Sustainability as an integral component of the corporate strategy – Know how and know why

Dear Reader,

It is not just the real estate industry that talks about the mega trends of ESG and digitisation,, which we have gradually embedded in our company over the past years: In the years ahead, these trends will be among the key factors deciding over the success or failure of real estate value creation and the long-term viability of business models. With this in mind, let me say right off: We at DIC are optimally equipped to handle the job, as we have spent well over ten years setting up the framework for a sustainable and viable DIC business model that will live up to the expectations of all stakeholders.

Even and especially the real estate industry, which accounts for about 40% of Germany’s total energy consumption and for well over 30% of the CO₂ emissions, is considered a key industry in the struggle to achieve the national and international climate targets which have been known to us since the Paris Climate Agreement of 2015 or since the publication of the “Financing Sustainable Growth” action plan in March 2018. Just a few weeks ago, the latest re-enactment of Germany’s Federal Climate Change Act (KSG) was moreover signed off by the federal cabinet in response to a ruling by the Federal Constitutional Court, further tightening the national climate targets.

CEO Sonja Waerntges

“We owe it to our environment: combining successful management and decarbonisation.”

We, as real estate industry players, are assuming responsibility not just for environmental topics but also for many other sustainability aspects. This includes, in equal measure, employees, tenants, investors, business partners and society at large, which we take into account when structuring our buildings and our built environments. The perception of the ESG paradigm among the general public and in the global investor landscape has shifted under the impact of the coronavirus pandemic.

The coronavirus pandemic has deepened the general awareness of the sensitive connections between the natural environment, the global economy, societal well-being, and everyone’s quality of life.

No doubt, the exceptional situation in 2020 has acted as an extra catalyst to boost the role of ESG for the global economy. Public awareness of the topic of climate change has also increased significantly in the wake of the coronavirus crisis, because it has raised a very central question: What is our long-term vision for the relationship between mankind and its natural environment? Against this background, professional investors have increasingly shifted the focus of their investment policy to sustainability strategies, and begun to implement ESG criteria in their investment decisions. Moving rapidly away from the notion that this is a “nice-to-have” feature, we have come to talk about it as a “must-have.” Market players, far from paying philosophical lip services to just the idea, have progressed to dimensions that speak for themselves: According to the latest market report (2021) of the FNG Forum for Sustainable Finance, more than EUR 335 billion were committed in sustainable investments in Germany by the end of 2020. It implies a 25-percent increase since 2019. We can safely conclude therefore that sustainability is a long-term subject, and it is fast becoming one of the main drivers of future investment strategies for capital providers.

“We consider “Big Data” a new resource that helps us to optimise the ways in which we use all other resources.”

In addition to ESG, another factor that will be influential for the future success of business models is digitisation. Again, the coronavirus pandemic acted as a catalyst because digitisation has played a key role both for the effort to get an analytic grasp of the whole picture and for the dynamic of the response. It has ultimately been decisive for the capacity to act, for swift decision-making, and for the control options. So, it comes as no surprise that companies with a high level of digitisation have shown a more robust and flexible response when coping with the pandemic.

But apart from this snapshot: Using information technology to collect and process data more efficiently will serve as basis for making the complex parameters of real estate more transparent in future. This includes the “DNA” of the over 230 properties that we manage on a daily basis from our eight branch offices in Germany via our proprietary real estate platform.

Being in this business for the long term, we are well aware of the advantages that the standardisation and automation of operational and administrative processes offer – not just for us, but for all stakeholders. It is one of the reasons why we see digitisation as an additional if central building block of our ESG strategy, and why we will, for one thing, employ “Big Data” to optimise energy consumption rates and emissions.

That being said we are also aware that a successful ESG strategy is not a finite project eventually completed, but that it will remain subject to review year after year. New milestones to focus on will successively be added. In order to stay abreast of the progressive evolution of our company, we reinforced the management team by creating the “Head of Sustainability” position in early 2021.

In the present report, we are not just taking a look back at the past sustainability performance of 2020. Instead, we present to you our expanded ESG strategy that is now centrally embedded in our claim “We manage our business proactively in line with sustainability aspects by our experienced management.” As an important consequence of our insights and convictions, we focus on the outlook inscribed in our current ESG roadmap, which we use for setting both near-term and medium-term goals, and which we keep expanding continuously.

In the same vein, we adopted the following guidelines for our business:

1.

We positively mitigate climate change:

DIC has integrated ESG aspects into all phases of its value-adding model, and uses it to exploit potential. We pursue an 360-degree approach that takes advantage of our in-house management platform to cover a broad bandwidth of the real estate value chain. It also keeps supplying us with fresh impetus for our entrepreneurial dynamic which we have seamlessly and cyclically sequenced into the phases “match – transact – operate – develop.” Our objective is to act sustainably across all of these phases – think of it as the basis for our ESG management approach.

Our objective being: to increase the sustainability of our real estate by identifying ESG potential and by implementing the corresponding upgrades of our portfolio buildings. We aim for a balanced relationship between return expectations and the necessity to invest sustainably. We see this as an opportunity to use our knowledge and data advantage to transform our properties in line with sustainability aspects to make them fit for the future.

2.

We shape our business with and for the people:

DIC is growing both organically and inorganically, in line with its corporate strategy. Of the essence in this context are the trust of our investors, the dialogue with our tenants, and the productive collaboration with our business partners. The constant ­involvement of our employees and their extraordinary dedication illustrates the dynamics of our business model. Our aspiration is to take an active approach to the expectations in a strong corporate culture: This way, we demonstrate that many different angles and contributions can interact to achieve success, and turn the ideal of a corporate culture into a living workday reality.

3.

.We are a reliable partner, and conduct our business activities in a transparent and accountable manner:

Our ambition is to present our ESG strategy, our ESG management approach and the associated targets and disclosures on a regular basis and in transparent ways. The task we will always set our-selves in this context is to integrate fresh insights and to pursue target-oriented improvements within the meaning of sustainable corporate governance. Yet since we interact with many other players along our development path, and since we see ourselves in the role of a structuring partner, we look beyond our own balance sheets: We also actively involve ourselves in the ongoing evolution of the real estate industry. Self-commitment and active involvement form an integral part of our company.

4.

We use digitisation for ESG purposes as yet another building block (3+1):

Climate change mitigation, sustainability and digitisation are gradually becoming key drivers of the ongoing development of the global and the national real estate market. The three ESG dimensions of “environmental,” “social” and “governance” are closely linked to digitisation as a fourth building block in our “3+1” corporate strategy. While taking an active and sustainable management ap-proach to both our proprietary and third-party real estate assets, we are also in the process of digitising more and more of our internal work streams.

Dear reader, we see ourselves as a highly dynamic company that continues to evolve and will not hesitate to try new approaches. Driven by our corporate maxim of “dynamic performance”, we keep setting new milestones for ourselves like “payments” toward a sustainable tomorrow.

In the ongoing year of 2021, we have actively and successfully moved things forward: In April, we implemented our first green finance project by placing a promissory note over EUR 250 million that is linked to our ESG performance. The promissory note ties in with a central objective of our ESG strategy and ESG roadmap: to expand the green building quota in our proprietary real estate portfolio. Raising the quota from 11.6% today to over 20%, measured in terms of our portfolio’s market value, will give us a chance to reduce our interest expenses in the future while making a positive contribution to climate change mitigation at the same time.

New ESG milestones have already been identified, offering the prospect of further win-win constellations for our stakeholders.

Our ESG journey continues. Know how and know why”: You are hereby invited to learn more about our ESG roadmap

Yours,

Sonja Wärntges