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  • 2017 Corporate Responsibility Report
2017 Corporate Responsibility Report

Sustainable finance

Companies that rely on sustainable business practices are more competitive in the long term. Analysts from Deutsche Asset & Wealth Management and researchers at the University of Hamburg collaborated to analyze more than 2,000 studies on the topic. Their conclusion: The business case for sustainability has a sound empirical basis, and the vast majority of the studies analyzed pointed to a positive relationship between sustainability and financial performance. This is why investors who are interested in sustainability tend to focus on long-term yields instead of short-term profit. Socially responsible investment (SRI img) can be an important component when it comes to securing capital for Deutsche Telekom AG in the long term.

Our contribution to the SDGs

SRI investment products consist of securities from companies that have passed an audit conducted in accordance with environmental, social, and governance (ESG img) criteria. This is why the development of demand for T-Shares from socially responsible investors serves as an indicator for assessing our sustainability performance. With our Socially Responsible Investment ESG KPI we measure how the financial markets perceive our CR activities. Investors concerned with sustainability often refer to ratings published by specialized SRI analysts. For this reason the rating given to our company by SRI analysts has an impact on our ability to win over and retain socially responsible investors and achieve our goal of keeping our company's medium and long-term cost of capital at a low level.

An increasing number of investors are responding favorably to the concept behind the UN's Sustainable Development Goals (SDGs). This is especially true with regard to the future orientation of the SDGs. It appeals to investors who are interested in companies engaging in more transparent reporting on their long-term strategic orientation and prioritization. In order to measure and quantify the effects of our activities, we started an Impact Measurement pilot project in 2017. This way we want to make our contribution to achieving the SDGs transparent.

We use different formats – both in our reporting as well as in direct dialog – to inform SRI analysts and investors of our CR activities. More and more investors and rating agencies are interested in receiving information on our CR activities. Investors not classified as broker, like Morgan Stanley, JP Morgan, Société Générale and HSBC are beginning to organize SRI conferences as well. Deutsche Telekom is regularly invited to present our CR strategy and commitment as best practice at these conferences.

Progress

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Investor communication

We have been publishing important Deutsche Telekom ESG KPIs in our Annual Report for several years. Financial market players interested in sustainability can also review ESG img information in the Socially Responsible Investment (SRI) section on our investor relations portal. Interested parties can find additional information on these topics in the CR rating info boxes provided as a supplement to this CR report.

In addition to our reporting activities, we also engage in targeted dialog with investors. For example, the CR and Investor Relations (IR) departments jointly held several Socially Responsible Investment (SRI img) roadshows, for instance in France and the USA, at which we offered to answer critical questions from our investors. We also held conference calls to keep interested investors informed and responded to numerous direct requests for information. In addition, we attended SRI conferences, organized conference calls and web conferences, and answered numerous direct queries from rating agencies, analysts and investors.

We covered the entire spectrum of ESG criteria: governance structure, data protection and data security, corporate responsibility controlling, sustainable supply chain, human rights, climate protection and business impact measurement.

Silke Thomas

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Current position in rankings and ratings

Deutsche Telekom's ESG img (environmental, social and governance) performance is assessed within the scope of CR ratings, which provide investors with valuable information for their investment decisions.

As in previous years, the T-Share was again listed in leading sustainability indexes such as the DJSI img World and the DJSI Europe Index from RobecoSAM img in 2017. In addition, the rating agency oekom once again singled us out as the world's best telecommunications company in terms of ecological and social performance. We qualified for the A list of internationally leading companies in the CDP img climate protection ranking for the second time in 2017. CDP commends companies that report their CO2 emissions in an extremely transparent and detailed manner. In addition to making it onto the A list, we were also included in the STOXX Global Climate Change Leaders Index. We were also listed in the STOXX Global ESG Leaders Index for the seventh year in a row – as well as in the iSTOXX SD KPI img since 2017. Once again, our share was listed in the FTSE4Good img index and the UN Global Compact 100 index in the reporting year. We were deemed to be an investible stock by the Fair World Fund for the first time in 2017. The Fund focuses on the topic of "development, international fairness and sustainability". At the beginning of 2018 we were also named one of the most ethical companies worldwide by Ethisphere, an institute that promotes ethical business methods. We are the only German company among the 135 commended companies.

Silke Thomas

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Silke Thomas

Combined non-financial statement in the Annual Report

In 2014 the European Parliament and the EU member states adopted a directive that expands the reporting obligations of large, capital-market-oriented companies. The CSR Directive obligates such companies to report on important non-financial aspects, such as environmental, social and employee concerns as well as protection of human rights and combating corruption and bribery. Germany enacted this directive as national law in 2017 under the CSR Directive Implementation Act.

Deutsche Telekom's combined non-financial statement is contained in the management report of the 2017 Annual Report.

Tax policy guidelines

The Group Tax department is responsible for ensuring that the Deutsche Telekom AG Group pays taxes and duties at the national and international level in accordance with the applicable statutory provisions.

Group Tax makes sure that the Deutsche Telekom Group complies with all its tax obligations in Germany and abroad, in particular that it pays the taxes in accordance with the local laws and regulations applicable to the individual Group entities. This includes the Group's income taxes, which must also be regularly reported in our IFRS financial statements, as well as VAT and income tax on salaries payable within the context of customer transactions and for Group employees. Group Tax also ensures that the corporation has an efficient tax structure within the framework of German and foreign tax law as applicable in each country, i.e., that the Group does not carry any unnecessary tax burden. The goal is to achieve sustainable tax efficiency for the Group, something in which transparent, reliable cooperation with local tax authorities is deemed to be indispensable.

In addition, Group Tax also has the ambition to contribute as much as possible to the success of Deutsche Telekom's operations, e.g., by providing detailed tax advice regarding new business models or innovative technological developments. In such matters, the department is particularly focused on immediately clarifying any unresolved tax law-related issues as well as providing practical solutions to meeting all applicable tax requirements.

The tax strategy – Tax Compliance, Sustainable Tax Efficiency, Tax as Valued Business Partner – was also adopted by the Deutsche Telekom Board of Management.

Socially responsible investment strategy for Deutsche Telekom pension funds

We are fully committed to sustainable finance. Correspondingly, we also apply our sustainability principles to the assets of the Telekom Pension Fund. We have pursued a sustainable investment strategy for the selection of these capital assets since 2013. In addition to financial aspects, we also take into account ecological and social principles as well as guidelines for good corporate governance.

In 2017 we refined our investment strategy. We specified the list of negative criteria we employ and added to it best-in-class strategies and approaches to commitment. Accordingly, excluded from investment are companies that manufacture or do business with so-called controversial weapons (for example, anti-personnel mines, cluster ammunition, nuclear weapons, biological or chemical weapons). Also prohibited are investments in companies that have repeatedly violated the principles of the UN Global Compact.

We have also defined a best-in-class approach. Our investment managers select companies that boast the best sustainability performance in their respective sectors in which to invest. A decision was also made to effectively support the Sustainable Development Goals (SDGs) as shareholders with voting rights (shareholder engagement).

The investment managers will be selected based on their expertise in ESG img issues. With this approach we aim to align attractive expected returns and sustainable value orientation with each other. By investing in stable values, we want to fulfill our fiduciary responsibility to our employees regarding capital investment. Our goal is also to avoid reputation risks and larger risks of loss.