How does Covivio align its financial policy with its ESG challenges?

How have the links between finance and ESG been strengthened?

Paul Arkwright: Over the last 4-5 years, we have seen financial players demonstrate stronger ESG commitments and ambitions, with a clear acceleration since 2022. This is due in particular to a regulatory aspect: financial players are now subject to obligations concerning their so-called ‘green’ investment units. One example is the SFDR (Sustainable Finance Disclosure Regulation), which, since the end of 2019, aims to promote sustainability in the finance sector in Europe. This regulatory framework has put the spotlight on funds investing in companies that offer the best ESG practices, in particular by relying on carbon trajectories verified by third-party bodies.
The bond market had already got into gear, with a boom in green bonds and exponential growth over 15 years, reaching 60% of bond issues in the real estate sector by 2024. Investors were able to draw on international standards, in particular those of the International Capital Market Association, to structure the definition of “green”.

Nicolas Moreau: The real estate sector is already highly structured and committed to ESG issues, so financial players are very interested in this sector, which enables them to meet the various regulations and make progress on their environmental commitments. This has been accelerated by the European Green Taxonomy, which provides a regulatory definition of a ‘green’ asset.

Paul Arkwright: Ultimately, it’s a virtuous circle that’s taking shape. The real estate sector, which accounts for 40% of CO₂ emissions, has set itself the task of decarbonising, and must involve all its stakeholders, particularly financial ones, in order to achieve this. At the same time, financial players have also set themselves environmental targets, and we in the real estate sector can help them to achieve their ambitions.

What are you doing to align Covivio’s financial policy with the Group’s CSR ambitions?

Paul Arkwright: There were several key stages. We set our certification rate target back in 2010 and issued our first green bond in 2016. Today, 100% of our bond financing is green, which is equivalent to around €5 billion for Covivio and Covivio Hotels. Over the years, we have introduced more demanding and ambitious criteria for defining our green bonds, based on recognised benchmarks: environmental certifications, European taxonomy, CRREM carbon trajectory^[1].
The second stage involves implementing ESG criteria for all our bank financing and refinancing.
In concrete terms, all our new corporate loans and mortgages in France now include ESG criteria, which are being added to as refinancing takes place and in line with the Group’s ESG ambitions. We have recently added the criteria of the European Green Taxonomy, our carbon trajectory to 2030 and the energy performance levels of our assets.
And the results are there: the Group’s debt linked to ESG objectives is 64% compared with 38% two years ago. Our objective is to reach 100%, and this will be achieved as we refinance.

Nicolas Moreau: When we issued our first green bonds, we came up with our own criteria, which were validated by investors. Today, we have a real dialogue with investors, who challenge us and push us to go even further, to have an ambitious CSR strategy that is constantly renewed. This encourages us to take a long-term view, to keep thinking about how our objectives and our portfolio should evolve, and also to think about incorporating new criteria from our CSR strategy, such as biodiversity or more social issues requested by the CSRD.

Paul Arkwright: Aligning the Group’s financial policy with its CSR challenges, and thus offering its stakeholders clear reporting, is also possible thanks to a real meeting of minds between the Finance and Sustainable Development teams, who now work hand in hand. All the Finance Department’s business lines are now involved in ESG issues, whether in the implementation of green financing, the monitoring of green capex, the application of the CSRD, the communication of ESG strategy to the financial community, etc.

One example that illustrates this perfectly is the construction of our ‘green’ financing for our hotels. We have worked together to identify the relevant indicators, the portfolio that meets these indicators, and its development over time.

What are the next environmental issues that will impact Covivio’s financial policy?

Nicolas Moreau: Biodiversity is one of the key issues that began to emerge 2 years ago and is now starting to be included by investors in their analyses, alongside climate change. Biodiversity is a major issue for real estate, with current and potential financial impacts, and is attracting growing attention from tenants and local authorities. Covivio has deployed a nature strategy and published its first Nature Report at the end of 2024.

Paul Arkwright: I would add that our challenges depend on our asset classes. As we are already close to 100% environmental certification for our offices, we are committed to improving the level of certification by monitoring the proportion of assets with a level of Very Good or higher (67% of offices today, vs. 52% in 2020).
In the residential sector, we have opted for a global environmental certification covering operations, and at the same time we are focusing on improving the level of energy performance and the EPD of homes.
In the hotel sector, relationships with operators are key to achieving our shared objectives. That’s why we’re opting more for the Green Key label, which focuses on hotel operations, with the aim of certifying 100% of our assets by the end of 2025. The recent consolidation of hotel properties in France and Belgium will also be accompanied by major renovation work, helping us to achieve our carbon trajectory.

[1] Carbon Risk Real Estate Monitoring: a tool for setting decarbonisation trajectories for each asset.