ESRS G1 – Business Conduct

ESRS 2 SBM-3 – Material Impacts, Risks and Opportunities and Their Interaction with Strategy and Business Model

Material Impacts, Risks, and Opportunities

Within the scope of our materiality assessment, we identified two material impacts, risks and opportunities (IROs) related to “business conduct”:

• Financial risk from corruption and bribery
• Positive impacts on employees through Code of Conduct and the development of a corresponding corporate culture

The “financial risk from corruption and bribery” also applies to our business areas. Financial risks, including liability and reputational risks, arising from violations of the Code of Conduct, the Group Anti-Corruption Policy or other legal requirements related to bribery and corruption, may include:

• Potential damages through fines or similar penalties
• Exclusion from tender procedures
• Negative press and reputational damage
• Adverse impact on employer branding
• Downgrades in ratings
• Loss of trust among stakeholders, including investors

We currently expect our material risks to have an influence on our business model, strategy and value chain in the medium term.

Significant cases of bribery and corruption, such as those resulting in reputational damage, loss of investor confidence, compensation claims, or rating downgrades, can negatively impact our financing strategy and liquidity by limiting our access to capital markets. This, in turn, can have adverse consequences for the financing and implementation of our new construction and development activities, ultimately affecting our (potential) tenants due to a reduced volume of new construction and modernization projects (business area). To mitigate these risks, we implement extensive preventive measures to combat bribery and corruption. For example, all employees in risk-sensitive roles are required to undergo annual training on bribery and corruption. Internal and external stakeholders can report suspected violations through whistleblowing channels (see G1-3 for details) and all reports are thoroughly investigated. Our Code of Conduct and Business Partner Code contain explicit provisions on bribery and corruption.

The actual positive impact of “positive impacts on employees through the Code of Conduct and the creation of a corresponding corporate culture” relates to the company’s own business area.

We currently expect our actual material impact to have an influence on our business model, strategy and value chain in the short term. This positive impact is closely linked to our strategy, as adherence to the Code of Conduct and the promotion of a corporate culture aligned with it can be directly shaped and influenced internally through strategic initiatives and targeted measures. Our efforts to foster a positive corporate culture and ensure that our Code of Conduct is consistently upheld play a significant role in driving these positive effects. Moreover, our corporate culture and Code of Conduct have direct impacts on people - specifically, our employees – who benefit from a culture of trust and respect, business conduct that considers the interests of all parties and strict adherence to legal requirements.

A strong corporate culture can enhance our appeal as an employer and help address the challenge of skilled labor shortages. A sufficient workforce in both technical and administrative areas is essential for our business model. To address the skilled labor shortage, we ensure attractive working conditions, which is an essential topic under ESRS S1, including a modern leadership style that contributes to a positive working atmosphere. Our HR strategy and related measures directly support this goal.

Additional measures to enhance positive impacts on employees focus on promoting diversity and equality of opportunity within our workforce. Our HR strategy explicitly includes measures to promote equality of opportunity and our Code of Conduct strictly prohibits any form of discrimination. This demonstrates the direct interconnection between our corporate culture and human resources strategies.

In the medium term, we anticipate a potential impact on our business model and value chain by our financial risk of bribery and corruption. Currently, we have not identified any current financial effects that could significantly impact our financial position, financial performance or cash flows in the next reporting period, nor do we foresee any material risks of adjustments to the carrying amounts of assets and liabilities in our financial statements.

Resilience of Our Business Model

The resilience of Vonovia’s strategy and business model is analyzed and evaluated annually as part of risk management. To evaluate the resilience of our business model in managing this material impact and risk, we continuously monitor potential violations of our Code of Conduct and the number of confirmed cases of corruption and bribery. Analyses from past reporting periods indicate that our systems for detecting bribery, corruption, and violations of the Code of Conduct remain effective in the short, medium, and long term. Reported violations are promptly investigated and, if necessary, sanctioned. In the event of a serious corruption or bribery incident, appropriate and effective measures are implemented, including internal investigations into each allegation. The necessary resources are immediately allocated by the Management Board. In 2023, a comprehensive internal investigation was conducted following a public prosecutor’s investigation into former employees and subcontractors of Vonovia. We also take a preventive approach by raising awareness of compliance topics among employees through mandatory training on the Code of Conduct and other relevant policies. We continuously monitor legal developments to ensure our training programs and policies, such as the Code of Conduct and Anti-Corruption Policy, are promptly updated in response to any regulatory changes. Our annual risk analysis helps us identify compliance risks and implement mitigating measures. We can therefore conclude that our current measures strengthen the resilience of our business model and ensure that no material risks emerge for our business model.