Real estate: Financing at the heart of environmental and social improvement

15/04/2022

As the leader in residential real estate in Europe, Vonovia aims to be able to offer its tenants long-term, sustainable and secure housing prospects.

In March 2022, and with the help of Societe Generale, the company issued its first two social bonds as well as its first EU-taxonomy aligned green bond, for an amount of €2.5 billion in total. The social bond proceeds will be used to finance affordable and low-barrier housing, thus addressing needs in the current housing markets in Germany, Austria and Sweden head-on.

Availability of affordable quality housing is one of the major challenges facing residential real estate markets. The two social bonds will fund subsidized housing for low-income households, privately-financed housing rented at a discount of at least 15% to the comparable local reference rent, as well as newly built units in Berlin rented for the first time at 11 EUR per m2 or less. Furthermore, the funds from social bonds will be used for low-barrier housing converted to cater more effectively for the needs of an ageing society.
The 10-year green bond will be used for refinancing of green buildings in Germany, Austria and Sweden, meeting the standards of the EU taxonomy for existing buildings, new constructions, and refurbishments. 
 

“ The bonds demonstrate our social responsibility and our strategy of sustainability. This is precisely what investors expect from companies today. In turn, we as a company benefit from social bonds and green bonds as an opportunity to expand our investor base. Continuous support by our long-standing, experienced bank partners such as Societe Generale is key for that. ”

Philip Grosse,
CFO, Vonovia

Why are these bonds environmental and social improvement accelerators? Because they are more binding for the issuer in terms of compliance with environmental or social criteria. In exchange, they are usually slightly less expensive. Investors also benefit, as they improve the SRI portion of their portfolio, which is a key priority for most of them today.

“ Sustainable Finance in the real estate sector is primarily limited to green bonds. But it is precisely the real estate industry that is predestined for social bonds. Affordable housing and housing for the elderly are the answer to the challenges of urbanisation and demographic change. These investments need to be funded sustainably and efficiently. Against this background, we are proud to back up our words with action. ”

Dr. Fabian Lander,
Head of Front Office Finance and Treasury, Vonovia

As a Joint Global Coordinator and Structuring Advisor on the latest transactions, as well as on Vonovia’s previous green bond, Societe Generale’s role was crucial in attracting investor interest, which reached 4.7 times the size of the final bond offering. 

“ With years of thought leadership, innovation and action behind us and a firm commitment to accelerating the energy transition and increasing social inclusion, Societe Generale is delighted when opportunities arise to help clients such as Vonovia develop positive impact solutions that progressively tackle the world ’s challenges and further foster the client relationship. ”

Martin Wagenknecht,
Head of Debt Capital Markets Germany, Switzerland & Austria, Societe Generale