Sustainability

							GROUP MANAGEMENT REPORT — SUSTAINABILITY




                   Sustainability.
                       LBBW regards a business model geared towards sustainability as an important prerequisite for
                       long-term success. The focus is not on the short-term maximization of profits, but on lasting
                       economic success in harmony with the environment.


                       In its second sustainability report, LBBW published comprehensive information in the 2008 fiscal
                       year on the further development of its sustainability management. Supplementary information
                       on the subject of sustainability that is not part of the Management Report is included in this report.
                       Details can be found, for example, on initiatives and figures from the last few years, economic
                       sustainability, strategy and management, our employees, donations, sponsoring and foundations
                       and corporate ecology.


                       The »Sustainability Report 2007/2008« can be accessed online at http://nachhaltigkeit.lbbw.de.
                       Some of the important subjects are singled out below. In particular, these are issues that relate to
                       the core business and with which progress was made in 2008.



                       Sustainable Management.
                       LBBW’s sustainability management includes all areas of business and is implemented throughout the
                       Group in several stages. In 2008, a »Sustainability Board« was set up at the divisional management
                       level, forming a bridge between the Board of Managing Directors and the specialized divisions. The
                       Sustainability Board bundles and steps up internal opinion-forming on strategic sustainability issues
                       and prepares decisions of the Board of Managing Directors. The committee is managed by Rudolf
                       Zipf, the member of the Board of Managing Directors with responsibility for corporate sustainability.




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The sustainability management system applies to LBBW Bank, BW-Bank and GastroEvent GmbH,
since April 1, 2008 to Sachsen Bank, since July 1, 2008 to Rheinland-Pfalz Bank and since
August 1, 2008 to the three subsidiaries BW Immobilien GmbH, LBBW Asset Management GmbH
and LBBW Immobilien GmbH.



Stakeholder Dialogue.
LBBW’s stakeholders include shareholders, employees, borrowers and lenders, fund managers
and analysts, NGOs (non-governmental organizations) and trade unions, which all, in one form or
another, are involved in the bank’s development. For LBBW, their opinions, which are sometimes
critical, can provide valuable ideas. Conversely, it is important for LBBW to explain the bank’s position
and strategy to the stakeholders in order to avoid misunderstandings and help them to contribute
ideas. For this reason, LBBW invited different groups of stakeholders to a total of four stakeholder
dialogues in 2007 and 2008. The knowledge gained will be used in the further development of the
sustainability policy.



Sustainable Investment Products.
There was increased interest last year in sustainable investment products, both from institutional
and from private investors. LBBW has responded to this interest by offering customers a variety of
investment products that meet sustainability criteria, from the Group itself and from third parties.


With the equity fund »LBBW Nachhaltigkeitsstrategie BWI«, the selection of securities is based on
social, cultural, ethical and ecological criteria. Investments are made on a broad basis worldwide in
companies that show an above-average commitment to sustainability within their sector (best-in-
class). This positive screening is complemented by strict exclusion criteria: the sustainability fund
has a negative screening system that excludes companies from controversial sectors and with
ethically questionable business practices. Another tranche was set up on October 15, 2008, which
is open to both private and institutional investors.


LBBW is now using its many years of experience with special funds geared towards sustainability
to set up a new bond fund with a focus on sustainability. The retail fund »LBBW Nachhaltigkeit
Renten BWI« invests in government bonds, covered bonds, corporate bonds and emerging markets
of companies or states that act in a more sustainable way than average.




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                       The equity fund »LBBW Global Warming Strategie BWI« invests specifically in companies that
                       offer products and services that work to counteract global warming or can mitigate its ecological and
                       economic effects. In terms of its value development, the fund is one of the best widely diversified
                       equity funds in Europe. The fund was in third place in a one-year comparison in the »Golden Bull«
                       Fund Award 2008 presented by EuroFinanzen. In the journal »Der Aktionär«, it occupied first place in
                       the rankings of all climate change funds. And in the Morningstar fund rankings, it regularly held top
                       spots in the category »Equity Funds Europe Leading Equities Growth«.


                       The »Nachhaltigkeitsbasket Nr. 1« set up on January 15, 2008, focuses on companies that operate in
                       a sustainable way in the field of renewable energy.


                       In asset management, BW-Bank pays specific attention to sustainability criteria on request when
                       putting together its portfolios. The rating agency oekom research AG supplies an up-to-date investment
                       universe each quarter, from which BW-Bank’s asset managers put together an individual portfolio.



                       Sustainable Capital Market Activities.
                       LBBW has built up share analysis expertise in the field of renewable energy that is recognized
                       throughout Europe and has strengthened its good competitive position in this sector.


                       In 2008, for example, LBBW supported SMA Technology AG and 3S Industries AG with stock
                       market transactions in the photovoltaic industry. In the last few years, several key suppliers to the
                       solar industry, such as Roth & Rau, Meyer Burger, Manz Automation and Centrotherm, were floated
                       on the stock market and in some cases supported subsequently with capital increases. In the
                       run-up to these capital market transactions, marketing roadshows were held for analysts, lasting
                       several weeks. During these roadshows and the LBBW investors’ conference in February 2008 in
                       Zurich, LBBW presented a new study in which LBBW’s market model for the photovoltaic sector has
                       been updated. All major European investors and numerous companies from the photovoltaic
                       industry were represented at this investors’ conference, which is currently the largest conference
                       for photovoltaics in German-speaking countries.




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Sustainable Financing.
At the beginning of 2008, the »guiding principle of credit« in accordance with the principles
established in LBBW’s sustainability policy was extended. This meant that an already common
practice was recorded in writing, as sustainability criteria have systematically been applied in
credit checks at LBBW since 2004. In addition, environmental reports are obtained for most project
financing and, if applicable, loans granted only provided that certain environmental conditions
are fulfilled.


In 2008, LBBW was also involved in the financing of projects of particular relevance to the environ-
ment, such as the financing of a thermal power station in Weener, near Papenburg, through BW-Bank.
This technologically unique plant with an energy efficiency of up to 65 % is powered exclusively by
waste from the region and supplies a nearby factory producing corrugated cardboard from recycled
paper – a customer of BW-Bank and one of the operators of the plant – with electricity and process
heat. This saves 30 million cubic meters of gas per year, benefiting customers and the environment.
LBBW also underlined the importance of renewable energy by creating the »Project Finance Renew-
ables« department in mid-2008, which focuses on the financing of wind and solar power stations.


In the last two years, LBBW has successfully expanded its financing portfolio in the renewable energy
sector. As part of its strategy for renewable energy, LBBW is aiming to expand its overall portfolio
significantly between the end of 2008 and the end of 2010.


In addition to the financing of larger projects, a newly developed consulting process including a
valuation tool allows the sound valuation and financing of smaller solar plants up to a volume of
EUR 10 million, whereby the bank’s expertise in the field of solar energy is also available to the
SME division.




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