////// Science for a better life Global Breadcrumb Home Investors Sustainability & Governance Sustainability & Socially Responsible Investing Science for a Better Life Helping more people thrive within planetary boundaries Sustainability is central to Bayer’s group strategy and an integral part of our business strategies. We aim to achieve lasting commercial success by connecting economic growth with ecological and social responsibility. Collectively, we face an urgent and unprecedented challenge to ensure that everyone can thrive while using our planet’s resources in a sustainable way.There is overwhelming scientific evidence that humanity cannot proceed at the current level of resource consumption. It requires the world to find a new balance between producing and preserving. Our vision is “Health for all, Hunger for none” We need to help more people thrive while using our planet’s resources responsibly. As a global company with leading businesses in health and nutrition, we address fundamental human needs that are essential for a sustainable and inclusive world. Our innovations, products and services enable us to contribute significantly towards meeting the Sustainable Development Goals set by the United Nations. We remain committed to having a positive impact on society and the planet hand-in-hand with financial performance – guided by our purpose “Science for a better life”. We will provide sustainable solutions from within our core business We have set measurable sustainability targets for the company: By combining the specific strengths of our Crop Science, Pharmaceuticals and Consumer Health divisions, we want to spark a systemic response to the complex challenges we face. This approach will unlock our potential to drive sustainable development around the world as well as create new opportunities for our business. As a global operating company with leading businesses in health and nutrition, we want to make a significant contribution to finding solutions to the most pressing problems of our time. Matthias Berninger , Head of Public Affairs & Sustainability, Bayer AG Bayer’s Sustainability targets reinforced by Governance Commitments We hold ourselves accountable in honoring our potential and responsibility to help build a more sustainable future for us all. That’s why, in addition to supporting the UN’s Sustainable Development Goals, we have also independently outlined many of our own. In 2019, we announced a comprehensive set of ambitious sustainability targets by 2030 and commitments: Bayer aims to be completely carbon-neutral in its own operations by 2030 We have outlined ambitious objectives to increase access to health and nutrition for low- and middle-income countries, with particular focus on empowering underserved communities. By 2030, we want to: support 100 million smallholder farmers to produce enough food to feed themselves and others, and to improve their incomes. provide 100 million women with access to family planning, which also means empowering them to exercise their rights as women and fulfill their potential, which is critical for the socioeconomic development of their domestic national economies. increase the availability and affordability of our pharmaceutical products via equitable pricing and patient affordability programs, with the ambition to reach 100 million people. expand access to everyday health for 100 million people in underserved communities. In addition, in our Crop Science Business we want to reduce the field greenhouse gas emitted by key crops in the main regions we serve by 30%. we further want to reduce the environmental impact of crop protection by 30%. Commitments: we also strengthened our Governance mechanisms to ensure a sustainable business development We have integrated our sustainability goals into the compensation system for the Board of Management by resolution of the 2020 Annual Stockholders’ Meeting. Under the new system, 20 percent of the Board of Management’s long-term variable compensation (LTI) will be linked to the attainment of our sustainability goals starting in 2021. We have initiated an independent Sustainability Council, which will advise the Board of Management in all sustainability matters. Our vision with its focus on innovation and sustainability is based on values and behaviors. To ensure that we meet current societal expectations and create value for all stakeholders through our business activities, we have enacted the Bayer Societal Engagement (BASE) Principles. They represent our guiding principles and form the basis for our activities. Transparency initiative: We also enhanced our commitment to build up and strengthen trust by making information accessible from a whole range of areas. Transparency is a top priority for Bayer. Dialogue with investors Continuous and systematic dialogue with our stakeholders –particularly investors – is important to us. Within the scope of our expanded integrated sustainability strategy, we aim to further intensify dialogue with capital market participants whose investment decisions are aligned to ecological and social criteria and responsible corporate governance. If you have any questions about how Bayer is pursuing sustainability, please contact us directly at our Corporate Sustainability department. We also inform our stakeholders about developments in non-financial data and performance indicators in our Sustainability Report. Bayer in Sustainability Indices Bayer continues to be included in important sustainability indices such as FTSE4Good, MSCI World Low Carbon Target Index, STOXX® Europe Sustainability Index, STOXX® Global ESG Impact and DAX® 50 ESG Index. In addition, in 2020 Bayer was again evaluated by the CDP (Carbon Disclosure Project) as one of the leading international pharmaceutical companies in the areas of climate protection and sustainable water management. Index Zone DAX-50-ESG-Index Germany FTSE4Good Index Series World MSCI ACWI Low Carbon Target Index World STOXX® Europe Sustainability Europe STOXX® Global ESG Impact World Recognition of our efforts to protect the climate Climate protection is a pressing issue that we at Bayer attach great importance to. Since end of 2019 we have embarked on an ambitious climate strategy and taken immediate actions. Guiding principle for us is to act in line with the Paris agreement. With our ambitious 2030 emission reduction targets, the Net Zero 2050 target, the additional target that addresses GHG reduction on farmer’s fields as well as our carbon farming activities we want to contribute noticeably to climate change mitigation and do our part to meet the UN SDGs. The investor-led Climate Action 100+ initiative (CA 100+) has recently published a Net-Zero Company Benchmark, which does not fully reflect our activities and targets. In the following we would like to illustrate key issues in the benchmark and thereby clarify matters regarding the status quo of climate action at Bayer: Net-Zero GHG Emissions by 2050: Bayer has set a Net Zero 2050 target including the entire supply chain and joined the Business Ambition for 1.5°C. Despite having signed and communicated this ambition the benchmark rates us as not having a Net Zero ambition. Long Term Target 2036-2050: Despite the Net Zero commitment of Bayer and having published even the full details on Scope 3 in CDP the Benchmark rates Bayer as having no long-term target. Medium term (2026-2035) GHG Target: Bayer has set itself an intermediate target in line with 1.5°C pathway until 2029 that is confirmed by the Science Based Target initiative (SBTi). Despite having a SBTi validated target for all three scopes including the most relevant categories in Scope 3, the Corporate Benchmark rates Scope 3 as not fulfilled. Short term (2020-2025) GHG Target: Despite having quantitatively anchored our Sustainability and Climate Targets in the Long Term Incentive (2021-2024) of our management including the board and communicated upon, the benchmark evaluates Bayer as having no target. Decarbonization Strategy: Bayer has published a decarbonization strategy to source 100% renewable energy by 2030 and decarbonize our operations. We expect to invest 500 million Euro CAPEX over the next 10 years for the emission reduction additional to the changes to renewable energy. Despite all the mentioned topics we are rated as having no decarbonization strategy. Capital allocation alignment: Despite introducing a carbon price of 100€/t for investments, the benchmark rates Bayer as having no capital allocation alignment. As confirmation of our efforts we recently received an A rating from CDP for our climate activities. You can find more information on our climate strategy in our recently published 2020 Annual Report, the 2020 Sustainability Report as well as in the TCFD Report on https://www.bayer.com/en/media/sustainability-reports and on our political positions website https://www.bayer.com/en/commitments/political-principles-and-positions. Industry Association Climate Review We are dedicated to a climate policy that is in harmony with our ambitious climate targets. To ensure transparency in this process, Bayer publishes its Industry Association Climate Review. The review assesses the alignment of our industry associations’ climate positions with our own commitments on climate change. Our industry associations represent us in the public debate, so we need to be transparent about where our climate-change goals are aligned with their actions and where we have different views. Where we find misalignment between our climate ambitions and those of our industry associations, we will take measures to bridge that gap. Thus, the 2021 review is the first step and forms the basis for Bayer’s continued commitment to advocacy for science-based policies addressing climate change through its member associations. In compiling the analysis, we have engaged with CA 100+. For more background and additional information, please also see the interview with Marco Annas, Head of Public Affairs. Please see below some initial quotes on the first Industry Association Climate Review from the CA100+ engagement leads: “We are very pleased to see the publication of Bayer’s first Industry Association Climate Review. The results evidence a lack of positioning on climate-related issues from over half of the organisations assessed and reinforces the critical importance of company engagement around this topic to prevent misalignment between rhetoric and action. Through ongoing dialogue as part of Climate Action 100+, Bayer has shown its openness to investor feedback and its commitment to support and advocate for science-based climate policy. Union Investment looks forward to continued engagement with Bayer on its increased alignment with the Climate Action 100+ Net-Zero Company Benchmark.” Janne Werning, Head of ESG Capital Markets and Stewardship, Union Investment “The Church Commissioners welcome Bayer’s first Industry Association Climate Review and engagement with Climate Action 100+. Bayer’s commitment to transparency and their engagement with misaligned and partially misaligned associations are appreciated, and we look forward to seeing tangible results. We also welcome Bayer’s aspiration to work with relevant organisations that currently have no climate stance to develop positions that support the low carbon transition across the global economy. The Church Commissioners will continue to engage with Bayer on environmental issues and value our ongoing constructive dialogue.” Bess Joffe, Head of Responsible Investment, Church Commissioners for England Topics of Interest for Rating Agencies In our discussions with stakeholders/raters, we hear and address allegations on certain topics. However, the scientific evidence we provide that supports our position on these areas is not always fully reflected in some rating agencies’ assessments. To promote further transparency with the public and investors, we include the following information to foster an objective evaluation. Neonicotinoids After the EU restricted the use of neonicotinoid insecticides, some rating agencies have classified their concerns about the compatibility of Bayer's continued production and marketing of neonicotinoid insecticides with the environmental principles of the UN Global Compact as serious controversy. The following report intends to reflect our responsible business action towards risk mitigation and tracking systems to guarantee the safe use of our neonicotinoid-based products. Report: Neonicotinoid Insecticides @ Bayer - Systematic Risk Mitigation & Portfolio Evolution Towards Minimized Risk for the Environment Appendices to the report I: Bayer neonicotinoid risk management proposal (2009) II: Descriptions of risk mitigation measures for seed treatment III: Admire PRO label highlighting specific precautions to protect bees IV: Poster demonstrating the global nature of collaborative bee research V: Annual Report (2020) Healthy Hives LATAM / Salud Apicola VI: Monitoring bee poisoning incidents in UK (2016) VII: Monitoring bee poisoning incidents in the EU (2009) VIII: Bayer Crop Protection Stewardship Report 2021 Bayer accepts the European Court Ruling on Neonicotinoids: In May 2021, the European Court of Justice revealed its second instance ruling on the pending court case which resulted in some media attention. Background: In July 2018, Bayer appealed against the ruling of the General Court of the European Union in Case T-429/13. This case was originally launched to assess the 2013 (initial) EU restrictions on the use of neonicotinoids. By appealing against the verdict, Bayer was seeking clarification of regulatory aspects, whose wide-ranging importance is not focused on neonicotinoids, alone, and aimed to ensure that some general interpretations concerning the certainty and predictability of the general regulatory system were re-considered. The appeal concerning the 2013 restrictions did not and was not intended to bring neonicotinoids back to the EU market. The 2013 (initial) restrictions were superseded by the 2018 (final) restrictions, which Bayer did not challenge, which are legally final and binding, Moreover, we also pro-actively withdrew imidacloprid and clothianidin from the renewal process in the EU and have publicly stated that we had no intention of applying for re-registrations of these products. Bayer respects the European legislative process and accepts the 2018 decision of the EU Member States to broadly restrict the use of certain neonicotinoids in agriculture. GMO The rating agency MSCI has claimed that GMO (Genetically Modified Organism) crops are harmful to the environment and has classified this as a very severe controversy. Here we will separate fact from fiction. Claim: Non-GMO crop fields are contaminated with strains of genetically modified crops which leads to the decline of local and indigenous crops. Claim: Bayer has to settle with affected farmers which includes crop remediation measures to restore the biological integrity of indigenous crops. Claim: the use of genetically modified crops leads to the decline of pollinators, particularly bees. Claim: the use of specialized herbicides in GMO cultivation destroys natural vegetation butterflies depend on. Claim: Genetically modified crops have been regulated in more than 60 countries and in some countries are banned outright. Other Topics Claim: Former Monsanto has been criticized for its business practices, especially its claims against smallholder farmers. Claim: Glyphosate is not safe. Claim: Allegations regarding compliance to the Global Compact Principle 7, “Businesses should support a precautionary approach to environmental challenges”. 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