Sustainability has become a key success factor in recent years. The issue is integral to many different fields within the industry and is becoming increasingly important for finance departments. Real estate company DIC Asset has been working for around 10 years to put itself in a sustainable position for the future.
First steps: sustainability reporting
In 2011, the company was one of the first in the market to publish its activities in an independent sustainability report. Since then, interest in sustainable reporting has grown steadily, both for institutional investors and on the part of stock analysts and shareholders. In line with the rapid development of the market and other regulatory requirements, sustainability reports have also developed steadily in recent years.
While the main focus at the beginning was to analyse the status quo and develop an initial strategy, DIC Asset is now focusing more on the further development of the strategy toward a consistent ESG approach. "The issue has once again gained enormous importance recently. In addition to the socio-political debates that have been initiated, we have also seen an increasing interest in sustainability issues among investors", says Rutger Kaeding, Head of Corporate Finance at DIC Asset. "As a company, we want to take this into account and develop sustainably, for example by investing more in green buildings or by using sustainable funding instruments”.
Green finance
In spring 2021, the company successfully awarded its first ESG-linked "Schuldschein" loan. "After successfully bringing a 'Schuldschein' loan to market in 2019, we wanted to use a 'Schuldschein' again for funding", says Kaeding. "But ING suggested that we start thinking about green finance early on, and after analysing the needs together, we decided on the ESG link". The "Schuldschein" is linked to the proportion of green properties in the portfolio, which currently stands at around 11 percent. By 2023, this share is expected to increase to over 20 percent. DIC Asset wants to achieve this by improving its portfolio, but also by purchasing additional sustainable properties. When the target is reached, the interest rate drops by five basis points, the proportion of green real estate remains below 15 percent, and the interest rate increases by five basis points.
Identifying a clear and realistic goal as a KPI was one of the biggest challenges for the company. The expertise of the banks is required here. ING has been supporting its customers in the field of sustainable funding for many years and advises them on the options for sustainable finance. It is important to analyse customers' needs precisely and to find tailor-made solutions, because not every green financing solution is equally suitable for every company. This was also the case for DIC Asset. The company initially decided to define the KPIs for the "Schuldschein" itself and is considering a second-party opinion for the next funding requirement. A second-party opinion includes an assessment of the objective and strategy of the funding in relation to sustainable criteria from an independent organisation.
Banks as partners
DIC Asset does not intend to stop here — in fact, the company plans to further develop its sustainability strategy this year and to work on sustainability in its own real estate portfolio. "Our sustainability journey is far from over. The market is constantly evolving, so we as a company need to stay on our game and pursue a consistent sustainability strategy. The finance department can contribute significantly to this regard and really make its mark", concludes Kaeding. This allows banks to support companies on their sustainability journey and to work with them to find viable and sustainable funding solutions. DIC Asset and ING have outlined what this could look like.
Are you also looking to operate more sustainably? You can find everything you need to know about sustainable finance here
Access the full recording of our "Sustainability Journey: What's important?" round table with DIC Asset at the Green FINANCE conference here.