Deutsche Pfandbriefbank : Non-financial Report 2021

Jahresabschluss

Non-Financial Report 2022

Deutsche Pfandbriefbank Group

Contents

Non-financial Report

Sustainability Strategy3

Materiality Analysis 9

Risks and Opportunities 11

Industry-specific Aspects 12

Corporate Governance 29

Employee Matters 36

Environment 48

Independent Auditor's Report 52

Imprint 55

Non-financial Report

Pursuant to sections 315b-c in connection with section 289b-e of the German Commercial Code (HGB), Deutsche Pfandbriefbank AG (pbb) has published this separate, combined non-financial report, prepared in line with the German Sustainability Code (DNK) and in accordance with the requirements of the German CSR Directive Implementation Act (CSR-Richtlinie-Um-setzungsgesetz).

The disclosure pursuant to Regulation (EU) 2020/852 (Taxonomy Regulation) complies with the requirements under Art. 8 (1) and (3) of the EU Taxonomy Regulation and the related specifica-tions pursuant to Art. 4 and 10 (2) of the relevant Delegated Regulation (EU) 2021/2178

Sustainability Strategy

For pbb Group, sustainability means making a substantial contribution to securing a long-term future through it's actions - and taking into account the consequences of those actions for all stakeholders. It is the Group's goal to combine long-term economic success with aspects of sus-tainability in the best possible way, thereby creating lasting benefits for society and the environ-ment while protecting natural resources. In view of its role as a bank, pbb Group, as part of the financial industry, has a key role to play in the transformation of the economy and society towards greater sustainability. pbb Group sees it as its duty to increasingly channel investment capital into sustainable forms of use.

Integrity, responsible corporate governance and adherence to high ethical principles are, from the perspective of pbb Group, necessary prerequisites for long-term business success. pbb Group takes into account not only the statutory, regulatory and supervisory requirements, but also the needs of its clients and the expectations of investors, the general public and its employ-ees. A regular, open and two-way dialogue is essential to ensure that pbb Group identifies the needs of all stakeholder groups at an early stage and afford them sufficient consideration in de-cision-making processes.

pbb Group is working to permanently embed the three pillars of ESG: climate and environment (E), social (S) and the legal and factual aspects of corporate governance (G) at the core of its business. Integration of ESG into the Group's processes, product range and corporate culture continues to progress. Following the initial project to design the ESG programme, the relevant content and processes are now being successively integrated into the individual divisions of the Bank. The central control of topics and processes via the ESG programme and a newly estab-lished ESG Office will remain in place.

pbb Group is fully committed to respecting, upholding and strengthening human rights and to preventing abuses thereof. This commitment applies not only to its own business activities, but extends along the entire pbb Group supply and value chain. The Human Rights Guidelines and a Code of Conduct serve as a framework in this regard.

OBJECTIVES

pbb Group has expressly undertaken to adhere to the Paris Climate Agreement, which targets a limitation of global warming to 1.5 degrees compared the pre-industrial age. Accordingly, the Bank is working to align its credit portfolios and its operations with the 1.5-degree target. With the goal of achieving this by 2050, pbb Group has set itself a fundamental long-term climate target that underlies strategic management.

Five overarching strategic ESG objectives have been identified:

•  transformation of the business model and positioning of pbb as a transformation financier,

•  sustainable funding/financing and compatibility with the Paris climate targets,

•  meeting regulatory requirements,

•  sustainable business ecology, and

•  transparency, disclosure and communication to bolster financial solidity, expand the business and remain an attractive investment

In 2022, pbb Group undertook to uphold the ten principles of the UN Global Compact (UNGC).

Moreover, pbb Group is committed to the Sustainable Development Goals (SDGs) of the United Nations. The SDGs serve to generally preserve sustainable development at an economic, social and environmental level and have been incorporated into pbb Group's sustainability strategy. The following goals have been identified as particularly relevant for the Bank:

•  ensuring affordable and clean energy through funding to increase the energy efficiency

  of buildings (derived from SDG 9),

•  providing funding for new housing (derived from SDG 9),

•  actively contributing to the decarbonisation of the real estate sector and reducing pbb's

  own environmental footprint (derived from SDG 11),

•  promoting gender equality and decent work (derived from SDGs 5 and 8),

•  economic growth (derived from SDG 8)

These goals actively feed into the strategic ESG objectives defined above.

PRODUCTS AND PORTFOLIO

Given that the real estate sector accounts for roughly 38% of all CO2 emissions, there is an urgent need for transformation in it.1 pbb Group aims to be a transformation partner for its clients, and to continuously expand and strengthen this position. In the (re-)financing, pbb Group is very well established in the market for the issuance of green bonds and intends to further expand this position.

The sustainability strategy is focused on providing support for financing the acquisition of green properties, green developments and transformation projects (manage to green) such as energy-efficient refurbishment to improve the energy efficiency of existing buildings. Since the fourth quarter of 2021, pbb Group has been offering green loans, and the pbb Green Loan Framework has been developed to assess which properties and financing projects are "green". It is geared toward two elements: pbb's own scoring model or the EU Taxonomy.

1 United Nations Environment Programme (2020). 2020 Global Status Report for Buildings and Construction: Towards a Zero-emission, Efficient and Resilient Buildings and Construction Sector

The pbb scoring model assesses properties/projects based on the three pillars of energy effi-ciency, green building certification and further sustainability factors, such as distance to public transportation and local amenities, use of sustainable energy or inclusion of biological diversity aspects. A property is classified as green - and is thus eligible for green loan financing - when it reaches a score of 60 points or more. Alternatively, a loan is eligible for green loan financing if it complies with the EU Taxonomy.

pbb Group has defined specific indicators and targets for the active and strategic management of its assets. By 2024/25, assets eligible for green loan financing are planned to account for 30% of the commercial real estate finance portfolio. The Bank also considers the volume of new busi-ness in green loans and the volume of new business in green CapEx/green developments to be relevant management indicators. The latter are geared towards leveraging the potential of financ-ing the transformation of non-green to green assets in new and existing business. The targets and related management approach are currently under development, but new business planning already includes specific green loan targets that serve toward achievement of the 2024/25 objec-tive.

On the liabilities side, pbb Group may - under certain conditions - refinance green assets via green bonds, which generate funding for activities (in this case, financing new or existing proper-ties) that explicitly help to prevent or mitigate environmental or climate damage. This interactive combination of pbb's asset and liability products promotes the allocation of funding resources to environmentally-friendly investments and ultimately the achievement of socially and politically sought climate targets.

The pbb Green Bond Framework on which the issued green bonds are based was published in 2020 and follows the ICMA Green Bond Principles. Under this framework, to be classified as green and considered eligible for green bond funding, an asset must comply with at least one of the two criteria: green building certification or energy efficiency performance. Within the scope of its audit, the dedicated Green Bond Committee also refers to an exclusion list which focuses primarily on building utilisation. Decisions made within the audit must be unanimous. pbb Group can issue green bonds both as Pfandbriefe and as senior unsecured (preferred and non-pre-ferred) bonds.

As at 31 December 2022, the total volume of pbb Group's outstanding green bonds amounted to €2.86 billion. The outstanding green bond volume will serve as a management indicator going forward, helping to make the Bank's funding portfolio consistently more sustainable.

Aside from ESG financing products (green loans, green CapEx/developments, green bonds), continuous analysis of the existing portfolio is vital for pbb Group to ensure comprehensive trans-parency and possibilities to manage the sustainability of pbb's portfolios. This is particularly im-portant for reaching pbb's long-term climate/carbon emissions target. To this end, pbb Group has made a concerted effort in 2022 to collect data on the loan portfolio and will continue to develop the necessary infrastructure for this purpose in the course of its ongoing business operations.

With a focus on transparency (within the climate dimension), pbb Group has defined another key management indicators: a transparency rate for the E score, energy consumption and energy performance certificates (EPCs) within the REF portfolio. Going forward, pbb also intends to use active climate management to align the portfolio to climate target-compatible transition paths. At the same time, pbb Group aims to actively manage the Green Asset Ratio (GAR) and Banking Book Taxonomy Alignment Ratio (BTAR), which are relevant for the EU Taxonomy. For these indicators, too, specific targets and a management approach are being defined.