Activist investor Jeff Ubben is joining an independent, external group of experts that advises Bayer’s management on sustainability, as the German industrial group tries to embrace its high-profile shareholder.
But the gesture may fail to satisfy Ubben, who wants the group to use sustainability to drive returns, as the position is informal and far less powerful than on one of the boards, say people familiar with the situation.
Under Germany’s two-tier board system, the sustainability council has neither formal decision making power nor oversight rights.
The two relevant bodies are the executive board and the supervisory board, which has a separate ESG committee to oversee Bayer’s execution of sustainability strategy.
Ubben, founder of hedge fund ValueAct Capital which he left in 2020 to start Inclusive Capital, says Bayer could become a “sustainability hero” by creating products to address food security and climate change problems.
Bayer’s shares have fallen nearly 60 per cent since 2015. It has been hit hard by litigation involving Roundup — a weedkiller it acquired when it bought Monsanto — claiming that the herbicide caused cancers.
The company suffered a vote of no confidence in management in 2019, unprecedented in German postwar corporate history.
Ubben, who took a €500mn stake to shake up the German crops and drugs conglomerate, has in previous campaigns sought and won seats on company boards.
He said he did not want to just show up and demand a board seat, but that he did not think having a seat on the sustainability council and the board would be “mutually exclusive”.
Ubben will also advocate resolving the remaining litigation involving Roundup and continue to raise questions about whether the company should be split into agriculture and pharmaceutical groups.
Ubben said he had a “big opportunity” with Anderson, who he will meet soon.
“He’s got this company that has three or four discounts attached to it. It’s got a conglomerate discount. It’s got an ESG discount. It had a governance discount, a litigation discount. All of those are opportunities for value creation,” he told the Financial Times.
Ubben describes Inclusive Capital as an impact fund, which means investing with the aim of driving up the long-term stock price by using environmental and social goals to gain value. “We are basically impact first.”
Bayer is Inclusive Capital’s largest investment to date. Ubben said it had been perceived as causing sustainability problems by investors concerned about genetically modified crops, rather than a solution to food security by creating new products to increase yields.
The sustainability council was established in 2020 and according to Bayer has “access to relevant documents and experts within the company”.
Ubben, who will receive an undisclosed amount of pay from Bayer for his work on the council, told the Financial Times that he hoped to work closely with new management.
Matthias Berninger, Bayer’s head of science and sustainability and a former politician with the German Green party, said the council has worked to improve the group’s ESG policies and wants to pioneer green technologies.
Additional reporting by Patrick Temple-West in New York