Case study: How Berlin Hyp works with its clients and customers to encourage sustainable practices

Stakeholder identification and consultation

Please describe which stakeholders (or groups/ types of stakeholders) you have identified, consulted, engaged, collaborated or partnered with for the purpose of implementing the Principles and improving your bank’s impacts. This should include a high-level overview of how your bank has identified relevant stakeholders, what issues were addressed/results achieved and how they fed into the action planning process.

For Berlin Hyp, the stakeholders that matter most are those who are directly or indirectly impacted by the bank’s activities and whose views and actions can influence its operations. This includes customers, employees, society, competitors, investors, and owners. Assessments of stakeholder relevance are carried out by the sustainability management team as needed.

To quickly identify and respond to the expectations and requirements of these stakeholders in terms of sustainability, Berlin Hyp employs established formats for engaging with key stakeholder groups in society. Interaction with stakeholders is woven into the fabric of daily operations, evident through customer conversations, employee surveys, and participation in business association committees.

Additionally, Berlin Hyp utilizes a variety of (digital and physical) formats, including:

• Customer satisfaction analyses
• Feedback collection following deal closures
• Customer engagement events
• Customer complaints management
• Dialogue sessions between the Board of Management and all employees
• Employee surveys assessing mental stress risks
• Employee satisfaction surveys conducted by the Works Council regarding management and the work environment
• Information events for employees (e.g., “Punkt10 Dialog” and “B-One Lunch”)
• Staff meetings
• Interaction with the Works Council as part of legal consultation and information obligations
• Engagement formats with experts and executives
• Investor roadshows
• Participation in committees and associations
• Round table discussions with industry representatives
• Ongoing collaboration with rating and sustainability agencies
• ESG Board meetings
• Strategic dialogues
• Management Committee discussions
• Engagement in panels by Board members and executives
• Participation in trade fairs

How did Berlin Hyp work with its clients and customers to encourage sustainable practices and enable sustainable economic activities?

In its 2023 PRB Progress Report Berlin Hyp reports that it works with its clients and customers to encourage sustainable practices and enable sustainable economic activities as follows:

Sustainable Finance Framework:

On April 7, 2022, Berlin Hyp launched its new Sustainable Finance Framework, which establishes a comprehensive approach for classifying sustainable financing products across a holistic spectrum. The framework includes detailed exclusion criteria for ecologically harmful real estate financing outlined in its Sustainability Guideline, with these criteria being regularly updated. Financing products under this Sustainable Finance Framework are categorized based on clearly defined eligibility standards. The primary focus is on Green Loans, which are aimed at funding energy-efficient and environmentally sustainable buildings. The structure of these Green Loans aligns with Berlin Hyp’s sustainability standards as well as relevant government regulations. These loans can be issued either as energy efficiency loans or taxonomy loans. When Green Loans are utilized to enhance the energy and carbon performance of buildings, they may be structured as transformation loans, supporting the improvement efforts for both taxonomy and energy efficiency loans.

As of the end of the reporting period, the proportion of financing for green buildings rose to 35.4%. Moving forward, environmental considerations will play an even greater role in the property selection process for financing. As part of its decarbonization initiative, Berlin Hyp developed a new control and pricing methodology for assessments in new lending, set to be implemented in 2024. This methodology would incorporate various sustainability parameters, including references to CREEM paths, transformation projects, and ESG risks, which would influence pricing decisions for financing property selections.

In April 2023, Berlin Hyp released an updated version of its Sustainable Finance Framework, providing a unified approach to holistically classify its sustainable financing products.

This update introduced a new financing product, the Social Loan, which is now an integral part of Berlin Hyp’s lending process. At the same time, the criteria for the Social Bond were transferred to the lending business. The Social Loan specifically focuses on financing affordable housing in Germany and the Netherlands. By adding this new product, Berlin Hyp aims to contribute to the development and provision of affordable housing.

The updated Sustainable Finance Framework categorizes its products based on clearly defined eligibility criteria.

Green Bonds:

Berlin Hyp is recognized as an ESG pioneer in the capital markets, having issued the first Green Pfandbrief. This leadership was further established in 2021 when the bank assessed itself as the first to issue a Sustainability-Linked Bond, followed by its inaugural Social Bond in May 2022. Currently, Berlin Hyp is the most active green bond issuer among commercial banks in Europe. Notably, during the reporting year, the bank had more outstanding ESG bonds than traditional bonds for the first time.

Since 2015, Berlin Hyp has significantly contributed to the growth of the sustainable bond market by financing sustainable, climate-friendly properties (green buildings) and refinancing them through Green Bonds. The bank introduced the world’s first Green Bond in 2015, and today, the total volume of outstanding Green Bonds has reached €7.8 billion. Additionally, in 2021, it issued a Sustainability-Linked Bond valued at €0.5 billion. Since spring 2022, Berlin Hyp has also issued Social Bonds totalling €1.75 billion, aligning its strategic sustainability objectives with its capital market refinancing efforts. As of the reporting date, the overall volume of all outstanding ESG bonds stood at €10.06 billion.

Sustainability-Linked Bonds:

In 2021, Berlin Hyp released its framework for Sustainability-Linked Bonds along with a methodology to assess its carbon footprint. This initiative enabled the bank to calculate and transparently present the CO2 emissions from its entire loan portfolio for the first time. The establishment of a comprehensive database—a crucial element for defining binding sustainability goals in the real estate investment sector—facilitated this development.

Social Bonds:

With the issuance of its first Social Bond in May 2022, Berlin Hyp emphasized the comprehensive nature of its ESG strategy. The Social Bond Framework is designed according to the ICMA Social Bond Principles, focusing on “affordable housing” in Germany and the Netherlands. The definition of affordability aligns with the current social laws in each country.

To reflect the evolving social legislation in both nations, the Social Bond Framework was updated in March 2023.

Since its debut Social Bond issuance, Berlin Hyp has established itself as a consistent issuer, currently having three outstanding Social Bonds with a total volume of €1,750 million. In March 2023, Berlin Hyp published its first allocation and impact report for its Social Bonds on its website.

UN Principles for Responsible Banking: Accelerating a positive global transition for people and the planet

With over 300 signatory banks representing almost half of the global banking industry, the Principles for Responsible Banking are the world’s foremost sustainable banking framework. Through these Principles, the banking community takes action to align core strategies, decision-making, lending and investment with the UN Sustainable Development Goals and international agreements such as the Paris Climate Agreement.

FBRH Principles for Responsible Banking (PRB) Assurance:

First class PRB assurance services: The result of solid, hands-on ESG/ Sustainability experience

• • • FBRH is a GRI Certified Training Partner (Global), ISEP Training Centre and a member of CPD.
    • FBRH builds trust. Over 200 reviews from top professionals from around the world demonstrate our ability to build strong, trusting business relationships.
    • FBRH possesses a unique skill set that combines ESG/sustainability certified training, experience in advisory services and report preparation, and ESG/sustainability report assurance.

The combination of all the above empowers FBRH to provide first class Principles for Responsible Banking (PRB) assurance services.

References:

This case study is based on published information by Berlin Hyp, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:

https://www.berlinhyp.de/en/media/newsroom/further-publications/progress-report-prb-2023

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