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Risks Related to Regulatory Environment & Overall Statutory Framework

Changes in the regulatory environment and in the overall statutory framework could give rise to risks for all of Vonovia’s business segments. At present, 2 (2021: 2) key amber risks have been identified.

In the Rental segment, regulations regarding rent and ancillary expenses have a particular impact. The legislation on the carbon tax introduced by the German government could entail risks for Vonovia with the potential to negatively impact Adjusted EBITDA in the Rental segment. The risk relating to the regulatory environment “Unfavorable carbon tax”, which is classified as an amber risk, has been assigned an expected amount of loss of € 40–150 million (2021: € 25–100 million) and is still assessed as having a probability of occurrence of 60–95%. In order to limit this risk, Vonovia has adopted a program for energy-efficient refurbishments within its portfolio and has started developing new methods for carbon-reduced energy production (power-heat coupling, sector coupling, etc.). The research center in Bochum-Weitmar is also part of this measure.

From the Group’s perspective, the results from our business activities in the Rental segment in Sweden depend not only on our operating success but also on exchange rate developments. As the Swedish companies are small compared to the rest of the Group (eurozone), no currency hedging instruments are currently in use. In order to avoid short-term negative EUR/SEK fluctuations, foreign currency forwards are concluded in certain cases for the period from the time at which the need for an SEK payment is identified until the time of the actual transfer. Beyond that, however, there is a general exchange rate risk. The amber risk with an impact on profit and loss associated with “unfavorable exchange rate developments”, which relates to our business activities in Sweden, has been assessed as having an expected amount of loss of € 40–150 million (2021: € 25–100 million) and an unchanged probability of occurrence of 40–59%.