Sustainability at DZ HYP.
Cooperative. Social. Ecological.
As thinking and acting sustainably grows in importance, it will have a determining influence on DZ HYP’s future. With social and political initiatives, the focus of attention in sustainability is changing constantly. We are looking forward to actively participating and jointly working on continuing the Bank’s stable development and forward-looking approach.
Sustainability across the board
Interview with Jörg Hermes, Member of der Management Board
Mr Hermes, first of all, congratulations on your appointment to the Management Board. You joined the company in 2002 and were also part of the former DG HYP. This means you know the Bank pretty well. Will you use your new position to preserve what has been established, or to promote innovation?
Fortunately, there is no need to correct the successful path of DZ HYP. Instead, we have the opportunity to preserve what has been established, as well as responding appropriately to tangible signs of change. We are able to analyse the opportunities that the future of DZ HYP offers from a position of strength, and then take the necessary steps.
What does this mean, specifically?
In recent years – despite the very intense merger process – we managed to preserve or even improve our market position in all business areas. Within the Bank, we were very inward-looking. This was necessary to create an integrated system environment and harmonised management methods, but it also required a lot of energy and effort. Furthermore, some of the mega trends that are currently impacting society, politics and the economy were pushed into the background. We did not lose sight of them, but we also were not able to push them forwards with our full focus. We want to approach this now.
That sounds like a fresh breeze for DZ HYP. What are those “mega trends” that you want to approach?
If combating the consequences of pandemics does not prevail as a new trend, for us as a real estate bank there are currently four mega trends: regulatory issues, digitalisation and the associated IT security, demographic change and, of course, sustainability. In my view, we need to align these fields, with the focus on sustainability acting as a bracket. Sustainability is an inter-generational topic that encompasses all areas of society. I realise this not least because of the debates I have at home with my children on topics such as climate change.
At DZ HYP, we now need to recognise one thing: while we also have developed, we have fallen somewhat behind in terms of sustainability due to the merger. This also evident in the ratings. We were still awarded Prime status. However, instead of a C+ rating, the rating agency ISS-ESG only gave us a C. Yet there are some advantages in not being first everywhere. We have refrained a bit from pioneering, and might now benefit from the findings of other market participants. As a financial institution, we want to take a holistic approach to sustainability.
You mentioned your children. Is sustainability more than just a job for you?
Absolutely. It is of genuine concern to me, and talking with my friends, family and colleagues I find that this topic is very important to many people. Combining this generally idealistic value with a professional life that is oriented primarily towards economic values is an exciting task. Wouldn’t it be great if DZ HYP’s sustainable corporate governance was rewarded with economic benefits in the medium term, such as attractive refinancing costs? That is where we are trying to go. Moreover, I hope that by focussing more on sustainability, we can also get young people excited by what we do. We at DZ HYP want to show that commercial real estate finance offers numerous shaping opportunities in the spirit of sustainability. Here we can clearly see the connection to the topic of demography.
Convincing young people with sustainability is not a bad idea. How will you convince other stakeholders that may have a more critical view on the topic?
The good thing about the topic of sustainability is that it is generally perceived positively. Everybody would confirm that sustainability per se is a desirable objective. This gives a major opportunity to motivate people for the topic. The reservations rather stem from practical considerations in the professional environment. Striving for sustainability first of all complicates processes. We need to reconsider our approaches, and be able to collect and analyse large amounts of additional data. This is where the topic of digitalisation comes into play. The efficient and appropriate handling of this data is becoming increasingly pivotal for the competitive position. Banking supervision and politics in general will aim to reward sustainable action – or sanction the absence of it. This could, for example, be reflected in the price of Pfandbriefe or in the capital adequacy. Sustainability is therefore not contrary to economic objectives. We need to stop perceiving these to be conflicting targets.
Which tasks will you approach next?
In 2019 we already intensively analysed where we need to gain more momentum in risk management, lending and sustainable products.
It is now time to take up these findings and align them with the new legal framework announced as an element of the European Commission’s action plan on sustainable finance. For this purpose, we need a diverse and regular analysis, as much of it is not yet available as a coordinated legal text. This is, by the way, a good example for the link between sustainability and regulation that I mentioned earlier.
How exactly do you proceed in order to ensure this?
At the beginning of 2020 we formed a task force, consisting of representatives from different divisions such as Capital Markets, Sustainability, Supervisory Law, Risk Controlling and Central Data Warehouse, to carry out a comprehensive evaluation. On this basis we will ensure that the findings are put into action. By systematically interlinking these divisions we can holistically plan further proceedings in order to achieve our objectives. We will, for example, define and implement sustainable lending criteria. That means we can then offer sustainable products such as green Pfandbriefe.
That sounds like a lot of unresolved issues. Is DZ HYP even ready for such a major effort, so soon after the merger?
At the start of the year I believed we were ready for this effort, as I am convinced of the capabilities within our organisation. However, we must admit to ourselves that the coronavirus has hindered reliable planning. For all our targets for 2020, we must therefore express reservation. We will probably not be able to implement everything as originally planned. Nevertheless, we are confident of our ability to achieve tangible results by the end of the year. Despite all adversities, we would like to prioritise sustainability because – for us – it is a call to action. In my talks within the Bank, I sense that many employees are keen to make DZ HYP even more sustainable. We must make use of this momentum, and ensure that all employees are on board for this process.
How exactly are you going to do this?
At the end of 2019, we established a Sustainability Committee. This body, which comprises the Heads of the Bank’s divisions, currently meets about every six weeks. During these meetings the task force regularly presents its findings: the colleagues involved discuss the most recent developments and take decisions. This way, on the one hand, the processes are brought into the Bank and anchored in the divisions. On the other hand, the divisions will have the opportunity to contribute their opinion to the decision-making process at an early stage, and to raise objections when the demands become too high. In addition, we use our intranet as well as our internal event series on sustainability in order to inform all of our employees about new developments, on a regular basis.
Finally, I would like to ask you for a forecast: how sustainably will we live in 2030?
Such forecasts are not part of my core expertise. However, I can tell you what I am wishing for: that we succeed in ensuring a good future for our children and grandchildren. Personally, I try to contribute to this by doing business in as sustainable a manner as possible; also by dealing responsibly with the environment and with my fellow human beings. For DZ HYP, we want to find a way to harmonise our profitability goals with our ambitious claim for sustainable action.