ESG Strategy: How to Attract Investors with Sustainable Business Models

Sustainability has now become a key factor in investor decisions. Companies that fail to meet ESG criteria (Environmental, Social, Governance) risk losing capital or bearing higher financing costs. In Germany and the EU, new laws such as the CSRD and the Supply Chain Due Diligence Act are tightening requirements.

What does this mean for you specifically?

• Investors expect clear ESG strategies: 82% demand ESG as an integral part of corporate strategy.
• Regulatory requirements are increasing: By 2028, almost 50,000 EU companies must submit sustainability reports.
• ESG performance influences financing: Companies with good ESG scores benefit from lower capital costs.

How can you respond?

• Systematically assess your business model for ESG compliance.
• Use ESG tools and external consultants to analyze data and create reports.
• Set measurable and transparent goals to avoid greenwashing.

The time to act is now – without a convincing ESG strategy, it will become increasingly difficult to attract investors and survive in the market.

Successfully Implementing ESG and CSRD: 5 Steps to a Sustainable Corporate Strategy

How to Assess Your Business Model for ESG Compliance

A structured analysis of your business model is crucial to uncover potential weaknesses in the areas of Environment, Social, and Governance (ESG). In fact, 79% of investors demand clear and systematic handling of ESG risks and opportunities. However, assessing ESG aspects is often complex: some rating agencies focus on carbon footprint, others on working conditions – and while some use quantitative methods, others rely on qualitative approaches. This makes it all the more important to develop a unified assessment strategy. After this initial evaluation, specialized tools can help capture relevant data points.

ESG Assessment Tools

ESG software is now an indispensable tool for collecting, analyzing, and reporting data on environment, social, and governance aspects. According to forecasts, the ESG software market will reach a volume of $571.74 million by 2028. Such tools not only automate data collection but also offer flexible reporting templates that comply with international standards. They also enable data-driven decisions based on current ESG data.

When selecting the right ESG software, you should clearly define your specific goals: Is it about more transparency, regulatory compliance, or tracking your CO₂ emissions? User reviews can give you insights into usability and effectiveness. Costs – both initial investment and ongoing fees – should also be considered.

Another approach is so-called Lifecycle Assessments (LCA). These evaluate the environmental impact of a product or service throughout its entire lifecycle, from raw material extraction to disposal. Carbon footprint calculators complement this by providing targeted insights into climate-relevant impacts. These methods provide a solid foundation for demonstrating your ESG progress to investors.

Identifying Weaknesses in ESG Performance

ESG gap analyses compare your current practices with industry standards and best practices. They help minimize risks, meet regulatory requirements, and strengthen your reputation.

A materiality assessment can help you identify the most important ESG topics for your company and set priorities. This prioritizes actual performance over mere perception. The process includes analyzing material topics, evaluating relevant data, conducting interviews with executives, benchmark comparisons, and considering current trends in stewardship.

You should also examine your supply chains for potential ESG risks. High-risk areas such as forced labor must be identified early and actively addressed. Close collaboration with suppliers and other stakeholders is essential to ensure they understand and support your ESG goals. If internal weaknesses become apparent, working with experienced experts can enable targeted improvements.

Collaboration with Expert Consultants

The number of ESG disclosure guidelines has doubled from 614 in 2020 to 1,225 in 2023 – a clear sign of increasing regulatory complexity. Here, support from specialized consultants like Fiegenbaum Solutions can be valuable. Johannes Fiegenbaum's consulting offers expertise in areas such as ESG strategies, lifecycle assessments, decarbonization, and climate risk management. As an independent partner, Fiegenbaum Solutions brings not only regulatory know-how but also current market insights and an entrepreneurial perspective.

Working with such experts can help you make rapid progress and create a solid foundation for your ESG measures. They support you in defining ESG goals, adapting business strategies, and regularly reporting on ESG metrics. This efficiently drives the integration of ESG into your business model.

PwC emphasizes: "ESG is no longer just a nice-to-have; it's a necessity. Consumers expect it; investors increasingly demand it; regulators are writing it into law. Companies that hesitate may find the cost of competitiveness too high. The time to act is now."

Partnerships with governments, NGOs, and other companies can further amplify your impact. Equally important are investments in technologies and practices that align with your sustainability and social responsibility goals. This not only creates long-term competitive advantages but also strengthens your market position.

How to Improve Your Business Model for Better ESG Performance

After analyzing your ESG position, it's time to take action. Germany has set ambitious goals: greenhouse gas emissions should be reduced by 65% by 2030, with climate neutrality the target by 2045. This is also reflected in investor expectations. Over 90% of S&P 500 companies now publish ESG reports. This gives you the opportunity to stand out positively through outstanding ESG performance.

Developing Carbon Reduction and Net-Zero Plans

Scope 3 emissions account for about 70% of total corporate emissions. There's enormous potential here that not only protects the environment but also convinces investors. The first step: systematically capture all emission sources. Then you can optimize production processes, transport routes, and your vehicle fleet. Sustainable packaging, renewable materials, and closed-loop systems are also crucial.

Germany's National Circular Economy Strategy (NCES) supports you in focusing on resource efficiency and environmental protection. Currently, only 13% of raw materials used come from secondary materials. This shows how much untapped potential still exists.

Another important point: set science-based targets. These help you make measures measurable and realistic – and they show investors that your climate strategy is based on solid foundations.

Making Supply Chains and Processes More Efficient

Germany's Supply Chain Due Diligence Act (LkSG) requires you to maintain responsible business practices throughout the entire supply chain. Violations can be expensive: fines of up to €8 million or even 2% of annual turnover for companies with over €400 million in revenue are possible.

Map your entire supply chain and integrate ESG criteria into your procurement guidelines. Regular assessments, such as audits or external certifications, are essential. You should develop individual action plans for each identified negative impact.

Minimize risks by diversifying your suppliers and bringing them closer to your key markets. You should avoid over-dependence on high-risk regions. Equally important: focus on reuse, recycling, and material recovery in the design of your products and packaging.

Gerd Müller, former Federal Minister for Economic Cooperation and Development, aptly stated: "The exploitation of people, nature, and child labor must not become the foundation of the global economy and our prosperity. That would be a boomerang that would come back to hit us. Our socioeconomic model can be a model for a global economy."

After optimizing your processes and supply chains, the next step is to define clear and verifiable ESG goals.

Setting Realistic Goals and Avoiding Greenwashing

To convince investors of your long-term success, you need clear, realistic, and transparent ESG goals. This is more important than ever, as 88% of Gen Z buyers distrust ESG claims from brands. According to a European Commission study, 53% of all "green" claims are vague or unfounded. A 2021 investigation even showed that 42% of such statements were misleading or false.

Avoid vague terms like "environmentally friendly" and instead focus on concrete statements that reflect your actual progress. Be honest about your successes – even if you haven't fully achieved your goals yet. Transparency pays off: 94% of customers remain loyal to brands that communicate openly.

Use the SMART principles (Specific, Measurable, Achievable, Relevant, Time-bound) to clearly formulate your ESG goals. These goals should also be reflected in your corporate KPIs and performance evaluations.

How to Present Your ESG Progress to Investors

Your ESG communication can have a decisive influence on investor decisions. A full 79% of investors consider a company's handling of ESG risks and opportunities as crucial for their investment decisions. At the same time, only 40% of investors trust the ESG ratings and scores they receive. This makes it all the more important that you present your ESG successes clearly, comprehensibly, and based on data.

Building an ESG Story with Data and Facts

A convincing ESG story is based on reliable data, precise KPIs, and external confirmations for key metrics. A good starting point is a solid materiality assessment that helps you identify the most relevant ESG topics for your company, industry, and stakeholders.

Interestingly, 88% of institutional investors scrutinize ESG topics as rigorously as operational or financial aspects. Therefore, it's crucial to directly link your ESG initiatives to risk management, new opportunities, and long-term financial performance.

Cyrus Taraporevala, CEO of State Street Global Advisors, puts it aptly: "We believe a company's ESG score will soon effectively be as important as its credit rating."

Honesty and transparency are indispensable. Speak openly about your progress and challenges. Actively address industry-specific ESG issues and show how you're tackling them. This openness builds trust and signals that you understand the complexity of your sustainability goals.

Integrating ESG into Investor Presentations

Based on your solid data, you can strategically incorporate your ESG successes into investor presentations. Individual approach is enormously important here – adapt your message to the specific interests, knowledge, and regional priorities of investors.

64% of investors consider a company's values and beliefs in their decisions. Your ESG story should therefore not only be authentic but also clearly reflect your corporate values. With an investor access platform, you can analyze investor preferences and past interactions and adapt your message accordingly.

Close collaboration between investor relations, ESG teams, management, legal department, and communications department ensures a unified and consistent ESG message. Over 80% of investors believe that sustainability should be a central component of corporate strategy. Therefore, show how ESG aspects are integrated into your business strategy rather than treating them as a separate topic. Active involvement of senior management – whether through CEO, CFO, or other board members – underscores your commitment and seriousness.

Barth Scholten, ESG Investor Relations Officer at ASR Nederland N.V., explains: "Our Sustainalytics rating has become part of the story that we communicate to the outside world. Being #1 in Sustainalytics' assessment is a great way to start any investor meeting. This external recognition also means a lot to our employees."

Utilizing Climate Tech and Technology Solutions

Technology plays a central role in collecting, communicating, and analyzing ESG data. Important technologies include data analytics and AI, blockchain, ESG reporting software, IoT and sensor technologies, as well as stakeholder engagement platforms.

The ESG reporting software market was valued at approximately $700 million in 2022 and is expected to grow to around $1.5 billion by 2026. Investments in your data collection and analysis capabilities are therefore an important step to ensure data-driven sustainability reporting.

Using XBRL (eXtensible Business Reporting Language) offers additional benefits through specialized reporting functions and precise error checking. In the EU, the European Sustainability Reporting Standards (ESRS) are already mandatory and require the use of iXBRL (Inline XBRL) for annual financial reports.

Kaisa Korri, Partner at EY Finland, emphasizes: "As capital markets and stakeholders consider sustainability information in their investment decisions, it is crucial to ensure that ESG disclosures are of high quality."

Videos can also have a great impact: people retain 95% of a message when they see it in a video, compared to only 10% when they merely read it. Use videos to make data more vivid, incorporate testimonials, or demonstrate best practices.

The applications of technology for ESG data extend far beyond sustainability. They not only help with risk management but also provide deeper insights into your business. This comprehensive use makes your technology investments a strategic advantage that sustainably convinces investors.

Understanding Green Financing Options

The market for sustainable financial products in Germany recorded impressive growth of over 50% in 2021, reaching a volume of €2.2 trillion. This clearly shows how companies can increasingly integrate their sustainability goals into their financing strategies.

Martin Steinbach, EY EMEIA IPO Leader, aptly summarizes the current development: "Green or sustainable financing and financing instruments are receiving more attention than ever due to the increasingly high importance of sustainability and climate change topics in business, society, and among stakeholders in the credit and capital markets."

Below, we take a closer look at the key instruments of green financing.

Available Types of Green Financing

Green Bonds: These bonds are specifically designed to mobilize capital for environmentally friendly projects. Although about 40% of listed companies use bonds for debt financing, the share of green or social bonds remains relatively small. Nevertheless, 54% of IR professionals see lower debt capital costs as an important advantage of this form of financing.

Sustainability-Linked Loans: Here, interest rates are linked to achieving ESG goals, which motivates companies to consistently improve their sustainability performance. Transparent reporting is a central component.

Green Project Financing: This form of financing focuses on specific environmentally friendly projects such as renewable energy, energy efficiency, or biodiversity protection. It's particularly suitable for companies implementing clearly defined sustainability initiatives.

Another important point: The EU is working on a Green Bond Standard to be introduced in 2024. The goal is to create a clear and transparent framework for green bonds and avoid greenwashing.

Meeting Requirements for Green Financing

For companies to benefit from green financing options, they must meet certain requirements. This includes assessing their "Green Bond Readiness." This means identifying suitable projects, building governance structures, and ensuring transparent reporting.

For Sustainability-Linked Loans, measurable ESG goals, regular progress reports, and external verification of sustainability metrics are necessary.

The Corporate Sustainability Reporting Directive (CSRD) is also bringing movement to the market: the number of reporting-obligated companies in Germany is increasing from about 500 to 15,000. This makes green financing options relevant for many more companies.

It's also interesting that 52% of IR managers consider easier access to ESG investors as a central factor for green bond decisions. Companies can increase their attractiveness through good sustainability ratings from agencies like MSCI or Sustainalytics.

These requirements flow directly into strategic financial planning and thus create a foundation for long-term success.

Linking Financial and ESG Planning

Integrating ESG aspects into financial planning is a crucial step to remain resilient in the long term.

Alexander Rasch, Sustainable Finance Advisory at Helaba Landesbank Hessen-Thüringen, emphasizes: "Sustainable Finance, i.e., directing capital flows into sustainable economic activities and expanding risk assessment to include ESG aspects, are central levers for the transformation process toward a sustainably oriented economy."

A remarkable trend: 60% of major investors in Germany now prioritize sustainability impact over returns in their investment decisions. This shows how important the strategic linking of financial and ESG planning has become.

Transition plans play a central role here. They outline how companies want to achieve climate neutrality and contain concrete milestones, financing needs, and risk assessments. These plans should be directly integrated into financial planning to support the transformation process.

Financial institutions are also adapting: they increasingly combine external ESG ratings with internal analyses. For companies, this means they should optimize both their publicly available ESG data and their internal data structures. Only this way can they meet disclosure requirements and ensure efficient controlling.

Conclusion: Aligning Your Business Model for Long-term Success

The approaches described above clearly show: your business model must be strategically redesigned to remain successful in the long term. The shift toward more sustainability is no longer an option but a business-critical necessity. With ESG-mandated assets potentially making up half of all professionally managed investments by 2025 and reaching a volume of $35 trillion, companies without convincing sustainability strategies risk being excluded from capital markets.

Examples like Siemens Healthineers demonstrate how sustainable goals can create real competitive advantages. The company has committed under the Science Based Targets Initiative (SBTi) to become climate neutral by 2030 – a clear response to new legal requirements and rising investor expectations. Such strategies show that sustainability can be seen not as sacrifice but as opportunity and value driver.

However, ambitious goals alone are not enough – concrete actions are needed. Microsoft and Unilever have demonstrated how linking executive compensation to ESG goals works. This approach creates accountability at the highest management level and makes sustainability a clearly measurable success factor.

Credibility comes through measurable progress. IKEA, for example, has committed to becoming climate positive by 2030, while Adidas wants to use exclusively recycled polyester by 2024. These concrete commitments not only strengthen trust but also show that ambitious sustainability goals are achievable.

A well-thought-out ESG strategy also has financial effects: 54% of investors are convinced that better ESG practices lead to stronger returns, and 70% of global consumers say they're willing to pay more for environmentally friendly products. Sustainability thus becomes a direct driver of revenue and growth.

For practical implementation, you should rely on data-driven decision processes. Regular materiality assessments help adapt to changing risks and stakeholder expectations. Choosing an appropriate ESG framework and building reliable data collection systems are essential to ensure credible reporting.

"If you don't adapt to change, you succumb to it," as Jennifer Duran from Kenvue aptly puts it.

Half-hearted approaches are not enough – 85% of executives now see sustainability as a central business goal. Now is the time to act. With a clear strategy and determined commitment, you not only secure access to capital but also a leading position in the green transformation. Use the opportunity to solidify your long-term market advantage.

FAQs

How can companies optimize their ESG strategy to convince investors in Germany?

To convince investors of your company, a thorough analysis and targeted development of your ESG strategy is crucial. Set clear, sustainable goals and ensure that you communicate your progress regularly and transparently. Compliance with relevant German regulations, such as the Corporate Sustainability Reporting Directive (CSRD), as well as other ESG laws, forms a solid foundation for this.

Additionally, innovative approaches, such as in climate technologies or sustainable business models, can significantly increase your attractiveness to investors. It's important that your sustainability measures are measurable and provide long-term benefits. Credible and proactive communication not only strengthens trust but also positions your company as forward-thinking and competitive.

How can ESG assessment tools help companies improve their sustainability performance?

ESG assessment tools offer companies the opportunity to systematically examine their sustainability performance. They capture, analyze, and monitor relevant ESG data systematically, which not only creates more transparency but also helps identify areas with improvement potential in a targeted manner.

Another advantage: These tools create trust among stakeholders by making a company's sustainability efforts measurable and comprehensible. Especially for investors who increasingly focus on sustainable business models, such insights are crucial. Companies that can clearly communicate their ESG strategies increase their chances of financing and secure a better long-term market position.

How can companies benefit from green financing options and achieve their sustainability goals?

Green financing options, such as Green Loans, open up exciting opportunities for companies in Germany. They often offer more favorable interest rates and attractive conditions, making it easier to realize sustainable projects such as energy efficiency measures or environmentally friendly technologies.

Additionally, these financing models help improve a company's environmental footprint. They support compliance with legal requirements and win the trust of investors who increasingly value ESG criteria. Access to such financing not only increases competitiveness but also makes an important contribution to achieving long-term sustainability goals.