are selected in a targeted manner in cooperation with the regions, and the optimal degree of modernization for each building is defined. The investments for the modernization programs are approved by the Management Board as a whole. Public-sector subsidy programs are being used for many of the modernization measures. Here, Federal subsidies for energy-efficient buildings (BEG) play a particularly crucial role in the investment program. This allowed a refurbishment rate of 2.3% to be achieved in the reporting year. The year-on-year drop (2020: 2.9%) is, among other things, attributable to the new conditions for subsidies and the adjustments to the internal management system to focus on the neighborhood level, which requires more complex and therefore longer planning. In the year ahead, it is expected that the refurbishment rate will once again exceed 2%.

Deutsche Wohnen also calculates and reports on a refurbishment rate; however, the definition of this rate differs from the key figure of Vonovia. The two rates will be merged as part of the integration process.

The CO₂ intensity of the building portfolio represents the central indicator of energy efficiency modernization. It is also an extremely important component of the Sustainability Performance Index (SPI) and therefore of the Corporate Management System. Alongside optimization of building envelopes, the switch to lower-carbon energy sources also stands at the forefront. As part of our quest to achieve a climate-neutral housing stock in 2045, Vonovia is aiming to have reduced the CO₂ intensity of its housing stock in Germany to below 25 kg CO₂e/m² by 2030. In the reporting year, CO₂ intensity stood at 38.4 kg CO₂e/m² and was therefore approx. 2.8% lower than in the previous year (2020: 39.5 kg CO₂e/m²)13. As such, the goal set for the reporting year of a reduction of at least 2% was achieved. In particular, the reduction is based on energy efficiency modernization and an improvement in the CO₂ intensity of district heating.

CO₂ intensity also represents a key figure at Deutsche Wohnen, whose reporting logic – despite becoming ever more similar in recent years – still differs from that of Vonovia in certain details, especially with respect to conversion factors for energy consumption. It came in at 32 kg CO₂e/m² in the reporting year. Recognition will be fully harmonized during the integration process.

As part of the continuous further development of our CO₂ accounting, we will make a modification in the CO₂ accounting of district heating starting in the 2022 fiscal year, where we will use the Carnot allocation method14 in the future. This has the advantage that the allocation of CO₂ emissions between electricity and district heating is based on purely physical considerations, meaning that we can structure our long-term climate strategy and corresponding innovations in a way that is robust against regulatory changes in the long term. Had this method been applied to the building portfolio in the 2021 reporting year, it would have resulted in a theoretical CO₂ intensity of 35.6 kg CO₂e/m².

Energy efficiency modernization measures in Austria are, like overall business operations in Austria, the responsibility of the Chief Development Officer (CDO) under the BUWOG umbrella, where they are led by the Real Estate Management division. Since 2011, BUWOG has been a partner of the “klimaaktiv Pakt” climate protection initiative launched by the Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology. Following completion of the first stage of the initiative in 2020, BUWOG has set a new goal as part of “klimaaktiv 2030”, the aim being to achieve a reduction of 55% by 2030, compared to the base year of 2005. The highest share of the CO₂ reduction will be accounted for by modernization and improvements to existing stocks, particularly insulation refurbishment, improvements in the efficiency of heating systems and conversion to renewable energy sources. BUWOG has also had a certified energy management system that is consistent with ISO 50001 standards in place in Austria since 2013/14 and in Germany since 2018. The system is a tool used voluntarily to systematically manage energy performance and improve it continuously. The corresponding establishment of processes that reflect this policy in the company and clear objectives serve to increase energy efficiency, reduce energy consumption and cut energy costs.

In Sweden, virtually all existing Victoriahem buildings are supplied with district heating, the generation of which already produces extremely low CO₂ emissions. Therefore, the road to climate neutrality will primarily be shaped by further decarbonization of heating supply, coupled with ongoing improvements in energy efficiency.

Renewable Energies and Energy Mix

A further key pillar of our climate strategy is the use and expansion of renewable energy sources. Vonovia is aiming to continuously increase the use and share of renewable energies, for example by expanding the use of hybrid heating systems, heat pumps, solar thermal energy, pellet heating and integrated neighborhood systems. We are also piloting innovative approaches such as the use of hydrogen technology in combination with electricity from renewable sources.

In 2021, Vonovia hit its target of installing PV panels on 1,000 roof areas. As the overall potential of the suitable roof areas is still considerably higher, we plan to install PV panels on 17,000 roofs by 2030; this equates to an installed output in excess of 200 MWp (compared to 18.0 MWp in 2021). In order to achieve this goal, we are also investing in in-house installation capacities and creating about 100 new jobs. In the long term, i.e., by 2050, we intend to fit all 30,000 suitable roof spaces in the German portfolio with PV panels. Looking ahead, the plan is to use the energy generated directly as landlord-to-tenant electricity in the individual neighborhoods as soon as the overall legal conditions make this commercially feasible. The PV program and other innovative approaches aimed at the CO₂ optimization of the real estate portfolio as part of the neighborhood concept are developed and managed by the Innovation & Business Building department.

Vonovia is offering its customers the opportunity to purchase electricity from renewable energy sources via its own energy distribution company (VESG). By supplying certified green electricity, Vonovia is helping its customers to avoid greenhouse gas emissions. In the mid- to long-term, Vonovia is seeking to decentralize the energy supply to its own neighborhoods using self-supply and tenant electricity concepts. Our objective is to maximize the share of energy we produce ourselves for the benefit of our customers and the environment, and also to use it for our housing-related services, e.g., e-mobility. The purchase of certified green electricity to supply communal areas makes a further contribution to our climate strategy.

All activities relating to renewable energies and energy distribution are organized in the Value-add business area and are managed by a chief representative who reported directly to the CEO of Vonovia until the end of the 2021 fiscal year. This responsibility will move to the Chief Transformation Officer (CTO) with effect from January 1, 2022.

Sustainable New Construction and Refurbishment

Vonovia’s new construction activities are helping to create urgently needed new and affordable homes, especially in metropolitan areas. In the reporting year, the integration of the new construction division of Vonovia Technischer Service GmbH – a company focusing on densification and the addition of extra stories to buildings – under the Development business, which operates under the BUWOG brand in Germany, was decided upon and spearheaded. BUWOG focuses on the development of high-quality residential neighborhoods for the company’s own portfolio (to hold) and for direct sale (to sell) in Germany and Austria. The activities of the BUWOG development business in Germany and Austria are the responsibility of the Chief Development Officer (CDO), and the individual development projects are approved by the Management Board.

In its new construction and refurbishment projects, Vonovia takes care to ensure optimized energy design and the use of renewable energies. We achieve this, for instance, by using the German efficiency house standard or the new-build criteria of the “klimaaktiv Pakt” initiative.

The average primary energy demand of newly constructed buildings, in relation to rental area, make up the most important performance indicator. This performance indicator is part of the planning process and must be made transparent as part of all Management Board approvals of new-build and development projects. Our aim is to reduce this significantly in the medium term. The increase in average primary energy demand in 2021 is attributable to projects that were already planned and approved under other framework conditions prior to the setting of our goals. For the same reason, a considerably higher figure is anticipated for 2022; in subsequent years, a considerable reduction is then expected.

In the reporting year, resource-saving and eco-friendly construction and, in particular, analysis of the entire life cycle came more to the fore. In many projects, various wooden construction methods were planned and used; these result in much lower CO₂ emissions and energy requirements in the manufacture of building materials. As such, the overall footprint can be reduced effectively. In the future, we will make greater use of increasing systemization, also taking the CO₂ impacts of the upstream chain into account. We will discuss and champion these and other approaches at our “Perspectives on the Future of Construction” conference, which is planned for 2022.

Designing the residential environment and preserving biodiversity are top priorities for us. Numerous buildings feature green spaces that serve as natural habitats for flora and fauna at ground level, on roofs or on facades. In addition to the optical effects, these green spaces also offer a practical added value, for example, by slowing the flow of rainwater into the partially overburdened municipal sewage system and by making a considerable contribution to the microclimate, especially by preventing urban heat islands in built-up areas. Attention is also paid to conserving resources and protecting the environment during the construction phase, too.