GOV-3 – Integration of Sustainability-related Performance in Incentive Schemes

To demonstrate the importance of sustainability for our corporate activities, we have integrated sustainability targets into Vonovia’s management and remuneration system for the Management Board and top management (first level below the Management Board) via the Sustainability Performance Index (SPI). The index comprises six sub-indicators based on the material sustainability priorities at Vonovia. They are each included in the SPI, which is measured as a percentage, with different weightings. The sub-indicators include:

The SPI is one of Vonovia’s internal performance indicators and relates explicitly to its core business, property management and development. Its six sub-indicators are company-specific metrics.

The indicators “proportion of accessible (partially) modernized newly rented apartments,” “customer satisfaction” and “carbon intensity of the housing stock” are only measured for Germany, i.e., they do not include Austria or Sweden. 

Climate-related considerations are incorporated into Management Board and top management remuneration via two SPI sub-indicators: “carbon intensity of the housing stock (in Germany)” and “average primary energy demand of new constructions (Group as a whole).” The carbon intensity of the housing stock (see E1-4) is designed to illustrate energy-efficient alterations to existing properties, while the energy demand of new constructions addresses the average primary energy demand of newly constructed housing. Overall, climate-related considerations are incorporated into long-term variable remuneration at 11.25%. In 2025, climate-related considerations of around 2% to 3% (2024: around 2% to 4%) were included in the total compensation paid to members of the Management Board (in accordance with Section 162 AktG).

We are aiming to achieve 100% target achievement in the 2026 fiscal year. The Management Board has set specific annual targets for each of the SPI indicators. The weighted targets add up to a target of 100%. Progress during the year is recorded, reported to the Management Board and monitored on a quarterly basis for internal annual controlling purposes. The SPI target achievement level for the 2025 fiscal year was 106.2% (see also the chapter Corporate Governance). The Management Board has also set medium-term targets for 2030 for internal management purposes (see table above).

The remuneration paid to members of the Management Board (and top management) is based on a number of components. Among other things, members are granted a remuneration component with a long-term incentive effect and a balanced risk-return profile in the form of notional shares (“performance shares”) in line with the provisions of the relevant applicable Long-term Incentive Plan (LTIP). Target achievement as part of the LTIP is calculated on the basis of three financial performance criteria and one non-financial performance criterion, the Sustainability Performance Index (SPI, excluding customer satisfaction).

• Relative total shareholder return (relative TSR) (40%)
• EPRA NTA (Net Tangible Assets) per share (20%)
• Operating free cash flow (OFCF) per share (20%)
• Sustainability Performance Index (SPI, excl. CSI) (20%)

The weightings assigned to the four performance criteria (which were previously assigned equal weightings) have been adjusted to place greater emphasis on Vonovia’s capital market performance via the relative TSR. Maximum target achievement, on the other hand, remains unchanged at 250% of the grant amount.

As part of the changes made to the remuneration system in the reporting year, customer satisfaction (CSI) was switched to a performance criterion for the Short-term Incentive Plan (STIP) to provide an incentive for ongoing high levels of customer satisfaction (see Remuneration Report). It is included, as an ESG target, in the short-term variable remuneration as part of the STIP at a rate of 20%, alongside adjusted earnings before tax (EBT), at a rate of 80%, and, where appropriate, a strategic factor (as a multiplier). To prevent double incentives via both variable remuneration components (LTIP and STIP), customer satisfaction (CSI) has now been removed from the Sustainability Performance Index (SPI) relevant to the LTIP for the purpose of Management Board remuneration.

The SPI targets are closely tied to the company’s five-year investment planning.

In the reporting year, around 22% (2024: 13% to 14%) of the (target) remuneration for members of the Management Board depended on sustainability-related targets, based on the total of LTIP and STIP. The increase resulted from the adjustment of the remuneration system.

The remuneration system and the SPI are described in detail in the Remuneration Report and in the chapter entitled Corporate Governance. These sections also present the payout amounts and target achievement levels for the individual LTIP tranches.

In accordance with the requirements of Sections 87 (1) and 87a (1) AktG, the Supervisory Board adopts a remuneration system for Vonovia SE Management Board members. The Supervisory Board is supported by the HR and Remuneration Committee, which develops recommendations relating to the Management Board remuneration system. The Supervisory Board submits the remuneration system to the Annual General Meeting for approval (every time any major adjustments are made to the remuneration system, but at least every four years). The Supervisory Board also makes a decision every year on the specific SPI targets for the term of the STIP and LTIP and on the parameters for target achievement.