Vonovia SE

Environmental & Social Information • Nov 9, 2020

The Future of Low-carbon Housing

ESG Webinar hosted by Morgan Stanley November 9, 2020

An increasing part of the population is moving into urban areas

We are providing apartments at fair price levels to a growing urban population

Our products and services give more than one million people an affordable home in their apartment and neighborhood

Ca. 1/3 of greenhouse gas emissions are related to real estate

An increasing share of the population is 65+ years

We are a driving force of the industry and have embarked on a climate path that will result in a CO² neutral portfolio by 2050 The energy-efficient modernization of the housing stock and innovative solutions for carbon neutral residential neighborhoods are paramount for achieving climate protection targets

We are preparing at one third of all apartments that become vacant for elderly tenants

Demographic changes require refurbishing apartments to enable an ageing population to stay in their homes with little or no assistance for longer

Our scale, sustainable business model and access to capital markets enable us to assume a leading role in our industry for finding and implementing solutions.

ESG Ratings

ESG Indices

Vonovia is a constituent of various ESG indices, including the following: DAX 50 ESG, STOXX Global ESG Leaders, EURO STOXX ESG Leaders 50, STOXX Europe ESG Leaders 50.

Vonovia's Climate Path towards CO² Neutrality through Continued Modernization, Renewable Energy and Sector Coupling

Note: This climate path refers to the German portfolio; we are in the process of developing separate climate paths for the portfolios in Austria and Sweden. Source: Fraunhofer ISE modelling of Vonovia portfolio. Reduction of energy need of 160 kWh towards 60% through the following measures: Building envelope (insulated facade, windows) to become KFW Standard 100-70; scenarios 2 and 3 include the simulation of a change of energy sources. ² In order to achieve the climate neutral case certain regulatory adjustments still need to be made and not all of the technological concepts have been fully developed yet.

The Future of Low-carbon Housing. ESG Webinar, Nov. 9, 2020 page 4

Vonovia's Climate Strategy

• Energy-efficient modernization of ca. 3%
• Continue building modernization with even greater depth (up to 60%)
• Additional efficiency gains from fuel switch & renewable energy:
  • Green district heat
  • New technologies
  • Sector coupling in the neighborhood (PV & mobility)
• New construction: CO² optimized, use of renewable energy (energy efficiency class A and better)

Source: Vonovia Sustainability Report 2019

Technologies for Reaching Climate Path Objectives Innovation for CO² -neutral Heat Generation

Existing technologies

Innovation for CO² -neutral Heat Generation

• Continue energy efficient building modernization with a 60% reduction rate for postrefurbishment energy need
• Replacement of oil heating systems with gas condensing boilers
• Hybrid heating (combination of condensing boilers and solar, renewable)
• Heat pumps
• Green district heat
• Sector coupling

Tomorrow's Energy Center Energiesprong – Serial

Construction of a proprietary research center in Bochum Weitmar to develop renewable energy systems

• Integration of technologies such as fuel cells, electrolyzer, etc.
• The objective is to evaluate different technologies in terms of economic and ecological impact with a view to roll them out in other neighborhoods of our portfolio

Refurbishment

• Concept for cost-neutral modernization by combining serial refurbishment and the integration of renewable heat and electricity
• First pilot in Bochum about to be implemented;

• Additional pilots planned until 2024

• Pellet heating is almost climate neutral

• Particularly suitable in connection with local district heating
• Pellet costs are similar to gas costs; heating plants are more expensive
• When subsidized, pellet heating is a viable ecological and economically feasible alternative
• First concepts for potential pilots underway

Pellet Heating Project Hydrogen Technology

• Decentralized generation of green hydrogen via PV
• Areas of application:
  • Hydrogen storage for subsequent heat generation
  • Disposal of hydrogen
• Technology currently still too expensive; a growing market is expected to lead to substantial cost reductions, rendering H² economically feasible

Five Areas of Action to Achieve CO² -neutral, Energy-autonomous Neighborhoods for a Decentralized Energy Revolution

			As a leader for climate protection in the residential sector Vonovia hosted the climate conference "Outlook for Climate neutral Living" in Berlin on October 1, 2020.
Renovation rate	Renewables	System change	Mobility	Stakeholders
Increase renovation rate and enable Energiesprong (energy efficiency leap) through high quality, swift, and affordable renovation Spread between gas and electricity needs to be further reduced to enable electricity-based, low CO2 heat supply	Include landlord-to tenant electricity in recoverable expenses Resi sector needs to be included in national Hydrogen Strategy	Accelerate conversion of the electrical energy system Modify regulation to support decentraliz ed electricity production Promote new energy markets for the financing of flexible electricity generators	Accelerate charging infrastructure and market availability of e-vehicles thorough tailored subsidy programs for resi sector Establish standards for technical connection needs of grid operators plus grandfathering clause for installing charging stations	Simplify landlord to-tenant electricity models in resi sector Raise awareness why we need energy transition Facilitate landlord to-tenant electricity in multifamily housing

• Continued modernization rate
  • Adequate subsidy regime
  • No grid fees or surcharges on decentralized and self-generated electricity

Three essentials Vonovia is in the process of developing and implementing a Sustainability Performance Index with quantitative, non-financial KPIs and medium-term targets until 2025.

	CO reduction in the portfolio 2
Specific annual	Energy-efficient new constructions
improvement	Volume of senior-friendly apartment refurbishments	Sustainability Performance
targets for each	Customer satisfaction	Index
score	Employee satisfaction
	Workforce gender diversity

s p e st xt e N	12/2020	Supervisory Board to decide on new management remuneration scheme to be presented to the 05/2021 AGM for approval
	03/2021 (FY 2020 results)	Updated Management System and reporting of 2019 and 2020 actuals plus 2021 guidance
	04/2021 (2020 Sustainability report)	Sustainability Performance Index roadmap and targets for 2025
	05/2021 (AGM)	Resolution on new management remuneration scheme

The Future of Low-carbon Housing. ESG Webinar, Nov. 9, 2020 page 8

Renovation Wave will address decarbonization & renovation rates and tackle the underlying barriers for improving energy efficiency.

The Objectives are to contribute to EU climate targets by

• New Target 55% CO² Reduction by 2030 (against 1990);
• 35 million building units renovated by 2030;
• At least doubling the annual rate of energy-efficient renovations of currently 1% of residential and nonresidential buildings by 2030 and fostering deep energy renovation;
• Creating up to 160,000 green jobs in the building sector until 2030.

Renovation Wave – Vonovia's Position on Main Topics

EU approach	Benefits	Challenges	Vonovia position
Doubling modernization rate (to 2%): accelerate modernization by 2030	Major economic recovery plan Necessary to be compliant with Paris Climate Accord targets	Cost-intensive and only feasible for large companies Vonovia is at 3% modernization rate
Combination of modernization & fuel switch	Accelerated integration of renewable energies	Integration of decentralized renewable energy systems
Expansion of decentralized renewable energies	Real estate industry as producer and supplier of decentralized renewable energy: new markets No fee on self-regenerated renewable energies	Obstacles in German legislation, e.g. landlord-to-tenant electricity and accounting for "green" electricity in building sector Reduction of grid fees and charges especially for decentralized energy
Focus on neighborhood/ sector coupling	Enables decentralized energy system transformation by creating synergies and efficiency gains	Electrification of heating market will be challenging: needs technology openness and technology leaps
Expand funding opportunities / access to public subsidies	Ensures socially acceptable climate protection (affordable for tenants)	Usability/enabling access also for large companies, hurdles of subsidy law and government aid regulation Simplified access necessary
Stricter regulations and minimum energy performance standards	Change in EPC requirements (Energieausweise) and better comparability Focus on CO -intensity, not only 2 on energy	Additional red tape (minimum requirements; digital logbooks etc.) slows down and complicates the process

Source: https://ec.europa.eu/energy/sites/ener/files/eu_renovation_wave_strategy.pdf

The Future of Low-carbon Housing. ESG Webinar, Nov. 9, 2020 page 10

VNA is monitoring the criteria of Green Bond emissions/ standards Relevant criteria for the Green Bond Standard can be aligned with Vonovia Portfolio:

• New construction: Prime energy demand must be lower than 20% than national net-zero-energy-building (NZEB) defined by GEG / EnEV 2016
• Existing building belongs to the top 15 % of the local existing stock (Primary Energy Demand of the building must be within the top 15%¹) / Renovated buildings - Efficiency ≥ 30 % better after renovation

Requirements to report non-financial information in annual report for large listed property companies

• VNA committed to comprehensive non-financial reporting, including nonfinancial declaration in annual report
• No need for a new or separate European Reporting Standard; better to improve existing reporting standards (like NFRD/German CSR-RUG, GRI, TCFD, International Accounting Standards IAS)

¹ Linked to local EPC / Definition of local Stock - Proxy Efficiency class B to C.

The Future of Low-carbon Housing. ESG Webinar, Nov. 9, 2020

EU Strategy

on

Sustainable

Finance

Green Bond Standards

NFRD Reporting Initiative

Rene Hoffmann Head of Investor Relations

+49 234 314 1629 rene.hoffmann@vonovia.de Catrin Coners Head of Sustainability & Strategy

+49 234 314 1642 catrin.coners@vonovia.de

www.investors.vonovia.de

Energy Innovation Center Bochum Weitmar

• In partnership with renowned Fraunhofer institutes, Vonovia is implementing a three-year hands-on innovation project as part of Open District Hub e. V. in our neighborhood in Bochum-Weitmar to develop and test new technologies in ongoing operations.
• The aim of the project is to supply the neighborhood with electricity and heating that is as carbon-neutral as possible. We aim to achieve this by linking the energy sectors via a central platform.
• A smart, self-learning energy management system then ensures that the right energy is distributed to tenants when they need it – at electric charging stations, in the form of electricity for tenants' own households or in the form of heating.

Level		Measure
	1	Implementation of measures that do not involve any structural intervention, e.g., optimized heating system settings
Apartment	2	Digitalization of buildings and apartments, e.g., to feature smart meters
	3	Energy-efficient refurbishment, e.g., measures relating to the building shells and heating systems
Building	4	Infrastructure for e-mobility, e.g., charging stations and e-wall sockets
	5	Sustainable energy supply, e.g., photovoltaic systems for tenant electricity
	6	Building digitalization and networking
	7	Sector coupling (heat, electricity, mobility, etc.) in the neighborhood via digital platform
Neighborhood	8	Storage and distribution of energy generated in a decentralized structure enables on-site consumption
	9	Promotion of biodiversity

	Board responsibility for climate action, defines strategy and targets and monitors progress
Governance	Central Department Sustainability/Strategy to coordinate measures
	ESG Score as central management KPI including CO -Intensity 2
	CO reduction in building stock & construction defined as major drivers for 2 business strategy
Strategy	High modernization rate of ≥ 3% p.a. and fuel-switch to renewable energies
	Scenario modelling of climate pathways together with Fraunhofer Society
	Climate change fully integrated in Corporate Risk Management
Risk	Physical risks assessed via risk maps based on regularly updated sources
Management	No material physical risks for Vonovia's properties identified
	1.147 mn t CO e in portfolio in 2019 (scopes 1,2,3 acc. to GHG protocol) 2
Metrics	Targets:
& Targets	GHG neutral building stock until 2050
	CO -intensity of 30-35 kg/m²/a until 2030 2

Disclaimer
Highlights	Segments	NAV & Valuation	LTV & Financing	Guidance	Wrap-up	Appendix

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Tables and diagrams may include rounding effects. Per-share numbers for 2013 and 2014 are TERP-adjusted.