5. Responsibility

Accountability within the company’s management with regard to sustainability is disclosed.

The approach to implement the agreed sustainability aspects as described in the Non-Financial Report constitutes an integral part of the business strategy and is the responsibility of the entire Board of Directors which discusses it with the Supervisory Board. A work group consisting of members of the departments of Organisation, Compliance, Human Resources and Communication as well as Marketing / Products / Business Intelligence, headed and coordinated by the Corporate Communication department and the Office of the Board of Directors ensure that sustainability objectives are implemented in the operation and that the Non-Financial Report is prepared. In order to comply with the complexity of the subject of sustainability it is managed in a coordinated and centralised manner by involving the different departments of the Bank.
 
The Non-Financial Reporting is verified and approved by the entire Board of Directors [see: OLB Leadership Team]. The Supervisory Board reviews and discusses the Non-Financial Report as part of the audit of the Financial Statements [see: OLB Supervisory Board].
 

6. Rules and Processes

The company discloses how the sustainability strategy is implemented in the operational business by way of rules and processes.

The approach for implementing agreed sustainability aspects described in the Non-Financial Report constitutes an integral part of the business strategy. The sustainability objectives of OLB are reviewed and further developed as part of its strategy revision on an annual basis. A work group consisting of members of the departments of Organisation, Compliance, Human Resources and Communication as well as Marketing / Products / Business Intelligence, headed and coordinated by the Corporate Communication department and the Office of the Board of Directors ensure that sustainability objectives are implemented in the operation and that the Non-Financial Report is prepared on an annual basis. Reports will be made by the Corporate Communication and the office of the Board of Directors which belongs to the area of responsibility of the Chairman of the Board, during the annual strategy process and based on notices given during the year which are the result of controls or adaptations.
 
The Bank has set out its orientation on sustainability topics and the underlying legal provisions, industry standards and own obligations in internal work instructions, guidelines and superior policies, such as the Code of Conduct, the Reputation Risk Management Guideline or its Remuneration Policy. It is currently preparing its own ESG Policy which will transform the strategic statements on sustainability set out in the business strategy into comprehensive, fundamental structures and processes.
 

7. Control

The company states how and what performance indicators related to sustainability are used in its regular internal planning and control processes. It discloses how suitable processes ensure reliability, comparability and consistency of the data used for internal management and external communication.

In addition to financial performance indicators, OLB also observes a series of non-financial performance indicators on a regular basis. These comprise, in particular, indicators on environmental issues, or environmental standards of the series 300 of the GRI standards, on employee matters (e.g. quota of employees working part-time, gender distribution in leadership positions, number and reasons for employees leaving the company), on social matters (e.g. funding projects and volume), client matters (e.g. client satisfaction, client development, processing quality index, number of complaints in the complaints report) and on the prevention of money laundering / fraud. These data are collected and reported regularly and by applying consistent methods in the competent departments, including by involving specialised external service providers, if needed, to ensure their comparability. Such data are analysed jointly with the responsible units and, in case of need, with the sustainability work group, in order to identify potentials for improvement and then, measures to increase the sustainability performance are defined and controlled.

Key Performance Indicators to criteria 5 to 7

Key Performance Indicator GRI SRS-102-16: Values
The reporting organization shall report the following information:

a. A description of the organization’s values, principles, standards, and norms of behavior.

Sustainability and social responsibility are firmly integrated in OLB’s business activity. In line with its business strategy, the Bank aligns its business activity, inter alia, with the United Nations “Principles for Responsible Banking“. The responsible corporate management requests the protection of natural resources. Therefore, special importance is given to the protection of natural resources in OLB’s Code of Conduct. Employees should ensure that they protect natural resources during their work and reduce their impact on the environment as far as possible, for example, by saving material and energy, avoiding or reducing and recycling of waste.
 
OLB defined a Code of Conduct for all employees, officers and members of the Board of Directors. The principles of conduct described therein implement generally recognised principles to recognise human rights and to integrate sustainability and social responsibility in OLB’s business activity. They describe guidelines which should assist employees, in particular if they are uncertain of what type of conduct is appropriate in certain situations. In addition to describing basic values and standards, the principles of conduct explain, in particular, a legal and compliant conduct of transactions, client protection, the prevention of bribery and corruption and a responsible company management. OLB published its Code of Conduct on the Internet [see: OLB Code of Conduct].
 
OLB pursues a sustainable business model with the client being at the heart of everything to permanently ensure its own corporate substance which is necessary for the business. A conscious taking of risks, or credit risks is part of its business and risk strategy. The Board of Directors places special importance on the promotion of an adequate and consistent risk culture on all levels of the company. Shared ethical values and a company-wide risk culture are important success factors for a sustainable business development of OLB and result in a sustainable prevention of potentially incorrect conduct. The culture lived within OLB simultaneously impacts the reputation of the Bank and how it is perceived externally. Cultural values such as credibility, reliability, trustworthiness and responsibility are at the core and might affect the financial performance and thus OLB’s ability to survive in the future. Structure and preservation of the risk culture are the contents of a guideline resolved upon by the Board of Directors. OLB’s management principles reflect the exemplary function of officers who are jointly responsible for a profitable, sustainable and risk-oriented growth of the Bank.
 

8. Incentive Systems

The company discloses how target agreements and remuneration schemes for executives and employees are also geared towards the achievement of sustainability goals and how they are aligned with long-term value creation. It discloses the extent to which the achievement of these goals forms part of the evaluation of the top managerial level (board/managing directors) conducted by the monitoring body (supervisory board/advisory board).

OLB’s remuneration systems are designed to support both the recruitment as well as the long-term retention of qualified employees and the achievement of a value-oriented and sustainable success of the company by taking into account essential regulatory requirements.
 
Incentives considering sustainability aspects are provided, in particular, by including relevant objectives and key performance indicators (KPI) in the target agreements concluded with members of the Board of Directors, officers and employees.
 
Target agreements of Board members not only contain business objectives, but also different sustainability aspects. This includes, in particular, the requirement to promote a uniform, performance-oriented company culture and to comply with the regulatory conditions. Ecological or social objectives are not explicitly agreed upon by the Bank at the present time. A high degree of sustainable incentives arises for Board members from the fact that the entire variable remuneration is subject to an assessment basis spanning several years. This counteracts the effects of short-time incentives and the strive for a short-time success. That is additionally supported by the fact that the Bank withholds parts of the variable remuneration pursuant to the requirements applicable to risk carriers working in important institutions, and only pays it out in batches after another review of the achievement of the underlying objectives.
 
OLB’s Supervisory Board is responsible for an adequate design of the remuneration system for the individual members of the Board of Directors. It not only means that it specifies the targets that will underly the target agreements concluded with Board members, but also the decision whether the targets agreed upon in the previous year have been achieved and the resulting decision about the achievement of the targets over several years. The Supervisory Board is also responsible for reviewing again whether the underlying objectives have been met, which is necessary before any of the retained batches will be paid out.
 
Sustainability objectives are also reflected in the target agreements concluded with officers and employees, however, the Bank does currently not explicitly agree on ecological or social targets. Sustainability targets are, for example, factors such as client satisfaction, implementation / compliance with legal requirements and conformity with OLB’s Compliance culture which will each be assessed when a decision is made on whether the targets in the past financial year have been achieved or not. This is reviewed by the Bank. Some of the employees are also risk carriers. The Bank withholds a part of their variable remuneration before it is paid out to review whether they achieved their underlying targets. Such a review is made by the Bank.
 

Key Performance Indicators to criteria 8

Key Performance Indicator GRI SRS-102-35: Renumeration policies
The reporting organization shall report the following information:

a. Remuneration policies for the highest governance body and senior executives for the following types of remuneration:
i. Fixed pay and variable pay, including performance-based pay, equity-based pay, bonuses, and deferred or vested shares;
ii. Sign-on bonuses or recruitment incentive payments;
iii. Termination payments;
iv. Clawbacks;
v. Retirement benefits, including the difference between benefit schemes and contribution rates for the highest governance body, senior executives, and all other employees.

b. How performance criteria in the remuneration policies relate to the highest governance body’s and senior executives’ objectives for economic, environmental, and social topics.

At the time of preparation of this Report, no data are available yet on the remuneration for the year 2020. For this reason, reference is made to the Disclosure Report published by OLB at the beginning of May each year, for information on the remuneration structure for employees and members of the Board of Directors [see: OLB Disclosure Reports - available in German language only]. If you are interested in the relevant page numbers, please see the Table of Contents of the Disclosure Report.

Key Performance Indicator GRI SRS-102-38: Annual total compensation ratio
The reporting organization shall report the following information:

a. Ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median annual total compensation for all employees (excluding the highest-paid individual) in the same country.

OLB will not disclose this figure.

9. Stakeholder Engagement

The company discloses how the socially and economically relevant stakeholders are identified and integrated into the sustainability process. It states whether and how an ongoing dialogue takes place with them and how the results are integrated into the sustainability process.

OLB defined the stakeholders which are socially or economically relevant for the Bank during its business activity and along the value chain: clients – classified in private clients, including private banking and wealth management, corporate and company clients as well as clients in the field of special financings –, in addition shareholders, employees and the public / media. Such identification of the stakeholders results from the Bank’s business process. People wishing to become clients of the Bank normally actively approach the OLB and are, from then on, in a dialogue between client and Bank. Media representatives actively register as media contacts which results in a regular active or reactive contact between the journalist and the Bank depending on the current matter at hand. The shareholders are another group of stakeholders and are automatically defined by the distribution of the shares in the Bank. And the employees also arise automatically as stakeholders since they are the persons working for OLB. These stakeholders are clearly delimitated and independent from each other.
 
The stakeholders in detail:
 
Clients
In the context of its business activity, OLB is in close contact and regular exchange with its clients, in particular with those requiring comprehensive consulting, such as corporate clients and wealthy private clients. The break-out of the Corona virus pandemic resulted in another increase of the need for consultation and support among many clients due to the economic consequences caused by the pandemic. In this exceptional situation and beyond, OLB advised and granted its own financial funds or arranged public funds, in particular, to commercial clients active in stationary retail trade or those operating restaurants, hotels or travel agencies who had been forced to close their business in times of the lockdown or were unable to perform their core activity.
 
The most important interface to the client remains the account manager, even in digital times. OLB continuously analyses how its clients see the Bank by conducting client surveys over the phone, by asking relevant questions during discussions or, to a larger extent, as part of organised analyses performed in certain intervals and based on the daily exchange with the clients on all sales channels. OLB further strengthens any of the aspects which received a positive feedback, such as e.g. the competency in personal advice; and any topics which were criticised by clients, such as changes in the location network, are explained in the best possible manner to clients by naming reasons and by giving timely alternatives for performing banking transactions.
 
For more than 30 years, the Bank has had an Advisory Board which consists of renowned personalities from the economy, science, culture and media. OLB‘s Advisory Board and the Board of Directors meet normally at least twice per year – apart from during the times of the Corona virus pandemic whose precautionary measures made it impossible – to exchange information on the current market situation and other topics relevant for the Bank. Members of the Advisory Board might also act as providers of ideas and impulses, while they also play an important role as multiplicators which goes far beyond the members of the Advisory Board. Members of the Advisory Board are appointed and dismissed by the Board of Directors. The Board of Directors appoints the chairman and their deputies.
 
Shareholders
OLB is backed by the following independent investors with long-term commitment and an excellent reputation as well as a strong financial basis: Teacher Retirement System of Texas (pension fund with retirement and comparable services for approx. 1.5 million payers and recipients in public and higher education– with registered office in Texas, USA), Apollo Global Management (leading global asset manager for equity, loan and real estate investments – registered office in Delaware, USA) and Grovepoint Investment Management (specialised private investment firm focused on private equity, credit and unique situations – registered office in London, United Kingdom). The shareholders represent their interests during the annual general meeting of OLB AG and through the Supervisory Board. The Supervisory Board consists of twelve members and represents the members directly elected by the employees of the Bank and the representatives elected by the shareholders.
 
Employees
The employee‘s right to codetermine matters of the Bank is ensured through the works councils active in the relevant business regions, the general works council and the employee representatives elected to the Supervisory Board. Senior officers of the Bank are represented by a spokesperson committee. And, representatives of young people and trainees and of severely disabled persons protect their special interests within the Bank. Employees are informed, as warranted, primarily by emails, during multimedia conferences or by personal meetings, or meetings directly with the Board of Directors – insofar as such were possible in the reporting year on account of the social distancing requirements and hygiene regulations imposed due to the Corona virus pandemic. In addition, OLB uploads comprehensive current information to a comprehensive Intranet portal, including longer reports, information, video films, etc. from the company, in case of need. The Bank obtains direct feedback from its employees in regular employee enquiries (not in the reporting year, due to normal rotation), in order to be able to consider relevant trends and opinions.
 
Public / media
OLB respects the professional independence of the media and differentiates between advertising for sales purposes and any communication for the purpose of corporate policies. That means, in particular, the OLB will not pay for printing editorial contributions, but attaches value to separating promotional ads and general information from the company. The bank continuously keeps the media and the public up to date or informs them about its business development or strategic decisions by publishing press releases and answering questions posed by the media. It actively sends information on special subjects to the press by using a media distributor for which interested representatives of the media had themselves registered by the Bank by observing the data protection provisions. OLB publishes relevant publications on the internet or additionally as a hardcopy version on a regular basis, such as e.g. financial reports, the disclosure report, the Code of Conduct, or this Non-Financial Report.
 

Key Performance Indicators to criteria 9

Key Performance Indicator GRI SRS-102-44: Key topics and concerns
The reporting organization shall report the following information:

a. Key topics and concerns that have been raised through stakeholder engagement, including:
i. how the organization has responded to those key topics and concerns, including through its reporting;
ii. the stakeholder groups that raised each of the key topics and concerns.

The Bank is continuously in dialogue with its Stakeholders. In addition to the obvious topics such as the modernisation of client contacts, the further development of digital payment options or human resources and health management which the Bank publishes on an annual basis in this report, new key topics arose in particular on account of the Corona virus pandemic. As reported below, both digital client contacts and the use of digital payment option intensified due to the pandemic. No other new topics occurred in 2020 which would be worthy of reporting.
 
The client is, per se, still at the heart of all of the Bank’s activities, due to OLB’s business model which is strongly oriented on personal advice. Clients may decide how they wish to contact the Bank: the branch office is the correct point of contact for competent and personal advice; questions can be answered and services provided quickly over the phone or clients may use online banking or OLB’s Banking App for conducting their everyday bank transactions. The Bank’s telephone client services answers about 2,500 calls each day – temporarily even more during peak times or in case of special occasions. The contents of these calls are, in the great majority of the cases, subjects like payment transactions, support in online banking, agreements on consulting appointments or even complaints about measures taken in special locations, short-time waiting periods or the availability of the telephone client service. Such telephone client service is a very good and customer-friendly medium, in particular for older clients since they may use all relevant services available for their banking transactions by legitimising them from the comfort of their home. In times of the Corona virus pandemic and in view of branch offices which were opened to a restricted extent as a consequence of such pandemic, our telephone client service also proved to be a very positive channel.
 
The digitalisation of payment transactions requires new payment options, and client behaviours are changing dynamically as well: visits to their local branch are declining, online banking is on the rise. OLB therefore further consequently aligns its payment transaction offers on the different and changing needs of its clients. As regards locations, the Bank bundles its consulting in competence centres and larger branch offices located in its core area of North West Germany. The strategy resulted in the closure of locations and some branches were transformed to self-service branches also during the year under review. The majority of clients recognises this focus to consulting services and uses numerous alternatives for obtaining cash which are available today, such as having cash paid out at the cash desk of supermarkets or in petrol stations or in DIY markets. This decline of branch offices is criticised mostly in locations which need to be closed completely.
 
The Bank tries to react to wishes and suggestions of its employees. Corporate health management and offers for further education are expanded continuously. OLB has, in the meantime, even introduced a new form of dialogue with its employees and officers. Different to former classic assessment discussions which consisted mainly of a simple review of the performance of staff members, such discussions now comprise an assessment of the current performance of the employee, a recognition of their potential for assuming other tasks and the preparation of individual steps for development. This results in a holistic assessment of the employees.

10. Innovation and Product Management

The company discloses how innovations in products and services are enhanced through suitable processes which improve sustainability with respect to the company’s utilisation of resources and with regard to users. Likewise, a further statement is made with regard to if and how the current and future impact of the key products and services in the value chain and in the product life cycle are assessed.

In order to offer suitable solutions for clients who wish to invest their money ecologically and ethically, OLB included relevant products in its portfolio. It currently offers sustainable investment funds that invest their fund assets in ecologically or ethically compliant investment universes. Sustainable funds must comply with on more stringent investment criteria in addition to undergoing an assessment of their profitability, liquidity and security. This includes, for example, investments in companies active in the fields of renewable energy, ethical or ecological products and services, green food, environmental refurbishment, regional economic cycles and human working conditions. These funds exclude any type of investment in child labour, the nuclear industry, chlorine chemistry, genetic engineering, overexploitation, animal testing or military technology.
 
OLB itself is actively committed to ecological responsibility and the careful use of resources: by introducing electronic mailboxes and a consequent increase of their usage rate among clients in the past years, the Bank has already reduced the number of printed documents by several million copies over the past years (see criterion 12 “Resource Management“). After the increase of active online banking users to almost 250,000 in 2020 (after the migration of Wüstenrot Bank Pfandbriefbank AG) and by combining it with a more intensified use of online services (e.g. electronic transfers, address changes, changes of tax exemption orders and permanent direct debit orders, etc.) many additional orders were handled electronically, without paper and by saving the natural resources.
 
The digital expansion is still a focus point to realise the communication and interaction with clients increasingly by electronic means and to achieve more positive effects in terms of resources consumed by clients and the OLB. For example, the OLB Banking App was established in 2018 completely without any use of paper. Since the introduction of this option to the end of the reporting period, approx. 47,000 accesses were created, and no hardcopy applications were needed for creating this digital access. The Bank introduced a fee for bank statements and receipts for payment transactions in hardcopy for some account versions, in order to motivate clients to use the available digital options and to reduce paper consumption.
 
In addition to the digitalisation of these important communication and information paths, OLB attaches increasingly value to reducing its product conclusion processes based on paper and the associated submission of physical receipts. For example, great progress was made in the field of digital document management and thus the avoidance of hardcopy receipts for core products in the unit of construction financing and instalment credits where the Bank created new application lines and partially combined them with digital platform providers. This not only saved paper but also made a positive impact on the Bank’s internal logistics, since physical application forms and receipts no longer need to be transported, which also reduces mileage.
 
OLB has also been supporting its clients from the industry for more than 20 years in the planning and construction of wind turbines. In addition to wind park financing, the Bank’s product range also comprises a so-called wind park time deposit since the year 2016, in case of need, which takes account of the conditions imposed by municipalities to grant a financial participation to affected residents – this product, has, however, not been requested in the year 2020. Agriculture is, besides renewable energy, generally an important economic factor in the region. The agricultural operations which have, in the meantime, become highly specialised and highly engineered businesses, and are subject to a strong structural change, are supported by corporate client managers and the Bank’s own specialist consultants for the fields of the agricultural sector and wind energy.
 
Another component of the Bank’s sustainable activities is its high expertise in the field of public subsidy programmes (in particular for energy efficiency) which accounts for a high degree of the credit business with approx. 9 % in the construction financing business, for about 53 % in investment financing and for about 27 % in all client groups. In 2020, OLB essentially supported its commercial and self-employed clients with liquidity loans made available by KfW, LRB and the development banks. Applications and grants are handled digitally by up to 95 %.
 
The Bank does not specifically measure the social and ecological effects of financial investments or credit products as a whole. Reason is, inter alia, that such a measurement would not be possible without greater efforts due to the manifold options for using such loan funds. OLB also grants very specific financial means, the ecological impact of which would need to be confirmed by energy efficiency experts. The financing share in such funds resulted in a reduction of greenhouse gases of about 1,996 tonnes of CO2 p.a. in 2017, according to a retrospective study conducted by the KfW.
 
Moreover, borrowers of OLB also use their loans for financing their own social or ecological activities. Investors acquire shares in special assets of the relevant fund vehicle, when they invest in an investment fund offered by OLB. This fund applies an investment policy set out in the sales prospectus and acquires securities / shares from / in companies which comply with the sustainable philosophy of the selected funds. Such an approach enables no direct measurement of social or ecological effects, but allows for an indirect conclusion of an improvement (e.g. when investors acquire shares in micro financial funds and the latter grant loans to MFI institutions which again grant micro-credits to small and very small entrepreneurs, it can be assumed that the social well-being of the target borrowers will increase).

Key Performance Indicators to criteria 10

Key Performance Indicator G4-FS11
(report also in accordance with GRI SRS): Percentage of assets subject to positive and negative environmental or social screening.(Note: the indicator should also be reported when reporting to GRI SRS)

For the above-mentioned reasons, OLB has, so far, not defined any criteria describing a positive or negative verification of financial investments according to ecological or social factors. Sustainability aspects are, however, considered when selecting financial investments or making investment recommendations, even though not as criteria which can explicitly be verified, as such are described in innovation and product management.