Human Resources & CSR

Commitment to climate protection

Climate protection is one of the primary issues of our times. Hence HypoVereinsbank has been taking action in various areas for years. By doing so, we are responding to the expectations of our stakeholders whilst also underscoring our commitment to solving global problems. To bundle and expand our activities, we are currently developing a climate strategy for HVB and the UniCredit Group. To date, we have been involved in:

• emissions trading services: trading, strategy consulting, hedging concepts and finance
• investment in the Carbon Fund (UniCredit Group)
• participation in the Carbon Disclosure project
• financing renewable energy sources
• applying the World Bank standards and Equator Principles
• sustainable asset management and certificates on the HVB Sustainability Index
• funds based on environmental technologies
• modernisation loans (energy-efficient property redevelopment)
• ImmoPass, a seal of quality for sustainable housing construction
• our environmental management system, certified and validated (ISO 14001, EMAS)
• implementing environmental standards in the procurement system
• sustainable mobility management
• ecological construction standards and energy management in bank buildings

Living values in a new corporate culture

The business combination between the UniCredit Group (UCI) and HypoVereinsbank has created the first truly European bank. This bank has its very own corporate culture which is increasingly emerging in the course of the integration process.

Key role of the Integrity Charter

Co-operation in the new UCI is based on the Integrity Charter, which is the common set of values for all our employees (see also the section entitled Our People). In addition, the values described in the charter – fairness, transparency, respect, reciprocity, freedom and trust – form the basis for our business operations (see also the description of the full Integrity Charter immediately prior to this section).

The Integrity Charter defines the way we collaborate with our stakeholders, such as our customers and suppliers; it also forms the basis of our legitimacy in society at large:

• For example, we want to offer our customers sustainable banking products and services which create value in both commercial and social respects. Trust and a distinct service culture serve as a foundation for the customer relationship.
• We ensure that our business relationship with our suppliers is characterised by fairness, trust and appreciation. We reach agreements to the satisfaction of all parties involved.
• As a company we have a social responsibility – after all, we are corporate citizens in the communities in which we operate. We seek to contribute towards the ongoing development of society through our commitment.

Our 2005 Sustainability Report had the motto “Creating value by living values”. In this report we dealt in depth with our set of values and with the approach we adopt towards our stakeholders (please refer to the Financial Calendar for ordering information).

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CSR management system as a steering and co-ordination tool

The proven sustainability management system in place at HVB and UCI’s CSR management concept complement each other in many ways. Combining the two approaches creates a solid basis for HVB to assume social responsibility as part of the UniCredit Group (corporate social responsibility).

Our CSR management system functions on the basis of a network structure, whilst the Management Board provides the set of values and the guidelines. The CSR Management unit is directly responsible for maintaining its internal and external network, reporting to the Management Board at regular intervals. The CSR team initiates and co-ordinates a broad array of activities, including benchmarking and monitoring the agreed targets and work programmes. It also bears responsibility for CSR communications with external stakeholders and in this connection works closely with the colleagues at UCI involved in CSR management and also with the heads of HVB divisions for specific tasks such as credit policies and product structuring.

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Environmental management system certified

Environmental management is another important area covered by CSR Management. The environmental management system of HypoVereinsbank had already been developed by the mid-nineties and was the reason for our excellent performance in numerous ratings and rankings. At the end of 2006, our system was certified compliant with the international ISO 14001 standard and validated in accordance with the European EMAS standard (European Management and Audit Scheme). Both standards define requirements which an environmental management system has to comply with – EMAS from a European perspective and ISO from a global one.

With the certification, we meet the requirements of external rating agencies for a generally recognised quality standard and are in step with UCI, which is also certified and validated in compliance with ISO 14001/EMAS. The certification process enabled us to optimise the existing environmental management system and to devise further measures to save energy and spare resources. Both direct and indirect environmental aspects were taken into consideration in this context:

• The direct aspects are concerned with the effects of facility management (energy used for heating, cooling and electricity) and with the conduct of employees (waste separation, paper consumption).
• Indirect environmental aspects relate to our products, for example the issue of how we manage our customers’ assets, the criteria used in the credit approval process and how environmentally and socially compatible these criteria are.

The synergies achieved from certification projects can also be quantified. Thus, around €100,000 can be saved in energy costs alone each year, for example by installing a new computer-assisted cooling plant in building Z2. Re-certification is due after three years.

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Sustainable banking products: Equator Principles and commitment to climate protection and renewable energy …

HVB was part of the group that established the Equator Principles. These constitute a global, industry-wide standard for large-scale project finance ensuring compliance with social and ecological principles. As one of the original group of 10 banks, HVB helped to set up a global, industry-wide standard for major project finance deals by introducing the Equator Principles in June 2003.

A total of 45 financial institutions worldwide introduced the revised Equator Principles during last year. In the process they undertook to comply with a code of extended environmental and social standards when financing projects. This helps the banks involved to better assess, mitigate and generally manage any potentially harmful effects of projects they fund on society and the environment.

Besides requiring compliance with the World Bank’s Performance Standards and Guidelines, the Equator Principles call for projects to be categorised as high-impact, medium-impact or low-impact. An environmental assessment must be prepared for projects with a high or medium risk, with the scope of the analysis and the package of measures depending on the degree of risk determined. The revised version of the Equator Principles reflects the experience gained by financial institutions such as HVB with the previous rules since they were introduced three years ago. At the same time, it takes account of the replacement of the Safeguard Policies with the new Performance Standards of the International Finance Corporation (IFC), on which some of the Equator Principles are based.

An intensive dialogue between Equator Principles banks and the IFC was launched in May 2004, and a large number of comments have been made on the first draft of the Performance Standards. Customers, lobby groups and development organisations were subsequently involved in drawing up the new Equator Principles. HypoVereinsbank has put a large amount of work into this process and recently assumed the chair of what is known as the Working Group, which represents the core Equator Principles banks.

The dialogue we foster with non-governmental organisations (NGOs) and other stakeholders also serves to minimise credit risks. For example, this occurred when Bulgaria announced plans to build two new nuclear power plants in Belene. This project, for which the Bulgarian government was responsible, led to protests by NGOs such as Greenpeace and Urgewald. After in-depth discussions and careful consideration, our Bank decided not to provide any finance.

We also played a pioneering role in the field of renewable energy. For several years now, HVB has been financing a broad array of wind farms, hydro-electric plants, biomass power plants, sewage treatment plants, desalination plants and water purification plants. We were the first bank to successfully market a self-contained portfolio of wind farms as a corporate bond. We also financed innovative projects in the fields of solar energy, biomass and biogas last year.

We have combined our expertise in the renewables sector in new credit approval structures, thus further expanding and optimising our nationwide market presence. In the year under review, we succeeded in expanding our portfolio. In the field of project finance alone, we recorded €465 million for new projects while our total portfolio for all areas of finance stood at €3.6 billion at the end of 2006.

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… and expansion in investment products and asset management

It is not incompatible to focus on returns and simultaneously take account of social and ecological criteria. On the contrary, sustainable capital investment products generate higher returns than conventional investments in many cases. HVB serves a growing group of customers comprising ecclesiastical investors, foundations and private investors who are looking to harmonise their return expectations with their values.

In recent years, HVB has created a portfolio of sustainable investment products. We offer investments from UniCredit’s subsidiary Pioneer (formerly: Activest) and also enter into special arrangements with other fund and research service providers. Thus, we co-operate with oekom research AG, a prestigious rating and research agency, on a permanent basis:

• in sustainable asset management with First Flex (security accounts from €500,000 upwards)
• in the issuing of sustainability certificates on the HVB Sustainability Index (five certificates in issue in 2006)
• in Activest EcoTech, the oldest German environmental fund, which has ranked among the top performers in this sector for several years now.

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Sustainable banking operations: cost cutting and risk minimisation

The ecological impact of banking operations lies primarily in the areas of building services, office operations, mobility, waste and procurement. The task at hand is to save on resources whilst also cutting costs and minimising risks.

Our environmental management system consistently optimises the consumption of energy, water and paper, including handling the waste that arises. One of our priorities is to avoid emissions, particularly of greenhouse gases, as well as reducing consumption levels. Environmentally aware construction which includes renewable energy and the creation of healthy interior environments are also key elements of our environmental management.

The reduction of emissions by restricting business trips is also an important concern for us. In recent years we have managed to significantly reduce the kilometres travelled per employee by switching to more environmentally compatible methods of transport and using modern means of communication such as video conferences.

As in other environmental issues, we rely on a large number of internal communication measures to encourage our employees to act in environmentally aware ways. This includes providing electronic tips, environmental guidelines and informative lectures at many internal events. We report extensively on our sustainable banking operations in our Sustainability Report. (Please refer to the Financial Calendar for ordering information.)

Our procurement system also complies with sustainability standards. When purchasing office and business equipment, selecting company cars or hiring service companies, HVB takes account not only of cost-effectiveness and functionality, but also social and ecological criteria. These factors are also decisive when selecting products and suppliers. In all major tenders and contracts, the suppliers are requested to complete standardised surveys providing information on environmental management as well as social and labour issues, and to attach relevant documentation. Some of the questions involved are formulated as “minimum requirements” on topics such as avoiding child labour. This self-declaration is incorporated in the contract, should the supplier be awarded work.

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Social commitment: donation management, …

For years now, HVB has been supporting a large number of institutions, projects and initiatives which enrich the community. We promote numerous social institutions and cultural happenings, thus contributing towards social development in the regions where we operate.

On the social side, for example, we have been supporting charitable facilities, relief organisations, churches and schools for years. One example is our traditional Christmas donation: in December 2006 ten different organisations were chosen and the €100,000 in donations divided up between them. The organisations and facilities work in the fields of the vocational training and integration of disabled people, providing assistance in medical emergencies or social hardship, hospice work, development aid and the environment.

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… promotion of sustainability initiatives …

We have been involved in sustainability initiatives at regional, national and international level for years.

• For example, we have participated in task forces such as the local Agenda 21 initiative and the Umwelt-Pakt Bayern.
• We are a member of the Verein für Umweltmanagement in Banken, Sparkassen und Versicherungen (VFU), the Forum Nachhaltige Geldanlagen and the Arbeitskreis für Umweltbewusstes Management (BAUM).
• At international level, we participate in the Finance Initiative of the United Nations Environment Programme and are cofounder of the UNEPFI Regional Task Force in Central and Eastern Europe. This task force is responsible for promoting sustainability management in the financial sector of this region through conferences, best practice models, an Internet-based platform for environmental risk assessments and other initiatives.

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… and commitment to art, culture and science

For a long time now, HypoVereinsbank has been promoting a large number of interests in the fields of the fine arts, culture and science.

With regard to the fine arts, our art collection comprises more than 25,000 works, which are on display to our customers and employees in our network of branches. In addition, we have made valuable paintings, including works by Goya and Boucher, accessible to the public by permanently lending them to top museums like the Alte Pinakothek in Munich.

The Kunsthalle run by the Hypo Foundation for Culture is one of the best known art exhibition halls in Germany and has already held about 70 exhibitions.

On the culture side, the Hypo Foundation for Culture has been supporting cultural institutions and projects since 1983. In addition, it is committed to the preservation of historic monuments and presents a highly regarded preservation award each year.

We also set standards as HypoVereinsbank in classical music. Not only are we one of the patrons of the huge festivals held in Bayreuth, Munich and Salzburg, we also support regional benefit concerts at locations where we maintain operations, such as the festival concerts in Rheingau, in Passau and Würzburg or the Richard-Strauss concerts in Garmisch-Partenkirchen. It is often possible to combine cultural sponsorship with social commitment, such as the benefit concert featuring the 12 cellists from the Berlin Philharmonic Orchestra held to support a children’s hospital in Würzburg or the benefit concert of “Yehudi Menuhin live music now” in Dresden. A further focal point of our music sponsorship involves promoting young talent. As chief sponsor we support one of the most important international opera singing competitions, the “Competizione dell’Opera” as we do the training of young talent at the Opera Academy at Gut Immling in Chiemgau.

In terms of science and education, for years we have been sponsoring universities and institutions such as the Stifterverband für die deutsche Wissenschaft (an association of donors to German science), the Deutsches Museum, the Ludwig Maximilian University and the Technical University in Munich. Moreover, HVB performs treasury functions for the fund-raising associations of the two universities in Munich, providing personnel and infrastructure for this purpose.

Sponsoring young people is a special interest of ours. The focal points are the “Förderpreis Deutscher Film” German film prize and the “Jugend kulturell” cultural sponsorship programme, which supports young artists with monetary prizes and opportunities to exhibit in our facilities, among other things. Moreover, we host the HVB Europe Concert with the European Youth Orchestra, which is sponsored by the EU.

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Outlook: expanding CSR management and the range of sustainable investments

Harmonising our CSR management system with that of UCI is one of our top priorities in 2007. The task here will be to intelligently pool the strengths of both sides.

CSR Management is designing a new concept for HVB’s social responsibility jointly with the divisions and back offices. At the same time, the requirements, experience and concerns of UCI in areas such as donations, corporate volunteering and local activities will be included. By doing so, we will strengthen our profile as an international corporate citizen.

As in the past, HVB will highlight the issue of sustainability, for example, as part of the UN Decade of Education for Sustainable Development in co-operation with the city of Munich.

The prime objective of the Decade of Education is to enable citizens and groups to independently organise their lives and economic activities in a sustainable way. In setting up BenE, a regional centre of expertise, Munich became one of the 30 regional centres of excellence currently accredited worldwide for “Education for Sustainable Development” by the United Nations University in February 2007. The goals of BenE supported by HVB are to network educational authorities and facilities, increase synergy potential and create joint packages of measures. In this connection HVB intends to set up the “BenE Netzwerk Wirtschaft” business network in April 2007 with other Munich-based companies.

We will also continue to develop our activities in our lending and investment business. This applies firstly to the Equator Principles and the field of renewable energy. But we will also endeavour to provide more product solutions for any investment volume and strengthen our marketing activities for sustainable investment products. We are also planning to issue two new sustainability certificates in the first quarter of 2007, which will enable us to fulfil our social responsibility in diverse ways. We will pool and significantly expand our activities in the field of climate protection and implement a climate strategy for HVB and UCI.

Sustainability ratings and rankings 2006

Rating agency/investor	Rating	Scale	Ranking
Dow Jones Sustainability Indexes	listed
FTSE4Good Europe/Global	listed
Ethibel Sustainability Index
Global/Europe	listed
ASPI – Advanced Sustainable
Performance Indices	listed
oekom research (2005)	B-	A+ to D–	4th out of 60 banks
scoris Dax 30 rating (2005)	69	1 to 100	8th out of 30 companies
Zürcher Kantonalbank (2005)	AA	AAA–C

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