The New Age of ESG for Investor Relations: A Deep Dive With Bayer’s Klaus Kunz
Dive into the latest episode of Street Tweets as Klaus Kunz, the ESG strategy leader at Bayer, unravels the intricacies of embedding sustainability into business. Discover how companies can bridge the gap between doing good and creating value
There's an undeniable shift towards environmental, social, and governance (ESG) factors nowadays—and IR professionals, decision-makers, and firms are being put on notice.
It's no longer just about profit margins and market shares; today's companies are tasked with the monumental challenge of weaving sustainability into the very fabric of their business blueprints.
But how does one navigate this intricate maze of sustainability, especially in a corporate giant?
Well, this is where it helps to hear from Klaus Kunz, the mastermind steering the ESG strategy at Bayer.
With a unique blend of expertise in both chemistry and economics, Klaus has charted a course through the corporate seas, positioning Bayer at the forefront of sustainability initiatives.
From his early days, immersed in the world of molecules and market dynamics, to his current role shaping Bayer's green endeavors, Klaus's journey is a testament to the transformative power of sustainable leadership.
But what's the real story behind Klaus's ascent in the ESG realm?
And, more importantly: how has he managed to seamlessly integrate ESG principles into Bayer's overarching strategy, ensuring not just environmental stewardship but also tangible value creation?
In our latest episode of Street Tweets, we pull back the curtain on our enlightening conversation with Klaus. We traverse the milestones of his illustrious career, unpack the essence of embedding ESG into corporate DNA, and explore the ways through which sustainability isn't just a buzzword but a catalyst for genuine value creation.
Klaus's insights are not just a reflection of Bayer's journey but serve as a beacon for companies worldwide, illuminating the path towards a greener, more sustainable future for firms and IR professionals.
Here are some of our favorite takeaways from this episode of Street Tweets with Julius Köhler:
Key Takeaway #1: Companies with a significant environmental footprint have the potential to create the most impact and drive transformation. Given their scale and reach, these companies can set industry benchmarks and influence peers to adopt sustainable practices—something Klaus emphasizes:
“I think if a company has a very impactful footprint, it has the biggest potential to create impact and also the biggest potential for potential transformation. So if the impact is very negative, there must be investors coming into this company asking and requesting progress and transformation. Otherwise they leave the field to those investors who don't care and then this company with a very big negative footprint will not change. So I think these companies which are basically required to transform, need to get the power from the finance sector behind the transformation process. So of course, in the end of day, there must be potential to transform into something positive.”
When large-scale businesses lead the way in sustainability, they not only reduce their own impact but also inspire a ripple effect throughout the industry.
Key Takeaway #2: Embedding sustainability into business strategies is crucial for creating value and attracting investor support. Investors are increasingly looking for companies that prioritize long-term sustainability over short-term profits, which makes it crucial for firms, decision-makers, and IR professionals to develop and fully-implement ESG efforts. Here’s what Klaus had to tell us about it:
“So if you want to create impact at scale, we need to come up with solutions addressing food security on the one hand and biodiversity loss and climate change on the other hand. And we need to make commitments which are significant and outcome driven. And we need to embed this in business and we need to find an angle to this where this creates value. And that's step number one in building that strategy, I think, for any company.”
A business that integrates sustainability at its core demonstrates foresight and resilience, making it a more attractive proposition for discerning investors.
Key Takeaway #3: Building trust with investors requires transparent reporting, governance, and linking remuneration to sustainability goals. Klaus stresses the need to align financial incentives with sustainability targets because this companies send a clear message about their commitment to these objectives:
“So it's very important to that's part of the governance you need to build. You need to make things transparent, you need to report under assurance, you need to embed it into the processes of your company. You need basically to institutionalize sustainability. That's for me, ESG. And one part of it, the remuneration system has to be connected to achieving these goals. And then honestly speaking, you are almost there.”
Trust is built on consistency and transparency—so, when your company walks the talk, they solidify their credibility in the eyes of investors.
Key Takeaway #4: Companies should address controversial topics and make progress on red flags in their ESG ratings to become investable. Ignoring or sidestepping these issues can lead to reputational risks and potential financial setbacks—leading to significant repercussions that affect both credibility and long-term investor attraction.
Here’s what Klaus had to tell us about this key point for consideration:
“If there are controversial topics out there which are still in the way, you can do whatever you want on all these topics beforehand. If you do not clean up your controversial topics, still you are not investable. So you need to work on the red flags of your ESG ratings on these controversial topics and you need to really make progress on these ones. And if you are, I think, successful on this last area too, then I think you have an integrated ESG strategy.”
By proactively addressing and rectifying ESG concerns, companies demonstrate responsibility and foresight, making them more appealing to informed investors.
Key Takeaway #5: Bridging the gap between doing good and creating value can be achieved through initiatives like investing in smallholder farming and exploring new business opportunities related to carbon sequestration. These initiatives not only contribute to global sustainability goals but also open up new revenue streams—as Klaus mentions:
“So to have a credible talking line on food security, we made a decision to shift significant investments into smallholder farming in low and middle income countries, which is where food is most needed. And that was a business decision. That's not a little project. That was a business decision to shift investments into those spaces where investment is needed and even more difficult on the space of biodiversity loss and climate change. What can a company commit, which is powerful and significant.”
Companies that innovate and adapt to the changing landscape of sustainability position themselves as both industry leaders and responsible global citizens.
Wrap-Up
The future of sustainability hinges on several key factors. Klaus calls for a convergence of reporting frameworks to facilitate alignment between investors and investees. This convergence would provide clarity and consistency in assessing the sustainability performance of companies.
Klaus's insights shed light on the evolving landscape of sustainability and the potential for companies to create value through ESG initiatives. By embedding sustainability into their strategies, companies can address their impact areas and gain the trust of investors.
As the world moves towards a more sustainable future, convergence, engagement, and innovation will be key drivers of change.
If you loved this jam-packed session with Klaus Kunz, you can access more of Street Tweet’s insightful resources on our website. Follow us on LinkedIn for the latest updates.
