Consideration of Sustainability Criteria in Lending at IBB

Our “Guidelines for Sustainable Lending” describe the IBB Group's approach and understanding with regard to the integration of ESG criteria and the handling of ESG risks in the lending business of IBB and the IBB Group, as agreed with the State of Berlin, for example, on the basis of the sustainability guidelines. They summarize the existing framework for identifying, assessing, and managing potential ESG risks in lending decisions.

IBB uses the ESG score to assess ESG risks. Engagements are classified into risk-relevant and non-risk-relevant lending. For non-risk-relevant lending, the "Industry" module of the S-ESG score is applied, focusing on the borrower's industry. As of the end of 2024, 96.3% of our total financing on the asset side had an ESG score. For risk-relevant lending, borrowers are also assessed using an individual ESG score, supported by an ESG questionnaire. Comparing the borrower’s individually determined score to their industry average allows qualitative evaluation of their position against the ESG industry benchmark.

To assess borrowers using the individualized S-ESG Score, additional information is required. This data is collected from borrowers in both business promotion and real estate financing using the designated “Questionnaire on ESG Criteria.”

The questionnaire enables a structured collection of relevant ESG aspects and is based on the requirements of the EBA Guideline (EBA/GL/2020/06).

The ESG questionnaire incorporates the following criteria from the ESG score:

Credit decisions are made jointly by the front office and back office. In new lending, the front office is responsible for creating the ESG scoring, as it has direct contact with the customer and can gather the necessary ESG information.

For existing loans, the back office division is responsible for monitoring the customer relationship and - analogous to credit rating - for assessing ESG risks through ESG scoring. For risk-relevant existing loans, the ESG risk assessment is performed annually and is generally linked to the regular review of the customer engagement.

The table below provides an overview of ESG performance in IBB’s new lending business for fiscal year 2024. It presents the financing volume in new business, broken down by ESG risk categories based on the S-ESG score. The table is part of IBB’s regular ESG reporting and supports the transparent and systematic monitoring of sustainability risks - especially in cases of elevated or high ESG risks.

Engagements with increased or high sustainability risks are considered ESG-critical. For new lending in such cases, an additional statement with recommendations from ESG management is required. Both opportunities and risks are assessed from an ESG perspective. Loans to borrowers with high sustainability risks are supported only if the financing contributes to improving sustainability standards. The respective transformation project must be presented by the applicants. Financing without positive ESG impact for borrowers with high sustainability risks is discouraged. Additionally, ESG-critical engagements must be approved at a higher level of authority.

Berlin’s real estate sector contributes significantly to greenhouse gas emissions, making it a critical area for transformation toward a climate-neutral Berlin. We aim to support customers in achieving sustainable building stock within the city.

Energy certificates indicate a building’s energy consumption or demand, determining its energy efficiency class (A+ to H). They also provide details on the energy source (e.g., district heating, oil, gas, etc.).

For all transactions with commercial real estate clients, an up-to-date energy certificate for the property is required. Based on this, we create an overview of our real estate portfolio’s energy performance. Energy certificates are also essential for credit decisions: for properties with inefficient energy standards or low energy efficiency classes, financing should aim for the property’s transformation to improve energy efficiency.